Exhibit 10(o)

 

[GRAPHIC APPEARS HERE]

 

PLEDGE AND SECURITY AGREEMENT

 

THIS PLEDGE AND SECURITY AGREEMENT (“Agreement”) is made as of the 15th day of
March, 2004, by EQUUS II INCORPORATED, a Delaware corporation (hereinafter
called “Debtor,”), whose place of business, and chief executive office (as those
terms are used in the Code) is located at 2929 Allen Parkway, Suite 2500,
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 THE FROST NATIONAL
BANK, a national banking association (“Secured Party”), whose address is P.O.
Box 1600, San Antonio, Texas 78296. 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 “Obligor” shall mean Debtor.

 

(b) 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.

 

(c) The term “Collateral” shall mean 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 (hereinafter collectively called the “Pledged
Securities”); however neither the Collateral, nor Debtor’s Net Asset Value,
shall include any of the foregoing items which are held from time to time in
Account Number VB 01383 98 maintained by Debtor with UBS Financial Services,
Inc. or in Account Number Z42-496693 maintained by Debtor with Fidelity
Investments. “Collateral” as used in this Agreement, includes the Pledged
Securities and, without limitation, (1) 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, together with (2)
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 Collateral and (3) all Debtor’s rights, title and
interest in that certain custody account (Account No. 1000308) maintained with
Secured Party, (4) 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

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located), (5) all renewals, replacements and substitutions of all of the
foregoing, (6) all Additional Property (as hereinafter defined), and (7) all
PRODUCTS and PROCEEDS of all of the foregoing. 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
whatsoever shall also constitute a pledge of such property as Collateral
hereunder.

 

(d) The term “Loan Agreement” means the Loan Agreement dated as of March 15,
2004, between Debtor and Secured Party, together with all amendments and
restatements thereto.

 

(e) The term “Indebtedness” shall mean (i) all indebtedness, obligations and
liabilities of Obligor to Secured Party of any kind or character, now existing
or hereafter arising, whether direct, indirect, related, unrelated, fixed,
contingent, liquidated, unliquidated, joint, several or joint and several, and
regardless of whether such indebtedness, obligations and liabilities may, prior
to their acquisition by Secured Party, be or have been payable to or in favor of
a third party and subsequently acquired by Secured Party (it being contemplated
that Secured Party may make such acquisitions from third parties), including
without limitation all indebtedness, obligations and liabilities of Obligor to
Secured Party now existing or hereafter arising by note, draft, acceptance,
guaranty, endorsement, letter of credit, assignment, purchase, overdraft,
discount, indemnity agreement or otherwise, including, without limitation that
one certain promissory note dated March 15, 2004, in the original principal
amount of $6,500,000.00 executed by Obligor and payable to the order of Secured
Party, (ii) all accrued but unpaid interest on any of the indebtedness described
in (i) above, (iii) all obligations of Obligor 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
incurred by Secured Party in connection with the collection and administration
of all or any part of the indebtedness and obligations described in (i), (ii)
and (iii) above or the protection or preservation of, or realization upon, the
collateral securing all or any part of such indebtedness and obligations,
including without limitation all reasonable attorneys’ fees, and (v) all
renewals, extensions, modifications and rearrangements of the indebtedness and
obligations described in (i), (ii), (iii) and (iv) above.

 

(f) The term “Loan Documents” shall mean all instruments and documents
evidencing, securing, governing, guaranteeing and/or pertaining to the
Indebtedness.

 

(g) The term “Net Asset Value” shall mean Debtor’s total assets, excluding all
intangible assets, less Debtor’s total liabilities, which, in accordance with
generally accepted accounting principles, would be required to be reflected on a
balance sheet of Debtor.

 

(h) The term “Obligated Party” shall mean any party other than Obligor who
secures, guarantees and/or is otherwise obligated to pay all or any portion of
the Indebtedness.

 

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(i) The term “Pledged Securities” shall include, but are not limited to, (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.

 

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 meaning 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. Collateral shall also include the following property
(collectively, the “Additional Property”) which Debtor becomes entitled to
receive or shall receive in connection with any other Collateral: (a) any stock
certificate, including without limitation, any certificate representing a stock
dividend or any certificate in connection with any recapitalization,
reclassification, merger, consolidation, conversion, sale of assets, combination
of shares, stock split or 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 (as hereinafter defined), Debtor shall be
entitled to all cash dividends and all interest paid on the Collateral (except
interest paid on any certificate of deposit pledged hereunder) free of the
security interest created under this Agreement. 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 immediately be delivered to or deposited with Secured Party
and held by Secured Party 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 requested by Secured Party, signatures guaranteed by
a bank or member firm of the New York Stock Exchange, all in form and substance
satisfactory to Secured Party. Secured Party shall be deemed to have possession
of any Collateral in transit to Secured Party or its agent.

 

4. Stock Power. Obligor agrees, at the request of the Secured Party, to execute
promptly additional stock powers in blank in connection with any certificates
evidencing all or part of the Collateral.

 

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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

 

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security interest created by this Agreement. No dispute, right of setoff,
counterclaim or defense exists with respect to all or any part of the
Collateral. 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. 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.
Debtor’s organizational structure, state of organization, and organizational
number (the “Organizational Information” are as set forth on the first page
hereof. Except as specified herein, the Organizational Information shall not
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

 

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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. 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. 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.

 

(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 request in order (i) to perfect and
protect the security interest created or purported to be created hereby and the
first priority of such security interest, (ii) to enable Secured Party to
exercise and enforce its rights and remedies hereunder in respect of the
Collateral, and (iii) to otherwise effect the purposes of this Agreement,
including without limitation: (A) executing (if

 

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requested) and filing any financing or continuation statements, or any
amendments thereto; (B) obtaining written confirmation from the issuer of any
securities pledged as Collateral of the pledge of such securities, in form and
substance satisfactory to Secured Party; (C) cooperating with Secured Party in
registering the pledge of any securities pledged as Collateral with the issuer
of such securities; (D) delivering notice of Secured Party’s security interest
in any securities pledged as Collateral to any financial intermediary, clearing
corporation or other party required or deemed preferable by Secured Party, in
form and substance satisfactory to Secured Party; and (E) obtaining written
confirmation of the pledge of any securities constituting Collateral from any
financial intermediary, clearing corporation or other party required or deemed
preferable by Secured Party, in form and substance satisfactory to Secured
Party. If all or any part of the Collateral is securities issued by an agency or
department of the United States, Debtor covenants and agrees, at Secured Party’s
request, to cooperate in registering such securities in Secured Party’s name or
with Secured Party’s account maintained with a Federal Reserve Secured Party.

 

(e) Control Agreements. Debtor will cooperate with Secured Party in obtaining a
control agreement in form and substance satisfactory to Secured Party with
respect to Collateral for which such agreement is required or deemed preferable
for perfection of a security interest pursuant to the Code (as determined by
Secured Party in its sole discretion).

 

9. Negative 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) Transfer or Encumbrance. Debtor will not (i) sell, assign (by operation of
law or otherwise) or transfer Debtor’s rights in any of the Collateral, (ii)
grant a lien or security interest in or execute, authorize, file or record any
financing statement or other security instrument with respect to the Collateral
to any party other than Secured Party, or (iii) deliver actual or constructive
possession of any certificate, instrument or document evidencing and/or
representing any of the Collateral to any party other than Secured Party;
provided, however, Debtor may add or delete Collateral solely as permitted under
Section 1 of the Loan Agreement,

 

(b) Impairment of Security Interest. Debtor will not take or fail to take any
action which would in any manner impair the value or enforceability of Secured
Party’s security interest in any Collateral.

 

(c) Restrictions on Securities. Debtor will not, after the date of this
Agreement, enter into any agreement creating any restriction or condition upon
the transfer, voting or control of any securities pledged as Collateral, except
as consented to in writing by Secured Party.

 

10. Rights of Secured Party. Secured Party shall have the rights contained in
this Section at all times during the period of time this Agreement is effective.

 

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(a) Power of Attorney. 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, to take any action and to execute any instrument which
Secured Party may from time to time in Secured Party’s discretion deem necessary
or appropriate to accomplish the purposes of this Agreement, including without
limitation, the following action: (i) transfer any securities, instruments,
documents or certificates pledged as Collateral in the name of Secured Party or
its nominee; (ii) use any interest, premium or principal payments, conversion or
redemption proceeds or other cash proceeds received in connection with any
Collateral to reduce any of the Indebtedness; (iii) exchange any of the
securities pledged as Collateral for any other property upon any merger,
consolidation, reorganization, recapitalization or other readjustment of the
issuer thereof, and, in connection therewith, to deposit and deliver any and all
of such securities with any committee, depository, transfer agent, registrar or
other designated agent upon such terms and conditions as Secured Party may deem
necessary or appropriate; (iv) exercise or comply with any conversion, exchange,
redemption, subscription or any other right, privilege or option pertaining to
any securities pledged as Collateral; provided, however, except as provided
herein, Secured Party shall not have a duty to exercise or comply with any such
right, privilege or option (whether conversion, redemption or otherwise) and
shall not be responsible for any delay or failure to do so; and (v) file any
claims or take any action or institute any proceedings which Secured Party may
deem necessary or appropriate for the collection and/or preservation of the
Collateral or otherwise to enforce the rights of Secured Party with respect to
the Collateral.

 

(b) Performance by Secured Party. If Debtor fails to perform any agreement or
obligation provided herein, Secured Party may itself perform, or cause
performance of, such agreement or obligation, and the expenses of Secured Party
incurred in connection therewith shall be a part of the Indebtedness, secured by
the Collateral and payable by Debtor on demand.

 

Notwithstanding any other provision herein to the contrary, Secured Party does
not have any duty to exercise or continue to exercise any of the foregoing
rights and shall not be responsible for any failure to do so or for any delay in
doing so.

 

11. Events of Default. Each of the following constitutes an “Event of Default”
under this Agreement:

 

(a) Default in Payment. The failure, refusal or neglect of Obligor to make any
payment of principal or interest on the Indebtedness, or any portion thereof, as
the same shall become due and payable, and the continuation of such failure
after the giving of any required notice and the expiration of any applicable
cure period, or

 

(b) Non-Performance of Covenants. The failure of Obligor or any Obligated Party
to timely and properly observe, keep or perform any covenant, agreement,
warranty or

 

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condition required herein or in any of the other Loan Documents and the
continuation of such failure after the giving of any required notice and the
expiration of any applicable cure period; or

 

(c) Default Under other Loan Documents. The occurrence of an event of default
under any of the other Loan Documents; or

 

(d) False Representation. Any representation contained herein or in any of the
other Loan Documents made by Obligor or any Obligated Party is false or
misleading in any material respect; or

 

(e) Default to Third Party. The occurrence of any event which permits the
acceleration of the maturity of any indebtedness owing by Obligor or any
Obligated Party to any third party under any agreement or undertaking; or

 

(f) Debtor’s Bankruptcy or Insolvency. If Obligor or any Obligated Party: (i)
becomes insolvent, or makes a transfer in fraud of creditors, or makes an
assignment for the benefit of creditors, or admits in writing its inability to
pay its debts as they become due; (ii) generally is not paying its debts as such
debts become due; (iii) has a receiver, trustee or custodian appointed for, or
take possession of, all or substantially all of the assets of such party or any
of the Collateral, either in a proceeding brought by such party or in a
proceeding brought against such party and such appointment is not discharged or
such possession is not terminated within sixty (60) days after the effective
date thereof or such party consents to or acquiesces in such appointment or
possession; (iv) files a petition for relief under the United States Secured
Bankruptcy Code or any other present or future federal or state insolvency,
bankruptcy or similar laws (all of the foregoing hereinafter collectively called
“Applicable Secured Bankruptcy Law”) or an involuntary petition for relief is
filed against such party under any Applicable Secured Bankruptcy Law and such
involuntary petition is not dismissed within sixty (60) days after the filing
thereof, or an order for relief naming such party is entered under any
Applicable Secured Bankruptcy Law, or any composition, rearrangement, extension,
reorganization or other relief of debtors now or hereafter existing is requested
or consented to by such party; (v) fails to have discharged within a period of
sixty (60) days any attachment, sequestration or similar writ levied upon any
property of such party; or (vi) fails to pay within thirty (30) days any final
money judgment against such party; or

 

(g) Execution on Collateral. The Collateral or any portion thereof is taken on
execution or other process of law in any action against Debtor; or

 

(h) Abandonment. Debtor abandons the Collateral or any portion thereof; or

 

(i) Action by Other Lienholder. The holder of any lien or security interest on
any of the assets of Debtor, including without limitation, the Collateral
(without hereby implying the consent of Secured Party to the existence or
creation of any such lien or security interest on the Collateral), declares a
default thereunder or institutes foreclosure or other proceedings for the
enforcement of its remedies thereunder; or

 

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(j) Liquidation, Death and Related Events. If Obligor or any Obligated Party is
an entity, the liquidation, dissolution, merger or consolidation of any such
entity or, if Obligor or any Obligated Party is an individual, the death or
legal incapacity of any such individual; or

 

(k) Search Report. Secured Party shall receive at any time following the
execution of this Agreement a search report indicating that Secured Party’s
security interest is not prior to all other security interests or other
interests reflected in the report.

 

12. Remedies and Related Rights. If an Event of Default shall have occurred, and
without limiting any other rights and remedies provided herein, under any of the
other Loan Documents or otherwise available to Secured Party, Secured Party may
exercise one or more of the rights and remedies provided in this Section.

 

(a) Remedies. Secured Party may from time to time at its discretion, without
limitation and without notice except as expressly provided in any of the Loan
Documents:

 

(i) exercise in respect of the Collateral all the rights and remedies of a
secured party under the Code (whether or not the Code applies to the affected
Collateral);

 

(ii) reduce its claim to judgment or foreclose or otherwise enforce, in whole or
in part, the security interest granted hereunder by any available judicial
procedure;

 

(iii) sell or otherwise dispose of, at its office, on the premises of Debtor or
elsewhere, the Collateral, as a unit or in parcels, by public or private
proceedings, and by way of one or more contracts (it being agreed that the sale
or other disposition of any part of the Collateral shall not exhaust Secured
Party’s power of sale, but sales or other dispositions may be made from time to
time until all of the Collateral has been sold or disposed of or until the
Indebtedness has been paid and performed in full), and at any such sale or other
disposition it shall not be necessary to exhibit any of the Collateral;

 

(iv) buy the Collateral, or any portion thereof, at any public sale;

 

(v) buy the Collateral, or any portion thereof, at any private sale if the
Collateral is of a type customarily sold in a recognized market or is of a type
which is the subject of widely distributed standard price quotations;

 

(vi) apply for the appointment of a receiver for the Collateral, and Debtor
hereby consents to any such appointment; and

 

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(vii) at its option, retain the Collateral in satisfaction of the Indebtedness
whenever the circumstances are such that Secured Party is entitled to do so
under the Code or otherwise, to the full extent permitted by the Code, Secured
Party shall be permitted to elect whether such retention shall be in full or
partial satisfaction of the Indebtedness.

 

In the event Secured Party shall elect to sell the Collateral, Secured Party may
sell the Collateral without giving any warranties as and shall be permitted to
specifically disclaim any warranties of title or the like. Further, if Secured
Party sells any of the Collateral on credit, Debtor will be credited only with
payments actually made by the purchaser, received by Secured Party and applied
to the Indebtedness. In the event the purchaser fails to pay for the Collateral,
Secured Party may resell the Collateral and Debtor shall be credited with the
proceeds of the sale. Debtor agrees that in the event Debtor or any Obligor is
entitled to receive any notice under the Code, as it exists in the state
governing any such notice, of the sale or other disposition of any Collateral,
reasonable notice shall be deemed given when such notice is deposited in a
depository receptacle under the care and custody of the United States Postal
Service, postage prepaid, at such party’s address set forth on the first page
hereof, ten (10) days prior to the date of any public sale, or after which a
private sale, of any of such Collateral is to be held. Secured Party shall not
be obligated to make any sale of Collateral regardless of notice of sale having
been given. Secured Party may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, be made at the time and place to which it was so
adjourned. Debtor further acknowledges and agrees that the redemption by Secured
Party of any certificate of deposit pledged as Collateral shall be deemed to be
a commercially reasonable disposition under Section 9.610 of the Code.

 

(b) Private Sale of Securities. Debtor recognizes that Secured Party may be
unable to effect a public sale of all or any part of the securities pledged as
Collateral because of restrictions in applicable federal and state securities
laws and that Secured Party may, therefore, determine to make one or more
private sales of any such securities to a restricted group of purchasers who
will be obligated to agree, among other things, to acquire such securities for
their own account, for investment and not with a view to the distribution or
resale thereof. Debtor acknowledges that each any such private sale may be at
prices and other terms less favorable than what might have been obtained at a
public sale and, notwithstanding the foregoing, agrees that each such private
sale shall be deemed to have been made in a commercially reasonable manner and
that Secured Party shall have no obligation to delay the sale of any such
securities for the period of time necessary to permit the issuer to register
such securities for public sale under any federal or state securities laws.
Debtor further acknowledges and agrees that any offer to sell such securities
which has been made privately in the manner described above to not less than
five (5) bona fide offerees shall be deemed to involve a “public sale” for the
purposes of Chapter 9 of the Code, notwithstanding that such sale may not
constitute a “public offering” under any federal or state securities laws and
that Secured Party may, in such event, bid for the purchase of such securities.

 

- 11 -

--------------------------------------------------------------------------------

(c) Application of Proceeds. If any Event of Default shall have occurred,
Secured Party may at its discretion apply or use any cash held by Secured Party
as Collateral, and any cash proceeds received by Secured Party in respect of any
sale or other disposition of, collection from, or other realization upon, all or
any part of the Collateral as follows in such order and manner as Secured Party
may elect:

 

(i) to the repayment or reimbursement of the reasonable costs and expenses
(including, without limitation, reasonable attorneys’ fees and expenses)
incurred by Secured Party in connection with (A) the administration of the Loan
Documents, (B) the custody, preservation, use or operation of, or the sale of,
collection from, or other realization upon, the Collateral, and (C) the exercise
or enforcement of any of the rights and remedies of Secured Party hereunder;

 

(ii) to the payment or other satisfaction of any liens and other encumbrances
upon the Collateral;

 

(iii) to the satisfaction of the Indebtedness;

 

(iv) by holding such cash and proceeds as Collateral;

 

(v) to the payment of any other amounts required by applicable law (including
without limitation, Section 9.6l5(a)(3) of the Code or any other applicable
statutory provision); and

 

(vi) by delivery to Debtor or any other party lawfully entitled to receive such
cash or proceeds whether by direction of a court of competent jurisdiction or
otherwise.

 

(d) Deficiency. In the event that the proceeds of any sale of, collection from,
or other realization upon, all or any part of the Collateral by Secured Party
are insufficient to pay all amounts to which Secured Party is legally entitled,
Obligor and any party who guaranteed or is otherwise obligated to pay all or any
portion of the Indebtedness shall be liable for the deficiency, together with
interest thereon as provided in the Loan Documents, to the full extent permitted
by the Code.

 

(e) Non-Judicial Remedies. In granting to Secured Party the power to enforce its
rights hereunder without prior judicial process or judicial hearing, Debtor
expressly waives, renounces and knowingly relinquishes any legal right which
might otherwise require Secured Party to enforce its rights by judicial process.
Debtor recognizes and concedes that non-judicial remedies are consistent with
the usage of trade, are responsive to commercial necessity and are the result of
a bargain at arm’s length. Nothing herein is intended to prevent Secured Party
or Debtor from resorting to judicial process at either party’s option.

 

(f) Other Recourse. Debtor waives any right to require Secured Party to proceed
against any third party, exhaust any Collateral or other security for the
Indebtedness, or to have

 

- 12 -

--------------------------------------------------------------------------------

any third party joined with Debtor in any suit arising out of the Indebtedness
or any of the Loan Documents, or pursue any other remedy available to Secured
Party. Debtor further waives any and all notice of acceptance of this Agreement
and of the creation, modification, rearrangement, renewal or extension of the
Indebtedness. Debtor further waives any defense arising by reason of any
disability or other defense of any third party or by reason of the cessation
from any cause whatsoever of the liability of any third party. Until all of the
Indebtedness shall have been paid in full, Debtor shall have no right of
subrogation and Debtor waives the right to enforce any remedy which Secured
Party has or may hereafter have against any third party, and waives any benefit
of and any right to participate in any other security whatsoever now or
hereafter held by Secured Party. Debtor authorizes Secured Party, and without
notice or demand and without any reservation of rights against Debtor and
without affecting Debtor’s liability hereunder or on the Indebtedness, to (i)
take or hold any other property of any type from any third party as security for
the Indebtedness, and exchange, enforce, waive and release any or all of such
other property, (ii) apply such other property and direct the order or manner of
sale thereof as Secured Party may in its discretion determine, (iii) renew,
extend, accelerate, modify, compromise, settle or release any of the
Indebtedness or other security for the Indebtedness, (iv) waive, enforce or
modify any of the provisions of any of the Loan Documents executed by any third
party, and (v) release or substitute any third party.

 

(g) Voting Rights. Upon the occurrence of an Event of Default, Debtor will not
exercise any voting rights with respect to securities pledged as Collateral.
Debtor hereby irrevocably appoints Secured Party as Debtor’s attorney-in-fact
(such power of attorney being coupled with an interest) and proxy to exercise
any voting rights with respect to Debtor’s securities pledged as Collateral upon
the occurrence of an Event of Default.

 

(h) Dividend Rights and Interest Payments. Upon the occurrence of an Event of
Default:

 

(i) all rights of Debtor to receive and retain the dividends and interest
payments which it would otherwise be authorized to receive and retain pursuant
to Section 3 shall automatically cease, and all such rights shall thereupon
become vested with Secured Party which shall thereafter have the sole right to
receive, hold and apply as Collateral such dividends and interest payments; and

 

(ii) all dividend and interest payments which are received by Debtor contrary to
the provisions of clause (i) of this Subsection shall be received in trust for
the benefit of Secured Party, shall be segregated from other funds of Debtor,
and shall be forthwith paid over to Secured Party in the exact form received
(properly endorsed or assigned if requested by Secured Party), to be held by
Secured Party as Collateral.

 

13. INDEMNITY. DEBTOR HEREBY INDEMNIFIES AND AGREES TO HOLD HARMLESS SECURED
PARTY, AND ITS OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND REPRESENTATIVES (EACH
AN “INDEMNIFIED

 

- 13 -

--------------------------------------------------------------------------------

PERSON”) FROM AND AGAINST ANY AND ALL LIABILITIES, OBLIGATIONS, CLAIMS, LOSSES,
DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, SUITS, COSTS, EXPENSES OR DISBURSEMENTS
OF ANY KIND OR NATURE (COLLECTIVELY, THE “CLAIMS”) WHICH MAY BE IMPOSED ON,
INCURRED BY, OR ASSERTED AGAINST, ANY INDEMNIFIED PERSON ARISING IN CONNECTION
WITH THE LOAN DOCUMENTS, THE INDEBTEDNESS OR THE COLLATERAL (INCLUDING WITHOUT
LIMITATION, THE ENFORCEMENT OF THE LOAN DOCUMENTS AND THE DEFENSE OF ANY
INDEMNIFIED PERSON’S ACTIONS AND/OR INACTIONS IN CONNECTION WITH THE LOAN
DOCUMENTS). THE INDEMNIFICATION PROVIDED FOR IN THIS SECTION SHALL SURVIVE THE
TERMINATION OF THIS AGREEMENT AND SHALL EXTEND AND CONTINUE TO BENEFIT EACH
INDIVIDUAL OR ENTITY WHO IS OR HAS AT ANY TIME BEEN AN INDEMNIFIED PERSON
HEREUNDER.

 

14. Miscellaneous.

 

(a) Entire Agreement. This Agreement contains the entire agreement of Secured
Party and Debtor with respect to the Collateral. If the parties hereto are
parties to any prior agreement, either written or oral, relating to the
Collateral, the terms of this Agreement shall amend and supersede the terms of
such prior agreements as to transactions on or after the effective date of this
Agreement, but all security agreements, financing statements, guaranties, other
contracts and notices for the benefit of Secured Party shall continue in full
force and effect to secure the Indebtedness unless Secured Party specifically
releases its rights thereunder by separate release.

 

(b) Amendment. No modification, consent or amendment of any provision of this
Agreement or any of the other Loan Documents shall be valid or effective unless
the same is in writing and authenticated by the party against whom it is sought
to be enforced, except to the extent of amendments specifically permitted by the
Code without authentication by the Debtor or Obligor.

 

(c) Actions by Secured Party. The lien, security interest and other security
rights of Secured Party hereunder shall not be impaired by (i) any renewal,
extension, increase or modification with respect to the Indebtedness, (ii) any
surrender, compromise, release, renewal, extension, exchange or substitution
which Secured Party may grant with respect to the Collateral, or (iii) any
release or indulgence granted to any endorser, guarantor or surety of the
Indebtedness. The taking of additional security by Secured Party shall not
release or impair the lien, security interest or other security rights of
Secured Party hereunder or affect the obligations of Debtor hereunder.

 

(d) Waiver by Secured Party. Secured Party may waive any Event of Default
without waiving any other prior or subsequent Event of Default. Secured Party
may remedy any default without waiving the Event of Default remedied. Neither
the failure by Secured Party to

 

- 14 -

--------------------------------------------------------------------------------

exercise, nor the delay by Secured Party in exercising, any right or remedy upon
any Event of Default shall be construed as a waiver of such Event of Default or
as a waiver of the right to exercise any such right or remedy at a later date.
No single or partial exercise by Secured Party of any right or remedy hereunder
shall exhaust the same or shall preclude any other or further exercise thereof,
and every such right or remedy hereunder may be exercised at any time. No waiver
of any provision hereof or consent to any departure by Debtor therefrom shall be
effective unless the same shall be in writing and signed by Secured Party and
then such waiver or consent shall be effective only in the specific instances,
for the purpose for which given and to the extent therein specified. No notice
to or demand on Debtor in any case shall of itself entitle Debtor to any other
or further notice or demand in similar or other circumstances.

 

(e) Costs and Expenses. Debtor will upon demand pay to Secured Party the amount
of any and all costs and expenses (including without limitation, attorneys’ fees
and expenses), which Secured Party may incur in connection with (i) the
transactions which give rise to the Loan Documents, (ii) the preparation of this
Agreement and the perfection and preservation of the security interests granted
under the Loan Documents, (iii) the administration of the Loan Documents, (iv)
the custody, preservation, use or operation of, or the sale of, collection from,
or other realization upon, the Collateral, (v) the exercise or enforcement of
any of the rights of Secured Party under the Loan Documents, or (vi) the failure
by Debtor to perform or observe any of the provisions hereof.

 

(f) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND APPLICABLE FEDERAL LAWS,
EXCEPT TO THE EXTENT PERFECTION AND THE EFFECT OF PERFECTION OR NON-PERFECTION
OF THE SECURITY INTEREST GRANTED HEREUNDER, IN RESPECT OF ANY PARTICULAR
COLLATERAL, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF
TEXAS.

 

(g) Venue. This Agreement has been entered into in the county in Texas where
Secured Party’s address for notice purposes is located, and it shall be
performable for all purposes in such county. Courts within the State of Texas
shall have jurisdiction over any and all disputes arising under or pertaining to
this Agreement and venue for any such disputes shall be in the county or
judicial district where this Agreement has been executed and delivered.

 

(h) Severability. If any provision of this Agreement is held by a court of
competent jurisdiction to be illegal, invalid or unenforceable under present or
future laws, such provision shall be fully severable, shall not impair or
invalidate the remainder of this Agreement and the effect thereof shall be
confined to the provision held to be illegal, invalid or unenforceable.

 

(i) No Obligation. Nothing contained herein shall be construed as an obligation
on the part of Secured Party to extend or continue to extend credit to Obligor.

 

- 15 -

--------------------------------------------------------------------------------

(j) Notices. All notices, requests, demands or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and given
by (i) personal delivery, (ii) expedited delivery service with proof of
delivery, or (iii) United States mail, postage prepaid, registered or certified
mail, return receipt requested, sent to the intended addressee at the address
set forth on the first page hereof or to such different address as the addressee
shall have designated by written notice sent pursuant to the terms hereof and
shall be deemed to have been received either, in the case of personal delivery,
at the time of personal delivery, in the case of expedited delivery service, as
of the date of first attempted delivery at the address and in the manner
provided herein, or in the case of mail, upon deposit in a depository receptacle
under the care and custody of the United States Postal Service. Either party
shall have the right to change its address for notice hereunder to any other
location within the continental United States by notice to the other party of
such new address at least thirty (30) days prior to the effective date of such
new address.

 

(k) Binding Effect and Assignment. This Agreement (i) creates a continuing
security interest in the Collateral, (ii) shall be binding on Debtor and the
heirs, executors, administrators, personal representatives, successors and
assigns of Debtor, and (iii) shall inure to the benefit of Secured Party and its
successors and assigns. Without limiting the generality of the foregoing,
Secured Party may pledge, assign or otherwise transfer the Indebtedness and its
rights under this Agreement and any of the other Loan Documents to any other
party. Debtor’s rights and obligations hereunder may not be assigned or
otherwise transferred without the prior written consent of Secured Party.

 

(l) Termination. It is contemplated by the parties hereto that from time to time
there may be no, outstanding Indebtedness, but notwithstanding such occurrences,
this Agreement shall remain valid and shall be in full force and effect as to
subsequent outstanding Indebtedness. Upon (i) the satisfaction in full of the
Indebtedness, (ii) the termination or expiration of any commitment of Secured
Party to extend credit to Obligor, (iii) written request for the termination
hereof delivered by Debtor to Secured Party, and (iv) written release delivered
by Secured Party to Debtor, this Agreement and the security interests created
hereby shall terminate. Upon termination of this Agreement and Debtor’s written
request, Secured Party will, at Debtor’s sole cost and expense, return to Debtor
such of the Collateral as shall not have been sold or otherwise disposed of or
applied pursuant to the terms hereof and execute and deliver to Debtor such
documents as Debtor shall reasonably request to evidence such termination.

 

(m) Cumulative Rights. All rights and remedies of Secured Party hereunder are
cumulative of each other and of every other right or remedy which Secured Party
may otherwise have at law or in equity or under any of the other Loan Documents,
and the exercise of one or more of such rights or remedies shall not prejudice
or impair the concurrent or subsequent exercise of any other rights or remedies.
Further, except as specifically noted as a waiver herein, no provision of this
Agreement is intended by the parties to this Agreement to waive any rights,
benefits or protection afforded to Secured Party under the Code.

 

- 16 -

--------------------------------------------------------------------------------

(n) Gender and Number. Within this Agreement, words of any gender shall be held
and construed to include the other gender, and words in the singular number
shall be held and construed to include the plural and words in the plural number
shall be held and construed to include the singular, unless in each instance the
context requires otherwise.

 

(o) Descriptive Headings. The headings in this Agreement are for convenience
only and shall in no way enlarge, limit or define the scope or meaning of the
various and several provisions hereof.

 

15. Financing Statement Filings. Debtor recognizes that financing statements
pertaining to the Collateral have been or may be filed in one or more of the
following jurisdictions: the location of Debtor’s principal residence, the
location of Debtor’s place of business, the location of Debtor’s chief executive
office, or other such place as the Debtor may be “located” under the provisions
of the Code; where Debtor maintains any Collateral, or has its records
concerning any Collateral, as the case may be. Without limitation of any other
covenant herein, Debtor will neither cause or permit any change in the location
of (i) any Collateral, (ii) any records concerning any Collateral, or (iii)
Debtor’s principal residence, the location of Debtor’s place of business, or the
location of Debtor’s chief executive office, as the case may be, to a
jurisdiction other than as represented in Subsection 6(g), nor will Debtor
change its name or the Organizational Information as represented in Subsection
6(g), unless Debtor shall have notified Secured Party in writing of such change
at least thirty (30) days prior to the effective date of such change, and shall
have first taken all action required or deemed preferable by Secured Party for
the purpose of further perfecting or protecting the security interest in favor
of Secured Party in the Collateral. In any written notice furnished pursuant to
this Subsection, Debtor will expressly state that the notice is required by this
Agreement and contains facts that may require additional filings of financing
statements, amendments or other notices for the purpose of continuing perfection
of Secured Party’s security interest in the Collateral.

 

Without limiting Secured Party’s rights hereunder, Debtor authorizes Secured
Party to file financing statements or amendments thereto under the provisions of
the Code as amended from time to time.

 

EXECUTED as of the date first written above.

 

DEBTOR:

EQUUS II INCORPORATED

By:

 

/s/ Nolan Lehmann

--------------------------------------------------------------------------------

   

Nolan Lehmann

   

President

 

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SECURED PARTY:

THE FROST NATIONAL BANK,

a national banking association

By: /s/ Nancy L. Clarkson

--------------------------------------------------------------------------------

Name: Nancy L. Clarkson

Title: Market President

 

- 18 -

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SCHEDULE 1

Portfolio Investments

 

Stock Certificates

 

Issuer

--------------------------------------------------------------------------------

       Certificate
Number

--------------------------------------------------------------------------------

   Class of Stock

--------------------------------------------------------------------------------

   Number of
Shares

--------------------------------------------------------------------------------

1.  

Champion Window Holdings, Inc.

   51    Common    1,160,000 2.  

Champion Window Holding, Inc.

   63    Common    10,000 3.  

Equicom, Inc.

   12    Common    452,000 4.  

Industrial Data Systems Corporation

   C0171    Common    864,199 5.  

PalletOne, Inc.

   008    Common    350,000 6.  

Strategic Holdings, Inc.

   1    Common    1,000 7.  

Strategic Holdings, Inc.

   2    Common    2,985,408 8.  

Strategic Holdings, Inc.

   8    Common    103,343 9.  

Strategic Holdings, Inc.

        Preferred    3,822,157 10.  

Doane Pet Care Enterprises, Inc.

   DPC0220    Common (Class A)    1,040,000 11.  

Doane Pet Care Enterprises, Inc.

   DPC0221    Common (Class A)    80,951 12.  

Doane Pet Care Enterprises, Inc.

             822,647 13.  

CMC Investments, L.L.C.

   2    Membership Units    2,055 14.  

Container Acquisition, Inc.

        Common    1,374,803 15.  

Container Acquisition, Inc.

   11    Preferred    1,333 16.  

Container Acquisition, Inc.

   12    Preferred    1,381 17.  

Container Acquisition, Inc.

   13    Preferred    1,431 18.  

Container Acquisition, Inc.

   14    Preferred    1,467 19.  

Container Acquisition, Inc.

   15    Preferred    1,488 20.  

Container Acquisition, Inc.

   16    Preferred    1,525 21.  

Container Acquisition, Inc.

   17    Preferred    1,580 22.  

Container Acquisition, Inc.

   18    Preferred    1,655 23.  

Container Acquisition, Inc.

   19    Preferred    1,589 24.  

Container Acquisition, Inc.

   2    Preferred    383 25.  

Container Acquisition, Inc.

   20    Preferred    1,683 26.  

Container Acquisition, Inc.

   21    Preferred    1,744

 

Page 1

--------------------------------------------------------------------------------

Issuer

--------------------------------------------------------------------------------

      

Certificate

Number

--------------------------------------------------------------------------------

   Class of
Stock

--------------------------------------------------------------------------------

   Number
of Shares

--------------------------------------------------------------------------------

27.  

Container Acquisition, Inc.

   22    Preferred    1,788 28.  

Container Acquisition, Inc.

   22    Preferred    1,788 29.  

Container Acquisition, Inc.

   23    Preferred    1,793 30.  

Container Acquisition, Inc.

   24    Preferred    1,858 31.  

Container Acquisition, Inc.

   25    Preferred    1,925 32.  

Equicom

        Preferred    633,061 33.  

Equicom, Inc.

   26    Preferred    15,000 34.  

Equicom, Inc.

   29    Preferred    9,550 35.  

Sovereign Business Forms, Inc.

   7    Preferred    990 36.  

Sovereign Business Forms, Inc.

   17    Preferred    294 37.  

Sovereign Business Forms, Inc.

   19    Preferred    302 38.  

Sovereign Business Forms, Inc.

   22    Preferred    308 39.  

Sovereign Business Forms, Inc.

   24    Preferred    316 40.  

Sovereign Business Forms, Inc.

   26    Preferred    322 41.  

Sovereign Business Forms, Inc.

   28    Preferred    329 42.  

Sovereign Business Forms, Inc.

   30    Preferred    337 43.  

Sovereign Business Forms, Inc.

   33    Preferred    345 44.  

Sovereign Business Forms, Inc.

   37    Preferred    352 45.  

Sovereign Business Forms, Inc.

   38    Preferred    361 46.  

Sovereign Business Forms, Inc.

   41    Preferred    368 47.  

Sovereign Business Forms, Inc.

   44    Preferred    377 48.  

Sovereign Business Forms, Inc.

   46    Preferred    385 49.  

Sovereign Business Forms, Inc.

   50    Preferred    394 50.  

Sovereign Business Forms, Inc.

   53    Preferred    402 51.  

Sovereign Business Forms, Inc.

   56    Preferred    412 52.  

Sovereign Business Forms, Inc.

   57    Preferred    421 53.  

Sovereign Business Forms, Inc.

   59    Preferred    430 54.  

Sovereign Business Forms, Inc.

   62    Preferred    441 55.  

Sovereign Business Forms, Inc.

   63    Preferred    450 56.  

Sovereign Business Forms, Inc.

   66    Preferred    460

 

Page 2

--------------------------------------------------------------------------------

Issuer

--------------------------------------------------------------------------------

   Certificate
Number

--------------------------------------------------------------------------------

   Class of Stock

--------------------------------------------------------------------------------

   Number of
Shares

--------------------------------------------------------------------------------

57.  

Sovereign Business Forms, Inc.

             48,933 58.  

Sovereign Business Forms, Inc.

             576,964 59.  

PalletOne, Inc.

   003    Preferred (Series A)    3,150,000 60.  

PalletOne, Inc.

   6    Preferred (Series A)    315,000 61.  

Turfgrass America, Inc.

   P2    Preferred (Series A)    1,136,041 62.  

Turfgrass America, Inc.

   P51    Preferred (Series A)    195,350 63.  

Turfgrass America, Inc.

   P56    Preferred (Series A)    175,835

 

Other Assets

 

1. Promissory Note dated April 1, 2001 in the original principal amount of
$502,035.20, executed by TURFGRASS AMERICA, INC., a Nevada corporation, and
payable to the Borrower.

 

2. Warrant to Purchase Shares of Common Stock dated effective April 1, 2001
issued by TURFGRASS AMERICA, INC., a Nevada corporation, for 250,412 shares of
common stock to the Borrower. Termination Date is April 1, 2010.

 

3. Series A Warrant No. 1 to Purchase Common Stock of Container Acquisition,
Inc. dated as of February 28, 1997 for 370,588 shares of common stock issued to
Borrower and expiring June 30, 2003, as renewed by
                                        .

 

4. Promissory Note dated December 21, 2001 in the original principal amount of
$4,740,606.60 executed by PETROCON ENGINEERING, INC. and payable to the order of
Borrower.

 

5. Replacement Subordinated Promissory Note dated September 19, 2001 in the
original principal amount of $459,545.38, executed by THE BRADSHAW GROUP, INC.
and payable to the order of Borrower.

 

6. Senior Subordinated Promissory Note No. PN-5 due 2004 issued October 29, 2002
in the original principal amount of $1,303,698.00 executed by SPECTRUM
MANAGEMENT L.L.C. and payable to the order of Borrower. Maturity Date is
November 12, 2004.

 

7. Subordinated Promissory Note dated December 14, 1998 in the original
principal amount of $6,750,000.00 executed by STRATEGIC HOLDINGS, INC. and
payable to the order of Borrower. Maturity Date is November 1, 2005.

 

8. Warrant to Purchase Shares of Common Stock of STRATEGIC HOLDINGS, INC. dated
December 14, 1998 for 2,219,237 shares of common stock issued to Borrower.

 

Page 3

--------------------------------------------------------------------------------

9. Subordinated Debenture dated September 9, 1999 in the original principal
amount of $1,000,000 executed by The Drilltec Corporation, Drilltec Patents &
Technologies Company, Inc., Drilltec GP, L.L.C., Drilltec LP, L.L.C., Drilltec
Technologies, L.P. and Drilltec Indonesia, Inc. and payable to the order of
Borrower. Maturity Date is August 18, 2006.

 

10. Promissory Note dated October 6, 1999 in the original principal amount of
$3,000,000, executed by SOVEREIGN BUSINESS FORMS, INC. and payable to the order
of The Board of Trustees of Texas Growth Fund, as Trustee for the Texas Growth
Fund – 1995 Trust, and Borrower, as renewed and extended by
                    .

 

11. Warrant Modification Agreement dated as of                     , 2003 by and
between Sovereign Business Forms, Inc., and The Board of Trustees of the Texas
Growth Fund, as Trustee for the Texas Growth Fund – 1995 Trust, and Borrower.
[Series E Warrant No. 1 for 546,900 shares of common stock?]

 

12. Warrant Modification Agreement dated as of                     , 2003 by and
between Sovereign Business Forms, Inc. and Borrower. [Series C Warrant No. 2
issued for 25,070 shares of common stock?]

 

13. Subordinated Promissory Note dated December 14, 1998 in the original
principal amount of $6,750,000.00 executed by STRATEGIC HOLDINGS, INC. and
payable to Borrower. Maturity Date is November 1, 2005.

 

14. Warrant to Purchase Shares of Common Stock of STRATEGIC HOLDINGS, INC. dated
October 31, 1996 issued for 100,000 shares of common stock to Borrower. Exercise
period expires August 31, 2005.

 

15. Warrant to Purchase Shares of Common Stock of STRATEGIC HOLDINGS, INC. dated
October 31, 1996 issued for 225,000 shares of common stock to Borrower. Exercise
period expires August 31, 2005.

 

16. Promissory Note dated                      in the original principal amount
of $800,000.00 executed by Sovereign Business Forms, Inc. and payable to
Borrower. Maturity Date is                     .

 

Page 4