EXHIBIT F SECURITY AGREEMENT
10.3
EXHIBIT
F
THIS
SECURITY AGREEMENT (this “Agreement”)
is executed as of November 11, 2008, by DEEP DOWN, INC., a Nevada corporation,
ELECTROWAVE USA, INC., a Nevada corporation, FLOTATION TECHNOLOGIES, INC., a
Maine corporation, MAKO TECHNOLOGIES, LLC, a Nevada limited liability company,
and DEEP DOWN INC., a Delaware corporation (collectively, “Debtor),
for the benefit of WHITNEY NATIONAL BANK, a national banking association (“Secured
Party”).
RECITALS
A. Debtor,
as borrower, and Secured Party, as lender, have entered into that certain Credit
Agreement dated of even date herewith (as amended, restated, or supplemented,
the “Credit
Agreement”),
together with certain other Loan Documents.
B. As
a condition precedent to Secured Party’s agreement to enter into the Credit
Agreement, Secured Party has required that Debtor execute and deliver this
Agreement to secure Borrower’s obligations under the Credit Agreement and the
other Loan Documents.
C. The
execution and delivery of this Agreement is an integral part of the transactions
contemplated by the Loan Documents and a condition precedent to Secured Party’s
obligations to extend credit or make loans under the Credit
Agreement.
AGREEMENTS
For good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Debtor covenants and agrees with Secured Party as
follows:
1. Certain
Definitions. Each capitalized term used but not defined in
this Agreement has the meaning given that term in the Credit Agreement or in the
UCC. If a defined term in the Credit Agreement conflicts with the
definition given that term in the UCC, the Credit Agreement definition shall
control to the extent allowed by Law. If the definition given a term
in Chapter 9 (or Article 9) of the UCC conflicts with the definition given that
term in any other chapter of the UCC, the Chapter 9 (or Article 9) definition
shall control. Terms used in this Agreement which are not capitalized
but are defined in the UCC have the meanings given them in the
UCC. As used in this Agreement, the following terms have the meanings
indicated:
“Agreement”
means this Agreement together with all schedules and exhibits and all
amendments, restatements and supplements.
“Collateral”
is defined in Section 3
of this Agreement.
“Debtor” is
defined in the preamble to this Agreement.
“Default”
is defined in the Credit Agreement.
Exhibit F
- Page 1
“Governmental
Authority” means any nation or government, any state or other political
subdivision thereof, any agency, authority, instrumentality, regulatory body,
court, administrative tribunal, central bank or other entity exercising
executive, legislative, judicial, taxing, regulatory or administrative powers or
functions of or pertaining to government.
“Obligation”
means the “Obligation” under and as defined in the Credit
Agreement.
“Obligor”
means a Person that, with respect to an obligation secured by a security
interest in the Collateral, (a) owes payment or other performance on the
obligation, (b) has provided property or other security or credit support other
than the Collateral to secure payment or other performance of the obligation, or
(c) is otherwise accountable in whole or in part for payment or other
performance of the obligation. The term does not include issuers or
nominated persons under a letter of credit.
“Secured
Party” is defined in the preamble to this Agreement.
“Security
Interest” means the security interests granted and the transfers, pledges
and assignments made under Section 3
of this Agreement.
“UCC” means
(a) the Uniform Commercial Code, as adopted and in effect from time to time in
the State of Texas, and (b) if the UCC provides that the law of another
jurisdiction governs certain matters, then, in respect of such matters, the
Uniform Commercial Code as adopted and in effect from time to time in such
jurisdiction.
2. Credit
Agreement. This Agreement is being executed and delivered
pursuant to the terms and conditions of the Credit Agreement. Each
Security Interest granted under this Agreement is a “Lien” referred to in the
Credit Agreement.
3. Security
Interest. To secure the prompt, unconditional, and complete
payment and performance of the Obligation when due, Debtor hereby pledges and
assigns to Secured Party, and grants to Secured Party a continuing security
interest in all of its right, title and interest in, to, and under the
following, wherever located and whether now owned or hereafter acquired or
created by Debtor (collectively, the “Collateral”):
all personal and fixture property of every kind and nature including, without
limitation, all goods (including inventory, equipment and any accessions
thereto), instruments (including promissory notes), documents, accounts,
accounts receivable, chattel paper (whether tangible or electronic), deposit
accounts, letter-of-credit rights (whether or not the letter of credit is
evidenced by a writing), commercial tort claims, securities and all other
investment property, supporting obligations, any other contract rights or rights
to the payment of money, insurance claims and proceeds, all software, fixtures,
vehicles (whether or not subject to a certificate of title statute), leasehold
improvements, and all general intangibles (including all payment intangibles and
trademarks and patents).
4. Collateral Security; No
Assumption or Modification. The Security Interest is given as
security only. Secured Party does not assume, and shall not be liable
for, any of Debtor’s liabilities, duties or obligations under, or in connection
with, the Collateral. Secured Party’s acceptance of this Agreement,
or its taking any action in connection with this Agreement, does not constitute
Secured Party’s approval of the Collateral or Secured Party’s assumption of any
liability, duty, or obligation under, or in connection with, the
Collateral. This Agreement does not affect or modify Debtor’s
obligations with respect to the Collateral.
Exhibit F
- Page 2
5. Fraudulent
Conveyance. Notwithstanding anything contained in this
Agreement to the contrary, Debtor agrees that if, but for the application of
this Section 5,
the Obligation or any Security Interest would constitute a preferential transfer
under 11 U.S.C. § 547, a fraudulent conveyance under 11 U.S.C. § 548 (or
any successor section of that Statute) or a fraudulent conveyance or transfer
under any state fraudulent conveyance or fraudulent transfer law or similar Law
in effect from time to time (each a “Fraudulent
Conveyance”), then the Obligation and each affected Security Interest
will be enforceable to the maximum extent possible without causing the
Obligation or any Security Interest to be a Fraudulent Conveyance, and shall be
deemed to have been automatically amended to carry out the intent of this Section 5.
6. Representations and
Warranties. Debtor represents and warrants to Secured Party
that:
(a) Binding
Obligation. The Security Interest in the Collateral created by
this Agreement (i) is a valid and binding obligation of Debtor in favor of
Secured Party and is enforceable against Debtor, and (ii) will be duly perfected
once the action required for perfection under applicable Law has been
taken. Once perfected, the Security Interest will constitute a first
and prior lien on the Collateral, subject only to Permitted
Liens. The creation, attachment and perfection of the Security
Interest do not require the consent of any third party.
(b) Place of Business; Location
of Records. Schedule 1
sets out the following information: (i) the exact name of Debtor, as such name
appears in its organizational documents, (ii) any change in Debtor’s
identity or legal structure within the past five years, (iii) all other names
(including trade names) used by Debtor or any of its divisions or other business
units in connection with the conduct of its business or ownership of its
properties at any time in the past five years, together with the date of such
change, (iv) Debtor’s federal taxpayer identification number, (v) Debtor’s
principal place of business, (vi) the locations where Debtor maintains its
inventory or equipment, (vii) all real property owned by Debtor, (viii) all real
property leased by Debtor; and (ix) all intellectual property owned or licensed
by Debtor. The failure of the description of locations of Collateral
on Schedule
1 to be accurate or complete will not impair the Security Interest in
such Collateral.
(c) No Prior
Lien. Except for Permitted Liens, the Collateral is owned by
Debtor free and clear of any Lien and Debtor has not executed any transfer,
assignment, pledge or security interest covering the Collateral or any interest
in the Collateral.
(d) No
Defenses. The amounts due Debtor under the Collateral are not
subject to any material setoff, counterclaim, defense, allowance or adjustment
(other than discounts for prompt payment shown on the invoice) or to any
material dispute, objection or complaint by any account debtor or other
Obligor.
(e) Existence and Ownership of
Patents and Trademarks. To the best of Debtor’s knowledge,
Debtor has full right to use the material patents and trademarks and all patents
and trademarks owned, controlled, or acquired by Debtor, or which Debtor has a
right to use: (i) are subsisting and have not been adjudged or claimed to be
invalid or unenforceable (either in whole or in part) and Debtor is not aware of
any basis for such a claim, (ii) are valid and enforceable, (iii) are in the
name of Debtor, (iv) are properly recorded and/or filed in the United States
Patent and Trademark Offices, and (v) Debtor has taken all necessary steps to
properly record or file ownership in the name of Debtor in the proper foreign
filing offices (the “Foreign Filing
Offices”) with respect to foreign patents and
trademarks, as appropriate. Debtor right, title and interest in the
patents and trademarks is free and clear of any Liens, registered user
agreements, or covenants by Debtor not to ▇▇▇ third Persons or
licenses.
(f) Registration. To
the best of Debtor’s knowledge, Debtor has properly completed all required
filings, payments, renewals and obligations in the United States Patent and
Trademark Offices or the appropriate Foreign Filing Offices, as the case may be,
to maintain material patents and trademarks as fully valid and
enforceable.
Exhibit F
- Page 3
(g) Third Party
Rights. No claim has been made that the ownership or use of
any of the patents and trademarks, or the manufacture, use or sale of any
product made in accordance therewith or service rendered thereunder, does or may
violate the rights of any third Person, and Debtor has no knowledge of any third
party rights which may be infringed or otherwise violated by the use of any of
the patents and trademarks.
(h) Additional
Collateral. The delivery at any time by Debtor to Secured
Party of Collateral or of additional specific descriptions of certain Collateral
will constitute a representation and warranty by Debtor to Secured Party under
this Agreement that the representations and warranties of this Section 6
are true and correct with respect to each item of such Collateral.
7. Covenants. Debtor
covenants and agrees with Secured Party that so long as Secured Party is
committed to extend credit to Debtor under the Credit Agreement and thereafter
until the Obligation is paid and performed in full and all commitments to extend
credit under the Credit Agreement have terminated, Debtor shall:
(a) Relocation of Office or
Books and Records; Change of Name or Address. Give Secured
Party at least 30 days prior written notice of (i) any proposed relocation of
its place of business, (ii) any proposed relocation of the place where its books
and records relating to accounts and general intangibles are kept, (iii) a
change of its name or type of organizational structure, and (iv) any proposed
relocation of any of the Collateral (other than with respect to goods in transit
between facilities, temporary warehousing for up to 30 days, or sales of
inventory in the ordinary course of business or the sale of
other Collateral to the extent permitted by the Credit Agreement) to
a location other than those set out on Schedule
1.
(b) Material
Change. Promptly notify Secured Party in writing of any change
in any material fact or circumstance represented or warranted by Debtor with
respect to any of the Collateral.
(c) Record of
Collateral. Maintain at its principal place of business a
current record of the location of all Collateral and permit Secured Party or its
representatives to inspect and make copies from such records pursuant to the
Credit Agreement and furnish to Secured Party, from time to time, such
documents, lists, descriptions, certificates and other information necessary or
helpful to keep Secured Party informed with respect to the identity, location,
status, condition, terms of, parties to, and value of the
Collateral.
(d) Adverse
Claim. Promptly notify Secured Party in writing of any claim,
action or proceeding challenging the Security Interest or affecting title to all
or any material portion of the Collateral or the Security Interest and, at
Secured Party’s request, appear in and defend any such action or proceeding at
Debtor’s reasonable expense.
(e) Hold Collateral In
Trust. Upon the occurrence and during the continuation of a
Default, hold in trust (and not commingle with its other assets) for Secured
Party all Collateral that is Chattel Paper, Instruments or Documents at any time
received by it and promptly deliver same to Secured Party unless Secured Party
at its option gives Debtor written permission to retain such
Collateral. Upon the occurrence and during the continuation of a
Default, at Secured Party’s request, each contract, Chattel Paper, Instrument or
Document so retained shall be marked to state that it is assigned to Secured
Party and each instrument shall be endorsed to the order of Secured Party (but
failure to so ▇▇▇▇ or endorse shall not impair the Security
Interest).
Exhibit F
- Page 4
(f) No
Assignment. Not sell, assign, or otherwise dispose of, or
permit the sale, assignment or disposition of, any Collateral, except as
permitted by the Credit Agreement.
(g) Maintain
Collateral. (i) Perform all of its obligations under or in
connection with the Collateral in accordance with customary business practices,
(ii) not amend, alter or modify, or permit the amendment, alteration or
modification of, any material portion (individually or collectively) of the
Collateral without Secured Party’s prior written consent, and (iii) not do or
permit any act which would impair any material portion of the
Collateral.
(h) Default Under
Collateral. Promptly notify Secured Party in writing of any
default by Debtor or, to the Debtor’s knowledge, by any other party under or in
connection with any material portion (individually or collectively) of the
Collateral and immediately use commercially reasonable efforts to remedy the
same or immediately demand that the same be remedied.
(i) Lock Box
Account. Upon the occurrence of a Default, Secured Party may
request that Debtor direct that all accounts receivable be paid directly into a
lock box account established with, or for the benefit of, Secured
Party.
8. Authorization to File
Financing Statements. Debtor hereby irrevocably authorizes
Secured Party at any time and from time to time to file in any filing office in
any UCC jurisdiction any initial financing statements and amendments thereto
that (a) indicate the Collateral (i) as “all assets of Debtor” or words of
similar effect, regardless of whether any particular asset which comprises part
of the Collateral falls within the scope of Article 9 of the UCC of such
jurisdiction, or (ii) as being of an equal or lesser scope or with greater
detail, and (b) provide any other information required by part 5 of Article
9 of the UCC, for the sufficiency or filing office acceptance of any financing
statement or amendment, including (i) whether Debtor is an organization, the
type of organization and any organizational identification number issued to
Debtor, and (ii) in the case of a financing statement filed as a fixture filing
or indicating Collateral as as-extracted collateral or timber to be cut, a
sufficient description of real property to which the Collateral
relates. Debtor agrees to furnish any such information to Secured
Party promptly upon Secured Party’s request.
9. Further
Assurances. To further the attachment, perfection and first
priority of, and the ability of Secured Party to enforce Secured Party’s
Security Interest in and lien upon the Collateral, and without limiting Debtor’s
other obligations in this Agreement, Debtor agrees, in each case, upon Secured
Party’s request and at Debtor’s expense, to take the following actions with
respect to the following to the extent that such items are included within the
definition of “Collateral:”
(a) Promissory Notes and
Tangible Chattel Paper. If Debtor at any time holds or
acquires any promissory notes or tangible chattel paper, Debtor shall promptly
endorse, assign and deliver the same to Secured Party, accompanied by such
instruments of transfer or assignment duly executed in blank as Secured Party
may from time to time request.
(b) Deposit
Accounts. For each deposit account that Debtor currently has
open or at any time opens or maintains, Debtor shall, at Secured Party’s request
and option, pursuant to an agreement in form and substance reasonably
satisfactory to Secured Party, either (i) cause the depositary bank to comply at
any time with instructions from Secured Party to such depositary bank directing
the disposition of funds from time to time credited to such deposit account,
without further consent of Debtor, or (ii) arrange for Secured Party to become
the customer of the depositary bank with respect to the deposit account, with
Debtor being permitted, only with the consent of Secured Party, to exercise
rights to withdraw funds from such deposit account. Secured Party
agrees with Debtor that Secured Party shall not give any such instructions or
withhold any withdrawal rights from Debtor, unless a Default exists, or would
occur, if effect were given to any withdrawal not otherwise permitted by the
Loan Documents.
Exhibit F
- Page 5
(c) Investment
Property. If Debtor at any time holds or acquires any
certificated securities comprising part of the Collateral, Debtor shall promptly
endorse, assign and deliver the same to Secured Party, accompanied by such
instruments of transfer or assignment duly executed in blank as Secured Party
may from time to time specify. If any Securities now or hereafter acquired by
Debtor are uncertificated and are issued to Debtor or its nominee directly by
the issuer thereof, Debtor shall immediately notify Secured Party thereof and,
at Secured Party’s request and option, pursuant to an agreement in form and
substance satisfactory to Secured Party, either (i) cause the issuer to agree to
comply with instructions from Secured Party as to such securities, without
further consent of Debtor or such nominee, or (ii) arrange for Secured Party to
become the registered owner of the securities. If any securities, whether
certificated or uncertificated, or other investment property now or hereafter
acquired by Debtor are held by Debtor or its nominee through a securities
intermediary or commodity intermediary, Debtor shall immediately notify Secured
Party thereof and, at Secured Party’s request and option, pursuant to an
agreement in form and substance satisfactory to Secured Party, either (A) cause
such securities intermediary or (as the case may be) commodity intermediary to
agree to comply with entitlement orders or other instructions from Secured Party
to such securities intermediary as to such Securities or other Investment
Property, or (as the case may be) to apply any value distributed on account of
any Commodity Contract as directed by Secured Party to such commodity
intermediary, in each case without further consent of Debtor or such nominee, or
(B) in the case of financial assets or other Investment Property held through a
securities intermediary, arrange for Secured Party to become the entitlement
holder with respect to such Investment Property, with Debtor being permitted,
only with the consent of Secured Party, to exercise rights to withdraw or
otherwise deal with such Investment Property. Secured Party agrees
with Debtor that Secured Party shall not give any such entitlement orders or
instructions or directions to any such issuer, securities intermediary or
commodity intermediary, and shall not withhold its consent to the exercise of
any withdrawal or dealing rights by Debtor, unless a Default exists or, after
giving effect to any such investment and withdrawal rights not otherwise
permitted by the Loan Documents, would occur. The provisions of this
Section
shall not apply to any financial assets credited to a securities account for
which Secured Party is the securities intermediary.
(d) Collateral in the Possession
of a Bailee. If any Collateral is at any time in the
possession of a bailee, Debtor shall promptly notify Secured Party and, at
Secured Party’s request and option, shall promptly obtain an acknowledgement
from the bailee, in form and substance satisfactory to Secured Party, that the
bailee holds such Collateral for the benefit of Secured Party, and that such
bailee agrees to comply, without further consent of Debtor, with instructions
from Secured Party as to such Collateral. Secured Party agrees with
Debtor that Secured Party shall not give any such instructions unless a Default
exists or would occur after taking into account any action by Debtor with
respect to the bailee.
Exhibit F
- Page 6
(e) Electronic Chattel Paper and
Transferable Records. If Debtor at any time holds or acquires
an interest in any electronic chattel paper or any “transferable record,” as
that term is defined in Section 201 of the federal Electronic Signatures in
Global and National Commerce Act, or in Section 16 of the Uniform Electronic
Transactions Act as in effect in any relevant jurisdiction, Debtor shall
promptly notify Secured Party thereof and, at the request and option of Secured
Party, shall take such action as Secured Party may reasonably request to vest in
Secured Party control, under Section 9.105 of the UCC, of such electronic
chattel paper or control under Section 201 of the federal Electronic Signatures
in Global and National Commerce Act or, as the case may be, Section 16 of the
Uniform Electronic Transactions Act, as so in effect in such jurisdiction, of
such transferable record. Secured Party agrees with Debtor that
Secured Party will arrange, pursuant to procedures satisfactory to Secured Party
and so long as such procedures will not result in Secured Party’s loss of
control, for Debtor to make alterations to the electronic chattel paper or
transferable record permitted under Section 9.105 of the UCC or, as the case may
be, Section 201 of the federal Electronic Signatures in Global and National
Commerce Act or Section 16 of the Uniform Electronic Transactions Act for a
party in control to make without loss of control, unless a Default exists or
would occur after taking into account any action by Debtor with respect to such
electronic chattel paper or transferable record.
(f) Letter-of-Credit
Rights. If Debtor is at any time a beneficiary under a letter
of credit, Debtor shall promptly notify Secured Party thereof and, at the
reasonable request and option of Secured Party, Debtor shall, pursuant to an
agreement in Proper Form, either (i) arrange for the issuer and any confirmer or
other nominated Person of such letter of credit to consent to an assignment to
Secured Party of the proceeds of the letter of credit, or (ii) arrange for
Secured Party to become the transferee beneficiary of the letter of credit, with
Secured Party agreeing, in each case, that the proceeds of the letter to credit
are to be applied to the Obligation.
(g) Other Actions as to Any and
All Collateral. Debtor further agrees, at the request and
option of Secured Party, all to the extent applicable, to (i) take any and all
other commercially reasonable actions Secured Party may determine to be
necessary or useful for the attachment, perfection and first priority of, and
the ability of Secured Party to enforce, Secured Party’s Security Interest, and
(ii) cooperate with Secured Party in identifying all of Debtor’s personal
property assets and proper descriptions of such assets for the purpose of
including such assets as part of the Collateral, including, without limitation
(A) authenticating, executing, delivering and, where appropriate, filing
financing statements and amendments relating thereto under the UCC, to the
extent, if any, that Debtor’s signature thereon is required, (B) causing Secured
Party’s name to be noted as secured party on any certificate of title for a
titled good if such notation is a condition to attachment, perfection or
priority of, or ability of Secured Party to enforce, Secured Party’s security
interest in such Collateral, (C) complying with any provision of any statute,
regulation or treaty of the United States as to any Collateral if compliance
with such provision is a condition to attachment, perfection or priority of, or
ability of Secured Party to enforce, Secured Party’s security interest in such
Collateral, (D) obtaining governmental and other third party waivers, consents
and approvals in Proper Form, including, without limitation, any consent of any
licensor, lessor or other Person obligated on Collateral, (E) obtaining waivers
from mortgagees and landlords in form and substance reasonably satisfactory to
Secured Party, (F) taking all actions under the UCC or under any other Law, as
reasonably determined by Secured Party to be applicable in any relevant Uniform
Commercial Code or other jurisdiction, including any foreign jurisdiction, (G)
providing Secured Party promptly upon its request with proper legal descriptions
of, and all other information and documents pertaining to, Debtor’s interest in
real property, deposit accounts, brokerage accounts, jewelry and all other
personal property assets of Debtor, and (H) providing such other information and
documents, and executing such other appropriate documents or instruments as
Secured Party may reasonably request in order to give effect to this Agreement
and the collateral security contemplated by this Agreement.
Exhibit F
- Page 7
10. Default; Remedies.
While a Default exists, subject to the terms and conditions of the Credit
Agreement, Secured Party has the following cumulative rights and remedies under
this Agreement:
(a) UCC
Rights. Secured Party may exercise any and all rights
available to a secured party under the UCC, in addition to any and all other
rights afforded by this Agreement and the other Loan Documents, at law, in
equity or otherwise, including, without limitation, (i) requiring Debtor to
assemble all or part of the Collateral and make it available to Secured Party at
a place to be designated by Secured Party which is reasonably convenient to
Debtor and Secured Party, (ii) applying by appropriate judicial proceedings for
appointment of a receiver for all or part of the Collateral, (iii) applying to
the Obligation any cash held by Secured Party under this Agreement, (iv)
reducing any claim to judgment, (v) exercising the rights of offset or banker’s
lien against the interest of Debtor in and to every account and other property
of Debtor in Secured Party’s possession to the extent of the full amount of the
Obligation, (vi) foreclosing the Security Interest and any other liens Secured
Party may have or otherwise realize upon any and all of the rights Secured Party
may have in and to the Collateral, or any part thereof, and (vii) bringing
suit or other proceedings before any Governmental Authority either for specific
performance of any covenant or condition contained in any of the Loan Documents
or in aid of the exercise of any right granted to Secured Party in any of the
Loan Documents.
(b) Notice. Reasonable
notification of the time and place of any public sale of the Collateral, or
reasonable notification of the time after which any private sale or other
intended disposition of the Collateral is to be made, shall be sent to Debtor
and to any other Person entitled to notice under the UCC; provided that, if any of the
Collateral threatens to decline speedily in value or is of the type customarily
sold on a recognized market, Secured Party may sell or otherwise dispose of the
Collateral without notification, advertisement, or other notice of any
kind. It is agreed that notice sent or given not less than ten
calendar days prior to the taking of the action to which the notice relates is
reasonable notification and notice for the purposes of this
subparagraph. It shall not be necessary that the Collateral be at the
location of the sale.
(c) Standards for Exercising
Rights and Remedies. To the extent that applicable Law imposes
duties on Secured Party to exercise remedies in a commercially reasonable
manner, Debtor acknowledges and agrees that it is not commercially unreasonable
for Secured Party (i) to fail to incur expenses reasonably deemed significant by
Secured Party to prepare Collateral for disposition or otherwise to fail to
complete raw material or work in process into finished goods or other finished
products for disposition, (ii) to fail to obtain third party consents for access
to Collateral to be disposed of, or to obtain or, if not required by other Law,
to fail to obtain governmental or third party consents for the collection or
disposition of Collateral to be collected or disposed of, (iii) to fail to
exercise collection remedies against account debtors or other Obligors, directly
or through the use of collection agencies and other collection specialists, (iv)
to fail to remove liens or encumbrances on or any adverse claims against
Collateral, (v) to advertise dispositions of Collateral through publications or
media of general circulation, whether or not the Collateral is of a specialized
nature, (vi) to contact other Persons, whether or not in the same business as
Debtor, for expressions of interest in acquiring all or any portion of the
Collateral, (vii) to hire one or more professional auctioneers to assist in the
disposition of Collateral, whether or not the Collateral is of a specialized
nature, (viii) to dispose of Collateral by utilizing Internet sites that provide
for the auction of assets of the types included in the Collateral or that have
the reasonable capability of doing so, or that match buyers and sellers of
assets, (ix) to dispose of assets in wholesale rather than retail markets, (x)
to disclaim disposition warranties, (xi) to purchase insurance or credit
enhancements to insure Secured Party against risks of loss, collection or
disposition of Collateral or to provide to Secured Party a guaranteed return
from the collection or disposition of Collateral, or (xii) to the extent deemed
reasonably appropriate by Secured Party, to obtain the services of other
brokers, investment bankers, consultants and other professionals to assist
Secured Party in the collection or disposition of any of the
Collateral. Debtor acknowledges that the purpose of this Section is
to provide non-exhaustive indications of what actions or omissions by Secured
Party would fulfill Secured Party's duties under the UCC or other Law of any
relevant jurisdiction in Secured Party's exercise of remedies against the
Collateral and that other actions or omissions by Secured Party shall not be
deemed to fail to fulfill such duties solely on account of not being indicated
in this Section.
Without limiting the foregoing, nothing contained in this Section
shall be construed to grant any rights to Debtor or to impose any duties
on Secured Party that would not have been granted or imposed by this Agreement
or by applicable Law in the absence of this Section.
Exhibit F
- Page 8
(d) Debtor’s
Lender. Secured Party shall be deemed to be irrevocably
appointed as Debtor’s agent and attorney-in-fact with all right and power to
enforce all of Debtor’s rights and remedies under or in connection with the
Collateral and this power is coupled with an interest. All reasonable
costs, expenses and liabilities incurred and all payments made by Secured Party
as Debtor’s agent and attorney-in-fact, including, without limitation,
reasonable attorney’s fees and expenses, shall be considered a loan by Secured
Party to Debtor which shall be repayable on demand and shall accrue interest at
the Default Rate and shall constitute part of the Obligation.
(e) Account Debtors and
Obligors. Secured Party may notify or require each account
debtor or other Obligor to make payment directly to Secured Party and Secured
Party may take control of the proceeds paid to Secured Party. Until
Secured Party elects to exercise these rights, Debtor is authorized to collect
and enforce the Collateral and to retain and expend all payments made on
Collateral. After Secured Party elects to exercise these rights,
Secured Party shall have the right in its own name or in the name of Debtor to
(i) compromise or extend time of payment with respect to all or any portion of
the Collateral for such amounts and upon such terms as Secured Party may
reasonably determine, (ii) demand, collect, receive, receipt for, ▇▇▇ for,
compound and give acquittance for any and all amounts due or to become due with
respect to Collateral, (iii) take control of cash and other proceeds of any
Collateral, (iv) endorse Debtor’s name on any notes, acceptances, checks,
drafts, money orders or other evidences of payment on Collateral that may come
into Secured Party’s possession, (v) sign Debtor’s name on any invoice or ▇▇▇▇
of lading relating to any Collateral, on any drafts against Obligors or other
Persons making payment with respect to Collateral, on assignments and
verifications of accounts or other Collateral and on notices to Obligors making
payment with respect to Collateral, (vi) send requests for verification of
obligations to any Obligor, and (vii) do all other acts and things reasonably
necessary to carry out the intent of this Agreement. If any Obligor
or account party fails to make payment on any Collateral when due, Secured Party
is authorized, in its sole discretion, either in its own name or in Debtor’s
name, to take such action as Secured Party reasonably shall deem appropriate for
the collection of any amounts owed with respect to Collateral or upon which a
delinquency exists. Regardless of any other provision of this
Agreement, however, Secured Party shall not be liable for its failure to
collect, or for its failure to exercise diligence in the collection of, any
amounts owed with respect to Collateral except for its own fraud, gross
negligence, or willful misconduct, nor shall it be under any duty to anyone
except Debtor to account for funds that it shall actually receive under this
Agreement. A receipt given by Secured Party to any Obligor or account
debtor shall be a full and complete release, discharge, and acquittance to such
Obligor or account party, to the extent of any amount so paid to Secured
Party. Secured Party may apply or set off amounts paid and the
deposits against any liability of Debtor to Secured Party.
Exhibit F
- Page 9
(f) Sale. Secured
Party’s sale of less than all the Collateral shall not exhaust Secured Party’s
rights under this Agreement and Secured Party is specifically empowered to make
successive sales until all the Collateral is sold. If the proceeds of
a sale of less than all the Collateral shall be less than the Obligation, this
Agreement and the Security Interest shall remain in full force and effect as to
the unsold portion of the Collateral just as though no sale had been
made. In the event any sale under this Agreement is not completed or
is, in Secured Party’s opinion, defective, such sale shall not exhaust Secured
Party’s rights under this Agreement and Secured Party shall have the right to
cause a subsequent sale or sales to be made. Any and all statements
of fact or other recitals made in any ▇▇▇▇ of sale or assignment or other
instrument evidencing any foreclosure sale under this Agreement as to nonpayment
of the Obligation, or as to the occurrence of any Default, or as to Secured
Party’s having declared all of such Obligation to be due and payable, or as to
notice of time, place and terms of sale and the properties to be sold having
been duly given, or as to any other act or thing having been duly done by
Secured Party, shall be taken as prima facie evidence of the
truth of the facts so stated and recited, subject, however, to manifest
error. Secured Party may appoint or delegate any one or more Persons
as agent to perform any act or acts necessary or incident to any sale held by
Secured Party, including the sending of notices and the conduct of sale, but
such acts must be done in the name and on behalf of Secured Party.
(g) Existence of
Default. Regarding the existence of any Default for purposes
of this Agreement, Debtor agrees that the Obligors or account debtors on any
Collateral may rely upon written certification from Secured Party that such a
Default exists and Debtor expressly agrees that Secured Party shall not be
liable to Debtor for any claims, damages, costs, expenses or causes of action of
any nature whatsoever in connection with, arising out of, or related to Secured
Party’s exercise of any rights, powers or remedies under any Loan Document
except for its own fraud, gross negligence, or willful misconduct.
(h) Application of
Proceeds. Secured Party shall apply the proceeds of any sale
or other disposition of the Collateral under this Section 10
in the following order (i) to the payment of all its reasonable expenses
incurred in retaking, holding and preparing any of the Collateral for sale(s) or
other disposition, in arranging for such sale(s) or other disposition, and in
actually selling or disposing of the same (all of which are part of the
Obligation), (ii) to repay Secured Party for amounts reasonably expended by
Secured Party under Section
11, (iii) to payment of the balance of the Obligation in the
order and manner specified in the Credit Agreement, and (iv) to make any
payments required under Sections 9.608(a)(1)(C) and 9.615(a)(3) of the
UCC. Any surplus remaining shall be delivered to Debtor or as a court
of competent jurisdiction may direct.
11. Other Rights of Secured
Party.
(a) Performance. In
the event Debtor fails to preserve the priority of the Security Interest in any
of the Collateral or, upon the occurrence and during the continuance of a
Default, otherwise fails to perform any of its obligations under the Loan
Documents with respect to the Collateral, then Secured Party may (but is not
required to) prosecute or defend any suits in relation to the Collateral or take
any other action which Debtor is required to take under the Loan Documents, but
has failed to take. Any sum which may be reasonably expended or paid
by Secured Party under this Section 11(a)
(including, without limitation, court costs and reasonable attorneys’
fees and expenses) shall bear interest from the date of expenditure or payment
at the Default Rate until paid and, together with such interest, shall be
payable by Debtor to Secured Party upon demand and shall be part of the
Obligation.
Exhibit F
- Page 10
(b) Collateral in Secured
Party’s Possession. If, while a Default exists, any Collateral
comes into Secured Party’s possession, Secured Party may use such Collateral for
the purpose of preserving it or its value pursuant to the order of a court of
appropriate jurisdiction or in accordance with any other rights held by Secured
Party in respect of such Collateral. Debtor covenants to promptly
reimburse and pay to Secured Party, at Secured Party’s request, the amount of
all reasonable expenses incurred by Secured Party in connection with its custody
and preservation of such Collateral, and all such expenses, costs, Taxes and
other charges shall bear interest at the Default Rate until repaid and, together
with such interest, shall be payable by Debtor to Secured Party upon demand and
shall be part of the Obligation. However, the risk of accidental loss
or damage to, or diminution in value of, Collateral is on Debtor, except for
Secured Party’s own fraud, gross negligence, or willful
misconduct. Secured Party shall have no liability for failure to
obtain or maintain insurance, nor to determine whether any insurance ever in
force is adequate as to amount or as to the risks insured. With
respect to Collateral that is in the possession of Secured Party, except for its
own fraud, gross negligence, or willful misconduct Secured Party shall have no
duty to fix or preserve rights against prior parties to such Collateral and
shall never be liable for any failure to use diligence to collect any amount
payable in respect of such Collateral, but shall be liable only to account to
Debtor for what it actually collects or receives thereon.
(c) Subrogation. If
any of the proceeds of the Obligation are given in renewal or extension of, or
are applied toward the payment of, indebtedness secured by any Lien, Secured
Party shall be, and is hereby, subrogated to all of the rights, titles,
interests and Liens securing the indebtedness so renewed, extended or
paid.
12. Miscellaneous.
(a) Term. Upon
full and final payment of the Obligation and final termination of Secured
Party’s commitment to extend credit under the Credit Agreement without Secured
Party having exercised its rights under this Agreement, this Agreement shall
terminate; provided
that, no Obligor or account debtor on any of the Collateral shall be
obligated to inquire as to the termination of this Agreement, but shall be fully
protected in making payment directly to Secured Party, which payment shall be
promptly paid over to Debtor after termination of this Agreement and the
complete and final payment of the Obligation.
(b) Actions Not
Releases. The Security Interest and Debtor’s obligations and
Secured Party’s rights under this Agreement shall not be released, diminished,
impaired or adversely affected by the occurrence of any one or more of the
following events: (i) the taking or accepting of any other security
or assurance for any or all of the Obligation; (ii) any release, surrender,
exchange, subordination or loss of any security or assurance at any time
existing in connection with any or all of the Obligation; (iii) the modification
of, amendment to, or waiver of compliance with any terms of any of the other
Loan Documents without Debtor’s consent, except as required therein; (iv) the
insolvency, bankruptcy or lack of corporate or trust power of any party at any
time liable for the payment of any or all of the Obligation, whether now
existing or hereafter occurring; (v) any renewal, extension or rearrangement of
the payment of any or all of the Obligation, either with or without notice to or
consent of Debtor, or any adjustment, indulgence, forbearance or compromise that
may be granted or given by Secured Party to Debtor, in each case, except as
required by the Loan Documents; (vi) any neglect, delay, omission, failure or
refusal of Secured Party to take or prosecute any action in connection with any
other agreement, document, guaranty or instrument evidencing, securing or
assuring the payment of all or any of the Obligation; (vii) any failure of
Secured Party to notify Debtor of any renewal, extension, or assignment of the
Obligation or any part thereof, or the release of any security under any other
document or instrument, or of any other action taken or refrained from being
taken by Secured Party against Debtor or any new agreement between Secured Party
and Debtor, it being understood that, except as expressly required by the Credit
Agreement or any other Loan Document, Secured Party shall not be required to
give Debtor any notice of any kind under any circumstances whatsoever with
respect to or in connection with the Obligation, including, without limitation,
notice of acceptance of this Agreement or any Collateral ever delivered to or
for the account of Secured Party under this Agreement; (viii) the illegality,
invalidity or unenforceability of all or any part of the Obligation against any
third party obligated with respect thereto by reason of the fact that the
Obligation, or the interest paid or payable with respect thereto, exceeds the
amount permitted by Law, the act of creating the Obligation, or any part
thereof, is ultra
▇▇▇▇▇, or the officers, partners or trustees creating same acted in
excess of their authority, or for any other reason; or (ix) if any payment by
any party obligated with respect thereto is held to constitute a preference
under applicable Laws or for any other reason Secured Party is required to
refund such payment or pay the amount thereof to someone else.
Exhibit F
- Page 11
(c) Waivers. Except
to the extent expressly otherwise provided in this Agreement or in other Loan
Documents, Debtor waives (i) any right to require Secured Party to proceed
against any other Person, to exhaust its rights in Collateral, or to pursue any
other right which Secured Party may have, (ii) with respect to the Obligation,
presentment and demand for payment, protest, notice of protest and nonpayment,
notice of acceleration, and notice of the intention to accelerate; and (iii) all
rights of marshaling in respect of any and all of the Collateral.
(d) Parties
Bound. This Agreement shall be binding on Debtor and its
successors and assigns and shall inure to the benefit of Secured Party and its
successors and assigns.
(e) Assignment. Debtor
may not, without Secured Party’s prior written consent, assign any rights,
duties or obligations under this Agreement, except as permitted by the Credit
Agreement. In the event of an assignment of all or part of the
Obligation permitted by the Credit Agreement, the Security Interest and other
rights and benefits under this Agreement, to the extent applicable to the part
of the Obligation so assigned, may be transferred with the
Obligation.
(f) Notice. Any
notice or communication required or permitted under this Agreement must be given
as prescribed in the Credit Agreement.
(g) Amendments. This
Agreement may only be amended by a writing executed by Debtor and Secured
Party.
(h) Multiple Counterparts and
Facsimile Signatures. This Agreement may be executed in any
number of counterparts with the same effect as if all signatories had signed the
same document. All counterparts must be construed together to
constitute one and the same instrument. This Agreement may be
transmitted and signed by facsimile and portable document format
(PDF). The effectiveness of any such documents and signatures shall,
subject to applicable Law, have the same force and effect as manually-signed
originals and shall be binding on Debtor, Secured Party, and the
Lender. Secured Party may also require that any such documents and
signatures be confirmed by a manually-signed original; provided that, the failure to
request or deliver the same shall not limit the effectiveness of any facsimile
or PDF document or signature.
13. Waiver of Jury
Trial. Debtor and Secured Party irrevocably and voluntarily
waive any right they may have to a trial by jury in respect of any
claim. This provision is a material inducement for the parties
entering into this Agreement.
14. Governing
Law. THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS MUST BE
CONSTRUED, AND THEIR PERFORMANCE ENFORCED, UNDER TEXAS LAW WITHOUT REGARD TO
CONFLICTS OF LAW PRINCIPLES.
[Signatures appear on the following
pages.]
Exhibit F
- Page 12
EXECUTED
as of the date set forth in the preamble.
| DEBTOR: |
|
a
Nevada corporation
|
|||
|
|
By:
|
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |
| ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |||
| Chief Financial Officer | |||
|
ELECTROWAVE
USA, INC.,
a
Nevada corporation
|
|||
|
|
By:
|
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |
| ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |||
| Chief Financial Officer | |||
|
FLOTATION
TECHNOLOGIES, INC.,
a
Maine corporation
|
|||
|
|
By:
|
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |
| ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |||
| Chief Financial Officer | |||
|
MAKO
TECHNOLOGIES, LLC,
a Nevada limited liability company
|
|||
|
|
By:
|
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |
| ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |||
| Chief Financial Officer | |||
|
DEEP
DOWN INC.,
a
Delaware corporation
|
|||
|
|
By:
|
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |
| ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ | |||
| Chief Financial Officer | |||
Exhibit F
- Page 13
| SECURED PARTY: |
|
WHITNEY
NATIONAL BANK,
a
national banking association
|
|||
|
|
By:
|
/s/ ▇▇▇▇ ▇. ▇▇▇▇ | |
| ▇▇▇▇ ▇. ▇▇▇▇ | |||
| Vice President | |||
Attachments:
Schedule
1 – Information
Exhibit
F - Page 14