deepdown_8k-ex1004.htm


    EXHIBIT
10.4


    SECOND
AMENDMENT TO SECURITY AGREEMENT

     

    THIS
SECOND AMENDMENT TO SECURITY AGREEMENT (this “Amendment”)
is executed as of May 29, 2009, by DEEP DOWN, INC., a Nevada corporation (“Parent”),
ELECTROWAVE USA, INC., a Nevada corporation (“Electrowave”),
FLOTATION TECHNOLOGIES, INC., a Maine corporation (“Flotech”),
MAKO TECHNOLOGIES, LLC, a Nevada limited liability company (“Mako”),
and DEEP DOWN INC., a Delaware corporation (“DD
Delaware,” and together with Parent, Electrowave, Flotech, and Mako,
collectively, “Debtor”),
for the benefit of WHITNEY NATIONAL BANK, a national banking association (“Secured
Party”).  Capitalized terms used but not defined in this
Amendment have the meanings given them in the Security Agreement (defined
below).

     

    RECITALS

     

    A.           Parent,
as borrower (in such capacity, “Borrower”),
and Secured Party, as lender, have entered into that certain Credit Agreement
dated as of November 11, 2008 (as amended by that certain First Amendment to
Credit Agreement dated as of December 18, 2008, that certain Second Amendment to
Credit Agreement dated as of February 13, 2009, that certain Third Amendment to
Credit Agreement dated as of the date hereof, and as further amended, restated,
or supplemented, the “Credit
Agreement”).

     

    B.           To
further secure the obligations of Borrower under the Credit Agreement,
Electrowave, Flotech, Mako, and DD Delaware executed that certain Guaranty dated
as of November 11, 2008 (as amended, restated, or supplemented, the “Guaranty”)
for the benefit of Secured Party, together with certain other Loan
Documents.

     

    C.           To
further secure their respective obligations under the Credit Agreement and
Guaranty, each Debtor executed that certain Security Agreement dated as of
November 11, 2008 (as amended by that certain First Amendment to Security
Agreement dated as December 18, 2008, and as further amended, restated, or
supplemented, the “Security
Agreement”).

     

    D.           Debtors
and Secured Party have agreed to amend the Security 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.    Exhibits and
Schedules.  Schedule 1
to the Security Agreement is hereby deleted in its entirety and replaced with
Schedule
1 to this Amendment.

     

    2.    Representations and
Warranties.  Each Debtor represents and warrants to Secured
Party 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
Parent, (c) no other consent of any Person (other than Secured Party) 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 Secured Party is required for Secured Party to rely on the
representations and warranties in this Amendment.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

       

    

    3.    Scope of Amendment;
Reaffirmation; Release.  All references to the Security
Agreement shall refer to the Security Agreement as amended by this
Amendment.  Except as effected by this Amendment, the Security
Agreement is unchanged and continues in full force and effect.  Each
Debtor 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).  Each Debtor hereby releases Secured Party from any
liability for actions or omissions in connection with the Credit Agreement,
Security Agreement, and the other Loan Documents prior to the date of this
Amendment.

     

    4.    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, Security 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 Secured
Party’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 Secured Party
under any provision of this Amendment must be in form and substance satisfactory
to Secured Party 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, the Security Agreement, or the other Loan
Documents.

     

    (d)    Costs, Expenses and
Attorneys’ Fees.  Each Debtor agrees to pay or reimburse
Secured Party 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 Secured Party’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 Debtors and Secured Party.  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.

     

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

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

     

    (h)    Entirety.  The Loan
Documents (as amended hereby) Represent the Final Agreement Between Debtors and
Secured Party 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
appear on the next page.]

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    The
Amendment is executed as of the date set forth in the preamble.

     

    
    

     

    
      	 	

              DEBTORS:

              


              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

              


              DEEP
      DOWN INC.,

              a
      Delaware corporation

              


              


              By:      /s/ Eugene L.
      Butler                                     

              Eugene
      L. Butler

              Chief
      Financial Officer of each of the 

              foregoing
      companies 

            
	 	

               

               

              SECURED
      PARTY:

              


              WHITNEY
      NATIONAL BANK,

              a
      national banking association

              


              


              By:      /s/ Paul W.
      Cole                                       
      

              Paul
      W. Cole

              Vice
      President 

            


    

     

     


    
      
        
          Signature
Page to Second Amendment to Security Agreement

        

         


      

      
         


        
          

        

      

      
         


      

    


    
      	
               
      

            	
              SCHEDULE 1

            


    

     

    
      	
               
      

            	
              Location
      of Books and Records

            


    

    
      	
               
      

            	
              as
      to Accounts and Principal Place of
Business

            


    

    


    
      	
               
      

            	
              DEEP DOWN,
      INC., a
      Nevada corporation

            


    

    


    
      	
              (a)

            	
              The
      exact name of Debtor, as such name appears in its organizational
      documents.

            


    

     

    
      	
               
      

            	
              Deep
      Down, Inc.

            


    

     

    
      	
              (b)

            	
              Any
      change in Debtor’s identity or legal structure within the past five
      years.

            


    

     

    
      	
               
      

            	
              In
      December 2006, Mediquip Holdings, Inc., a Nevada corporation (later
      renamed Deep Down, Inc., a Nevada corporation), divested Westmeria
      Healthcare Limited, its wholly-owned subsidiary representing substantially
      all of its preceding operations, and subsequently acquired Deep Down,
      Inc., a Delaware corporation.

            


    

     

    
      	
              (c)

            	
              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.

            


    

     

    
      	
               
      

            	
              See
      (b)
      above.

            


    

     

    
      	
              (d)

            	
              Debtor’s
      federal taxpayer identification
number.

            


    

     

    
      	
               
      

            	
              75-2263732

            


    

     

    
      	
              (e)

            	
              Debtor’s
      principal place of business.

            


    

     

    
      	
               
      

            	
              15473
      East Freeway, Channelview, Texas
77530

            


    

     

    
      	
              (f)

            	
              The
      locations where Debtor maintains its
inventory.

            


    

     

    
      	
               
      

            	
              15473
      East Freeway, Channelview, Texas
77530

            


    

     

    
      	
              (g)

            	
              All
      real property owned by Debtor.

            


    

     

    
      	
               
      

            	
              15473
      East Freeway, Channelview, Texas
77530

            


    

     

    (h)           All
real property leased by Debtor.

     

    8827 W. Sam Houston Parkway N., Suite
100, Houston, Texas 77040

    


    (i)           All
intellectual property of Debtor.

     

    None.

     

    



    
      
        
          Schedule
1 to Second Amendment to Security Agreement – Page 1

        

         


      

      
         


        
          

        

      

      
         


      

    


    
      	
               
      

            	
              ELECTROWAVE USA, INC.,
      a Nevada corporation

            


    

    


    
      	
              (a)

            	
              The
      exact name of Debtor, as such name appears in its organizational
      documents.

            


    

     

    
      	
               
      

            	
              Electrowave
      USA, Inc. (“Electrowave”)

            


    

     

    
      	
              (b)

            	
              Any
      change in Debtor’s identity or legal structure within the past five
      years.

            


    

     

    
      	
               
      

            	
              In
      2007, Deep Down, Inc., a Nevada corporation, formed a wholly-owned
      subsidiary, Electrowave, for purposes of acquiring substantially all of
      the assets of Electrowave USA, Inc., a Texas
  corporation.

            


    

     

    
      	
              (c)

            	
              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.

            


    

     

    
      	
              (d)

            	
              Debtor’s
      federal taxpayer identification
number.

            


    

     

    
      	
               
      

            	
              33-1157259

            


    

     

    
      	
              (e)

            	
              Debtor’s
      principal place of business.

            


    

     

    
      	
               
      

            	
              15473
      East Freeway, Channelview, Texas
77530

            


    

     

    
      	
              (f)

            	
              The
      locations where Debtor maintains its
inventory.

            


    

     

    
      	
               
      

            	
              15473
      East Freeway, Channelview, Texas
77530

            


    

     

    
      	
              (g)

            	
              All
      real property owned by Debtor.

            


    

     

    
      	
               
      

            	
              None.

            


    

     

    (h)           All
real property leased by Debtor.

     

    None.

     

    (i)           All
intellectual property of Debtor.

     

    
      	
              ·    
        

            	
              One
      issued patent – US Patent No.
6,869,254

            


    

     

    
      	
              ·    
        

            	
              The
      following trademark registrations with the United States Patent and
      Trademark Office:  Electrowave, Reg. No. 2,853,428; Drilsys,
      Reg. No. 2,831,872; and Mudsys, Reg. No.
  2,869,165

            


    

     


    
      
        
          Schedule
1 to Second Amendment to Security Agreement – Page 2

        

         


      

      
         


        
          

        

      

      
         


      

    


    
      	
               
      

            	
              FLOATATION
      TECHNOLOGIES, INC., a Maine
      corporation

            


    

    


    
      	
              (a)

            	
              The
      exact name of Debtor, as such name appears in its organizational
      documents.

            


    

     

    
      	
               
      

            	
              Flotation
      Technologies, Inc.

            


    

     

    
      	
               (b)

            	
              Any
      change in Debtor’s identity or legal structure within the past five
      years.

            


    

     

    
      	
               
      

            	
              Deep
      Down, Inc., Nevada, acquired all of the issued and outstanding stock
      effective June 5, 2008.

            


    

     

    
      	
              (c)

            	
              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.

            


    

     

    
      	
               
      

            	
              N/A

            


    

     

    
      	
              (d)

            	
              Debtor’s
      federal taxpayer identification
number.

            


    

     

    
      	
               
      

            	
              01-0433648

            


    

     

    
      	
              (e)

            	
              Debtor’s
      principal place of business.

            


    

     

    
      	
               
      

            	
              20
      Morin Street, Biddeford, ME 04005

            


    

     

    
      	
              (f)

            	
              The
      locations where Debtor maintains its
inventory.

            


    

     

    
      	
               
      

            	
              20
      Morin Street, Biddeford, ME 04005

            


    

     

    
      	
              (g)

            	
              All
      real property owned by Debtor.

            


    

     

    
      	
               
      

            	
              20
      Morin Street, Biddeford, ME 04005

            


    

     

    (h)           All
real property leased by Debtor.

     

    None.

     

    (i)           All
intellectual property of Debtor.

     

    Patents

     

    Drilling Riser Buoyancy Produced with
Plastic Shell, Serial No. 61/000,476

    


    Driller Riser Auxiliary Clamp with
Integral Mux Clamp, Serial No. 61/000,471

    


    Distributed Buoyancy Module, Serial No.
60/503,811

    


    Clamp for Holding Distributed Buoyancy
Modules, Serial No. 60/503,812

    



    
      
        
          Schedule
1 to Second Amendment to Security Agreement – Page 3

        

         


      

      
         


        
          

        

      

      
         


      

    


    Unregistered
Trademarks

    


    HardBallTM
floats

    Quick-LocTM cable
floats

    FlotecTM
syntactic foams

    Flex-LokTM
buoyancy bend restrictors

    Hydro-FloatTM of
HydrofloatTM mooring
buoys

    StablemoorTM high
current ADCP buoys

    ROVitTM
floats

    CoreTecTM
drilling riser buoyancy modules

    FLOTECTTM and
FLOTECT HDTM impact
and abrasion protection

    InflexTM bend
restrictors and bend stiffeners

    The
Company has used the motto “A Company with Depth” for many years.

    The
Company has used the saying “Tales from the Deep” for many years for its annual
OTC party and a previous newsletter.

    


    Internet Domain Names owned
by Debtor

    


    Flotec.com

     

    Flotationtechnologies.com

     

    Adepbuoys.com

     

    Buoyancycollars.com

     

    Buoyancymodules.com

     

    Buoyancysolutions.com

     

    Cable-floats.com

     

    Cablefloat.com

     

    Cablefloats.com

     

    Cableflotation.com

     

    Distributedbuoyancy.com

     

    Flowlineinsulation.com

     

    Floatationdevices.com

     


    
      
        
          Schedule
1 to Second Amendment to Security Agreement – Page 4

        

         


      

      
         


        
          

        

      

      
         


      

    


    
      	
               
      

            	
              MAKO TECHNOLOGIES,
      LLC, a Nevada limited liability
company

            


    

    


    
      	
              (a)

            	
              The
      exact name of Debtor, as such name appears in its organizational
      documents.

            


    

     

    
      	
               
      

            	
              Mako
      Technologies, LLC (“Mako”)

            


    

     

    
      	
              (b)

            	
              Any
      change in Debtor’s identity or legal structure within the past five
      years.

            


    

     

    
      	
               
      

            	
              In
      December 2007, Deep Down, Inc., a Nevada corporation formed a wholly-owned
      subsidiary, Mako, for purposes of acquiring all of the outstanding common
      stock of Mako Technologies, Inc., a Louisiana corporation, which then
      merged with and into Mako, with Mako as the surviving
    entity.

            


    

     

    
      	
              (c)

            	
              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.

            


    

     

    
      	
              (d)

            	
              Debtor’s
      federal taxpayer identification
number.

            


    

     

    
      	
               
      

            	
              26-1573407

            


    

     

    
      	
              (e)

            	
              Debtor’s
      principal place of business.

            


    

     

    
      	
               
      

            	
              125
      Mako Lane, Morgan City, LA 70380

            


    

     

    
      	
              (f)

            	
              The
      locations where Debtor maintains its
inventory.

            


    

     

    
      	
               
      

            	
              125
      Mako Lane, Morgan City, LA 70380

            


    

     

    
      	
              (g)

            	
              All
      real property owned by Debtor.

            


    

     

    
      	
               
      

            	
              None.

            


    

     

    (h)           All
real property leased by Debtor.

     

    
      	
               
      

            	
              125
      Mako Lane, Morgan City, LA 70380

            


    

     

    (i)           All
intellectual property of Debtor.

     

    None.

     


    
      
        
          Schedule
1 to Second Amendment to Security Agreement – Page 5

        

         


      

      
         


        
          

        

      

      
         


      

    


    
      	
               
      

            	
              DEEP DOWN
      INC., a
      Delaware corporation

            


    

    


    
      	
              (a)

            	
              The
      exact name of Debtor, as such name appears in its organizational
      documents.

            


    

     

    
      	
               
      

            	
              Deep
      Down Inc. (“Deep Down”)

            


    

     

    
      	
              (b)

            	
              Any
      change in Debtor’s identity or legal structure within the past five
      years.

            


    

     

    
      	
               
      

            	
              On
      November 21, 2006 Subsea Acquisition Corporation (“Subsea”), a Texas
      corporation acquired all of the outstanding capital stock of Strategic
      Offshore Services Corporation (“SOS”), a Texas corporation, and also
      acquired Deep Down.  Immediately after the acquisition, Subsea
      merged with and into SOS, with Subsea continuing as the surviving
      company.  Immediately thereafter, Subsea merged with and into
      its wholly-owned subsidiary Deep Down, with Deep Down continuing as the
      surviving company.  In December 2006, Mediquip Holdings, Inc., a
      Nevada corporation (later renamed Deep Down, Inc., a Nevada corporation),
      divested Westmeria Healthcare Limited, its wholly-owned subsidiary
      representing substantially all of its preceding operations, and
      subsequently acquired Deep Down.

            


    

     

    
      	
               (c)

            	
              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.

            


    

     

    
      	
              (d)

            	
              Debtor’s
      federal taxpayer identification
number.

            


    

     

    
      	
               
      

            	
              76-0550204

            


    

     

    
      	
              (e)

            	
              Debtor’s
      principal place of business.

            


    

     

    
      	
               
      

            	
              15473
      East Freeway, Channelview, Texas
77530

            


    

     

    
      	
              (f)

            	
              The
      locations where Debtor maintains its
inventory.

            


    

     

    
      	
               
      

            	
              15473
      East Freeway, Channelview, Texas
77530

            


    

     

    
      	
              (g)

            	
              All
      real property owned by Debtor.

            


    

     

    
      	
               
      

            	
              None.

            


    

     

    (h)           All
real property leased by Debtor.

     

    None.

     

    (i)           All
intellectual property of Debtor.

     

    
      	
               
      

            	
              The
      following trademark registrations with the United States Patent and
      Trademark Office:  Moray, Reg. No. 2,745,237; Aquasox, Reg. No.
      2,890,204; and Seastax, Reg. No.
2,647,390

            


    

     

    


    
      Schedule
1 to Second Amendment to Security Agreement – Page
6