deep_8k-ex1003.htm


    EXHIBIT
10.3

     

    
      FIRST
AMENDMENT TO SECURITY AGREEMENT

       

      THIS
FIRST AMENDMENT TO SECURITY AGREEMENT (this “Amendment”)
is executed 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 the date hereof, 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 (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.            
Amendments to Security
Agreement.

       

      (a)          
Section 3
of the Security Agreement is deleted in its entirety and is replaced with
the following:

       

      “3.           Security
Interest.  To secure the prompt, unconditional, and complete
payment and performance of the Obligation when due, Debtor hereby pledges and
assigns to Secured Party, and grants to Secured Party a continuing security
interest in all of its right, title and interest in, to, and under the
following, wherever located and whether now owned or hereafter acquired or
created by Debtor (collectively, the “Collateral”):
all personal and fixture property of every kind and nature including, without
limitation, all goods (including inventory, equipment and any accessions
thereto), instruments (including promissory notes), documents, accounts,
accounts receivable, chattel paper (whether tangible or electronic), deposit
accounts, letter-of-credit rights (whether or not the letter of credit is
evidenced by a writing), commercial tort claims, securities and all other
investment property, supporting obligations, any other contract rights or rights
to the payment of money, insurance claims and proceeds, all software, fixtures,
vehicles (whether or not subject to a certificate of title statute), leasehold
improvements, all general intangibles (including all payment intangibles and
trademarks and patents), and all remote operated vehicles, including the remote
operated vehicle purchased by Borrower using proceeds of the Term Facility under
the Credit Agreement.”

       

      
        
           

        

        
          1

          
            

          

        

        
           

        

      

       

      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.

       

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

       

      (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.

       

      (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 December 18, 2008.

       

      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

       

       

       

      4