Exhibit
10.3





SECOND
AMENDMENT TO CREDIT AGREEMENT





THIS
SECOND AMENDMENT TO CREDIT AGREEMENT (this “Amendment”)
is entered into as of February 13, 2009, between DEEP DOWN, INC., a Nevada
corporation (“Borrower”),
and WHITNEY NATIONAL BANK, a national banking association (the “Lender”).  Capitalized
terms used but not defined in this Amendment have the meaning given them in the
Credit Agreement (defined below).




RECITALS




A.           Borrower
and Lender entered into that certain Credit Agreement dated as of November 11,
2008 (as amended by First Amendment to Credit Agreement dated December 18, 2008,
and as further amended, restated, or supplemented, the “Credit
Agreement”).




B.           Borrower
and Lender have agreed to amend the Credit Agreement, subject to the terms and
conditions of this Amendment.




NOW
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are acknowledged, the undersigned hereby agree as follows:




1.           Amendments to Credit
Agreement.




(a)           Section
1.1 of the Credit Agreement is amended to delete the defined terms “Guarantor,”
“Loan
Documents,” “Permitted
Debt,” and “Permitted
Liens” in their entirety and replace them with the
following:




“Guarantor
means each of, and Guarantors
means all of, (a) Deep Down Inc., a Delaware corporation, ElectroWave USA, Inc.,
a Nevada corporation, Mako Technologies, LLC, a Nevada limited liability
company, Flotation Technologies, Inc., a Maine corporation, and Deep Down
International Holdings, LLC, a Nevada limited liability company, (b) any of
Borrower’s other Subsidiaries, or (c) any other Person which signs a
Guaranty.”




“Loan
Documents means (a) this Agreement, certificates and requests delivered
under this Agreement, and exhibits and schedules to this Agreement, (b) the
Notes, (c) all Guaranties, (d) the Security Documents, (e) all Swap Contracts,
(f) all other agreements, documents, and instruments in favor of Lender ever
delivered in connection with or under this Agreement, and (g) all renewals,
extensions, amendments, modifications, supplements, restatements, and
replacements of, or substitutions for, any of the foregoing.”




“Permitted
Debt means (a) the Obligation, (b) Debt arising from endorsing negotiable
instruments for collection in the ordinary course of business, (c) purchase
money Debt and capital lease obligations incurred in the ordinary course of
business which, in the aggregate do not exceed $250,000, (d) Debt among the
Companies and guaranties by any Company of Permitted Debt, (e) Debt existing on
the Closing Date and described on Schedule 1.2,
(f) indemnities arising under agreements entered into by any Company in the
ordinary course of business, (g) trade payables, Tax liabilities and other
current liabilities incurred in the ordinary course of business, (h) any Debt
approved in writing by Lender after the Closing Date, (i) if Borrower requests
in writing that Lender increase the amount of its Commitment or approve
additional credit extensions to Borrower and Lender declines to do so, Borrower
may obtain Funded Debt from a third party in an amount equal to or less than the
amount of the credit requested pursuant to such written request, and (j) the TD
Bank Debt to the extent that the aggregate principal amount of the TD Bank Debt
does not at any time exceed $2,500,000.







Permitted
Liens means (a) Liens securing the Obligation, (b) Liens existing on the
Closing Date and described on Schedule 1.2,
(c) Liens which secure purchase money Debt and capital lease obligations
permitted under clause (c) of the
definition of Permitted Debt, (d) easements, rights-of-way, encumbrances and
other restrictions on the use of real property which do not materially impair
the use thereof, (e) Liens for Taxes; provided that, (i) no
amounts are due and payable and no Lien has been filed or agreed to, or
(ii)  the validity or amount thereof is being contested in good faith by
lawful proceedings diligently conducted, and reserve or other provision required
by GAAP has been made, (f) judgments and attachments permitted by Section
11.4, (g) pledges or deposits made to secure payment of workers’
compensation, unemployment insurance or other forms of governmental insurance or
benefits or to participate in any fund in connection with workers’ compensation,
unemployment insurance, pensions or other social security programs, (h) rights
of offset or statutory banker’s Liens arising in the ordinary course of business
in favor of commercial banks; provided that, any such Lien shall only extend to
deposits and property in possession of such commercial bank and its Affiliates,
(i) good-faith pledges or deposits made in the ordinary course of business to
secure (i) performance of bids, tenders, trade contracts (other than for the repayment
of borrowed money) or leases, (ii) statutory obligations, or (iii) surety
or appeal bonds, or indemnity, performance or other similar bonds, which, in the
aggregate under this clause
(i), do not exceed $50,000 at any time, (j) Liens (other than for Taxes) imposed
by operation of law (including Liens of mechanics, materialmen, warehousemen,
carriers and landlords and similar Liens); provided that, (i) the
validity or amount thereof is being contested in good faith by lawful
proceedings diligently conducted, (ii) reserve or other provision required
by GAAP has been made, and (iii) within 60 days after the entry thereof,
levy and execution thereon have been (and continue to be) stayed or payment
thereof is covered in full by insurance (subject to the customary deductible),
(k) Liens which secure any Company’s obligations under any lease for equipment
used by such Company in the ordinary course of its business, (l) Liens which
secure the Funded Debt permitted under clause (i) of the definition
of Permitted Debt, and (m) Liens arising pursuant to the TD Bank Loan
Documents.”




(b)           Section
1.1 of the Credit Agreement is further amended to add the following new
defined terms in the appropriate alphabetical order:




“Deep Down
International means Deep Down International Holdings, LLC, a Nevada
limited liability company, which is or will become a direct wholly-owned
subsidiary of Borrower.”





“Flotation
Technologies means Flotation Technologies, Inc., a Maine
corporation.





Flotation
Technologies Real Estate means that certain real property located at 20
Morin Street, Biddeford, Maine 04005.”


2





“TD Bank
means TD Bank, N.A., a national banking association.





TD Bank
Debt means the indebtedness owed by Flotation Technologies to TD Bank
pursuant to the TD Bank Loan Documents which (a) does not, in the aggregate
principal amount, at any time exceed $2,500,000, and (b) is secured solely by
the TD Bank Loan Documents.





TD Bank Loan
Agreement means that certain Loan Agreement dated February 13, 2009,
between Flotation Technologies, as borrower, and TD Bank.





TD Bank Loan
Documents means (a) the TD Bank Loan Agreement, (b) the TD Bank Mortgage,
and (c) all other documents and instruments executed in connection
therewith.





TD Bank
Mortgage means that certain Mortgage and Security Agreement dated
February 13, 2009, from Flotation Technologies to TD Bank, pursuant to which
Flotation Technologies granted a lien on the Flotation Technologies Real Estate
in favor of TD Bank to secure the repayment of the TD Bank Debt.





TD Bank Negative
Pledge means the prohibition on the pledge of assets by Flotation
Technologies set forth in Section 23 of the TD Bank Mortgage.”





(c)           Section
6.1 of the Credit Agreement is amended to delete the second sentence
thereof in its entirety and replace it with the following:




“Each
Company shall execute all applicable Security Documents to pledge all of the
Collateral it owns, provided
that, Flotation Technologies shall not be required to grant a Lien on the
Flotation Technologies Real Estate in favor of Lender.”





(d)           Section
9.2 of the Credit Agreement is hereby deleted in its entirety and
replaced with the following:




“9.2  Liens.  No
Company shall create, incur, or permit any Lien upon any of its assets, except Permitted
Liens.  No Company shall enter into any agreement (other than the Loan
Documents and the TD Bank Loan Documents) prohibiting the creation or assumption
of any Lien upon its assets or revenues or prohibiting or restricting the
ability of any Company to amend or otherwise modify this Agreement or any other
Loan Document.”





(e)           The
Credit Agreement is further amended to add the following new Section
11.12 in the appropriate numerical order:




“11.12 Default Under Other Debt
Documents.  A default or an event of default exists under the
TD Bank Loan Agreement or any other TD Bank Document.”





2.           Schedule
7.2.  Schedule
7.2 to the Credit Agreement is deleted in its entirety and replaced with
Schedule
7.2 attached hereto.




3.           Schedule
7.12.  Schedule
7.12 to the Credit Agreement is deleted in its entirety and replaced with
Schedule
7.12 attached hereto.




3


4.           Schedule
7.16.  Schedule
7.16 to the Credit Agreement is deleted in its entirety and replaced with
Schedule
7.16 attached hereto.




5.           Conditions.  This
Amendment shall be effective once each of the following have been delivered to
Lender:




(a)           this
Amendment executed by Borrower and Lender;




(b)           Guarantors’
Consent and Agreement;




(c)           a
Joinder Agreement in Proper Form, pursuant to which Deep Down International
becomes a Guarantor under the Guaranty;




(d)           a
Joinder Agreement in Proper Form, pursuant to which Deep Down International
becomes a “Debtor” under, and as defined in, the Security Agreement and grants a
lien on all of its assets in favor of Lender;




(e)           Officer’s
Certificate from Deep Down International certifying as to incumbency of
officers, specimen signatures, articles of incorporation and bylaws, and
resolutions adopted by its Board of Directors authorizing its execution of this
Amendment and the Joinder Agreements pursuant to which Deep Down International
will become a party to the Guaranty and the Security Agreement;




(f)           Intercreditor
Agreement among TD Bank, Lender, Flotation Technologies, and
Borrower;




(g)           executed
copies of the TD Bank Loan Documents; and




(h)           such
other documents as Lender may reasonably request.




6.           Representations and
Warranties.  Borrower represents and warrants to Lender that
(a) it possesses all requisite power and authority to execute, deliver and
comply with the terms of this Amendment, (b) this Amendment has been duly
authorized and approved by all requisite corporate action on the part of
Borrower, (c) no other consent of any Person (other than Lender) is required for
this Amendment to be effective, (d) the execution and delivery of this Amendment
does not violate its organizational documents, (e) the representations and
warranties in each Loan Document to which it is a party are true and correct in
all material respects on and as of the date of this Amendment as though made on
the date of this Amendment (except to the extent that
such representations and warranties speak to a specific date), (f) it is in full
compliance with all covenants and agreements contained in each Loan Document to
which it is a party, and (g) no Default or Potential Default has occurred and is
continuing.  The representations and warranties made in this Amendment
shall survive the execution and delivery of this Amendment.  No
investigation by Lender is required for Lender to rely on the representations
and warranties in this Amendment.




4


7.           Scope of Amendment;
Reaffirmation; Release.  All references to the Credit Agreement
shall refer to the Credit Agreement as amended by this
Amendment.  Except as affected by this Amendment, the Loan Documents
are unchanged and continue in full force and effect.  However, in the
event of any inconsistency between the terms of the Credit Agreement (as amended
by this Amendment) and any other Loan Document, the terms of the Credit
Agreement shall control and such other document shall be deemed to be amended to
conform to the terms of the Credit Agreement.  Borrower hereby
reaffirms its obligations under the Loan Documents to which it is a party and
agrees that all Loan Documents to which they are a party remain in full force
and effect and continue to be legal, valid, and binding obligations enforceable
in accordance with their terms (as the same are affected by this
Amendment).  Borrower hereby releases Lender from any liability for
actions or omissions in connection with the Credit Agreement and the other Loan
Documents prior to the date of this Amendment.




8.           Miscellaneous.




(a)           No Waiver of
Defaults.  Except as expressly set out above, this Amendment
does not constitute (i) a waiver of, or a consent to, (A) any provision of the
Credit Agreement or any other Loan Document not expressly referred to in this
Amendment, or (B) any present or future violation of, or default under, any
provision of the Loan Documents, or (ii) a waiver of Lender’s right to insist
upon future compliance with each term, covenant, condition and provision of the
Loan Documents.




(b)           Form.  Each
agreement, document, instrument or other writing to be furnished Lender under
any provision of this Amendment must be in form and substance satisfactory to
Lender and its counsel.




(c)           Headings.  The
headings and captions used in this Amendment are for convenience only and will
not be deemed to limit, amplify or modify the terms of this Amendment, the
Credit Agreement, or the other Loan Documents.




(d)           Costs, Expenses and
Attorneys’ Fees.  Borrower agrees to pay or reimburse Lender on
demand for all its reasonable out-of-pocket costs and expenses incurred in
connection with the preparation, negotiation, and execution of this Amendment,
including, without limitation, the reasonable fees and disbursements of Lender’s
counsel.




(e)           Successors and
Assigns.  This Amendment shall be binding upon and inure to the
benefit of each of the undersigned and their respective successors and permitted
assigns.




(f)           Multiple
Counterparts.  This Amendment 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 Amendment may be transmitted and
signed by facsimile or 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 Borrower and Lender.  Lender may also require that any such
documents and signatures be confirmed by a manually-signed original; provided thatthe failure to
request or deliver the same shall not limit the effectiveness of any facsimile
or PDF document or signature.




(g)           Governing
Law.  This Amendment and the other Loan Documents must be
construed, and their performance enforced, under Texas law.




5


(h)           Entirety.  The Loan
Documents (as amended hereby) Represent the Final Agreement Between Borrower and
Lender and May Not Be Contradicted by Evidence of Prior, Contemporaneous, or
Subsequent Oral Agreements by the Parties.  There Are No Unwritten
Oral Agreements among the Parties.







[Signatures are on the following
page.]































6










The
Amendment is executed as of the date set out in the preamble to this
Amendment.










BORROWER:
              
              DEEP
      DOWN, INC.,
              a
      Nevada corporation
              
              
              By:/s/Eugene L.
      Butler
              Eugene
      L. Butler
              Chief
      Financial Officer
              
              
              LENDER:
              
              WHITNEY
      NATIONAL BANK,
              a
      national banking association
              
              
              By: /s/Paul W.
      Cole
              Paul
      W. Cole
              Vice
      President











Signature
Page to the Second Amendment to Credit Agreement


GUARANTORS’
CONSENT AND AGREEMENT




TO


SECOND
AMENDMENT TO CREDIT AGREEMENT




As an
inducement to Lender to execute, and in consideration of Lender’s execution of,
this Amendment, each of the undersigned hereby consents to this Amendment and
agrees that this Amendment shall in no way release, diminish, impair, reduce or
otherwise adversely affect the obligations and liabilities of the undersigned
under the Guaranty executed by the undersigned in connection with the Credit
Agreement, or under any Loan Documents, agreements, documents or instruments
executed by the undersigned to create liens, security interests or charges to
secure any of the Obligation (as defined in the Credit Agreement), all of which
are in full force and effect.  Each of the undersigned further
represents and warrants to Lender that (a) the representations and warranties in
each Loan Document to which it is a party are true and correct in all material
respects on and as of the date of this Amendment as though made on the date of
this Amendment (except to the extent that such representations and warranties
speak to a specific date), (b) it is in full compliance with all covenants and
agreements contained in each Loan Document to which it is a party, and (c) no
Default or Potential Default has occurred and is continuing.  Each
Guarantor hereby releases Lender from any liability for actions or omissions in
connection with the Loan Documents prior to the date of this
Amendment.  This Consent and Agreement shall be binding upon the
undersigned, their successors and permitted assigns, and shall inure to the
benefit of Lender, and its successors and assigns.










GUARANTORS:
              
              ELECTROWAVE
      USA, INC.,
              a
      Nevada corporation
              
              FLOTATION
      TECHNOLOGIES, INC.,
              a
      Maine corporation
              
              MAKO
      TECHNOLOGIES, LLC,
              a
      Nevada limited liability company
              
              DEEP
      DOWN INC.,
              a
      Delaware corporation
              
              
              By:/s/Eugene L.
      Butler
              Eugene
      L. Butler
              Chief
      Financial Officer of each of the foregoing
  companies






Guarantors'
Consent and Agreement to Second Amendment to Credit Agreement


SCHEDULE
7.2


Subsidiaries





1.
            Electrowave
      USA, Inc., a Nevada corporation
              15473
      East Freeway
                Channelview,
      Texas 77530
                Borrower’s
      percentage
ownership:  100%







2.
            Mako
      Technologies, LLC, a Nevada limited liability company
              125
      Mako Lane
                Morgan
      City, Louisiana 70380
                Borrower’s
      percentage
ownership:  100%







3.
            Deep
      Down, Inc., a Delaware corporation
              15473
      East Freeway
                Channelview,
      Texas 77530
                Borrower’s
      percentage
ownership:  100%







4.
            Flotation
      Technologies, Inc., a Maine corporation
              20
      Morin Street
                Biddeford,
      Maine 04005
                Borrower’s
      percentage
ownership:  100%







5.
            Deep
      Down International Holdings, LLC, a Nevada limited liability
      company
              15473
      East Freeway
                Channelview,
      Texas 77530
                Borrower’s
      percentage
ownership:  100%



















Schedule
7.2 - Page 1





SCHEDULE
7.12




Place of
Business





Place of Business and Chief
Executive Office of each Company:




DEEP DOWN, INC., DEEP DOWN
INC., ELECTROWAVE USA, INC., DEEP DOWN INTERNATIOANL HOLDINGS,
LLC,  AND MAKO TECHNOLOGIES, LLC





15473
East Freeway


Channelview,
Texas 77530








FLOATION TECHNOLOGIES,
INC.





20 Morin
Street


Biddeford,
Maine 04005








Location of Books and
Records for each Company:




DEEP DOWN, INC., DEEP DOWN
INC., ELECTROWAVE USA, INC., DEEP DOWN INTERNATIONAL HOLDINGS, LLC, AND MAKO
TECHNOLOGIES, LLC





15473
East Freeway


Channelview,
Texas 77530








FLOATION TECHNOLOGIES,
INC.





20 Morin
Street


Biddeford,
Maine 04005











Schedule
7.12 - Page 1





SCHEDULE
7.16




Material
Agreements





1.           Subordinated
Debenture issued by Borrower to Charter Capital Holdings, LP, in the amount of
$500,000.00, with interest at a rate of six percent (6%) per annum and a
maturity date of March 31, 2011.





2.           The
TD Bank Loan Documents.