REVOLVING LOAN AND SECURITY AGREEMENT
BETWEEN
COMPASS BANK
as
Lender
and
DIVERSIFIED CORPORATE RESOURCES, INC.,
MANAGEMENT ALLIANCE CORPORATION
INFORMATION SYSTEMS CONSULTING CORP.
TEXCEL SERVICES, INC.
TRAIN INTERNATIONAL, INC.
and
XXXXX ASSESSMENT AND PERFORMANCE SYSTEMS, INC.
as
Borrowers
July 8, 1999
TABLE OF CONTENTS
SECTION 1. Definitions __________________________________________________ 1
SECTION 2. Borrowers' Representations, Warranties
and Covenants ________________________________________________ 5
SECTION 3. Bank's Agreement to Make Loans _______________________________ 9
SECTION 4. Inspection of Records; Further Assurance _____________________ 11
SECTION 5. Security Interest of Bank in Collateral ______________________ 11
SECTION 6. Collection of Accounts _______________________________________ 12
SECTION 7. Affirmative Covenants ________________________________________ 14
SECTION 8. Negative Covenants ___________________________________________ 16
SECTION 9. Events of Default; Acceleration ______________________________ 17
SECTION 10. Power of Sell or Collect Collateral; Remedies
Cumulative ___________________________________________________ 19
SECTION 11. Deposits _____________________________________________________ 20
SECTION 12. Waivers ______________________________________________________ 21
SECTION 13. Expenses; Proceeds of Collateral _____________________________ 21
SECTION 14. Durable; Extension ___________________________________________ 22
SECTION 15. General ______________________________________________________ 22
EXHIBITS
Exhibit A Offices and Other Locations of Borrowers
Exhibit B Actions, Suits & Proceedings
Exhibit C Schedule of Certain Indebtedness and Leases
(i)
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT ("Agreement") is executed this 8th
day of July, 1999, by and among DIVERSIFIED CORPORATE RESOURCES, INC.,
MANAGEMENT ALLIANCE CORPORATION, INFORMATION SYSTEMS CONSULTING CORP., TRAIN
INTERNATIONAL, INC. and XXXXX ASSESSMENT AND PERFORMANCE SYSTEMS, INC. each a
Texas corporation, and TEXCEL SERVICES, INC., a Pennsylvania corporation
("Borrowers") and COMPASS BANK, a Texas state chartered banking institution
("Bank"). The Borrowers have applied to the Bank for a revolving line of
credit (the "Revolving Line") not to exceed an aggregate principal amount at
any one time outstanding in the sum of Four Million Five Hundred Thousand and
No/100 Dollars ($4,500,000.00) to be evidenced by a Revolving Promissory Note
of even date herewith (the "Note") in such amount, such extension of credit
to be secured by a security interest in all of the Collateral (as hereinafter
defined) now owned or hereafter acquired by the Borrowers on the terms
hereinafter set forth.
The Bank is willing to extend credit under the Revolving Line to the
Borrowers up to aggregate amounts not in excess of the sum set forth above
and upon the security of such Collateral on the terms and subject to the
conditions hereinafter set forth.
A G R E E M E N T:
NOW, THEREFORE, in consideration of the premises, the credit to be
extended hereunder, the mutual agreements of the parties as set forth herein
and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties, intending to be legally bound
hereby, agree as follows:
SECTION 1. DEFINITIONS.
1.1 "ACCOUNT" and "ACCOUNT RECEIVABLE" shall include accounts,
accounts receivable, notes, notes receivable, rental agreements and other
rights to collect rent, contract rights, drafts, acceptances, instruments,
chattel paper, general intangibles, and other forms of obligation or rights
to payment and receivables, whether or not yet earned by performance,
including state and federal tax refunds.
1.2 "ACCOUNT DEBTOR" shall mean the party who is obligated on
or under any Account or contract right.
1.3 "BORROWERS' LOAN ACCOUNT" shall mean the account on the books of
the Bank with respect to the Borrowers in which the Bank will separately
record advances under the Revolving Line and other advances made by Bank to
Borrowers pursuant to this Agreement, payments received thereon and other
appropriate debits and credits as provided by this Agreement.
LOAN AND SECURITY AGREEMENT-PAGE 1
1.4 "COLLATERAL" shall mean any and all personal, real or intangible
property of the Borrowers in which the Bank acquired, now has, or by this
Agreement or any other agreement acquires, or hereafter acquires a security
interest or other rights or interests as security for the Borrowers'
Liabilities, including, without limitation, Borrowers' obligations under this
Agreement.
1.5 "COMBINED BASIS" shall mean for accounting purposes,
consolidating certain financial data of the Borrowers and their affiliates in
the manner in which consolidated and consolidating financial statements are
prepared under generally accepted accounting principles.
1.6 "DEBT TO TANGIBLE NET WORTH RATIO" shall be defined as the ratio
of (a) Borrowers' total Liabilities on a Combined Basis to (b) Borrowers'
Tangible Net Worth on a Combined Basis, calculated in accordance with
generally accepted accounting principles consistently applied as of the date
hereof.
1.7 "DEFAULT RATE" shall mean the lesser of the Maximum Rate and
five percentage points (5%) in excess of the Compass Bank Index Rate.
1.8 An "ELIGIBLE ACCOUNT" shall mean an Account which meets each of
the following requirements, together with such other requirements as Bank may
hereafter determine:
(a) it arises from the sale of goods or from services rendered, such
goods have been shipped or delivered to the Account Debtor under
such Account and such services have been fully performed and have
been accepted by the Account Debtor, and the applicable Borrowers'
full right to payment for all sums due from such Account Debtor
with respect to such Account shall have been earned and then be
due and payable;
(b) it is a valid and legally enforceable obligation of the Account
Debtor thereunder according to its express terms, and is not
subject to any offset, counterclaim, cross-claim, or other defense
on the part of such Account Debtor denying liability thereunder
in whole or in part;
(c) it is not subject to any mortgage, lien, security interest, or
similar adverse rights or interests whatsoever other than the
security interest in favor of Bank hereunder;
(d) it is evidenced by an invoice, dated not later than thirty
days following the date of performance by Borrowers of all
requirements for payment and having payment terms acceptable
to the Bank which required payment no later than thirty (30)
days following the invoice date, rendered to such Account
Debtor, and is not evidenced by an instrument or chattel
paper, except with respect to Permanent Placement Accounts,
which shall have a due date no later than ten (10) days
following the employee's commencement date and not later than
forty-five (45) days following the invoice date;
LOAN AND SECURITY AGREEMENT-PAGE 2
(e) it is not owing by an Account Debtor whose obligations the
Bank, acting in its sole discretion, shall have notified the
applicable Borrowers are not deemed to constitute an Eligible
Account;
(f) it is not due from an affiliated corporation or entity,
subsidiary corporation or entity, parent corporation or entity,
stockholder, officer, director or employee of any Borrowers or
any such affiliate, subsidiary, or parent corporation or entity;
or any individual or entity affiliated or related to any of the
foregoing, whether by blood, marriage, or otherwise;
(g) it does not constitute retainages or deferred payments under a
contract not fully performed;
(h) it does not constitute, in whole or in part, interest or finance
charges on outstanding balances;
(i) it is an Account with respect to which no return, repossession,
rejection, cancellation, or repudiation shall have occurred or
have been threatened;
(j) it is an Account with respect to which the applicable Borrowers
continues to be in full conformity with the representations,
warranties, and covenants of Borrowers made with respect thereto;
(k) it is not subject to any sales terms, trial terms, sales-or-return
terms, consignment terms, guaranteed sales performance or
warranties or representations relating to minimum sales volume,
C.O.D. terms, cash terms, or similar terms or conditions, except
with respect to Permanent Placement Accounts, which shall have
guaranties or warranties that extend no more than ninety (90) days
following the commencement date of the employee;
(l) it is not owed by an Account Debtor that is not an individual
residing in the United States or a corporation or partnership
organized and validly existing under the laws of a state within
the United States, unless payment is secured by a letter of credit
acceptable to Bank;
(m) it is not an Account subject, in whole or in part, to any "xxxx
and hold" or similar arrangement pursuant to which the invoice is
delivered prior to the actual delivery of the sold or leased goods
or the performance of the services;
(n) it is not an Account with respect to which seventy-five (75)
days or more shall have passed since the invoice date;
LOAN AND SECURITY AGREEMENT-PAGE 3
(o) it is not owed by any Account Debtor who or which has at any
time account balances with Borrowers on a Combined Basis
equaling or exceeding twenty percent (20%) of its total
accounts receivable at such time unpaid after seventy-five
(75) days from invoice date, excluding retainage;
(p) it is not an Account owed by an Account Debtor whose account
balance exceeds twenty percent (20%) of the total of
Borrowers' (on a Combined Basis) aggregate accounts
receivable, except to the extent of the Eligible Accounts of
such Account Debtor that do not exceed twenty percent (20%) of
the total of Borrowers' aggregate accounts receivable, or
except as expressly permitted from time to time by Bank in its
sole discretion; and
(q) it is not an Account as to which any Borrowers or any other
party to such Account is in default or is likely to become in
default in the performance or observance of any of the terms
thereof.
1.9 "INSOLVENCY" of any Borrowers or any other person or entity
shall mean that there shall have occurred with respect to that person or
entity one or more of the following events: death, dissolution, termination
of existence, liquidation, insolvency, business failure, appointment of a
receiver, liquidator, fiscal agent, or trustee of any part of the property
of, assignment for the benefit of creditors by or against such person or
entity, or institution of any action or proceeding with respect to such
person or entity under or pursuant to any insolvency laws relating to the
relief of debtors by or against any such person or entity, institution of
proceedings in bankruptcy or with respect to the readjustment of
indebtedness, reorganization, composition, or extension by or against such
person or entity (including, without limitation, under or pursuant to the
United States Bankruptcy Code, as amended, or under any similar law at any
time enacted).
1.10 "INTEREST COVERAGE RATIO" shall mean, for any period, the ratio
of (i) Borrowers' Net Income on a Combined Basis during such period, to (ii)
Borrowers' combined liabilities for interest accruing during such period,
each calculated in accordance with generally accepted accounting principles
consistently applied.
1.11 "LIABILITIES" shall mean any and all liabilities, obligations,
and indebtedness of any Borrowers to the Bank of every kind and description,
direct or indirect, absolute or contingent, matured or unmatured, primary or
secondary, whether as principal borrower or guarantor, liquidated or
unliquidated, due or to become due, now existing or hereafter arising, and
whether arising directly or acquired from others, regardless of how such
Liabilities arise or by what agreement or instrument they may be evidenced or
whether the foregoing Liabilities include obligations to perform acts and
refrain from taking actions as well as obligations to pay money. Without
limiting the foregoing, Liabilities specifically include Borrowers'
obligations evidenced by the Note.
LOAN AND SECURITY AGREEMENT-PAGE 4
1.12 "LOAN" shall mean the loan from Bank to Borrowers, executed
this date, in the amount of the Note.
1.13 "NET WORTH" shall mean Borrowers' net worth on a Combined
Basis, calculated in accordance with generally accepted accounting principles
consistently applied.
1.14 "NOTE" shall mean the Revolving Promissory Note of even date
herewith in the original principal amount of $4,500,000.00 executed by
Borrowers for the benefit of Bank.
1.15 "PERMANENT PLACEMENT ACCOUNT" shall mean an Account which
arises from the placement of an employee with an employer with the
expectation that the employment will continue indefinitely or until either
the employer or employee wishes to sever the relationship.
1.16 "PROCEEDS" shall mean all forms of payment received by or due
to the applicable Borrowers from the collection of Accounts or performance of
services or sale, lease, exchange, collection, or other disposition of
inventory or other property constituting Collateral hereunder and any and all
claims against any third party for loss or damage to any Collateral,
including insurance claims, and further, without limiting the generality of
the foregoing, Proceeds shall include all Accounts, checks, cash, money
orders, drafts, chattel paper, instruments, notes, or other documents
evidencing payment obligations to the applicable Borrowers for sale or
exchange of Collateral.
1.17 "TANGIBLE NET WORTH" shall mean Borrowers' Net Worth on a
Combined Basis plus all debt of Borrowers on a Combined Basis to its
subordinated creditors that are expressly and validly subordinated to the
Liabilities pursuant to documents in form and substance acceptable to Bank,
LESS (i) any and all loans and other advances to affiliates, subsidiaries,
parent, employees, officers, stockholders, directors, or other related
entities; (ii) notes, notes receivable, accounts, accounts receivable,
inter-company receivable, and other amounts owing from another Borrowers,
affiliates, subsidiaries, parent, employees, officers, stockholders,
directors, or other related entities; (iii) treasury stock, good will,
trademarks, trade names, patents, and deferred charges; and (iv) any and all
other intangible assets; calculated in accordance with generally accepted
accounting principles consistently applied.
1.18 DEFINITIONS. Any terms used to describe Bank's security
interest hereunder not specifically defined herein shall have the meaning and
definition given those terms under the Texas Business and Commerce Code as in
effect from time to time.
SECTION 2. BORROWERS' REPRESENTATIONS, WARRANTIES, AND COVENANTS.
To induce the Bank to enter into this Agreement, the Borrowers
represent, warrant, and covenant as follow:
2.1 Each of Borrowers (a) is a duly organized corporation, which is
validly existing and in good standing under the laws of the state of its
incorporation, (b) is duly qualified and in
LOAN AND SECURITY AGREEMENT-PAGE 5
good standing (and will remain so qualified and in good standing) in every
state in which it is doing business or in which the failure so to qualify
would or could have an adverse effect on its business or properties or Bank,
and (c) has all necessary corporate power and authority to own its assets and
conduct its business as now conducted or presently proposed to be conducted.
2.2 The execution, delivery, and performance hereof and of all other
agreements or instruments contemplated hereby are within each of Borrowers'
corporate powers, have been duly authorized, and are not in contravention of
the law or the terms of Borrowers' articles of incorporation, bylaws, or
other incorporation papers. The execution, delivery, and performance hereof
and of all other agreements or instruments contemplated hereby are not in
contravention of any indenture, agreement, or undertaking to which each of
the Borrowers is a party or by which they or any of their properties is
bound. This Agreement, the Note, and all other agreements and instruments
executed by each of the Borrowers in connection herewith have been validly
executed and delivered by each, as applicable, and constitute legal, valid,
and binding obligations of Borrowers enforceable against it accordance with
their respective terms, except as limited by applicable bankruptcy,
insolvency, reorganization, moratorium, or similar laws at the time in effect
affecting the rights of creditors generally.
2.3 Except for the security interest granted hereby or by any other
document executed in favor of Bank, the applicable Borrower is and, as to
Accounts, Inventory, and Collateral arising or to be acquired after the date
hereof, shall be the sole and exclusive owner of the Accounts, and each and
every other item of Collateral free from any lien, security interest, or
encumbrance, and each of the Borrowers shall defend its Accounts, and each
and every other item of Collateral and all Proceeds and products thereof
against all claims and demands of all persons at any time claiming the same
or any interest therein adverse to the Bank.
2.4 Each of Borrowers will promptly pay all taxes or charges levied
on or with respect to the Collateral, and will at all times keep the
Accounts, and each and every other item of Collateral free and clear of all
liens, claims, charges, security interests, and encumbrances whatsoever,
other than the security interest granted hereby or by any other document
executed in favor of Bank. Each of Borrowers agrees to take all actions that
the Bank may request to establish and maintain a valid security interest in
the Accounts, and each and every other item of Collateral, free and clear of
all other liens, claims, charges, security interests, and encumbrances
whatsoever. If such taxes or other assessments remain unpaid after the date
fixed for the payment of same, or if any lien, charge, claim, security
interest, or encumbrance shall arise, or be claimed or asserted with respect
to the Accounts, or any other item of Collateral, the Bank may, without
notice to the Borrowers, pay such taxes, assessments, charges, or claims, and
take any and all other actions (including the payment of money) deemed
desirable by the Bank to remove any such lien, charge, claim, security
interest, or encumbrance, and Borrowers agrees that the amounts thereof shall
be charged to the Borrowers' Loan Account created hereby and shall bear
interest at the rate of interest then borne by the Borrowers' obligations
under the Note. Not withstanding the other provisions of this Section 2.4,
nothing herein shall require the payment or discharge of any such taxes or
assessments so long as the applicable Borrowers (a) shall, in good faith, and
at its own expense, contest the same or the validity thereof by appropriate
legal
LOAN AND SECURITY AGREEMENT-PAGE 6
proceedings diligently pursued; and (b) shall, at the Bank's option, post a
bond or provide other security deemed equivalent by the Bank to cover or
secure payment of such taxes or assessments.
2.5 Each of Borrowers will not sell, transfer, lease, otherwise
dispose of, or suffer to exist any lien, charge, claim, security interest, or
encumbrance (except for those in favor of the Bank) with respect to any of
the Collateral or any interest therein (or any of the Proceeds thereof,
whether money, checks, money orders, drafts, notes, instruments, documents,
chattel paper, Accounts, returns, or repossessions), without the Bank's prior
written consent.
2.6 At the time any Account becomes subject to a security interest
in favor of the Bank, said Account shall be a good and valid Account
representing an undisputed, bona fide indebtedness incurred by the Account
Debtor named therein, for merchandise held subject to delivery instructions
or theretofore shipped or delivered pursuant to a contract of sale, or for
services theretofore performed by the applicable Borrower with or for said
Account Debtor; there shall be no set-offs, counterclaims, or disputes
against any such Account except as indicated in some written list, statement,
or invoice furnished to the Bank with reference thereto; and the applicable
Borrower shall be the lawful owner of all such Accounts and shall have good
right to subject the same to a security interest in favor of Bank. No such
Account shall be sold, assigned, or transferred to any person other than the
Bank or in any way encumbered except to the Bank, and the applicable Borrower
shall defend the same against the lawful claims and demands of all persons.
If any Account shall be in violation of any one or more of the warranties
expressed in this section, it shall not be deemed an Eligible Account for
purposes of this Agreement.
2.7 At the time Borrowers pledge, sell, assign, or transfer to the
Bank any instrument, document of title, security, chattel paper, or other
property, or any interest therein, the applicable Borrower shall be the
lawful owner thereof and shall have good right to pledge, sell, assign, or
transfer the same; none of such property shall have been pledged, sold,
assigned, or transferred to any person other than the Bank or in any way
encumbered, and the applicable Borrower shall defend the same against the
lawful claims and demands of all persons.
2.8 Set forth on EXHIBIT A is a list of each office of the Borrowers
at which records of the Borrowers pertaining to Accounts are kept and of
Borrowers' chief executive office. Borrowers shall give sixty (60) days
advance written notice to Bank of any change in any such office or other
location, and, prior to making such change, the Borrowers agree to execute
any additional financing statements or other documents or notices that Bank
may require.
2.9 Subject to any limitations stated therein or in connection
therewith, (a) all balance sheets, earnings statements, and other financial
data which have been or may hereafter be furnished to the Bank to induce it
to enter into this Agreement, or otherwise furnished in connection herewith,
do or shall fairly represent the financial condition and results of
operations of Borrowers (or other entity, as applicable), as of the dates and
for the periods for which the same are furnished, in accordance with
generally accepted accounting principles consistently applied, (b) all
balance sheets, income statements and other financial data of the other
Borrowers which have been or may hereafter be furnished to the Bank do or
shall fairly represent the
LOAN AND SECURITY AGREEMENT-PAGE 7
financial condition of such Borrowers as of the date and for the period for
which the same are furnished, and (c) all other information, reports, and
other papers and data furnished to the Bank shall be accurate, as of the
relevant date, and correct in all material respects and complete insofar as
completeness may be necessary to give the Bank a true and accurate knowledge
of the subject matter.
2.10 Except as specifically disclosed by the Borrowers to the Bank
in EXHIBIT B, there are no actions, suits, or proceedings pending or, to the
knowledge of the Borrowers, threatened against the Borrowers at law, or in
equity, or by or before any governmental department, commission, board,
bureau, agency, or instrumentality, or any arbitrator, that are not at least
eighty percent (80%) covered by insurance or which involve in the aggregate
as to any one Borrower more than Twenty Five Thousand Dollars ($25,000.00).
2.11 Borrowers are not engaged in the business of extending credit
for the purpose of purchasing or carrying "margin" stock within the meaning
of Regulation U of the Board of Governors of the Federal Reserve System (12
C.F.R. Part 221), as amended from time to time ("Regulation U"). Funds
borrowed pursuant to this Agreement shall not be used for the purpose,
whether immediate, incidental, or ultimate, of purchasing or carrying within
the meaning of Regulation U, any "margin stock" as defined therein, except
with Bank's prior written consent.
2.12 Prior to the execution of this Agreement, each of the Borrowers
is solvent, having assets of a value that exceeds the amount of its or his
respective liabilities. Taking into consideration the considerable value of
the Collateral securing the Liabilities directly incurred by Borrowers, and
the satisfactory value of the rights of subrogation and contribution that
each of Borrowers would enjoy in the event it is required to satisfy the
obligations of another Borrower hereunder, each of Borrowers reasonably
anticipates that it will be able to meet its debts as they mature. Borrowers
have adequate capital to conduct the business in which they are engaged. The
acceptance by Borrowers of advances hereunder shall be deemed to be a
representation and warranty to Bank that each of Borrowers is solvent at the
time of such advance, and otherwise that the representations and warranties
of Borrowers in this Agreement are true and correct as if made again on the
date of such advance.
2.13 Neither this Agreement, nor any document, certificate, or
statement furnished to the Bank by or on behalf of the Borrowers pursuant to
or in connection with this Agreement contains any untrue statement of a
material fact or omits to state a material fact necessary to make the
statements contained herein and therein not misleading. There is no fact
known to the Borrowers that materially and adversely affects, or will
materially and adversely affect, the assets, business, operations, or
condition of the Borrowers that has not been specifically set forth in this
Agreement or otherwise disclosed by the Borrowers to the Bank in writing.
2.14 Borrowers will give Bank thirty (30) days prior written notice
of any change of any of Borrowers' name and will execute and deliver to Bank
all financing statement amendments and other documents requested by Bank
prior to such name change becoming effective.
LOAN AND SECURITY AGREEMENT-PAGE 8
2.15 On or prior to September 30, 1999, Borrowers shall have taken
all action necessary to ensure that the automated systems used by Borrowers
that are material to its operation shall operate properly and process data
accurately, including dates before, as of and after December 31, 1999
(collectively "Year 2000 Compliance"). Borrowers agree that upon the
reasonable request of Lender, Borrowers will make its employees, consultants,
premises, records and documentation available to Lender with respect to
Borrowers' Year 2000 Compliance efforts.
SECTION 3. BANK'S AGREEMENT TO MAKE LOAN.
3.1 Subject to the terms and conditions of this Agreement, and so
long as no Event of Default or event which with notice or the passage of time
would constitute an Event of Default, as defined below or under any other
document or instrument executed in connection herewith shall have occurred or
be continuing:
(a) From the date hereof until June 30, 2000, or such future
date to which the expiration date of the Note may be extended
(the "Revolving Line Termination Date"), the Bank agrees to
extend to Borrowers an open-end credit line on the basis of
the following advance formula (such advance formula being
hereinafter referred to as the "Borrowing Base"):
(i) eighty percent (80%) of the value of Borrowers' Eligible
Accounts, other than Eligible Accounts that are accounts
for permanent placements, plus
(ii) seventy percent (70%) of the value of Borrowers' Eligible
Accounts that are accounts for permanent placements.
provided, however, that in no event shall the aggregate sum
of all advances made by the Bank to Borrowers under the
Revolving Line exceed the Revolving Line Limit as set forth
in Subsection 3.1(b). Within such limits, the Borrowers may
borrow, repay, and reborrow hereunder, from the date of this
Agreement until the Revolving Line Termination Date.
(b) In no event shall the aggregate amount advanced to Borrowers
under the Revolving Line exceed Four Million Five Hundred
Thousand Dollars ($4,500,000.00) at any one time outstanding
(the "Revolving Line Limit").
3.2 All borrowings under the Revolving Line shall be evidenced by
the Note and by entering such advances as debits to Borrowers' Loan Account.
Bank also shall record in Borrowers' Loan Account other charges, expenses,
and items properly chargeable to Borrowers hereunder, all payments made by
such Borrowers on account of its indebtedness hereunder, and other
appropriate debits and credits. The debit balance of Borrowers' Loan Account
shall reflect the amount of Borrowers' indebtedness under the Revolving Line
from time to time hereunder.
LOAN AND SECURITY AGREEMENT-PAGE 9
Notwithstanding the foregoing, no failure by Bank to properly reflect any
advance actually made or any such charge, expense, or item actually incurred
in Borrowers' Loan Account shall relieve Borrowers from its true and correct
obligations with respect thereto. At least once each month, Bank shall render
a statement of account for Borrowers' Loan Account. Each such statement shall
be considered correct and accepted by the Borrowers and conclusively binding
upon Borrowers except to the extent that Bank receives a written notice of
Borrowers' exceptions within thirty (30) days after such statement has been
mailed by ordinary mail to Borrowers.
3.3 If at any time the sum of the outstanding balance of the
Borrowers' Loan Account exceeds the lesser of (i) its Borrowing Base or (ii)
Revolving Line Limit, then Borrowers shall remit to Bank immediately good
funds sufficient to eliminate such excess. If Borrowers fail to remit to Bank
good funds sufficient to eliminate such excess within such time period, Bank
may, without further notice to or demand on Borrowers, at Bank's option (in
addition to and without waiving any and all other rights and remedies of
Bank) apply against such excess (x) any collections on and Proceeds from
Accounts Receivable forwarded to Bank and/or in Bank's possession; (y) any
other property of Borrowers and the Proceeds thereof now or hereafter held by
Bank (whether for safekeeping, custody, pledge, transmission, collection or
otherwise); and (z) Borrowers' deposit balances (general or special) and
credits with Bank. Borrowers shall repay to the Bank on the Revolving Line
Termination Date the aggregate amount in Borrowers' Loan Account at the close
of business on the Revolving Line Termination Date.
3.4 In the event that the availability of advances expires by the
terms of this Agreement, or by the terms of any agreement extending the
expiration date of this Agreement, Bank may, in its sole discretion, make
requested advances; however, it is expressly acknowledged and agreed that, in
such event, Bank shall have the right, in its sole discretion, to decline to
make any requested advance and may require payment in full of Borrowers' Loan
Account without prior notice to Borrowers and the making of any such advances
shall not be construed as a waiver of such right by Bank.
3.5 The Borrowers shall pay interest on the principal amount of the
Revolving Line from time to time at a per annum interest rate set forth in
the Note, but in no event shall the interest rate exceed the Maximum Rate.
All payments of principal and interest that are past due shall, at the option
of Bank, bear interest at a per annum interest rate equal to the Default Rate.
3.6 All funds borrowed under the Revolving Line shall be used for
working capital and general corporate purposes; however, no more than
$3,000,000.00 may be borrowed on the Revolving Line to fund the cost of
repurchasing registered stock of Diversified Corporate Resources, Inc. or to
fund acquisitions of third parties. Notwithstanding the foregoing, no
borrowings shall be made under the Revolving Line for the purpose of
acquiring a third party, without the prior written consent of the Bank, which
consent may be withheld in Bank's sole discretion.
3.7 In addition to interest accruing on the Revolving Note and to
compensate Bank for maintaining funds available under the Revolving Line,
Borrowers shall pay to Bank on
LOAN AND SECURITY AGREEMENT-PAGE 10
July 1, 1999 and on the first (1st) day of each third calendar month
thereafter, through and including the Revolving Line Termination Date, a
commitment fee in the amount of one-quarter percent (1/4%) per annum
calculated on the basis of a year of 360 days on the average daily amount of
the Available Commitment during the preceding three month period (except that
with respect to the fee due on July 1, 1999, such fee shall be calculated for
the period beginning on the date of this Agreement through July 1, 1999, and
with respect to the fee due on the Revolving Line Termination Date, such fee
shall be calculated from the end of the prior period through the Revolving
Line Termination Date. "Available Commitment" shall mean at any time an
amount equal to $4,500,000.00 minus the outstanding principal balance of the
Revolving Note at such time.
Nothing in this Section shall be deemed to extend the duration of
the Loans beyond the times noted in Section 14 hereof.
SECTION 4. INSPECTION OF RECORDS; FURTHER ASSURANCE.
4.1 The Borrowers shall, prior to the funding of the Loan and on a
quarterly basis thereafter, allow the Bank, by or through any of its
officers, agents, employees, attorneys, or accountants (i) to examine,
inspect, or make extracts from the Borrowers' books and records; (ii) to
analyze financial statements; and (iii) to arrange for verification of
Accounts under reasonable procedures, directly with Account Debtors or by
other methods (all the foregoing collectively referred to as "Audits").
Audits by the Bank may be at any time during normal business hours, following
the giving by Bank to Borrowers of five (5) days advance notice, unless an
Event of Default or event which with notice or passage of time would
constitute an Event of Default has occurred, in which event the Audits may be
without prior notice to Borrowers. The Borrowers shall pay Bank an annual
audit fee determined by Bank in its reasonable discretion, which shall not
exceed $1,500.00 per year.
4.2 Each of Borrowers shall do, make, execute and deliver all such
additional and further acts, things, deeds, assurances and instruments which
the Bank may require more completely to vest in and assure to the Bank its
rights hereunder or in any Collateral.
SECTION 5. SECURITY INTEREST OF BANK IN COLLATERAL.
5.1 As security for the payment and performance of all Liabilities,
the Bank shall have and is hereby granted a continuing lien on, a security
interest in and a right of set-off against the following Collateral:
(a) all Accounts of the Borrowers, whether now or hereafter
existing, created, arising or acquired;
(b) all general intangibles of the Borrowers, whether now or
hereafter existing, created, arising, or acquired;
LOAN AND SECURITY AGREEMENT-PAGE 11
(c) all books and records now owned and hereafter acquired relating
to any other Collateral and all files, correspondence, computer
programs, tapes, disks and related data processing software owned
by any of Borrowers or in which any of Borrowers has an interest
that contains information concerning or relating to any of the
other Collateral or any item thereof; and
(d) all Proceeds and products of all of the foregoing, including,
without limitation, insurance proceeds.
No submission by the Borrowers to the Bank of any schedule or other
particular identification of Collateral shall be necessary to vest in the
Bank a security interest in each and every item of Collateral now existing or
hereafter acquired, but rather, such security interest shall vest in the Bank
immediately upon the creation or acquisition of any item of Collateral,
without the necessity for any other or further action by the Borrowers or the
Bank.
5.2 To the extent applicable, the Texas Business and Commerce Code
governs the security interests provided for herein. In connection therewith,
the Borrowers shall take such steps and execute and deliver such financing
statements and other papers as the Bank may from time to time request.
5.3 If, by reason of location of Collateral or otherwise, the
creation, validity, or perfection of security interests provided for herein
are governed by the law of a jurisdiction other than Texas, the Borrowers
shall take such steps and execute and deliver such papers as the Bank may
from time to time request to comply with the Uniform Commercial Code, the
Uniform Trust Receipts Act, the Factors Lien Act, the Federal Food Security
Act, or other laws of other states or jurisdictions. Borrowers hereby appoint
and empower Bank, or any employee of Bank which Bank may designate for the
purpose, as attorney-in-fact, to execute on its behalf any financing
statements which, in Bank's sole judgment, are necessary to be filed in order
to perfect or preserve the perfection of Bank's security interests granted
hereby.
5.4 The Borrowers shall not sell (except as expressly permitted in
this Agreement), assign, pledge, mortgage, or create or suffer to exist a
security interest in any Accounts, Inventory, other Collateral, or any
Proceeds or products thereof in favor of any person other than the Bank.
SECTION 6. COLLECTION OF ACCOUNTS.
6.1 (a) Until Borrowers are notified by Bank to the contrary,
Borrowers shall have the right to collect Accounts and
deposit proceeds received from Account Debtors in operating
accounts of Borrowers maintained at the Bank.
(b) Following the occurrence of an Event of Default or event
which following notice or the passage of time would constitute
an Event of Default, the Bank may, at its option, notify
Borrowers that Borrowers must immediately establish Remittances
LOAN AND SECURITY AGREEMENT-PAGE 12
Accounts at the Bank. Thereafter, Borrowers and
the Corporate Borrowers shall notify the Bank of such
collections as are received pursuant to the provisions of
Section 7.1 below and shall hold the proceeds received from
collection in trust for the Bank without commingling the same
with other funds of the Borrowers and shall turn the same over
to the Bank immediately upon receipt in the identical form
received. Proceeds so transmitted to the Bank may be handled
and administered in and through remittance or special
accounts; the maintenance of any such accounts shall be solely
for the convenience of the Bank, and Borrowers shall not have
any right, title, or interest in or to any such accounts or in
the amounts at any time appearing to the credit thereof.
(c) Bank may following notice to Borrowers apply against the
outstanding balance of Borrowers' Loan Account from time to
time any collections on and Proceeds from Accounts Receivable
forwarded to Bank and/or in Bank's possession (including,
without limitation, any such collections and Proceeds in any
lock-box, remittance accounts or any operating or other
account maintained or to be maintained by or for Borrowers at
Bank). Nothing herein shall be deemed to diminish or limit any
of Bank's rights or remedies under applicable law or Section
3.3, Section 10, Section 11, or any other Section of this
Agreement or otherwise. If no Event of Default has occurred or
is continuing hereunder and if there is no excess outstanding
balance in Borrowers' Loan Account required to be paid by
Borrowers under Section 3.3 hereof, Bank may, at its option,
deposit any or all collections on and Proceeds from Accounts
Receivable in Bank's possession into the applicable Borrowers'
operating account maintained and to be maintained at Bank.
Bank shall not be required to credit Borrowers' Loan Account
with the amount of any check or other instrument constituting
provisional payment until the Bank has received final payment
thereof at its office in cash or solvent credits accepted by
the Bank.
(d) Until the Bank requests that Account Debtors on accounts
of the Borrowers be notified of the Bank's security interest,
the applicable Borrowers shall continue to collect such
Accounts. The Borrowers shall, at the request of the Bank,
notify the Account Debtors of the security interest of the
Bank in any Account and shall instruct Account Debtors to
remit payments directly to Bank, and the Bank may itself, at
any time, so notify Account Debtors.
6.2 Borrowers agree that no court action or other legal proceeding
or garnishment, attachment, repossession of property, or any other attempt to
repossess any merchandise covered by an Account shall be attempted by the
Borrowers except by or under the direction of competent legal counsel.
Borrowers hereby agree to indemnify and hold the Bank harmless for any loss
or liability of any kind or character which may be asserted against the Bank
by virtue of any suit filed, process issued, or any repossession or attempted
repossession done or attempted by the Borrowers or by virtue of any other
endeavors which the Borrowers may make to collect any Accounts or repossess
any such merchandise.
LOAN AND SECURITY AGREEMENT-PAGE 13
SECTION 7. AFFIRMATIVE COVENANTS.
Until all indebtedness of Borrowers to Bank has been paid and all
Liabilities have been satisfied, Borrowers shall furnish or cause to be
furnished to Bank:
7.1 (a) As soon as available, and in any event within 90 days
following the end of Borrowers' fiscal year, an SEC Form 10-K
and an audited financial statement for Borrowers on a Combined
Basis, prepared by an independent certified public accountant
acceptable to Bank, showing the financial condition of
Borrowers at the close of such fiscal year and the results of
operations during such fiscal year, which financial statements
shall be materially complete and correct, prepared in
accordance with GAAP, and shall include, but shall not be
limited to, an operating statement, an income statement, a
balance sheet, a reconciliation of equity amounts, a source
and application of funds report, and such other matters as
Bank may reasonably request.
(b) As soon as available, and in any event within 30 days after
the filing thereof, a copy of the federal income tax returns
of Borrowers and all requests for extensions to the filing
thereof.
(c) As soon as available, and in any event within 45 days
following the end of each fiscal quarter, an SEC Form 10-Q and
internally prepared financial statements for Borrowers on a
Combined Basis, signed by a duly authorized representative,
and showing the results of operations during such quarter,
which statements shall include, but shall not be limited to,
an operating statement, an income statement, a balance sheet,
profit and loss statement, and such other matters as Bank may
reasonably request.
(d) As soon as available and in any event within 45 days from the
end of each fiscal quarter, a Compliance Certificate in form
approved by Bank for the fiscal quarter having then ended.
(e) As soon as available, and in any event within 30 days
following the end of each calendar month, reports
(including agings) in form acceptable to Bank of the
combined accounts receivable of Borrowers as of the last
day of the immediately preceding calendar month, and the
period of time which has elapsed with respect to such
accounts receivable and accounts payable since the invoice
date with respect thereto; provided however, that reports
required under this subparagraph may be deferred until 30
days following the end of each fiscal quarter if, as of
the due date of such report, no principal is then
outstanding under the Note and all accrued interest and
other charges are then paid in full.
LOAN AND SECURITY AGREEMENT-PAGE 14
(f) Together with each request for an advance, or if not
previously furnished, within thirty (30) days following the
end of each calendar month, a Borrowing Base Report in form
approved by Bank, and if request by Bank, with copies of
invoice register/sales journal, cash receipts journal and
other supporting documentation, as of the last day of the
immediately preceding calendar month signed by an authorized
officer of Borrowers; provided however, that reports required
under this subparagraph may be deferred until 30 days
following the end of each fiscal quarter if, as of the due
date of such report, no principal is then outstanding under
the Note and all accrued interest and other charges are then
paid in full.
(g) if requested by the Bank, monthly, within thirty (30) days
following the end of each calendar month, a report
reflecting the amount of all deposits to operating
accounts, Remittances Accounts (as defined below), if
applicable, and other accounts of Borrowers, together with
the Accounts and amounts thereof with respect to which
deposits were made; provided however, that the Bank may,
following the occurrence of an Event of Default or event
which following notice or the passage of time would
constitute an Event of Default, at its option, require
Borrowers to establish a remittances account maintained by
and in the name of the Bank (the "Remittances Account")
for the deposit of each and every remittance with respect
to the Accounts, and in such event, the Borrowers shall
provide contemporaneously with each and every remittance
with respect to the Accounts and upon each deposit of
funds to the Remittances Account to the Bank, a report
reflecting the amount of all such remittances, the
Accounts and amounts thereof with respect to which such
remittances were made.
(h) Such other documents, instruments, data, or information of any
type reasonably requested by Bank with respect to the accounts
receivable, collections, remittances and any other Collateral.
7.2 The Borrowers shall (a) maintain insurance in form, amount, and
substance acceptable to Bank including, without limitation, extended
multi-peril hazard, worker's compensation, and general liability insurance
written by companies reasonably acceptable to Bank upon all facets of its
business and its property, of such character and amounts as are usually
maintained by companies engaged in like business; (b) furnish to Bank, upon
request, a statement of the insurance coverage; (c) obtain other or
additional insurance promptly, upon request of Bank, to the extent that such
insurance may be available; and (d) cause Bank to be named as loss payee as
to any property constituting Collateral hereunder, pursuant to a loss payable
endorsement in form acceptable to Bank.
7.3 The Borrowers shall maintain with Bank their primary operating
and depository accounts ("Depository Accounts"), and Bank, at Bank's option,
may make all advances hereunder into Borrowers' Depository Accounts, and
Borrowers expressly agrees that Bank may, at Bank's option, debit against any
such Depository Accounts any and all sums, amounts, charges, and payments due
under or in connection with the Loans and/or the Note.
LOAN AND SECURITY AGREEMENT-PAGE 15
7.4 The Borrowers do and shall at all times comply with all present
and future laws, ordinances, rules, and regulations (of any governmental
authority or entity) applicable to, governing or affecting the Borrowers,
their operations, their property, the Collateral, or any part of any of the
foregoing, and shall immediately notify Bank of any and all alleged or
asserted violations of any such law, ordinance, or regulation.
7.5 Borrowers shall at the time of their first knowledge or notice
immediately notify Bank in writing of (i) the occurrence of any event or the
existence of any event, circumstance, or condition which constitutes or upon
notice or lapse of time would constitute an Event of Default under the terms
of this Agreement and (ii) any other information that may adversely affect in
any material manner the assets of Borrowers including, but not limited to,
the filing of any lawsuit against or involving Borrowers.
7.6 Borrowers shall defend, indemnify and hold harmless Bank of and
from any and all loss, cost, damage or expense, of every kind and nature,
including reasonable attorneys' fees, which Bank could or might incur by
reason of any violation of any laws by Borrowers or by any predecessors or
successors in title to any property of the Borrowers.
Nothing in this Section shall be deemed to extend the duration of
the Loans beyond the times noted in Section 14 hereof.
SECTION 8. NEGATIVE COVENANTS.
8.1 The Borrowers shall not create or permit the creation or
continuance of any lien, charge, encumbrance, or other interest upon any of
their property, except for liens (collectively, "Permitted Liens") (a) for
taxes, assessments or governmental charges not yet payable; (b) of landlords
and vendors arising in the ordinary course of business for sums not yet due;
(c) for purchase money security interests in vehicles and equipment properly
perfected; and (d) approved in advance in writing by Bank or listed on
EXHIBIT C attached hereto.
8.2 Without Bank's prior written consent, none of the Borrowers
shall borrow any money, or otherwise directly or indirectly incur
indebtedness, in an amount greater than $1 million in the aggregate, other
than for trade credit in the ordinary course of business, the existing
indebtedness listed on EXHIBIT C attached hereto and debt to its subordinated
creditors that is expressly and validly subordinated to the Liabilities
pursuant to documents in form and substance acceptable to Bank, and none of
the Borrowers shall guarantee, endorse, or assume, either directly or
indirectly, any indebtedness of any other corporation, person, or entity.
8.3 None of the Borrowers shall liquidate, or discontinue or
materially reduce its normal operations with intention to liquidate, and
shall not merge or consolidate with or into any corporation, partnership, or
other entity, or sell, lease, transfer, or otherwise dispose of all or any
substantial part of its assets, or any of its Accounts. None of the Borrowers
shall cause, allow, or suffer to occur a material change in the ownership,
nature, or management of the applicable
LOAN AND SECURITY AGREEMENT-PAGE 16
Borrowers or its business without the Bank's prior written consent. None of
the Borrowers will change its name or identity without notifying Bank of such
change in writing at least thirty (30) days prior to the effective date of
such change, and the applicable Borrowers will take all steps necessary prior
to any such change to maintain at all times the priority and validity of all
liens and security interests contemplated by this Agreement.
8.4 Diversified Corporate Resources, Inc. shall not declare, make or
pay any dividends, bonuses or other distributions to any shareholder or
affiliate upon their outstanding shares in excess of $1,000,000.00 in each
fiscal year.
8.5 Without Bank's prior written consent, Borrowers shall not make
in any calendar year capital expenditures or contracts for capital
expenditures together aggregating in excess of $2,000,000.00.
8.6 Borrowers shall not cause, allow, or suffer to occur their Net
Worth (on a Combined Basis) to be less than $8,900,000.00 at any time.
8.7 Borrowers and the Corporate Borrowers shall not cause, allow or
suffer to occur their Interest Coverage Ratio (on a Combined Basis) to be
less than 2.0 to 1.0.
Nothing in this Section shall be deemed to extend the duration of
the Loans beyond the times noted in Section 14 hereof.
SECTION 9. EVENTS OF DEFAULT; ACCELERATION.
Any or all of the liabilities of Borrowers to the Bank, including,
without limitation, the Note and the Liabilities, shall all be, at the option
of the Bank and notwithstanding any time or credit allowed by any instrument
evidencing a Liability, immediately due and payable without notice or demand,
and the obligation of the Bank to make advances hereunder shall immediately
cease and terminate upon the occurrence of any of the following, which shall
be considered Events of Default:
(a) default in the payment or performance, when due or payable, of
any Liability of Borrowers, or of any Liability or obligation of
any endorser, guarantor, or surety for any Liability of the
Borrowers to the Bank;
(b) failure by any of Borrowers to perform any act or obligation
imposed hereby, or in any other agreement to which Bank and any
Borrowers are parties, or any Borrower's failure to abide by the
terms of this Agreement, or any other document or instrument
executed in connection herewith, or in any other agreement to
which Bank and any Borrowers are parties and such failure
continues for fifteen (15) days following the giving of notice
thereof by Bank to Borrowers;
LOAN AND SECURITY AGREEMENT-PAGE 17
(c) failure of any of Borrowers to pay when due any taxes, including
without limitation federal income and FICA taxes and state and
local sales and property taxes, each with the appropriate taxing
authorities and as required by law;
(d) if any warranty or representation contained herein shall prove
false or misleading or if any of Borrowers, or any endorser,
guarantor, or surety for any Liability of the Borrowers to the
Bank makes any other misrepresentation to the Bank for the
purpose of obtaining credit or any extension of credit;
(e) failure of any of Borrowers, or any endorser, guarantor, or
surety for any Liability of the Borrowers to the Bank, after
request by the Bank, to furnish financial information or to
permit the inspection of the books or records or Collateral of
Borrowers, endorser, guarantor, or surety for any Liability of
the Borrowers to the Bank;
(f) issuance of an injunction or attachment against property of any
of the Borrowers;
(g) calling of a meeting of creditors, appointment of a committee of
creditors or liquidation agents, or offering of a composition or
extension to creditors by, for or of any of Borrowers, or any
endorser, guarantor, or surety for any Liability of the
Borrowers to the Bank;
(h) bankruptcy or Insolvency of any of Borrowers or of any endorser,
guarantor, or surety for any Liability of the Borrowers to the
Bank;
(i) any material change in the nature or executive management of any
of Borrowers or its business without the prior written consent
of the Bank;
(j) any of Borrowers' failure to maintain any insurance required
hereunder or pay any premium on (i) any insurance policy
assigned to the Bank, or (ii) any insurance covering any
Collateral;
(k) fraud or misrepresentation by or on behalf of any of Borrowers
in its transactions with the Bank;
(l) violation of any affirmative or negative covenant recited in
Section 7 or Section 8 hereof or violation of or failure to
abide by any other provision of this Agreement;
(m) any default or event of default under the Note, or any other
document or agreement executed in connection herewith, or any
other document or agreement to which any of Borrowers and Bank
are parties;
(n) any endorser, guarantor, or surety for any Liability terminates
or attempts to terminate a guaranty or other agreement with
Bank, whether or not such
LOAN AND SECURITY AGREEMENT-PAGE 18
termination or attempted termination constitutes a breach under
such guaranty or other agreement;
(o) if a judgment against any of Borrowers remains unpaid, unstayed,
or undismissed for a period of more than ten (10) days;
(p) if any of Borrowers discontinues doing business for any reason;
or
(q) if any event occurs that, under any agreement to which any of
Borrowers is a party, grants the option to the holder of
indebtedness of such Borrower to accelerate such indebtedness;
SECTION 10. POWER TO SELL OR COLLECT COLLATERAL; REMEDIES CUMULATIVE.
10.1 Upon the occurrence of any one or more of the above Events of
Default and at any time thereafter (such defaults not having been previously
cured), the Bank shall have, in addition to all other rights and remedies,
the remedies of a secured party under the Texas Business and Commerce Code
(regardless of whether the Uniform Commercial Code has been enacted in the
jurisdiction where rights or remedies are asserted), including, without
limitation, the right to take possession of the Collateral, and for that
purpose the Bank may, so far as the Borrowers can give authority therefor,
enter upon any premises on which the Collateral may be situated and remove
the same therefrom or take possession of same and store same on such premises
pending disposition under the terms of this Agreement or applicable law. The
Bank may require the Borrowers to assemble the Collateral and make it
available to the Bank at a place designated by the Bank which is reasonably
convenient to both parties. Unless the Collateral is perishable or threatens
to decline speedily in value or is to a type customarily sold on a recognized
market, the Bank shall give to the Borrowers at least five (5) days' written
notice of the time and place of any public sale of Collateral or of the time
after which any private sale or any other intended disposition is to be made,
which time period shall be deemed for all purposes to be commercially
reasonable. The Bank may, at any time in its discretion, transfer any
securities or other property constituting Collateral into its own name or
that of its nominee, and receive the income thereon and hold the same as
security for the Liabilities or apply it on principal or interest due on
Liabilities. Insofar as Collateral shall consist of Accounts, insurance
policies, instruments, chattel paper, choices in action, or the like, the
Bank may demand, collect, receipt for, settle, compromise, adjust, xxx for,
release, extend the time of payment, make allowances and adjustments,
foreclose, or realize upon Collateral as the Bank may determine, whether or
not Liabilities or Collateral are then due, and for the purpose of realizing
the Bank's rights therein, the Bank may receive, open, and dispose of mail
addressed to the Borrowers and endorse notes, checks, drafts, money orders,
documents of title, or other evidences of payment, shipment, or storage or
any form of Collateral on behalf of and in the name of the Borrowers.
10.2 No right, power, or remedy conferred in this Agreement, the
Note, or any other agreement executed in connection herewith or any other
document or agreement to which any of Borrowers and Bank are parties, or now
or hereafter existing at law, in equity, or admiralty, by
LOAN AND SECURITY AGREEMENT-PAGE 19
statute or otherwise, shall be exclusive, and each such right, power, or
remedy, shall, to the full extent permitted by law, be cumulative and in
addition to every other such right, power, or remedy.
10.3 The sale by Bank of less than the whole of the Collateral shall
not exhaust the rights of Bank hereunder, and Bank is specifically empowered
to make successive sales hereunder until the whole of the Collateral shall be
sold. If the proceeds of any sale of less than the whole of the Collateral
shall be less than the aggregate of the Liabilities, this Agreement and the
security interests created hereby shall remain in full force and effect as to
the unsold portion of the Collateral just as though no sale had been made,
provided, however, that the Borrowers shall never have any right to require
sale of less than the whole of the Collateral but Bank shall have the right,
at its sole election, to sell less than the whole of the Collateral.
10.4 Bank may resort to any security given by this Agreement or to
any other security now existing or hereafter given to secure the payment of
Borrowers' Liabilities, in whole or in part, and in such portions and in such
order as may seem best to Bank in its sole discretion, and any such action
shall not in any way be considered as a waiver of any of the rights,
benefits, or security interests evidenced by this Agreement.
10.5 Bank may, at all times, proceed directly against any of
Borrowers to enforce payment of Borrowers' Liabilities and shall not be
required first to enforce its rights in the Collateral or any other security
granted to it. Bank shall not be required to take any action of any kind to
preserve, collect, or protect Borrowers' rights in the Collateral or any
other security granted to it.
SECTION 11. DEPOSITS.
Bank, any participant, and any other holder of all or any part of
the Liabilities are hereby given a continuing lien as additional security for
all Liabilities hereunder upon any and all moneys, securities, and other
property of the Borrowers, and the Proceeds thereof, now or hereafter held or
received by or in transit to Bank, such participant, or such holder from or
for the Borrowers, whether for safekeeping, custody, pledge, transmission,
collection, or otherwise, and also upon any and all deposit balances (general
or special) and credits of the Borrowers with, and any and all claims of the
Borrowers against Bank, such participant, or such holder at any time
existing, and upon an event of default hereunder, Bank, such participant, or
such holder may apply or set off the same against the Liabilities and
indebtedness hereby secured, without notice and without liability. The
Borrowers agree that any other person or entity purchasing a participation
from Bank may exercise all its rights of payment (including the right of
set-off) with respect to such participation as fully as if such person or
entity was the direct creditor of the Borrowers in the amount of such
participation.
LOAN AND SECURITY AGREEMENT-PAGE 20
SECTION 12. WAIVERS.
Borrowers and each guarantor, accommodation party, surety, endorser,
or other person or entity liable for the payment or collection of the
Liabilities expressly waive demand, presentment for payment, notice of
protest, notice of intent to accelerate, notice of acceleration, notice of
acceptance of this Agreement, and notice of loans made, credit extended,
Collateral received or delivered, or other action taken in reliance hereon
and all other demands and notices of any description. With respect both to
the Liabilities and Collateral, the Borrowers consent to any extension or
postponement of the time of payment or any other indulgence, to any
substitution, exchange, or release of any or all of the Collateral, to the
addition or release of any party or person primarily or secondarily liable,
to the acceptance of partial payments thereon and the settlement,
compromising, or adjusting of any thereof, all in such manner and at such
time or times as the Bank may deem advisable. The Bank shall have no duty as
to the collection or protection of any or all of the Collateral or any income
thereon, nor as to the preservation of any rights pertaining thereto beyond
the safe custody of Collateral without resorting or regard to other
collateral or sources of reimbursement for the Liabilities. The Bank shall
not be deemed to have waived any of its rights upon or under any of the
Liabilities or Collateral unless such waiver be in writing and signed by the
Bank. No course of dealing and no delay or omission on the part of the Bank
in exercising any right shall operate as a waiver of such right or any other
right. A waiver on any one occasion shall not be construed as a bar to or
waiver of any right on any further occasion. All rights and remedies of the
Bank with respect to Liabilities or Collateral, whether evidenced hereby or
by any other instrument or paper, shall be cumulative and may be exercised
singly or concurrently.
SECTION 13. EXPENSES; PROCEEDS OF COLLATERAL.
Borrowers shall pay all expenses, including without limitation,
reasonable legal expenses, incurred by Bank from time to time in connection
with the preparation, administration, amendment or modification of this
Agreement, the Note, and other documents executed in connection with the
creation of the Loans and those associated with the perfection and creation
of the security interests granted pursuant hereto. The Borrowers shall pay to
the Bank on demand any and all expenses and costs of collection, including,
without limitation, reasonable counsel fees, incurred or paid by the Bank in
protecting or enforcing its rights upon or with respect to any of the
Liabilities or the Collateral. After deducting all of said expenses, the
residue of any proceeds of collection or sale of Liabilities or Collateral
shall be applied to the payment of principal or interest on Liabilities in
such order or preference as the Bank may determine, proper allowance for
interest on Liabilities not then due being made, and any excess shall be
returned to the Borrowers, and the Borrowers shall remain liable for any
deficiency.
SECTION 14. DURATION; EXTENSION.
The Revolving Line shall terminate on the Revolving Line Termination
Date; however, the parties recognize that they may wish to extend the
expiration date by mutual agreement. The termination or expiration of the
Revolving Line shall in no way affect any transactions entered
LOAN AND SECURITY AGREEMENT-PAGE 21
into or rights created or obligations incurred prior to such termination or
expiration; rather, such rights and obligations shall be fully operative
until the same are fully disposed of, concluded, and/or liquidated. Without
limiting the generality of the foregoing, such termination or expiration
shall not release nor diminish any of the Borrowers' obligations and
agreements hereunder until payment in full of all of the Liabilities under
this Agreement and all other sums and amounts payable under or pursuant to
this Agreement. This Agreement shall be a continuing agreement in every
respect. No modification or amendment of this Agreement or extension of the
Revolving Line Termination Date shall be effective unless placed in writing
and duly executed by Bank and Borrowers.
SECTION 15. GENERAL.
15.1 Any demand upon or notice to a party shall be effective upon
delivery if such notice is given personally, or upon dispatch if deposited in
the mails or delivered to a telegraph, wireless, or radio company addressed
to the other party at the mailing address shown below or, if a party has
notified the other party in writing of a change of address, to the party's
last address so notified. Demands or notices addressed to the Borrowers'
addresses at which the Bank customarily communicates with the Borrowers also
shall be effective.
IF TO BANK:
Compass Bank
P. O. Box 650561
Dallas, Texas 75265-0561
Attention: Xxxx X. Xxxxxxxx
IF TO BORROWERS:
Diversified Corporate Resources, Inc.
00000 X. Xxxxxxx Xxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: M. Xxx Xxxxxxx
Management Alliance Corporation
00000 X. Xxxxxxx Xxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: M. Xxx Xxxxxxx
Information Systems Consulting Corp.
00000 X. Xxxxxxx Xxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: M. Xxx Xxxxxxx
LOAN AND SECURITY AGREEMENT-PAGE 22
Texcel Services, Inc.
00000 X. Xxxxxxx Xxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: M. Xxx Xxxxxxx
Train International, Inc.
00000 X. Xxxxxxx Xxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: M. Xxx Xxxxxxx
Xxxxx Assessment and Performance Systems, Inc.
00000 X. Xxxxxxx Xxx., Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: M. Xxx Xxxxxxx
15.2 If at any time or times by assignment or otherwise the Bank
transfers any of the Liabilities (either separately or together with the
Collateral therefor), such transfer shall carry with it the Bank's powers and
rights under this Agreement with respect to the Liabilities and Collateral
transferred, and the transferee shall become vested with said powers and
rights whether or not they are specifically referred to in the transfer. If
and to the extent the Bank retains any other of the Liabilities or
Collateral, the Bank will continue to have the rights and powers herein set
forth with respect thereto.
15.3 This Agreement and all rights and obligations hereunder,
including matters of construction, validity, and performance, shall be
governed by the laws of the State of Texas, except that Finance Code, Section
346, of Vernon's Texas Codes Annotated, which regulates certain revolving
credit loan accounts and revolving tri-party accounts, shall not apply to
this Agreement, the Note, the Revolving Line, or any transaction contemplated
hereby. Unless changed in accordance with law, the applicable rate under
Texas law shall be the indicated rate ceiling from time to time in effect as
provided in Tex. Rev. Civ. Stat. Xxx. art. 5069-1D.001.
15.4 This Agreement is performable in Dallas County, Texas, and any
action brought for the enforcement or construction of any term of this
Agreement or any of the Notes or other instruments executed in connection
herewith shall be brought in a court of appropriate jurisdiction in Dallas
County, Texas.
15.5 It is the intention of the Bank and the Borrowers to conform
strictly to any applicable usury laws. Accordingly, if the transactions
contemplated hereby would be usurious under any applicable law, then, in that
event, notwithstanding anything to the contrary in this Agreement, the Note
or any other agreement or instrument entered into in connection with or as
security for or guaranteeing this Agreement or the Note, it is agreed as
follows: (i) the aggregate of all consideration that constitutes interest
under applicable law that is contracted for, taken, reserved, charged, or
received by the Bank under this Agreement, the Note, or under any other
agreement entered into in connection with or as security for or guaranteeing
this Agreement or
LOAN AND SECURITY AGREEMENT-PAGE 23
the Note shall under no circumstances exceed the Highest Lawful Rate (as
defined below), and any excess shall be canceled automatically and, if
theretofore paid, shall, at the option of the Bank, be credited by the Bank
on the principal amount of any indebtedness owed to the Bank by the Borrowers
or refunded by the Bank to the Borrowers, and (ii) in the event that the
maturity of the Note or any other of the Liabilities are accelerated or in
the event of any required or permitted prepayment, then such consideration
that constitutes interest under law applicable to the Bank may never include
more than the Highest Lawful Rate and excess interest, if any, provided for
in this Agreement or the Note or otherwise shall be canceled automatically as
of the date of such acceleration or prepayment and, if theretofore paid,
shall, at the option of the Bank, be credited by the Bank on the principal
amount of any indebtedness owed to the Bank by the Borrowers or refunded by
the Bank to the Borrowers.
15.6 Notwithstanding anything herein to the contrary, in no event
will interest payable to the Bank exceed the maximum amount permitted by the
law applicable to the Bank (after taking into account all charges payable to
the Bank that constitute interest under such applicable law), but if any
amount referred to in any of this Agreement, the Note, or any other agreement
or instrument to which Bank and the Borrowers are parties that would be
payable to the Bank but for the applicability of usury or other laws limiting
the consideration payable to the Bank is not paid to the Bank as a result of
the applicability of such laws, then interest on the outstanding principal
balance of the Liabilities payable to the Bank shall, to the extent permitted
by law, accrue at the Highest Lawful Rate (after taking into account all
charges payable to the Bank that constitute interest under applicable law)
until the total amount received by the Bank equals the amount it would have
received had no such laws been applicable.
15.7 "HIGHEST LAWFUL RATE" means the maximum non-usurious interest
rate (computed on the basis of a year of 365 or 366 days, as applicable) that
at any time or from time to time may be contracted for, taken, reserved,
charged or received on amounts due to the Bank, under laws applicable to the
Bank that are presently in effect or, to the extent allowed by law, under
such applicable laws which allow a higher maximum non-usurious rate than
applicable laws now allow.
15.8 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 Borrowers 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 Borrowers, their successors and assigns, and inures to the
benefit of Bank, its successors and assigns. All representations and
warranties of Borrowers herein, and all covenants and agreements herein or in
any document
LOAN AND SECURITY AGREEMENT-PAGE 24
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.
BORROWERS:
DIVERSIFIED CORPORATE RESOURCES,
INC., a Texas corporation
By:
-----------------------------------------
M. Xxx Xxxxxxx, President
MANAGEMENT ALLIANCE CORPORATION,
a Texas corporation
By:
-----------------------------------------
M. Xxx Xxxxxxx, Vice President
INFORMATION SYSTEMS CONSULTING
CORP., a Texas corporation
By:
-----------------------------------------
M. Xxx Xxxxxxx, Vice President
TEXCEL SERVICES, INC.,
a Pennsylvania corporation
By:
-----------------------------------------
M. Xxx Xxxxxxx, Vice President
LOAN AND SECURITY AGREEMENT-PAGE 25
TRAIN INTERNATIONAL, INC.,
a Texas corporation
By:
-----------------------------------------
M. Xxx Xxxxxxx, Vice President
XXXXX ASSESSMENT AND PERFORMANCE
SYSTEMS, INC., a Texas corporation
By:
-----------------------------------------
M. Xxx Xxxxxxx, Vice President
BANK:
COMPASS BANK
By:
-----------------------------------------
Xxxx X. Xxxxxxxx
Its: Senior Vice President
LOAN AND SECURITY AGREEMENT-PAGE 26
EXHIBIT A
Offices and Other Locations of Borrowers
1. Location(s) at which records regarding Accounts are kept:
2. Chief executive office:
EXHIBIT A TO LOAN AND SECURITY AGREEMENT - PAGE 1
EXHIBIT B
Actions, Suits & Proceedings
EXHIBIT B TO LOAN AND SECURITY AGREEMENT - PAGE 1
EXHIBIT C
Schedule of Certain Indebtedness and Leases
ATTACHED
EXHIBIT C TO LOAN AND SECURITY AGREEMENT - PAGE 1