Unassociated Document


    
      

    

    EXHBIT
10.4 – FORM OF SECURITY AGREEMENT

    


    SECURITY
AGREEMENT

    


    SECURITY
AGREEMENT (this “Agreement”), dated as
of February 25, 2008, by and among Admiralty Holding Corporation, a Colorado
corporation (“Parent”), Admiralty
Corporation, a Georgia corporation and Admiralty Marine Operations, Ltd., a
Bahamas corporation (collectively the “Subsidiary”)(hereinafter
the Parent and the Subsidiary shall collectively be referred to as the “Company”) and the
secured parties signatory hereto and their respective endorsees, transferees and
assigns  (collectively, the “Secured
Party”).

    


    W I T N E
S S E T H:

    


    WHEREAS,
pursuant to a Securities Purchase Agreement, dated the date hereof, between
Parent and the Secured Party (the “Purchase Agreement”),
Parent has agreed to issue to the Secured Party and the Secured Party has agreed
to purchase from Parent certain of Parent’s 8% Callable Secured Convertible
Notes, due three years from the date of issue (the “Notes”), which are
convertible into shares of Company’s Common Stock, par value $.001 per share
(the “Common
Stock”).  In connection therewith, Parent shall issue the
Secured Party certain Common Stock purchase warrants (the “Warrants”);
and

    


    WHEREAS,
the Parent and the Subsidiary have been, and are now, engaged principally in the
business of locating and recovering valuable cargoes from historic shipwrecks.
The company also continues to evaluate the technology for assisting domestic
governmental agencies in locating and retrieving unexploded marine ordinances
and weapons. Operating business is principally conducted through Admiralty
Corporation. It has undertaken to fund and conduct research to develop ATLIS, a
remote sensing nonferrous metal detection device. Admiralty Marine Operations,
Ltd. is the title and registration holder of the ship, the M. V. New World
Legacy. In the past, as now, the Parent has provided financing for the
Subsidiary, and the Subsidiary has relied upon the Parent to provide such
financing.  In addition, it is anticipated that, if the Subsidiary
executes and delivers this , the Parent will continue to provide such financing
to the Subsidiary, and that the proceeds of the Purchase Agreement and
Notes will be used,
in part, for the general working capital purposes of the Subsidiary;
and

    


    WHEREAS,
the Subsidiary constitutes all of the subsidiaries of the Parent and it is in
the best interest of the Subsidiary as subsidiaries of the Parent and the
indirect beneficiaries of the Purchase Agreement and Notes, that the Secured
Party enter into the Purchase Agreement and purchase the Notes to the Company;
and

    


    WHEREAS,
in order to induce the Secured Party to purchase the Notes, Company has agreed
to execute and deliver to the Secured Party this Agreement for the benefit of
the Secured Party and to grant to it a first priority security interest in
certain property of Company to secure the prompt payment, performance and
discharge in full of all of Company’s obligations under the Notes and exercise
and discharge in full of Company’s obligations under the Warrants;
and


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    WHEREAS,
in light of the foregoing, the Company expects to derive substantial benefit
from the Purchase Agreement and sale of the Notes and the transactions
contemplated thereby and, in furtherance thereof, has agreed to execute and
deliver this .

    


    NOW,
THEREFORE, in consideration of the agreements herein contained and for other
good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto hereby agree as follows:

    


    1.           
 Certain
Definitions.  As used in this Agreement, the following terms
shall have the meanings set forth in this Section 1.  Terms used but
not otherwise defined in this Agreement that are defined in Article 9 of the UCC
(such as “general
intangibles” and “proceeds”) shall have
the respective meanings given such terms in Article 9 of the UCC.

    


    (a)        
   “Collateral” means the
collateral in which the Secured Party is granted a security interest by this
Agreement and which shall include the following, whether presently owned or
existing or hereafter acquired or coming into existence, and all additions and
accessions thereto and all substitutions and replacements thereof, and all
proceeds, products and accounts thereof, including, without limitation, all
proceeds from the sale or transfer of the Collateral and of insurance covering
the same and of any tort claims in connection therewith:

    


    (i)         
   All Goods of the Company, including, without limitations, all
machinery, equipment, computers, motor vehicles, trucks, tanks, boats, ships,
appliances, furniture, special and general tools, fixtures, test and quality
control devices and other equipment of every kind and nature and wherever
situated, together with all documents of title and documents representing the
same, all additions and accessions thereto, replacements therefor, all parts
therefor, and all substitutes for any of the foregoing and all other items used
and useful in connection with the Company’s businesses and all improvements
thereto (collectively, the “Equipment”);
and

    


    (ii)       
    All Inventory of the Company; and

    


    (iii)           All
of the Company’s contract rights and general intangibles, including, without
limitation, all partnership interests, stock or other securities, licenses,
distribution and other agreements, computer software development rights, leases,
franchises, customer lists, quality control procedures, grants and rights,
goodwill, trademarks, service marks, trade styles, trade names, patents, patent
applications, copyrights, deposit accounts, and income tax refunds
(collectively, the “General
Intangibles”); and

    


    (iv)           All
Receivables of the Company including all insurance proceeds, and rights to
refunds or indemnification whatsoever owing, together with all instruments, all
documents of title representing any of the foregoing, all rights in any
merchandising, goods, equipment, motor vehicles and trucks which any of the same
may represent, and all right, title, security and guaranties with respect to
each Receivable, including any right of stoppage in transit;
and


    
      
         


      

      
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    (v)           All
of the Company’s documents, instruments and chattel paper, files, records, books
of account, business papers, computer programs and the products and proceeds of
all of the foregoing Collateral set forth in clauses (i)-(iv)
above.

    


    (b)       
    “Company” shall mean,
collectively, Company and all of the subsidiaries of Company, a list of which is
contained in Schedule
A, attached hereto.

    


    (c)       
    “Obligations” means
all of the Company’s obligations under this Agreement and the Notes, in each
case, whether now or hereafter existing, voluntary or involuntary, direct or
indirect, absolute or contingent, liquidated or unliquidated, whether or not
jointly owed with others, and whether or not from time to time decreased or
extinguished and later decreased, created or incurred, and all or any portion of
such obligations or liabilities that are paid, to the extent all or any part of
such payment is avoided or recovered directly or indirectly from the Secured
Party as a preference, fraudulent transfer or otherwise as such obligations may
be amended, supplemented, converted, extended or modified from time to
time.

    


    (d)        
   “UCC” means the
Uniform Commercial Code, as currently in effect in the State of New
York.

    


    2.          
  Grant of
Security Interest.  As an inducement for the Secured Party to
purchase the Notes and to secure the complete and timely payment, performance
and discharge in full, as the case may be, of all of the Obligations, the
Company hereby, unconditionally and irrevocably, pledges, grants and
hypothecates to the Secured Party, a continuing security interest in, a
continuing first lien upon, an unqualified right to possession and disposition
of and a right of set-off against, in each case to the fullest extent permitted
by law, all of the Company’s right, title and interest of whatsoever kind and
nature in and to the Collateral (the “Security
Interest”).

    


    3.         
   Representations, Warranties,
Covenants and Agreements of the Company.  The Company
represents and warrants to, and covenants and agrees with, the Secured Party as
follows:

    


    (a)        
   The Company has the requisite corporate power and authority to
enter into this Agreement and otherwise to carry out its obligations
thereunder.  The execution, delivery and performance by the Company of
this Agreement and the filings contemplated therein have been duly authorized by
all necessary action on the part of the Company and no further action is
required by the Company.  This Agreement constitutes a legal, valid
and binding obligation of the Company enforceable in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditor’s rights generally.

    


    (b)       
    The Company represents and warrants that it has no place
of business or offices where its respective books of account and records are
kept (other than temporarily at the offices of its attorneys or accountants) or
places where Collateral is stored or located, except as set forth on Schedule A attached
hereto;

    


    (c)       
    The Company is the sole owner of the Collateral (except
for non-exclusive licenses granted by the Company in the ordinary course of
business), free and clear of any liens, security interests, encumbrances, rights
or claims, and is fully authorized to grant the Security Interest in and to
pledge the Collateral.  There is not on file in any governmental or
regulatory authority, agency or recording office an effective financing
statement, security agreement, license or transfer or any notice of any of the
foregoing (other than those that have been filed in favor of the Secured Party
pursuant to this Agreement) covering or affecting any of
the  Collateral.  So long as this Agreement shall be in
effect, the Company shall not execute and shall not knowingly permit to be on
file in any such office or agency any such financing statement or other document
or instrument (except to the extent filed or recorded in favor of the Secured
Party pursuant to the terms of this Agreement).


    
      
         


      

      
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    (d)         
  No part of the Collateral has been judged invalid or
unenforceable.  No written claim has been received that any Collateral
or the Company’s use of any Collateral violates the rights of any third party.
There has been no adverse decision to the Company’s claim of ownership rights in
or exclusive rights to use the Collateral in any jurisdiction or to the
Company’s right to keep and maintain such Collateral in full force and effect,
and there is no proceeding involving said rights pending or, to the best
knowledge of the Company, threatened before any court, judicial body,
administrative or regulatory agency, arbitrator or other governmental
authority.

    


    (e)        
   The Company shall at all times maintain its books of account
and records relating to the Collateral at its principal place of business and
its Collateral at the locations set forth on Schedule A attached
hereto and may not relocate such books of account and records or tangible
Collateral unless it delivers to the Secured Party at least 30 days prior to
such relocation (i) written notice of such relocation and the new location
thereof (which must be within the United States) and (ii) evidence that
appropriate financing statements and other necessary documents have been filed
and recorded and other steps have been taken to perfect the Security Interest to
create in favor of the Secured Party valid, perfected and continuing first
priority liens in the Collateral.

    


    (f)         
  This Agreement creates in favor of the Secured Party a valid
security interest in the Collateral securing the payment and performance of the
Obligations and, upon making the filings described in the immediately following
sentence, a perfected first priority security interest in such
Collateral.  Except for the filing of financing statements on Form-1
under the UCC with the jurisdictions indicated on Schedule B, attached
hereto, no authorization or approval of or filing with or notice to any
governmental authority or regulatory body is required either (i) for the grant
by the Company of, or the effectiveness of, the Security Interest granted hereby
or for the execution, delivery and performance of this Agreement by the Company
or (ii) for the perfection of or exercise by the Secured Party of its rights and
remedies hereunder.

    


    (g)       
    On the date of execution of this Agreement, the Company
will deliver to the Secured Party one or more executed UCC financing statements
on Form-1 with respect to the Security Interest for filing with  the
jurisdictions indicated on Schedule B, attached
hereto and in such other jurisdictions as may be requested by the Secured
Party.

    


    (h)      
     The execution, delivery and performance of this
Agreement does not conflict with or cause a breach or default, or an event that
with or without the passage of time or notice, shall constitute a breach or
default, under any agreement to which the Company is a party or by which the
Company is bound.  No consent (including, without limitation, from
stock holders or creditors of the Company) is required for the Company to enter
into and perform its obligations hereunder.


    
      
         


      

      
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    (i)        
    The Company shall at all times maintain the liens and
Security Interest provided for hereunder as valid and perfected first priority
liens and security interests in the Collateral in favor of the Secured Party
until this Agreement and the Security Interest hereunder shall terminate
pursuant to Section 11.  The Company hereby agrees to defend the same
against any and all persons.  The Company shall safeguard and protect
all Collateral for the account of the Secured Party.  At the request
of the Secured Party, the Company will sign and deliver to the Secured Party at
any time or from time to time one or more financing statements pursuant to the
UCC (or any other applicable statute) in form reasonably satisfactory to the
Secured Party and will pay the cost of filing the same in all public offices
wherever filing is, or is deemed by the Secured Party to be, necessary or
desirable to effect the rights and obligations provided for herein. Without
limiting the generality of the foregoing, the Company shall pay all fees, taxes
and other amounts necessary to maintain the Collateral and the Security Interest
hereunder, and the Company shall obtain and furnish to the Secured Party from
time to time, upon demand, such releases and/or subordinations of claims and
liens which may be required to maintain the priority of the Security Interest
hereunder.

    


    (j)         
   The Company will not transfer, pledge, hypothecate, encumber,
license (except for non-exclusive licenses granted by the Company in the
ordinary course of business), sell or otherwise dispose of any of the Collateral
without the prior written consent of the Secured Party.

    


    (k)       
    The Company shall keep and preserve its Equipment,
Inventory and other tangible Collateral in good condition, repair and order and
shall not operate or locate any such Collateral (or cause to be operated or
located) in any area excluded from insurance coverage.

    


    (l)         
   The Company shall, within ten (10) days of obtaining knowledge
thereof, advise the Secured Party promptly, in sufficient detail, of any
substantial change in the Collateral, and of the occurrence of any event which
would have a material adverse effect on the value of the Collateral or on the
Secured Party’s security interest therein.

    


    (m)           The
Company shall promptly execute and deliver to the Secured Party such further
deeds, mortgages, assignments, security agreements, financing statements or
other instruments, documents, certificates and assurances and take such further
action as the Secured Party may from time to time request and may in its sole
discretion deem necessary to perfect, protect or enforce its security interest
in the Collateral including, without limitation, the execution and delivery of a
separate security agreement with respect to the Company’s intellectual property
(“Intellectual
Property Security Agreement”) in which the Secured Party has been granted
a security interest hereunder, substantially in a form acceptable to the Secured
Party, which Intellectual Property Security Agreement, other than as stated
therein, shall be subject to all of the terms and conditions
hereof.


    
      
         


      

      
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    (n)       
    The Company shall permit the Secured Party and its
representatives and agents to inspect the Collateral at any time, and to make
copies of records pertaining to the Collateral as may be requested by the
Secured Party from time to time.

    


    (o)       
    The Company will take all steps reasonably necessary to
diligently pursue and seek to preserve, enforce and collect any rights, claims,
causes of action and accounts receivable in respect of the
Collateral.

    


    (p)       
    The Company shall promptly notify the Secured Party in
sufficient detail upon becoming aware of any  attachment, garnishment,
execution or other legal process levied against any Collateral and of any other
information received by the Company that may materially affect the value of the
Collateral, the Security Interest or the rights and remedies of the Secured
Party hereunder.

    


    (q)       
    All information heretofore, herein or hereafter supplied
to the Secured Party by or on behalf of the Company with respect to the
Collateral is accurate and complete in all material respects as of the date
furnished.

    


    (r)         
   Schedule A attached
hereto contains a list of all of the subsidiaries of Company.

    


    4.        
    Defaults. The
following events shall be “Events of
Default”:

    


    (a)          
 The occurrence of an Event of Default (as defined in the Notes) under the
Notes;

    


    (b)        
   Any representation or warranty of the Company in this
Agreement or in the Intellectual Property Security Agreement shall prove to have
been incorrect in any material respect when made;

    


    (c)        
   The failure by the Company to observe or perform any of its
obligations hereunder or in the Intellectual Property Security Agreement for ten
(10) days after receipt by the Company of notice of such failure from the
Secured Party; and

    


    (d)         
  Any breach of, or default under, the Warrants.

    


    5.          
  Duty To
Hold In Trust.  Upon the occurrence of any Event of Default and
at any time thereafter, the Company shall, upon receipt by it of any revenue,
income or other sums subject to the Security Interest, whether payable pursuant
to the Notes or otherwise, or of any check, draft, note, trade acceptance or
other instrument evidencing an obligation to pay any such sum, hold the same in
trust for the Secured Party and shall forthwith endorse and transfer any such
sums or instruments, or both, to the Secured Party for application to the
satisfaction of the Obligations.

    


    6.         
   Rights and Remedies Upon
Default.  Upon occurrence of any Event of Default and at any
time thereafter, the Secured Party shall have the right to exercise all of the
remedies conferred hereunder and under the Notes, and the Secured Party shall
have all the rights and remedies of a secured party under the UCC and/or any
other applicable law (including the Uniform Commercial Code of any jurisdiction
in which any Collateral is then located).  Without limitation, the
Secured Party shall have the following rights and powers:


    
      
         


      

      
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    (a)        
   The Secured Party shall have the right to take possession of
the Collateral and, for that purpose, enter, with the aid and assistance of any
person, any premises where the Collateral, or any part thereof, is or may be
placed and remove the same, and the Company shall assemble the Collateral and
make it available to the Secured Party at places which the Secured Party shall
reasonably select, whether at the Company’s premises or elsewhere, and make
available to the Secured Party, without rent, all of the Company’s respective
premises and facilities for the purpose of the Secured Party taking possession
of, removing or putting the Collateral in saleable or disposable
form.

    


    (b)       
    The Secured Party shall have the right to operate the
business of the Company using the Collateral and shall have the right to assign,
sell, lease or otherwise dispose of and deliver all or any part of the
Collateral, at public or private sale or otherwise, either with or without
special conditions or stipulations, for cash or on credit or for future
delivery, in such parcel or parcels and at such time or times and at such place
or places, and upon such terms and conditions as the Secured Party may deem
commercially reasonable, all without (except as shall be required by applicable
statute and cannot be waived) advertisement or demand upon or notice to the
Company or right of redemption of the Company, which are hereby expressly
waived.  Upon each such sale, lease, assignment or other transfer of
Collateral, the Secured Party may, unless prohibited by applicable law which
cannot be waived, purchase all or any part of the Collateral being sold, free
from and discharged of all trusts, claims, right of redemption and equities of
the Company, which are hereby waived and released.

    


    7.           
 Applications of
Proceeds.  The proceeds of any such sale, lease or other
disposition of the Collateral hereunder shall be applied first, to the expenses
of retaking, holding, storing, processing and preparing for sale, selling, and
the like (including, without limitation, any taxes, fees and other costs
incurred in connection therewith) of the Collateral, to the reasonable
attorneys’ fees and expenses incurred by the Secured Party in enforcing its
rights hereunder and in connection with collecting, storing and disposing of the
Collateral, and then to satisfaction of the Obligations, and to the payment of
any other amounts required by applicable law, after which the Secured Party
shall pay to the Company any surplus proceeds.  If, upon the sale,
license or other disposition of the Collateral, the proceeds thereof are
insufficient to pay all amounts to which the Secured Party is legally entitled,
the Company will be liable for the deficiency, together with interest thereon,
at the rate of 15% per annum (the “Default Rate”), and
the reasonable fees of any attorneys employed by the Secured Party to collect
such deficiency.  To the extent permitted by applicable law, the
Company waives all claims, damages and demands against the Secured Party arising
out of the repossession, removal, retention or sale of the Collateral, unless
due to the gross negligence or willful misconduct of the Secured
Party.

    


    8.        
    Costs and
Expenses.  The Company agrees to pay all out-of-pocket fees,
costs and expenses incurred in connection with any filing required hereunder,
including without limitation, any financing statements, continuation statements,
partial releases and/or termination statements related thereto or any expenses
of any searches reasonably required by the Secured Party.  The Company
shall also pay all other claims and charges which in the reasonable opinion of
the Secured Party might prejudice, imperil or otherwise affect the Collateral or
the Security Interest therein.  The Company will also, upon demand,
pay to the Secured Party the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel and of any experts and
agents, which the Secured Party may incur in connection with (i) the enforcement
of this Agreement, (ii) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral, or (iii) the
exercise or enforcement of any of the rights of the Secured Party under the
Notes.  Until so paid, any fees payable hereunder shall be added to
the principal amount of the Notes and shall bear interest at the Default
Rate.


    
      
         


      

      
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    9.          
  Responsibility for
Collateral.  The Company assumes all liabilities and
responsibility in connection with all Collateral, and the obligations of the
Company hereunder or under the Notes and the Warrants shall in no way be
affected or diminished by reason of the loss, destruction, damage or theft of
any of the Collateral or its unavailability for any reason.

    


    10.        
   Security Interest
Absolute.  All rights of the Secured Party and all Obligations
of the Company hereunder, shall be absolute and unconditional, irrespective of:
(a) any lack of validity or enforceability of this Agreement, the Notes, the
Warrants or any agreement entered into in connection with the foregoing, or any
portion hereof or thereof; (b) any change in the time, manner or place of
payment or performance of, or in any other term of, all or any of the
Obligations, or any other amendment or waiver of or any consent to any departure
from the Notes, the Warrants or any other agreement entered into in connection
with the foregoing; (c)  any exchange, release or nonperfection of any
of the Collateral, or any release or amendment or waiver of or consent to
departure from any other collateral for, or any guaranty, or any other security,
for all or any of the Obligations; (d) any action by the Secured Party to
obtain, adjust, settle and cancel in its sole discretion any insurance claims or
matters made or arising in connection with the Collateral; or (e) any other
circumstance which might otherwise constitute any legal or equitable defense
available to the Company, or a discharge of all or any part of the Security
Interest granted hereby.  Until the Obligations shall have been paid
and performed in full, the rights of the Secured Party shall continue even if
the Obligations are barred for any reason, including, without limitation, the
running of the statute of limitations or bankruptcy.  The Company
expressly waives presentment, protest, notice of protest, demand, notice of
nonpayment and demand for performance.  In the event that at any time
any transfer of any Collateral or any payment received by the Secured Party
hereunder shall be deemed by final order of a court of competent jurisdiction to
have been a voidable preference or fraudulent conveyance under the bankruptcy or
insolvency laws of the United States, or shall be deemed to be otherwise due to
any party other than the Secured Party, then, in any such event, the Company’s
obligations hereunder shall survive cancellation of this Agreement, and shall
not be discharged or satisfied by any prior payment thereof and/or cancellation
of this Agreement, but shall remain a valid and binding obligation enforceable
in accordance with the terms and provisions hereof.  The Company
waives all right to require the Secured Party to proceed against any other
person or to apply any Collateral which the Secured Party may hold at any time,
or to marshal assets, or to pursue any other remedy.  The Company
waives any defense arising by reason of the application of the statute of
limitations to any obligation secured hereby.

    


    11.       
    Term of
Agreement.  This Agreement and the Security Interest shall
terminate on the date on which all payments under the Notes have been made in
full and all other Obligations have been paid or discharged.  Upon
such termination, the Secured Party, at the request and at the expense of the
Company, will join in executing any termination statement with respect to any
financing statement executed and filed pursuant to this
Agreement.


    
      
         


      

      
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    12.        
   Power of Attorney; Further
Assurances.

    


    (a)        
   The Company authorizes the Secured Party, and does hereby
make, constitute and appoint it, and its respective officers, agents, successors
or assigns with full power of substitution, as the Company’s true and lawful
attorney-in-fact, with power, in its own name or in the name of the Company, to,
after the occurrence and during the continuance of an Event of Default, (i)
endorse any notes, checks, drafts, money orders, or other instruments of payment
(including payments payable under or in respect of any policy of insurance) in
respect of the Collateral that may come into possession of the Secured Party;
(ii) to sign and endorse any UCC financing statement or any invoice, freight or
express bill, bill of lading, storage or warehouse receipts, drafts against
debtors, assignments, verifications and notices in connection with accounts, and
other documents relating to the Collateral; (iii) to pay or discharge taxes,
liens, security interests or other encumbrances at any time levied or placed on
or threatened against the Collateral; (iv) to demand, collect, receipt for,
compromise, settle and sue for monies due in respect of the Collateral; and (v)
generally, to do, at the option of the Secured Party, and at the Company’s
expense, at any time, or from time to time, all acts and things which the
Secured Party deems necessary to protect, preserve and realize upon the
Collateral and the Security Interest granted therein in order to effect the
intent of this Agreement, the Notes and the Warrants, all as fully and
effectually as the Company might or could do; and the Company hereby ratifies
all that said attorney shall lawfully do or cause to be done by virtue
hereof.  This power of attorney is coupled with an interest and shall
be irrevocable for the term of this Agreement and thereafter as long as any of
the Obligations shall be outstanding.

    


    (b)       
    On a continuing basis, the Company will make, execute,
acknowledge, deliver, file and record, as the case may be, in the proper filing
and recording places in any jurisdiction, including, without limitation, the
jurisdictions indicated on Schedule B, attached
hereto, all such instruments, and take all such action as may reasonably be
deemed necessary or advisable, or as reasonably requested by the Secured Party,
to perfect the Security Interest granted hereunder and otherwise to carry out
the intent and purposes of this Agreement, or for assuring and confirming to the
Secured Party the grant or perfection of a security interest in all the
Collateral.

    


    (c)       
    The Company hereby irrevocably appoints the Secured
Party as the Company’s attorney-in-fact, with full authority in the place and
stead of the Company and in the name of the Company, from time to time in the
Secured Party’s discretion, to take any action and to execute any instrument
which the Secured Party may deem necessary or advisable to accomplish the
purposes of this Agreement, including the filing, in its sole discretion, of one
or more financing or continuation statements and amendments thereto, relative to
any of the Collateral without the signature of the Company where permitted by
law.

    


    13.           Notices.  All
notices, requests, demands and other communications hereunder shall be in
writing, with copies to all the other parties hereto, and shall be deemed to
have been duly given when (i) if delivered by hand, upon receipt, (ii) if sent
by facsimile, upon receipt of proof of sending thereof, (iii) if sent by
nationally recognized overnight delivery service (receipt requested), the next
business day or (iv) if mailed by first-class registered or certified mail,
return receipt requested, postage prepaid, four days after posting in the U.S.
mails, in each case if delivered to the following addresses:


    
      
         


      

      
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              If
      to the Company:

            	
              Admiralty
      Holding Company

            
	 
      	
              3455
      Peachtree Road, Suite 560

            
	 
      	
              Atlanta,
      GA 30326

            
	 
      	
              Attention:
      Chief Executive Officer

            
	 
      	
              Telephone:  (404)
      995-7010

            
	 
      	
              Facsimile:  (404)
      995-7001

            
	 
      	 
      
	 
      	
              Admiralty
      Corporation

            
	 
      	
              _____________________

            
	 
      	
              _____________________

            
	 
      	
              Attention:
      _____________

            
	 
      	
              Telephone:
      ____________

            
	 
      	
              Facsimile:
      _____________

            
	 
      	 
      
	 
      	
              Admiralty
      Marine Operations, Ltd.

            
	 
      	
              _____________________

            
	 
      	
              _____________________

            
	 
      	
              Attention:
      _____________

            
	 
      	
              Telephone:
      ____________

            
	 
      	
              Facsimile:
      _____________

            
	 
      	 
      
	
              With
      copies to:

            	 
      


    


    
      
         


      

      
        10

        
          

        

      

      
         


      

    

     

    
      	
              If
      to the Secured Party:

            	
              AW
      Partners, LLC

            
	 
      	
              AJW
      Master Fund, Ltd.

            
	 
      	
              New
      Millennium Capital Partners II, LLC

            
	 
      	
              1044
      Northern Boulevard

            
	 
      	
              Suite
      302

            
	 
      	
              Roslyn,
      New York 11576

            
	 
      	
              Attention:  Corey
      Ribotsky

            
	 
      	
              Facsimile:  516-739-7115

            
	 
      	 
      
	 
      	 
      
	 
      	 
      
	
              With
      copies to:

            	
              Ballard
      Spahr Andrews & Ingersoll, LLP

            
	 
      	
              1735
      Market Street

            
	 
      	
              51st
      Floor

            
	 
      	
              Philadelphia,
      Pennsylvania  19103

            
	 
      	
              Attention:  Gerald
      J. Guarcini, Esq.

            
	 
      	
              Telephone:  215-865-8625

            
	 
      	
              Facsimile:  215-864-8999

            


    

    


    14.           Other
Security.  To the extent that the Obligations are now or
hereafter secured by property other than the Collateral or by the guarantee,
endorsement or property of any other person, firm, corporation or other entity,
then the Secured Party shall have the right, in its sole discretion, to pursue,
relinquish, subordinate, modify or take any other action with respect thereto,
without in any way modifying or affecting any of the Secured Party’s rights and
remedies hereunder.

    


    15.           Miscellaneous.

    


    (a)           No
course of dealing between the Company and the Secured Party, nor any failure to
exercise, nor any delay in exercising, on the part of the Secured Party, any
right, power or privilege hereunder or under the Notes shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.

    


    (b)           All
of the rights and remedies of the Secured Party with respect to the Collateral,
whether established hereby or by the Notes or by any other agreements,
instruments or documents or by law shall be cumulative and may be exercised
singly or concurrently.

    


    (c)           This
Agreement constitutes the entire agreement of the parties with respect to the
subject matter hereof and is intended to supersede all prior negotiations,
understandings and agreements with respect thereto.  Except as
specifically set forth in this Agreement, no provision of this Agreement may be
modified or amended except by a written agreement specifically referring to this
Agreement and signed by the parties hereto.


    
      
         


      

      
        11

        
          

        

      

      
         


      

    


    (d)           In
the event that any provision of this Agreement is held to be invalid, prohibited
or unenforceable in any jurisdiction for any reason, unless such provision is
narrowed by judicial construction, this Agreement shall, as to such
jurisdiction, be construed as if such invalid, prohibited or unenforceable
provision had been more narrowly drawn so as not to be invalid, prohibited or
unenforceable.  If, notwithstanding the foregoing, any provision of
this Agreement is held to be invalid, prohibited or unenforceable in any
jurisdiction, such provision, as to such jurisdiction, shall be ineffective to
the extent of such invalidity, prohibition or unenforceability without
invalidating the remaining portion of such provision or the other provisions of
this Agreement and without affecting the validity or enforceability of such
provision or the other provisions of this Agreement in any other
jurisdiction.

    


    (e)           No
waiver of any breach or default or any right under this Agreement shall be
considered valid unless in writing and signed by the party giving such waiver,
and no such waiver shall be deemed a waiver of any subsequent breach or default
or right, whether of the same or similar nature or otherwise.

    


    (f)           This
Agreement shall be binding upon and inure to the benefit of each party hereto
and its successors and assigns.

    


    (g)           Each
party shall take such further action and execute and deliver such further
documents as may be necessary or appropriate in order to carry out the
provisions and purposes of this Agreement.

    


    (h)           This
Agreement shall be construed in accordance with the laws of the State of New
York, except to the extent the validity, perfection or enforcement of a security
interest hereunder in respect of any particular Collateral which are governed by
a jurisdiction other than the State of New York in which case such law shall
govern.  Each of the parties hereto irrevocably submit to the
exclusive jurisdiction of any New York State or United States Federal court
sitting in Manhattan county over any action or proceeding arising out of or
relating to this Agreement, and the parties hereto hereby irrevocably agree that
all claims in respect of such action or proceeding may be heard and determined
in such New York State or Federal court.  The parties hereto agree
that a final judgment in any such action or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on the judgment or in any other
manner provided by law.  The parties hereto further waive any
objection to venue in the State of New York and any objection to an action or
proceeding in the State of New York on the basis of forum non
conveniens.

    


    (i)           EACH
PARTY HERETO HEREBY AGREES TO WAIVE ITS RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY
CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT.  THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL
ENCOMPASSING OF ANY DISPUTES THAT MAY BE FILED IN ANY COURT AND THAT RELATE TO
THE SUBJECT MATER OF THIS AGREEMENT, INCLUDING WITHOUT LIMITATION CONTRACT
CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND
STATUTORY CLAIMS.  EACH PARTY HERETO ACKNOWLEDGES THAT THIS WAIVER IS
A MATERIAL INDUCEMENT FOR EACH PARTY TO ENTER INTO A BUSINESS RELATIONSHIP, THAT
EACH PARTY HAS ALREADY RELIED ON THIS WAIVER IN ENTERING INTO THIS AGREEMENT AND
THAT EACH PARTY WILL CONTINUE TO RELY ON THIS WAIVER IN THEIR RELATED FUTURE
DEALINGS. EACH PARTY FURTHER WARRANTS AND REPRESENTS THAT IT HAS REVIEWED THIS
WAIVER WITH ITS LEGAL COUNSEL, AND THAT SUCH PARTY HAS KNOWINGLY AND VOLUNTARILY
WAIVES ITS RIGHTS TO A JURY TRIAL FOLLOWING SUCH CONSULTATION.  THIS
WAIVER IS IRREVOCABLE, MEANING THAT, NOTWITHSTANDING ANYTHING HEREIN TO THE
CONTRARY, IT MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER
SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS AND SUPPLEMENTS OR
MODIFICATIONS TO THIS AGREEMENT.  IN THE EVENT OF A LITIGATION, THIS
AGREEMENT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.


    
      
         


      

      
        12

        
          

        

      

      
         


      

    


    (j)           This
Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement.  In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the party executing (or on whose behalf such
signature is executed) the same with the same force and effect as if such
facsimile signature were the original thereof.

    


    


    


    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]


    
      
         


      

      
        13

        
          

        

      

      
         


      

    


    IN
WITNESS WHEREOF, the parties hereto have caused this to be duly executed on the
day and year first above written.

    


    
      	 
      	
              COMPANY

            
	 
      	 
      	 
      
	 
      	
              ADMIRALTY
      HOLDING COMPANY

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              ________________________________

            
	 
      	 
      	
              Herbert
      C. Leeming

            
	 
      	 
      	
              CEO

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              ADMIRALTY
      CORPORATION

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              ________________________________

            
	 
      	 
      	
              Herbert
      C. Leeming

            
	 
      	 
      	
              CEO

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              ADMIRALTY
      MARINE OPERATIONS, LTD.

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              ________________________________

            
	 
      	 
      	
              Herbert
      C. Leeming

            
	 
      	 
      	
              CEO

            


    


    
      
         


      

      
        
        

        
          

        

      

      
         


      

    

     

    
      	 
      	
              SECURED
      PARTY:

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              AJW
      PARTNERS, LLC

            
	 
      	
              By:
      SMS Group, LLC

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              _____________________________________

            
	 
      	 
      	
              Corey
      S. Ribotsky

            
	 
      	 
      	
              Manager

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              AJW
      MASTER FUND, LTD.

            
	 
      	
              By:  First
      Street Manager II, LLC

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              _____________________________________

            
	 
      	 
      	
              Corey
      S. Ribotsky

            
	 
      	 
      	
              Manager

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              NEW
      MILLENNIUM CAPITAL PARTNERS II, LLC

            
	 
      	
              By:  First
      Street Manager II, LLC

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              _____________________________________

            
	 
      	 
      	
              Corey
      S. Ribotsky

            
	 
      	 
      	
              Manager

            


    

    


     

    2