DEED OF TRUST, SECURITY AGREEMENT AND UCC FINANCING STATEMENT FOR FIXTURE FILING

DEED OF TRUST, SECURITY AGREEMENT

AND UCC FINANCING STATEMENT FOR FIXTURE FILING

(Texas)

by

DEEP DOWN, INC. ,

as Grantor ,

to

GARY M. OLANDER ,

as Trustee ,

for the benefit of

WHITNEY NATIONAL BANK

as Beneficiary

 

This Instrument shall be effective as a

UNIFORM COMMERCIAL CODE FINANCING STATEMENT FILED AS A

FIXTURE FILING

 

This Financing Statement covers goods described herein by item or type some or all of which are affixed or are to be affixed to the real property described in Exhibit A attached hereto.

THIS INSTRUMENT PREPARED BY AND AFTER RECORDING PLEASE RETURN TO:

Porter & Hedges, L.L.P.

1000 Main Street, 36th Floor

Houston, Texas 77002

Attn:  Nick H. Sorensen

TABLE OF CONTENTS

 

 

                                                                                                                                        

 

DEED OF TRUST, SECURITY AGREEMENT

AND UCC FINANCING STATEMENT FOR FIXTURE FILING

This DEED OF TRUST, SECURITY AGREEMENT AND UCC FINANCING STATEMENT FOR FIXTURE FILING (as amended, restated, or supplemented, this “ Deed of Trust ”) is executed as of May 29, 2009, by DEEP DOWN, INC., a Nevada corporation (“ Grantor ”), to GARY M. OLANDER, Trustee, and his successors in the trust hereby created (such Trustee and any successor in trust, being hereinafter referred to as the “ Trustee ”) for the benefit of Whitney National Bank, a national banking association (“ Beneficiary ”).

SECTION 1.      DEFINITIONS.  Unless otherwise defined in this Deed of Trust, or unless the context otherwise requires, each capitalized term used in this Deed of Trust shall have the meaning given such term in the Credit Agreement, as hereinafter defined.  As used in this Deed of Trust, the following terms shall have the following meanings:

 

 

2.1       Grant of Lien; Habendum Clause .  To secure the full and timely payment of the Indebtedness and the full and timely performance and discharge of Grantor’s obligations under this Deed of Trust, Grantor has GRANTED, BARGAINED, SOLD, and CONVEYED, and by these presents does GRANT, BARGAIN, SELL, and CONVEY unto the Trustee the Mortgaged Property, subject to the Permitted Encumbrances, TO HAVE AND TO HOLD the Mortgaged Property unto the Trustee, the Trustee’s successors in trust, and the Trustee’s assigns forever, in trust with power of sale, and Grantor does hereby bind itself and its successors, legal representatives, and assigns to warrant and forever defend the title to the Mortgaged Property unto the Trustee against every Person whomsoever lawfully claiming or to claim the same or any part thereof by, through or under Grantor, but not otherwise; provided that, if the Indebtedness has been paid in full and the Beneficiary’s commitment to lend under the Credit Agreement has finally terminated, then the Liens, security interests, estates, and rights granted in this Deed of Trust shall terminate; otherwise the same shall remain in full force and effect.

2.2       Subrogation .  The Trustee and Beneficiary are hereby subrogated to the claims and liens of all parties whose claims or liens are fully or partially discharged or paid with the proceeds of the Indebtedness secured by this Deed of Trust, notwithstanding that such claims or liens may have been cancelled and satisfied of record.

SECTION 3.      WARRANTIES AND REPRESENTATIONS.  Grantor acknowledges that certain representations and warranties in the Credit Agreement are applicable to it and confirms that each such representation and warranty is true and correct.  Furthermore, Grantor hereby unconditionally warrants and represents to the Beneficiary as follows:

3.1       Lien of this Instrument .  This Deed of Trust constitutes a valid, subsisting lien on the Land, the Improvements, and the Fixtures, and a valid, subsisting security interest in and to the Personalty.

3.2       Litigation .  Except as disclosed on Schedule 7.5 to the Credit Agreement, there are no actions, suits, or proceedings pending or, to the knowledge of Grantor, threatened against or affecting the Mortgaged Property or involving the validity or enforceability of this Deed of Trust or the priority of the lien and security interest hereof.

3.3       Acknowledgment by Grantor .  Grantor acknowledges that the execution and delivery of this Deed of Trust is a requirement to Beneficiary’s execution of the Credit Agreement and the other Loan Documents and is an integral part of the transactions contemplated by the Loan Documents and is a condition precedent to the effectiveness of the Credit Agreement.

3.4       Environmental .  In addition to the representations set out above, Grantor expressly incorporates into this Deed of Trust the representations set forth in Section 7.7 of the Credit Agreement, and confirms that the same are true and correct.

SECTION 4.      AFFIRMATIVE COVENANTS.  Grantor acknowledges that certain covenants in the Credit Agreement are applicable to it or shall be imposed upon it, and Grantor covenants and agrees to comply with each of them.  Furthermore, Grantor hereby unconditionally covenants and agrees with Beneficiary as follows:

4.1       Payment and Performance .  Grantor will pay, or cause to be paid, the Indebtedness as and when called for in the Loan Documents and will perform all of its obligations under this Deed of Trust on or before the dates they are to be performed.

4.2       Payment of Impositions .  Grantor will pay and discharge, or cause to be paid and discharged, the Impositions and Grantor’s obligations to materialmen, mechanics, carriers, warehousemen, or other like Persons as and when required to be paid pursuant to the terms of the Credit Agreement unless contested in good faith by appropriate proceedings.

4.3       Repair .  Grantor will keep the Mortgaged Property in good order and condition and presenting a good appearance and will make all repairs, replacements, renewals, additions, betterments, improvements, and alterations thereof and thereto, interior and exterior, structural and nonstructural, ordinary and extraordinary, foreseen and unforeseen, which are necessary or reasonably appropriate to keep same in such order and condition.  Grantor will also use its best efforts to prevent any act or occurrence which might materially impair the value or usefulness of the Mortgaged Property for its intended usages as set forth in any plans and specifications for the Improvements submitted to Beneficiary or in the Loan Documents.  In instances where repairs, replacements, renewals, additions, betterments, improvements, or alterations are required in and to the Mortgaged Property on an emergency basis to prevent loss, damage, waste, or destruction thereof, Grantor shall proceed to construct same, or cause same to be constructed, notwithstanding anything to the contrary contained in Section 5.2 below; provided that , in instances where such emergency measures are to be taken, Grantor will promptly notify Beneficiary in writing of the commencement of such emergency measures and, when same are completed, the completion date and the measures actually taken.

4.4       Insurance .  In addition to the requirements of Section 8.6 of the Credit Agreement, Grantor shall obtain and maintain insurance upon and relating to the Mortgaged Property insuring against personal injury and death, loss by fire and such other hazards, casualties, and contingencies (including but not limited to fire, lightning, hail, windstorm, explosion, malicious mischief, vandalism, and rent loss or extra expense insurance covering loss of Rents) as are covered by extended coverage policies in effect where the Land is located and such other risks as may be reasonably specified by Beneficiary from time to time, all in such amounts and with such insurers of recognized responsibility as are reasonably acceptable to Beneficiary; provided that , absent written direction from Beneficiary, such insurance shall be in an amount not less than the full insurable replacement value of the Mortgaged Property.  If, and to the extent that the Mortgaged Property is located within an area that has been or is hereafter designated or identified as an area having any type of flood, mudslide, or flood-related erosion hazard by the Federal Emergency Management Agency or by such other official as shall from time to time be authorized by federal or state law to make such designation pursuant to the National Flood Insurance Act of 1968, as such act may from time to time be amended and in effect, or pursuant to any other national or state program of flood insurance, Grantor shall carry flood insurance with respect to the Mortgaged Property in an amount not less than the maximum amount available under the Flood Disaster Protection Act of 1973 and the regulations issued pursuant thereto, as amended from time to time, in form complying with the “insurance purchase” requirement of that Act.  Each insurance policy issued in connection with the Mortgaged Property shall provide, by way of endorsements, riders, or otherwise, that proceeds will be payable to Beneficiary as its interest may appear and should be cancelable only after Beneficiary is given thirty (30) days written notice of such cancellation.  All renewal and substitute policies of insurance or certified copies thereof shall be delivered at the office of Beneficiary, premiums then due and payable paid, at least fifteen (15) days before termination of policies theretofore delivered to Beneficiary.  Beneficiary shall have the right, but not the obligation, to make premium payments, at Grantor’s expense, to prevent any cancellation, endorsement, alteration or reissuance, and such payments shall be accepted by the insurer to prevent same.

4.5       Restoration Following Casualty .  If any act or occurrence of any kind or nature (including any casualty for which insurance was not obtained or obtainable) shall result in damage to or loss or destruction of the Mortgaged Property, Grantor shall give notice thereof to Beneficiary.  If any of the Mortgaged Property covered by insurance is destroyed or damaged by any casualty against which insurance shall have been required hereunder, the proceeds of such insurance will be applied as provided in the Credit Agreement.

4.6       Defense of Title .  If the title of the Trustee to, or the interest of Beneficiary in, the Mortgaged Property or any part thereof, shall be endangered or shall be attacked, directly or indirectly, Grantor shall, at Grantor’s expense, take all necessary and proper steps for the defense of such title or interest, including the employment of counsel, the prosecution or defense of litigation, and the compromise or discharge of claims made against such title or interest in the Mortgaged Property.  In the event of Grantor’s failure or inability to proceed initially as provided above, the Trustee and Beneficiary or either of them (whether or not named as parties to legal proceedings with respect thereto) are hereby authorized and empowered to take, at Grantor’s expense, such additional steps as in their reasonable judgment may be necessary or proper for the defense of any such legal proceedings or the protection of the validity or priority of this Deed of Trust and the rights, titles, liens and security interests created or evidenced hereby.

4.7       Future Impositions .  If at any time any law shall be enacted imposing or authorizing the imposition of any tax upon this Deed of Trust or upon any rights, titles, liens, or security interests created hereby, or any part thereof, Grantor shall promptly pay all such taxes to the extent it can lawfully do so.  In the event of the enactment of such a law, if it is unlawful for Grantor to pay such taxes, payment of such tax shall be deemed an obligation which Beneficiary may pay pursuant to Section 10.6 of this Deed of Trust.

4.8       Environmental Indemnification .  In addition to the covenants set out in Sections 4 and  5 of this Deed of Trust, Grantor expressly incorporates into this Deed of Trust the indemnification set forth in Section 13.10 of the Credit Agreement and hereby agrees to the same.

4.9       Information About Mortgaged Property .  Grantor will maintain at its chief executive office, a current record of the location of all Mortgaged Property, and furnish to Beneficiary, at such intervals as Beneficiary may reasonably request, lists, descriptions, and other information as may be necessary or proper to keep Beneficiary informed with respect to the identity, location, status, condition and value of the Mortgaged Property.  Grantor will promptly notify Beneficiary of any change in any material fact or circumstance represented or warranted by Grantor with respect to any of the Mortgaged Property, or any material claim, action or proceeding affecting title to any of the Mortgaged Property.

4.10     Further Assurances . Grantor will from time to time promptly execute and deliver to Beneficiary all such other assignments, certificates, supplemental documents, and financing statements, and do all other acts or things as Beneficiary may reasonably request in order to more fully create, evidence, perfect, continue and preserve the priority of the Lien created by this Deed of Trust.

SECTION 5.      NEGATIVE COVENANTS.  Grantor acknowledges that certain covenants in the Credit Agreement are applicable to it or shall be imposed upon it and covenants and agrees to comply with each of them.  Furthermore, Grantor hereby covenants and agrees that, until the entire Indebtedness is paid in full and the Beneficiary’s commitment to lend under the Credit Agreement is finally terminated:

5.1       Use Violations .  Grantor will not use, maintain, operate, or occupy, or allow the use, maintenance, operation, or occupancy of the Mortgaged Property in any manner which, in case of any of the following would constitute a Material Adverse Event, (a) violates any Legal Requirement, (b) may be dangerous unless safeguarded as required by law, or (c) constitutes a public or private nuisance.

5.2       Alterations .  Grantor will not commit or permit any waste of the Mortgaged Property that would constitute a Material Adverse Event on its value as security for the Indebtedness and will not (subject to the provisions of Section 4.3 herein), without the advance written notice to Beneficiary, make or permit to be made any alterations or additions to the Mortgaged Property of a mater