Exhibit 10(h)
Execution
PLEDGE AND SECURITY
AGREEMENT
THIS PLEDGE AND
SECURITY AGREEMENT (“ Agreement
”) is made as of the 13 th day of August, 2008, by EQUUS
TOTAL RETURN, INC., Delaware corporation (hereinafter called
“Debtor”), whose place of business, and chief executive
office (as those terms are used in the Code) is located at 2727
Allen Parkway, Suite 1300, Houston, Texas 77019 and whose
organizational identification number issued by the appropriate
authority of the State of Delaware is 2271275, and whose federal
taxpayer identification number is 76-0345915, in favor of AMEGY
BANK NATIONAL ASSOCIATION, a national banking association
(“ Secured Party ”), whose address is 4400 Post
Oak Parkway, Houston, Harris County, Texas 77027, or at such other
address or addresses as Secured Party may from time to time
designate in writing to Debtor. Debtor hereby agrees with Secured
Party as follows:
1. Definitions . As used in
this Agreement, the following terms shall have the meanings
indicated below:
(a) The term “ Code
” shall mean the Texas Business and Commerce 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.
(b) The term “
Collateral ” shall mean (1) the Pledged
Securities, (2) all money this day delivered to and deposited
with Secured Party, and all money heretofore delivered or which
shall hereafter be delivered to or come into the possession,
custody or control of Secured Party representing proceeds of,
payment on, or distributions related to any of the Pledged
Securities during the existence of this Agreement or the Loan
Agreement, and whether held in a general or special account,
(3) any stock rights, rights to subscribe, liquidating
dividends, stock dividends, property, cash distributions, dividends
paid in stock, new securities, cash dividends or other property
which Debtor may hereafter become entitled to receive on account of
the Pledged Securities, (4) all Debtor’s rights, title
and interest in that certain custody account (Account No. EQU02505)
maintained with Secured Party, (5) all certificates,
instruments, records, data and/or other documents evidencing the
foregoing and following (including without limitation, any computer
software on which such records and data may be located),
(6) all renewals, replacements and substitutions of all of the
foregoing, (7) all Additional Property (as hereinafter
defined), and (8) all PRODUCTS and PROCEEDS of all of the
foregoing; provided that “Collateral” shall not
include any of the Excluded Assets. The designation of proceeds
does not authorize Debtor to sell, transfer or otherwise convey any
of the foregoing property. The delivery at any time by Debtor to
Secured Party of any property as a pledge to secure payment or
performance of any indebtedness or obligation in connection with
the Loan Documents shall also constitute a pledge of such property
as Collateral hereunder.
(c) The term “ Pledged
Securities ” means any and all investment property,
instruments, chattel paper and general intangibles owned by Debtor
from time to time,
including all notes receivable,
common and preferred stock, stock options, warrants, and other
investments which at any given time are included in Debtor’s
computation of Net Asset Value, except any of the foregoing that
are Excluded Assets, and shall include without limitation
(i) all publicly traded securities sold or issued by the
companies listed on Schedule 1 owned by Debtor and pledged to
Secured Party, including all income from, and all proceeds of, such
securities, and (ii) all of the privately held securities
issued or sold by the companies listed on Schedule 1 owned by
Debtor and pledged to Secured Party, including all income from, and
all proceeds of, such securities.
(d) The term “ Excluded
Assets ” means any assets which are held from time to
time in Account Number Z42-496693 maintained by Debtor with
fidelity Investments and any account that replaces such account,
and (iii) any other account in which assets are held to secure
RIC Borrowings (as defined in the Loan Agreement) in compliance
with Sections 7(d)(x) and 7(e)(iii) of the Loan
Agreement.
(e) The term “ Loan
Agreement ” means the Loan Agreement dated of even date
herewith between Debtor and Secured Party, together with all
amendments, restatements, and other modifications
thereto.
(f) The term “
Indebtedness ” shall mean (i) all indebtedness,
obligations and liabilities of Debtor to Secured Party of any kind
or character, now existing or hereafter arising under the Loan
Documents, whether direct, indirect, related, unrelated, fixed,
contingent, liquidated, unliquidated, joint, several or joint and
several, (ii) all accrued but unpaid interest on any of the
indebtedness described in (i) above, (iii) all
obligations of Debtor to Secured Party under any documents
evidencing, securing, governing and/or pertaining to all or any
part of the indebtedness described in (i) and (ii) above,
(iv) all costs and expenses payable by Debtor under
Section 18 of the Loan Agreement, and (v) all renewals,
extensions, modifications and rearrangements of the indebtedness
and obligations described in (i), (ii), (iii) and
(iv) above.
(g) The term “ Additional
Property ” means any of the following property which
Debtor becomes entitled to receive or shall receive in connection
with any other Collateral, except to the extent any of the
following constitutes Excludcd Assets: (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
spin-off; (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; and
(e) any conversion or redemption proceeds; provided, however,
that until the occurrence of an Event of Default, “Additional
Property” shall not include any cash dividends or interest
paid on the Collateral (except interest paid on any certificate of
deposit pledged hereunder).
(h) The term “ Loan
Documents ” shall have the meaning given such term in the
Loan Agreement.
(i) The term “ Net Asset
Value ” shall have the meaning given such term in the
Loan Agreement.
(j) The term “ Event of
Default ” shall have the meaning given such term in the
Loan Agreement.
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 for 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. Capitalized terms not otherwise defined
herein have the meanings specified in the Loan
Agreement.
2. Security Interest . As
security for the Indebtedness, Debtor, for value received, hereby
grants to Secured Party a continuing security interest in the
Collateral.
3. Additional Property . All
Additional Property received by Debtor shall be received in trust
for the benefit of Secured Party. All Additional Property and all
certificates or other written instruments or documents evidencing
and/or representing the Additional Property that is received by
Debtor, together with such instruments of transfer as Secured Party
may request, shall promptly be delivered to or deposited with
Secured Party or Secured Party’s bailee, (any such bailee,
together with its successors in such capacity, the “
Bailee ”) and held by Secured Party or Bailee as
Collateral under the terms of this Agreement. If the Additional
Property received by Debtor 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 reasonably requested
by Secured Party, signatures guaranteed by a bank or member firm of
the New York Stock Exchange, all in form and substance reasonably
satisfactory to Secured Party. Secured Party shall be deemed to
have possession of any Collateral in transit to Secured Party or
its agent.
4. Control Agreement; Stock
Power . Debtor agrees, at the request of the Secured Party, to
execute and to cause the Bailee to execute promptly a control
agreement whereby the Secured Party may direct the Bailee to follow
directives issued by Secured Party with respect to Collateral held
by Bailee. The Secured Party hereby agrees not to issue directives
or exercise any other rights under any such control agreement
unless an Event of Default has occurred and is continuing. Debtor
also agrees, at the request of the Secured Party, to execute
additional stock powers in blank in connection with any
certificates evidencing all or part of the Collateral.
5. Voting Rights . As long as
no Event of Default shall have occurred hereunder, any voting
rights incident to any stock or other securities pledged as
Collateral may be exercised by Debtor; provided, however, that
Debtor will not exercise, or cause to be exercised, any such voting
rights, without the prior written consent of Secured Party, if the
direct or indirect effect of such vote will result in an Event of
Default hereunder.
6. Maintenance of Collateral
. Other than the exercise of reasonable care to assure the safe
custody of any Collateral in Secured Party’s possession from
time to time, Secured Party does not have any obligation, duty or
responsibility with respect to the Collateral. Without
limiting the generality of the foregoing,
Secured Party 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
relating to the Collateral or informing Debtor with respect to any
such matters; (b) fix, preserve or exercise any right,
privilege or option (whether conversion, redemption or otherwise)
with respect to the Collateral unless (i) Debtor makes written
demand to Secured Party to do so, (ii) such written demand is
received by Secured Party in sufficient time to permit Secured
Party to take the action demanded in the ordinary course of its
business, and (iii) Debtor provides additional collateral,
acceptable to Secured Party in its sole discretion;
(c) collect any amounts payable in respect of the Collateral
(Secured Party being liable to account to Debtor only for what
Secured Party 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) Debtor makes written demand upon Secured Party to
sell the Collateral, and (ii) Debtor provides additional
collateral, acceptable to Secured Party in its sole discretion; or
(f) hold the Collateral for or on behalf of any party other
than Debtor.
7. Representations and
Warranties . Debtor hereby represents and warrants the
following to Secured Party:
(a) Authority . The
execution, delivery and performance of this Agreement and all of
the other Loan Documents by Debtor have been duly authorized by all
necessary corporate action of Debtor.
(b) Accuracy of Information .
All information heretofore, herein or hereafter supplied to Secured
Party by or on behalf of Debtor with respect to the Collateral is
true and correct. The exact legal name, organizational
identification number and federal taxpayer identification number of
Debtor are correctly shown in the first paragraph
hereof.
(c) Enforceability . This
Agreement and the other Loan Documents constitute legal, valid and
binding obligations of Debtor, enforceable in accordance with their
respective terms, except as limited by bankruptcy, insolvency or
similar laws of general application relating to the enforcement of
creditors’ rights and except to the extent specific remedies
may generally be limited by equitable principles.
(d) Ownership and Liens .
Debtor has good and marketable title to the Collateral free and
clear of all liens, security interests, encumbrances or adverse
claims, except for the security interests created by this Agreement
and the other Loan Documents and any security interests permitted
under Section 7(d)(ii) of the Loan Agreement. No dispute,
right of setoff, counterclaim or defense exists with respect to all
or any part of the Collateral. Debtor 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
Secured Party.
(e) No Conflicts or Consents
. Neither the ownership, the intended use of the Collateral by
Debtor, the grant of the security interest by Debtor to Secured
Party herein nor the exercise by Secured Party of its rights or
remedies hereunder, will (i) conflict with
any provision of (A) any
domestic or foreign law, statute, rule or regulation, (B) the
articles or certificate of incorporation or bylaws of Debtor, or
(C) any agreement, judgment, license, order or permit
applicable to or binding upon Debtor 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 Debtor
or of any person except as may be expressly contemplated in the
Loan Documents. Except as expressly contemplated in the Loan
Documents, no consent, approval, authorization or order of, and no
notice to or filing with, any court, governmental authority or
third party is required or deemed preferable in connection with the
grant by Debtor of the security interest herein or the exercise by
Secured Party of its rights and remedies hereunder.
(f) Security Interest .
Debtor has and will have at all times full right, power and
authority to grant a security interest in the Collateral to Secured
Party in the manner provided herein, free and clear of any lien,
security interest or other charge or encumbrance except any
security interests permitted under Section 7(d)(ii) of the
Loan Agreement. This Agreement creates a legal, valid and binding
security interest in favor of Secured Party in the
Collateral.
(g) Location/Identity .
Debtor’s place of business and chief executive office (as
those terms are used in the Code), as the case may be, is located
at the address set forth on the first page hereof. Except as
specified elsewhere herein, all Collateral and records concerning
the Collateral shall be kept at such address or held by Bailee.
Debtor’s organizational structure, state of organization, and
organizational number (the Organizational Information’) are
as set forth on the first page hereof. Borrower shall not change
its Organizational Information without complying with Section 15 of
this Agreement with respect to such change.
(h) Solvency of Debtor . As
of the date hereof, and after giving effect to this Agreement and
the completion of all other transactions contemplated by Debtor at
the time of the execution of this Agreement, (i) Debtor is and
will be solvent, (ii) the fair saleable value of
Debtor’s assets exceeds and will continue to exceed
Debtor’s liabilities (both fixed and contingent),
(iii) Debtor is paying and will continue to be able to pay its
debts as they mature, and (iv) if Debtor is not an individual,
Debtor has and will have sufficient capital to carry on
Debtor’s businesses and all businesses in which Debtor is
about to engage.
(i) Securities . Any
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 non-assessable, and were not issued in violation of the
preemptive rights of any party or of any agreement by which Debtor
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 Secured Party in
writing.
8. Affirmative Covenants .
Debtor will comply with the covenants contained in this Section at
all times during the period of time this Agreement is effective
unless Secured Party shall otherwise consent in writing.
(a) Ownership and Liens .
Debtor 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 Loan Documents. Debtor will not
permit any dispute, right of setoff, counterclaim or defense to
exist with respect to all or any part of the Collateral. Debtor
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 Secured Party or in
connection with a lien permitted under Section 7(d)(ii) of the
Loan Agreement. Debtor hereby irrevocably appoints Secured Party as
Debtor’s attorney-in-fact, such power of attorney being
coupled with an interest, with full authority in the place and
stead of Debtor and in the name of Debtor or otherwise, for the
purpose of terminating any financing statements currently filed
with respect to the Collateral except in connection with any lien
permitted under Section 7(d)(ii) of the Loan Agreement. Debtor
will defend at its expense Secured Party’s right, title and
security interest in and to the Collateral against the claims of
any third party except the holder of any lien permitted under
Section 7(d)(ii) of the Loan Agreement.
(b) Inspection of Books and
Records . Debtor will keep adequate records concerning the
Collateral and will permit Secured Party and all representatives
and agents appointed by Secured Party to inspect Debtor’s
books and records of or relating to the Collateral at any time
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 . Debtor
covenants and agrees to promptly notify Secured Party of any claim,
action or proceeding affecting title to the Collateral, or any part
thereof, or the security interest created hereunder and, at
Debtor’s expense, defend Secured Party’s security
interest in the Collateral against the claims of any third party.
Debtor also covenants and agrees to promptly deliver to Secured
Party a copy of all written notices received by Debtor with respect
to the Collateral, including without limitation, notices received
from the issuer of any securities pledged hereunder as
Collateral.
(d) Further Assurances .
Debtor will contemporaneously with the execution hereof and from
time to time thereafter at its expense promptly execute and deliver
all further instruments and documents and take all further action
necessary or appropriate or that Secured Party may reasonably
request in order (i) to perfect and protect the security
interest creat
