Exhibit 10(f)

 

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SECOND MODIFICATION AGREEMENT

 

THIS SECOND MODIFICATION AGREEMENT (“Agreement”) is entered into this         
day of March, 2005, but to be effective as of the 31st day of March, 2005, by
and between THE FROST NATIONAL BANK, a national banking association (“Lender”),
and EQUUS II INCORPORATED, a Delaware corporation (“Borrower”).

 

R E C I T A L S:

 

A. Lender is the sole owner and holder of that one certain Revolving Promissory
Note (the “Note”) dated March 15, 2004, executed by Borrower and payable to the
order of Lender in the original principal amount of Six Million Five Hundred
Thousand and No/100 Dollars ($6,500,000.00).

 

B. The Note is secured by a Pledge and Security Agreement of even date with the
Note executed by Borrower and Lender with respect to the Collateral as therein
described (the “Security Agreement”).

 

C. Borrower and Lender entered into a Loan Agreement (herein so called) of even
date with the Note. The Note, Loan Agreement, Security Agreement and all other
documents and instruments executed in connection with the indebtedness evidenced
by the Note are herein called the “Loan Documents.”

 

D. Borrower and Lender entered into a Modification Agreement dated November 30,
2004, pursuant to which various terms and provisions of the Loan Agreement were
modified;

 

E. Borrower has requested that Lender agree to modify the Note to extend the
maturity date and reduce the availability of borrowings under the Loan
Agreement, all as hereinafter provided, and in consideration thereof Borrower
has made certain agreements with Lender as hereinafter more fully set forth.

 

F. Lender has agreed to such requests, subject to the terms and conditions set
forth herein.

 

NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00) and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged and agreed, Borrower and Lender hereby agree as follows:

 

1. Acknowledgment of Outstanding Balance. The parties hereto acknowledge that
the outstanding principal balance of the Note as of the date hereof is ZERO
DOLLARS ($0.00).

 

2. Renewal and Extension of Maturity. The Note is hereby renewed and the
maturity of the Note is hereby extended to May 1, 2006 (the “Revised Maturity
Date”).

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3. Reduction in Availability. The description of the “Borrowing Base Line of
Credit” set forth in Section 1 of the Loan Agreement shall be and hereby is
deleted and the following shall be and hereby is inserted in lieu thereof:

 

Borrowing Base Line of Credit. Subject to the terms and conditions set forth
herein, Lender agrees to lend to Borrower, on a revolving basis from time to
time during the period commencing on the date hereof and continuing through the
maturity date of the promissory note evidencing this Credit Facility from time
to time, such amounts as Borrower may request hereunder; provided, however, the
total principal amount outstanding at any time shall not exceed the lesser of
(i) an amount equal to the Borrowing Base (as such term is defined hereinbelow),
or (ii) $5,000,000.00 (the “Borrowing Base Line of Credit”). If at any time the
aggregate principal amount outstanding under the Borrowing Base Line of Credit
shall exceed an amount equal to the Borrowing Base, Borrower agrees to
immediately repay to Lender such excess amount, plus all accrued but unpaid
interest thereon. Subject to the terms and conditions hereof, Borrower may
borrow, repay and reborrow hereunder. The sums disbursed under the Borrowing
Base Line of Credit (each of such disbursements being hereinafter called an
“Advance”) shall be used for working capital and operating expenses.

 

Notwithstanding that the stated principal amount of the Note is $6,500,000.00,
at no time after the date of this Agreement shall the outstanding principal
balance of the Note exceed $5,000,000.00.

 

4. Required Payments. From and after the effective date of this Agreement,
principal and interest under the Note shall be due and payable as follows:

 

Interest only shall be due and payable quarterly as it accrues on the 1st day of
each and every calendar quarter, beginning June 1, 2005 and continuing regularly
and quarterly thereafter until May 1, 2006, when the entire amount hereof,
principal and interest then remaining unpaid, shall be then due and payable;
interest being calculated on the unpaid principal each day principal is
outstanding and all payments made credited to any collection costs and late
charges, to the discharge of interest accrued and to the reduction of the
principal, in such order as Lender shall determine.

 

5. Loan Fee. In consideration of Lender’s agreeing to extend the term of the
Note and modify the Loan Documents in the manner set forth in the Agreement,
Borrower agrees to pay a fee to Lender in the amount of $25,000.00.

 

6. Texas Finance Code. In no event shall Chapter 346 of the Texas Finance Code
(which regulates certain revolving loan accounts and revolving tri-party
accounts) apply to the Note. To the extent that Chapter 303 of the Texas Finance
Code is applicable to the Note, the “weekly ceiling” specified in such article
is the applicable ceiling; provided that, if any applicable law permits greater
interest, the law permitting the greatest interest shall apply.

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7. Usury. No provisions of this Agreement or the Loan Documents shall require
the payment or permit the collection, application or receipt of interest in
excess of the maximum permitted by applicable state or federal law. If any
excess of interest in such respect is herein or in any such other instrument
provided for, or shall be adjudicated to be so provided for herein or in any
such instrument, the provisions of this paragraph shall govern, and neither
Borrower nor any endorsers of the Note nor their respective successors, assigns
or personal representatives shall be obligated to pay the amount of such
interest to the extent it is in excess of the amount permitted by applicable
law. It is expressly stipulated and agreed to be the intent of Borrower and
Lender to at all times comply with the usury and other laws relating to the Loan
Documents and any subsequent revisions, repeals or judicial interpretations
thereof, to the extent applicable thereto. In the event Lender or other holder
of the Note ever receives, collects or applies as interest any such excess, such
amount which would be excessive interest shall be applied to the reduction of
the unpaid principal balance of the Note and, if upon such application the
principal balance of the Note is paid in full, any remaining excess shall be
forthwith paid to Borrower and the provisions of the Loan Documents shall
immediately be deemed reformed and the amounts thereafter collectible thereunder
reduced, without the necessity of execution of any new document, so as to comply
with the then applicable law, but so as to permit the recovery of the fullest
amount otherwise called for thereunder. In determining whether or not the
interest paid or payable under any specific contingency exceeds the maximum
interest allowed to be charged by applicable law, Borrower and Lender or other
holder hereof shall, to the maximum extent permitted under applicable law,
amortize, prorate, allocate and spread the total amount of interest throughout
the entire term of the Note so that the amount or rate of interest charged for
any and all periods of time during the term of the Note is to the greatest
extent possible less than the maximum amount or rate of interest allowed to be
charged by law during the relevant period of time. Notwithstanding any of the
foregoing, if at any time applicable laws shall be changed so as to permit a
higher rate or amount of interest to be charged than that permitted prior to
such change, then unless prohibited by law, references in the Note to
“applicable law” for purposes of determining the maximum interest or rate of
interest that can be charged shall be deemed to refer to such applicable law as
so amended to allow the greater amount or rate of interest.

 

8. Release and Waiver of Claims. In consideration of (i) the modification of
certain provisions of the Note, as herein provided, and (ii) the other benefits
received by Borrower hereunder, Borrower hereby RELEASES, RELINQUISHES and
forever DISCHARGES Lender, as well as its predecessors, successors, assigns,
agents, officers, directors, employees and representatives, of and from any and
all claims, demands, actions and causes of action of any and every kind or
character, past or present, which Borrower may have against Lender and its
predecessors, successors, assigns, agents, officers, directors, employees and
representatives arising out of or with respect to (a) any right or power to
bring any claim against Lender for usury or to pursue any cause of action
against Lender based on any claim of usury, and (b) any and all transactions
relating to the Loan Documents occurring prior to the date hereof, including any
loss, cost or damage, of any kind or character, arising out of or in any way
connected with or in any way resulting from the acts, actions or omissions of
Lender, and its predecessors, successors, assigns, agents, officers, directors,
employees and representatives, including any breach of fiduciary duty, breach of
any duty of fair dealing, breach of confidence, breach of funding commitment,
undue influence, duress, economic coercion, conflict of interest,

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negligence, bad faith, malpractice, intentional or negligent infliction of
mental distress, tortious interference with contractual relations, tortious
interference with corporate governance or prospective business advantage, breach
of contract, deceptive trade practices, libel, slander or conspiracy, but in
each case only to the extent permitted by applicable law.

 

9. Reaffirmation of Representations, Etc. Borrower hereby reaffirms to Lender
each of the representations, warranties, covenants and agreements of Borrower
set forth in the Loan Documents.

 

10. Enforceable Obligations. Borrower hereby ratifies, affirms, reaffirms,
acknowledges, confirms and agrees that the Loan Documents represent valid and
enforceable obligations of Borrower, and Borrower further acknowledges that
there are no existing claims, defenses, personal or otherwise, or rights of
setoff whatsoever with respect to the Note, and Borrower further acknowledges
and represents that no event has occurred and no condition exists which would
constitute a default under the Loan Documents or this Agreement, either with or
without notice or lapse of time, or both.

 

11. Miscellaneous.

 

(a) As modified hereby, the provisions of the Loan Documents shall continue in
full force and effect, and the Borrower acknowledges and reaffirms its liability
to Lender thereunder. In the event of any inconsistency between this Agreement
and the terms of the Loan Documents, this Agreement shall govern.

 

(b) Borrower hereby agrees to pay all costs and expenses incurred by Lender in
connection with the execution and administration of this Agreement and the
modification of the Loan Documents including, but not limited to, all appraisal
costs, title insurance costs, legal fees incurred by Lender and filing fees.

 

(c) Any default by Borrower in the performance of its obligations herein
contained shall constitute a default under the Loan Documents and shall allow
Lender to exercise all of its remedies set forth in the Loan Documents.

 

(d) Lender does not, by its execution of this Agreement, waive any rights it may
have against any person not a party to this Agreement.

 

(e) In case any of the provisions of this Agreement shall for any reason be held
to be invalid, illegal or unenforceable, such invalidity, illegality or
unenforceability shall not affect any other provision hereof, and this Agreement
shall be construed as if such invalid, illegal or unenforceable provision had
never been contained herein.

 

(f) This Agreement and the Loan Documents shall be governed and construed
according to the laws of the State of Texas (without regard to any conflict of
laws principles) and the applicable laws of the United States.

 

(g) This Agreement shall be binding upon and inure to the benefit of Lender,
Borrower and their respective successors, assigns and legal representatives.

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(h) Borrower hereby acknowledges and agrees that it has entered into this
Agreement of its own free will and accord and in accordance with its own
judgment after advice of its own legal counsel, and states that it has not been
induced to enter into this Agreement by any statement, act or representation of
any kind or character on the part of the parties hereto, except as expressly set
forth in this Agreement.

 

(i) This Agreement may be executed in multiple counterparts, each of which shall
constitute an original instrument, but all of which shall constitute one and the
same agreement.

 

(j) Except as modified herein, all other terms, conditions and provisions of
Loan Documents shall remain in full force and effect as of the date thereof and
Borrower acknowledges and reaffirms its liability to Lender thereunder.

 

EXECUTED as of the day and year first above written.

 

BORROWER

 

EQUUS II INCORPORATED,

a Delaware corporation

     

LENDER:

 

THE FROST NATIONAL BANK,

a national banking association

By:           By:    

Name:

 

Nolan Lehmann

     

Name:

   

Title:

 

President

     

Title:

   

 

PREPARED IN THE LAW OFFICE OF:

 

J. Robert Fisher

Winstead Sechrest & Minick P.C.

2400 Bank One Center

910 Travis Street

Houston, Texas 77002