Document:

deepdown_10ksb-ex0404.htm

    EXHIBIT
4.3

     

    THIS
WARRANT AND THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED UPON THE EXERCISE
OF THIS WARRANT HAVE BEEN ACQUIRED SOLELY FOR INVESTMENT AND HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
STATE SECURITIES LAWS. SUCH SECURITIES MAY NOT BE SOLD. OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH SALE, OFFER,
PLEDGE OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF THE ACT.

     

    DEEP
DOWN, INC.

    COMMON
STOCK PURCHASE WARRANT

    
    

     

     

    
      	No.
3 	
              Void after January
      4, 2013

            

    

     

    THIS
CERTIFIES THAT. for value received, Dragonfly
Capital Partners, LLC (the "Holder") is entitled at any time, during the
60 month period commencing on January 4, 2008 ("Initial Warrant Exercise Date")
and ending on January 4, 2013, to subscribe for and purchase One Hundred and
Eighteen Thousand Eight Hundred and Twelve (118,812) shares of the fully paid
and nonassessable Common Stock, $.001 par value (the "Shares"), of DEEP DOWN,
INC., a Nevada corporation (the "Company") at the per share exercise price of
$1.01, subject to the provisions and upon the terms and conditions hereinafter
set forth.

     

    1.    Method of
Exercise; Payment.

     

    
      
        	
                      a.  

              	
                Cash
      Exercise. The purchase rights represented by this Warrant may be
      exercised by the Holder, in whole or in part, by the surrender of this
      Warrant (with the notice of exercise form attached hereto as Exhibit A
      duly executed) at the principal office of the Company. and by the payment
      to the Company, by certified, cashier's or other check acceptable to the
      Company or by wire transfer to an account designated by the Company. of an
      amount equal to the aggregate Exercise Price of the Shares being
      purchased.

              

      

    

     

    
      
        	
                      b.  

              	
                Relinquishment
      of Options. (i) The Holder in lieu of purchasing the entire number
      of shares subject to purchase hereunder, shall have the right to
      relinquish all or any part of the then unexercised portion of this Warrant
      (to the extent then exercisable) for a number of shares of Common Stock to
      be determined in accordance with the following provisions of this clause
      (b):

              

      

    

     

    (A)  The
number of shares of Common Stock, if any, issuable pursuant to such
relinquishment shall be the number of such shares, rounded to the next greater
number of full shares, as shall be equal to the quotient obtained by dividing
(A) the Appreciated Value by (B) the purchase price per share of Common Stock
specified in this Warrant;

     

    (B)  For the
purpose of this clause (b), "Appreciated Value" means the excess of (x) the
aggregate current market value of the shares of Common Stock covered by the
option or the portion thereof to be relinquished over (y) the aggregate purchase
price for such shares specified in this Warrant;

     

    (ii)  Such right of
relinquishment may be exercised only upon receipt by the Company of a written
notice of such relinquishment which shall be dated the date of election to make
such relinquishment; and that, for the purposes of this Warrant, such date of
election shall be deemed to be the date when such notice is sent by registered
or certified mail, or when receipt is acknowledged by the Company, if mailed by other than registered or
certified mail or if delivered by hand or by any telegraphic communications
equipment of the sender or otherwise delivered; provided, that, in the event the
method just described for determining such date of election shall not be or
remain consistent with the provisions of Section 16(b) of the Exchange Act or
the rules and regulations adopted by the Commission thereunder, as presently
existing or as may be hereafter
amended, which regulations exempt from the operation of Section 16(b) of the
Exchange Act in whole or in part any such relinquishment transaction, then such
date of election shall be determined by such other method consistent with
Section 16(b) of the Exchange Act or the rules and regulations thereunder as the
Company shall in its discretion select and apply;

     

    
      
        
        

      

      
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    (iii)  The "current market
value" of a share of Common Stock on a particular date shall be deemed to be
its
fair market value on that date determined as follows:

     

    (A)  If the
Common Stock is listed on a
national securities exchange or admitted to unlisted trading privileges
on such exchange, the current value shall be the last reported sales price of
the Common Stock on such exchange on the last business day prior to the date of
exercise of this Option or if no such sale is made on such day, the average of
the closing bid and asked prices for such day on such exchange; or

     

    (B)  If the
Common Stock is not so listed or admitted to unlisted trading privileges, the
current value shall be the mean of the last reported bid and asked prices
reported by the National Association of Securities Dealers Automated Quotation
System ("NASDAQ"), or if not so quoted on NASDAQ then by the National Quotation
Bureau, LLC, New York, New York, on the last business day prior to the date of
the exercise of this Warrant; or

     

    (C)  If the Common Stock is
not so listed or admitted to unlisted trading privileges and bid and asked
prices are not so reported, the current value shall he an amount, not less than
book value, determined in such reasonable manner as may be prescribed by the
Company's board of directors, and supported by the written fairness opinion of
an independent, nationally-recognized stock valuation expert.

     

    (iv)  The Warrant, or any
portion thereof, may be relinquished only to the extent that (A) it is
exercisable on the date written notice of relinquishment is received by the
Company, (B) the Holder pays, or makes provision satisfactory to the Company for
the payment of, any taxes which the Company is obligated to collect with respect
to such relinquishment.

     

    (v)  if a Warrant is
relinquished, such Warrant shall be deemed to have been exercised to the extent
of the number of shares of Common Stock covered by the Warrant or part thereof
which is relinquished, and no further Warrants will be isssued covering such
shares of Common Stock.

     

    
      
        	
                      c.    

              	
                Stock
      Certificates. In the event of any exercise of the rights
      represented by this Warrant, certificates for the Shares so purchased
      shall be delivered to the Holder within a reasonable time and, unless this
      Warrant has been fully exercised or has expired, a new Warrant
      representing the shares with respect to which this Warrant shall not have
      been exercised shall also be issued to the Holder within such
      time.

              

      

    

     

    
      
        	
                2.    

              	
                Stock
      Fully Paid; Reservation of Shares. All of
      the Shares
      issuable upon the exercise of the rights represented by this
      Warrant will, upon issuance and receipt of the Exercise Price therefor, be
      fully paid and nonassessable, and free from all taxes, liens and charges
      with respect to the issue thereof. During the period within which the
      rights represented by this Warrant may be exercised, the Company shall at
      all times have authorized and reserved for issuance sufficient shares of
      its Common Stock to provide for the exercise of the rights represented by
      this Warrant.

              

      

    

     

    
      
        	
                3.    

              	
                Adjustments.
      The number and kind of
      securities purchasable upon the exercise of this Warrant and the Exercise
      Price therefor shall be subject to adjustment from time to time upon the
      occurrence of certain events, as
follows:

              

      

    

     

    
      
        
        

      

      
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                      a.    

              	
                Reclassification.
      In the case of any reclassification or change of securities of the class
      issuable upon exercise of this Warrant (other than a change in par value,
      or from par value to no par value, or from no par value to par value, or
      as a result of a subdivision or combination), or in case of any merger of
      the Company with or into another corporation (other than a merger with
      another corporation in which the Company is the acquiring and the
      surviving corporation and which does not result in any reclassification or
      change of outstanding securities issuable upon exercise of this Warrant),
      or in case of any sale of all or substantially all of the assets of the
      Company, the Company, or such successor or purchasing corporation, as the
      case may be, shall duly execute and deliver to the holder of this Warrant
      a new Warrant (in form and substance reasonably satisfactory to the holder
      of this Warrant), or the Company shall make appropriate provision without
      the issuance of a new Warrant, so that the holder of this Warrant shall
      have the right to receive, at a total purchase price not to exceed that
      payable upon the exercise of the unexercised portion of this Warrant, and
      in lieu of the shares of Common Stock theretofore issuable upon exercise
      of this Warrant, (i) the kind and amount of shares of stock, other
      securities, money and property receivable upon such reclassification,
      change, merger or sale by a holder of the number of shares of Common Stock
      then purchasable under this Warrant, or (ii) in the case of such a merger
      or sale in which the consideration paid consists all or in part of assets
      other than securities of the successor or purchasing corporation, at the
      option of the Holder of this Warrant, the securities of the successor or
      purchasing corporation having a value at the time of the transaction
      equivalent to the fair market value of the Common Stock at the time of the
      transaction. The provisions of this subparagraph (a) shall similarly apply
      to successive reclassifications, changes, mergers and
      transfers.

              

      

    

     

    
      
        	
                      b.    

              	
                Stock
      Splits, Dividends and Combinations. In the event that the Company
      shall at any time subdivide the outstanding shares of Common Stock or
      shall issue a stock dividend on its outstanding shares of Common Stock the
      number of Shares issuable upon exercise of this Warrant immediately prior
      to such subdivision or to the issuance of such stock dividend shall be
      proportionately increased, and the Exercise Price shall be proportionately
      decreased, and in the event that the Company shall at any time combine the
      outstanding shares of Common Stock the number of Shares issuable upon
      exercise of this Wan•ant immediately prior to such combination shall be
      proportionately decreased, and the Exercise Price shall be proportionately
      increased, effective at the close of business on the date of such
      subdivision, stock dividend or combination, as the case may
      be.

              

      

    

     

    
      
        	
                4.    

              	
                Notice
      of Adjustments.
      Whenever the number of
      Shares purchasable hereunder or the Exercise Price thereof shall be
      adjusted pursuant to Section 3 hereof, the Company shall provide notice to
      the Holder setting forth, in reasonable detail, the event requiring the
      adjustment. the amount of the adjustment. the method by which such
      adjustment was calculated, and the number and class of shares which may be
      purchased thereafter and the Exercise Price therefor after giving effect
      to such adjustment.

              

      

    

     

    
      
        	
                5.    

              	
                Fractional
      Shares. Whether or not the number of shares purchasable upon the
      exercise of a Warrant is adjusted pursuant to Section 3 of this Agreement,
      this Warrant may not he exercised for fractional shares and the Company
      shall not be required to issue fractions of Shares upon exercise of the
      Warrants or to distribute Shares certificates that evidence fractional
      Shares, In lieu of fractional Shares, there shall be returned to
      exercising Registered Holders of the Warrants upon such exercise an amount
      in cash, in United States dollars. equal to the amount in excess of that
      required to purchase the largest number of full
  Shares.

              

      

    

     

    
      
        	
                6.    

              	
                Representations
      of the Company. The Company represents that all corporate actions
      on the part of the Company, its officers, directors and shareholders
      necessary for the sale and issuance of the Shares pursuant hereto and the
      performance of the Company's obligations hereunder were taken prior to and
      are effective as of the effective date of this
  Warrant.

              

      

    

     

    
      
        	
                7.    

              	
                Representations
      and Warranties by the Holder. The Holder represents and
      warrants to the Company as
      follows:

              

      

    

     

    
      
        
        

      

      
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                      a.     

              	
                This
      Warrant and the Shares issuable upon exercise thereof are being acquired
      for its own account. for investment and not with a view to. or for resale in
      connection with, any distribution or public offering thereof within the
      meaning of the Securities Act of 1933, as amended (the "Act"). Upon
      exercise of this Warrant, the Holder shall. if so requested by the
      Company, confirm in writing, in a form satisfactory
      to the Company, that the
      securities issuable upon exercise of this Warrant are being acquired for
      investment and not with a view toward distribution or
      resale.

              

      

    

     

    
      
        	
                      b.     

              	
                The Holder
      understands that the Warrant and the Shares have not been registered under
      the Act by reason of their issuance in a transaction exempt from
      the registration and prospectus delivery requirements of the Act pursuant
      to Section 4(2) thereof, and that they must be held by the Holder
      indefinitely, and that the Holder must therefore bear the economic risk of
      such investment indefinitely, unless a subsequent disposition thereof is
      registered under the Act or is exempted from such
      registration.

              

      

    

     

    
      
        	
                      c.     

              	
                The
      Holder has such knowledge and experience in financial and business matters
      that it is capable of evaluating the merits and risks of the purchase of
      this Warrant and the Shares purchasable pursuant to the terms of this
      Warrant and of protecting its interests in connection
      therewith.

              

      

    

     

    
      
        	
                      d.     

              	
                The
      Holder is able to bear the economic risk of the purchase of the Shares
      pursuant to the terms of this
Warrant.

              

      

    

     

    
      
        	
                8.    

              	
                Restrictive
      Legend. The Shares (unless registered under the Act) shall
      be stamped or imprinted with a legend in substantially the following form:
      THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
      INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR
      DISTRIBUTION THEREOF, AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
      ACT OF 1933, AS AMENDED. SUCH SHARES MAY NOT BE SOLD OR TRANSFERRED IN THE
      ABSENCE OF SUCH REGISTRATION OR UNLESS THE COMPANY RECEIVES AN OPINION OF
      COUNSEL REASONABLY ACCEPTABLE TO IT STATING THAT SUCH SALE OR TRANSFER IS
      EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF THE
      ACT. UPON THE FULFILLMENT OF CERTAIN OF SUCH CONDITIONS DEEP DOWN, INC.
      HAS AGREED TO DELIVER TO THE HOLDER HEREOF A NEW CERTIFICATE NOT BEARING
      THIS LEGEND FOR THE SECURITIES REPRESENTED HEREBY REGISTERED IN THE NAME
      OF THE HOLDER HEREOF. A COPY OF THE AGREEMENT MAY BE OBTAINED AT NO COST
      BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
      SECRETARY OF DEEP DOWN, INC.

              

      

    

     

    
      	
              9.            
      

            	
              Restrictions
      Upon Transfer and Removal of
Legend.

            

    

     

    
      
        	
                      a.     

              	
                The
      Company need not register a transfer of this Warrant or Shares bearing the
      restrictive legend set forth in Section 8 hereof, unless the conditions
      specified in such legend are satisfied. The Company may also instruct its
      transfer agent not to register the transfer of the Shares, unless one of
      the conditions specified in the legend referred to in Section 8 hereof is
      satisfied.

              

      

    

     

    
      
        	
                      b.     

              	
                Notwithstanding
      the provisions of paragraph (a) above, no opinion of counsel shall be
      necessary for a transfer without consideration by any holder (i) if such
      holder is a partnership, to a partner or retired partner of such
      partnership who retires after the date hereof or to the estate of any such
      partner or retired partner, or (ii) if such holder is a corporation, to a
      shareholder of such corporation, or to any other corporation under common
      control, direct or indirect, with such
holder.

              

      

    

     

    
      
        
        

      

      
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              10.     

            	
              Rights
      of Shareholders. No holder of this Warrant shall be entitled, as a
      Warrant holder, to vote or receive dividends or be deemed the holder of
      any Shares or any other securities of the Company which may at any time be
      issuable on the exercise hereof for any purpose, nor shall anything
      contained herein be construed to confer upon the holder of this Warrant,
      as such, any of the rights of a stockholder of the Company or any right to
      vote for the election of directors or upon any matter submitted to
      shareholders at any meeting thereof, or to give or withhold consent to any
      corporate action (whether upon any recapitalization, issuance of stock,
      reclassification of stock, change of par value, consolidation, merger,
      conveyance, or otherwise) or to receive notice of meetings, or to receive
      dividends or subscription rights or otherwise until the Warrant shall have
      been exercised and the Shares purchasable upon the exercise hereof shall
      have become deliverable, as provided
herein.

            

    

     

    
      	
              11.    

            	
              Registration
      Rights.

            

    

     

    
      	
                    a.    

            	
              Definitions.
      As used herein:

            

    

     

    
      	
                          i.    

            	
              The
      terms "register," "registered" and "registration" refer to a registration
      effected by preparing and filing with the Securities and Exchange
      Commission (the "SEC") a registration statement pursuantto
      the Securities Act of 1933, as amended (the "Act"), and the
      declaration or order of effectiveness of such registration
      statement.

            

    

     

    
      	
                         ii.            
      

            	
              For
      the purposes hereof the term "Registerable Securities" means shares of (i)
      common stock,
      preferred stock or debt securities of the Company (the "Securities"), (ii)
      stock or debt securities issued in lieu of the Securities in any
      reorganization which have not been sold to the public and (iii) stock
      issued in respect of the stock referred in (i) and (ii) as a result of a
      stock split, stock dividend. recapitalization or combination, which have
      not been sold to the public.

            

    

     

    
      	
                    b.    

            	
              Incidental
      Registration.

            

    

     

    
      	
                         i.    

            	
              If
      the Company at any time proposes to register any of its securities under
      the Act, whether
      of its own accord or at the demand of any holder of such securities
      pursuant to an agreement with respect to the registration thereof
      (provided such agreement does not prohibit third parties from including
      additional securities in such registration), and if the form of
      registration statement proposed to be used may be used for the
      registration of Registerable Securities, the Company will give notice to
      Holder not less than 10 days nor more than 30 days prior to the filing of
      such registration statement of its intention to proceed with the proposed
      registration (the "Incidental Registration"), and, upon written request of
      the Holder made within ten (10) days after the receipt of any such notice
      (which request will specify the Registerable Securities intended to be
      disposed of by the Holder and state the intended method of disposition
      thereof'), the Company will use its best efforts to cause all Registerable
      Securities of Holder as to which registration has been requested to be
      registered under the Act, provided that if such registration is in
      connection with an underwritten public offering, Holder's Registerable
      Securities to be included in such registration shall be offered upon the
      same terms and conditions as apply to any other securities included in
      such registration. Notwithstanding anything contained in this Section 1.2
      to the contrary, the Company shall have no obligation to cause
      Registerable Securities to be registered with respect to any Registerable
      Securities which shall be eligible for resale under Rule 144(k) of the
      Securities Act.

            

    

     

    
      	
                         ii.           
      

            	
              If an Incidental Registration is
      a primary registration on behalf of the Company and is in connection
      with an underwritten public offering, and if the managing underwriters
      advise the Company in writing that in their opinion the amount of
      securities requested to be included in such registration (whether by the
      Company. the
      Holder, or other holders of the Company's securities pursuant to
      any other rights granted by the Company to demand inclusion of any such
      securities in such registration) exceeds the amount of
      such securities which can be successfully sold in such offering, the
      Company will include in such registration the amount of securities
      requested to be included which in the opinion of such underwriters can be
      sold, in the following order (A) first, all of the securities the Company
      proposes to sell, and (B) second, any other securities requested to he
      included in such registration, pro rata among the holders thereof on the
      basis of the amount of such securities then owned by such
      holders.

            

    

     

    
      
        
        

      

      
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                         iii.        
      

            	
              If
      an Incidental Registration is a secondary registration on behalf of
      holders of securities of the Company and is in
      connection with an underwritten public offering, and if the
      managing underwriters advise the Company in writing that in their
      opinion the amount of securities requested to be included in such
      registration (whether by such holders, by the Holder, or by holders of the
      Company's securities pursuant to any other rights granted by the Company
      to demand inclusion of securities in such registration) exceeds the amount
      of such securities which can be sold in such offering, the Company will
      include in, such registration the amount of securities requested to be
      included which in the opinion of such underwriters can be sold, in the
      following order (A) first, all of the securities requested to be included
      by holders demanding or requesting such registration, and (B) second, any
      other securities requested to be included in such registration, pro rata
      among the holders thereof on the basis of the amount of such securities
      then owned by such holders.

            

    

     

    
      
        	
                      c.    

              	
                Registration
      Procedures. The Company will advise the Holder in writing as
      to the effective date of the registration and as to the completion
      thereof. At its expense the Company
will:

              

      

    

     

    
      	
                         i.    

            	
              keep
      the registration effective for a period of days or until the Holder has
      completed the distribution
      described in the registration statement relating thereto, whichever first
      occurs; and

            

    

     

    
      	
                         ii.           
      

            	
              furnish
      such number of prospectuses and any other documents incident thereto as
      the Holder
      from time to time may reasonably
request.

            

    

     

    
      	
              12.      

            	
              Notices.
      All notices and other communications required or permitted hereunder shall
      be in writing, shall be effective when given, and shall in any event be
      deemed to be given upon receipt or, if earlier, (a) five (5) days after
      deposit with the U.S. Postal Service or other applicable postal service,
      if delivered by first class mail, postage prepaid, (b) upon delivery, if
      delivered by hand. (c) one business day after the business day of deposit
      with Federal Express or similar overnight courier, freight prepaid or (d)
      one business day after the business day of facsimile transmission, if
      delivered by facsimile transmission with copy by first class mail, postage
      prepaid. and shall be addressed (i) if to the Holder, at the Holder's
      address as set forth on the books of the Company, and (ii) if to the
      Company, at the address of its principal corporate offices (attention:
      President) or at such other address as a party may designate by ten days
      advance written notice to the other party pursuant to the provisions
      above.

            

    

     

    
      	
              13.      

            	
              Governing
      Law. This Warrant and all actions arising out of or in connection
      with this Agreement shall be governed by and construed in accordance with
      the laws of the State of Nevada, without regard to the conflicts of law
      provisions of the State of Nevada or of any other
  state.

            

    

     

    
      	
              14.      

            	
              Entire
      Agreement; Modification; Waivers. This Agreement contains the
      entire agreement of the parties, and supersedes any prior agreements with
      respect to its subject matter. Except for the provisions of subsection
      4.2, the Warrant Agent and the Company, by supplemental agreement, may
      make any changes in this Agreement (i) that they shall deem appropriate to
      cure any ambiguity or to correct any defective or inconsistent provision
      or manifest mistake or error herein contained; or (ii) that they may deem
      necessary or desirable and that shall not adversely affect the interests
      of the Registered Holders of Warrant Certificates (this provision, for instance, shall permit
      the Exercise Price to be decreased at the Company's
    option).

            

    

     

    
      
        
        

      

      
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              15.             

            	
              Assignment.
      This Warrant may be assigned or transferred, in whole or in part, by due
      execution of the assignment form attached hereto as Exhibit B and the
      delivery of a true and correct copy thereof to the principal office of the
      Company along with a certification by the Holder that the assignee is, or
      was at the time this Warrant was issued, a registered representative with
      Dragonfly Capital Partners, LLC. Any assignment shall be null, void and of
      no force or effect unless the assignee is. or was at the time this Warrant
      was issued, a registered representative with Dragonfly Capital Partners.
      LLC and the assignment is accompanied by a certification to such
      effect.

            

    

     

    
      	
              16.             
      

            	
              Jurisdiction
      and Venue. The courts of the State of Texas, sitting in the City of
      Houston. (the "Texas Courts') shall have exclusive jurisdiction to hear,
      adjudicate, decide, determine and enter final judgment in any action,
      suit, proceeding, case. controversy or dispute. whether at law or in
      equity or both, and whether in contract or tort or both, arising out of or
      related to this Agreement, or the construction or enforcement hereof or
      thereof (any such action, suit. proceeding. case, controversy or dispute,
      a "Related Action"). The Company and the Registered Holder hereby
      irrevocably consent and submit to the exclusive personal jurisdiction of
      the Texas Courts to hear, adjudicate, decide, determine and enter final
      judgment in any Related Action. The Company and the Registered Holder
      hereby irrevocably waive and agree not to assert any right or claim that
      it is not personally subject to the jurisdiction of the Texas Courts in
      any Related Action, including any claim of
      forum non conveniens or that the Texas Courts are not the proper
      venue or form to adjudicate any Related Action. If any Related Action is
      brought or maintained in any court other than the Texas Courts, then that
      court shall, at the request of the Company or the Registered Holder.
      dismiss that action.

            

    

     

    
      	
              17.             

            	
              Specific
      Performance. The Company hereby acknowledges and agrees that it is
      difficult, if not impossible to measure in money the damages that will
      accrue to the Registered Holder by reason of a failure to issue the Shares
      under this Agreement, and that the Registered Holder may seek to
      specifically enforce the Company's obligation to issue the Shares.
      Therefore, if the Registered Holder shall institute any action or
      proceeding to enforce the provisions hereof, the Company hereby waives all
      claims or defenses therein that the Registered Holder has an adequate
      remedy at law, and hereby agrees not to assert or otherwise raise any such
      claim or defense.

            

    

     

    
      	
              18.             

            	
              Waiver
      of Jury Trial. The Company and the Registered Holder hereby waive
      trial by jury in any Related
Action.

            

    

     

    
      	
              19.             
      

            	
              Attorney's
      Fees .The prevailing party in any Related Action shall be entitled
      to recover that party's costs of suit, including reasonable attorney's
      fees.

            

    

     

    
      	
              20.             

            	
              Binding
      Effect. This Agreement shall be binding on, and shall inure to the
      benefit of the parties and their respective successors in
      interest.

            

    

     

    
      	
              2l.              
      

            	
              Construction,
      Counterparts. This Agreement shall be construed as a whole and in
      favor of the validity and enforceability of each of its provisions, so as
      to carry out the intent of the parties as expressed herein. Heading are
      for the convenience of reference, and the meaning and interpretation of
      the text of any provision shall take precedence over its heading. This
      Agreement may be signed in one or more counterparts, each of which shall
      constitute an original, but all of which, taken together shall constitute
      one agreement. A faxed copy or photocopy of a party's signature shall be
      deemed an original for all
purposes.

            

    

     

    Issued on the 4th day of January, 2008.

    
       

      
        
          	 	DEEP
      DOWN, INC.	 
	 	 	 	 
	
                   

                	
                  By:
      

                	/s/ Ronald
      E. Smith	 
	 	 	Name:
      Ronald E. Smith 	 
	 	 	Title:
      President & CEO 	 
	 	 	 	 

        

      

       

      
        
          
          

        

        
          Page 7 of
7

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
A

       

      NOTICE OF
EXERCISE

       

      TO:     
DEEP DOWN. INC.

                 
15473 East Freeway

                 
Channelview, TX 77530

                 
Attention: Eugene L.
Butler

       

      
        
          	
                      1.     

                	
                  The
      undersigned hereby elects to purchase _______ Shares of DEEP DOWN, INC.
      pursuant to the terms of the attached
Warrant.

                

        

      

       

      
        
          	
                      2.     

                	
                  Method
      of Exercise (Please initial the applicable blank);
  

                

        

         

        [  ]
in lawful money of the United States; or

         

      

      [ ] [if
permitted] the cancellation of such number of Warrant Shares as is necessary. in
accordance with the formula set forth in subsection 2(c), to exercise this
Warrant with respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in subsection
1(b)).

       

      
        
          	
                      3.     

                	
                  Please
      issue a certificate or certificates representing said Shares in the name
      of the undersigned or in such other name as is specified
      below;

                
	 	 
	 	______________________________________ 
	 	           (Name) 
	 	 
	 	______________________________________  
	 	 
	 	______________________________________  
	 	          
      (Address) 

        

      

       

      
        
          	
                      4.     

                	
                  The
      undersigned hereby represents and warrants that the aforesaid Shares are
      being acquired for the account of the undersigned for investment and not
      with a view to. or for resale, in connection with the distribution
      thereof, and that the undersigned has no present intention of distributing
      or reselling such shares and all representations and warranties of the
      undersigned set forth in Section 7 of the attached Warrant are true and
      correct as of the date
hereof.

                

        

      

       

       

      
      

       

      
        	 	_______________________________ 
	 	(Signature) 
	 	Title:___________________________ 

      

       

       

      _____________________________

      (Date)

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      EXHIBIT
B

      ASSIGNMENT

       

      FOR VALUE
RECEIVED the undersigned hereby sells, assigns and transfers unto

       

       

      PLEASE
INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

       

       

       

      
        

      

      (Please
print or typewrite name and address, including postal zip code, of
assignee)

       

       

      
        
          

        

      

      The right
to purchase _______  shares of common stock in accordance with the
terms of the within Common Stock
Purchase Warrant, and said rights thereto, hereby irrevocably constituting and
appointing

       

       

        
          

        

      

      Attorney
to transfer said Certificate on the books of the Certificate Registrar, with
hill power of substitution in the premises.

       

      Dated:_____________________

       

      
        	 	___________________________________________________ 
	 	
                Signature
      Guaranteed: 

                 

              
	 	___________________________________________________ 

      

       

       

      NOTICE:
The signature to this assignment must correspond with the name as it appears
upon the face of the within Certificate in every particular. without alteration,
enlargement or any change whatever. Such signature must be guaranteed by a
member firm of the New York Stock Exchange or a commercial bank or trust
company.Unassociated Document

    Exhibit 10.1

     

    CONSULTING
AGREEMENT

     

    This
Consulting Agreement (the "Agreement") is made this 6th day of August, 2007,
between Deep Down,
Inc., located at 15473 East Freeway, Channelview, Texas 77530 (the
"Company") and Strategic Capital Services, Inc., located at 16810 Bending
Creek, Friendswood, Texas 77546 (the "Consultant").

     

    ARTICLE
I

     

    TERMS
AND DUTIES

     

    
      	
              1.1

            	
              The
      Consultant is hereby engaged for a three-year period commencing August 6,
      2007 (the "Initial Term"), and the Consultant hereby accepts the
      engagement by providing the services of Robert E. Chamberlain, Jr.
      ("Chamberlain") as Chairman and Chief Acquisitions Officer. The Initial
      Term shall be automatically renewed for up to two successive consecutive
      one (1) year periods (each, a "Renewal Term" and the Initial Term and
      Renewal Term are collectively referred to as the "consulting period")
      thereafter unless either party sends notice to the other party, not more
      than 270 days and not less than 90 days before the end of the
      then-existing consulting period, of such party's desire to terminate the
      Agreement at the end of the then-existing term, in which case this
      Agreement will terminate at the end of the then- existing term. Consulting
      services will be provided at the Company address or at such other places
      as may be directed by the Company. The Consultant agrees that time is to
      be scheduled by the Company and to devote reasonable productive time,
      ability and attention to the business of the Company during the term of
      this Agreement, subject to the direction and supervision of the
      Company.

            

    

    

    ARTICLE
II

     

    COMPENSATION

     

    
      	
              2.1

            	
              As
      compensation for services rendered under this Agreement, the Consultant
      shall be entitled to receive a base consulting fee of One Hundred Eighty
      Thousand and NO/100 DOLLARS ($180,000.00) per annum payable twice monthly
      plus an amount equal to Federal and State payroll withholdings customarily
      withheld for an employee earning this compensation, including but not
      limited to FICA and Medicare. The consulting fee may be increased annually
      at the discretion of the Board of Directors. The Consultant is also
      entitled to annual bonuses as determined by the Board of Directors. The
      Consultant shall provide such reasonable business hours as the Company
      shall dictate, but at least forty hours per
  week.

            

    

     

     

    

    
      
        
           

        

        
          Page 1 of
4

          
            

          

        

        
           

        

      

    

    

    

    
      	
              2.2

            	
              Chamberlain
      shall be eligible to participate in any and all benefits as are available
      from time to time to
      key executive officers, directors and employees (and
      their families) of the Company, including all health,
      medical, dental, and life insurance benefits. The Company shall pay 100 % of all premiums with respect to
      such plans for Chamberlain. Chamberlain may, at his option, elect to be reimbursed for medical
      insurance premiums incurred for medical insurance not provided
      through the Company. Chamberlain will be entitled to four weeks paid vacation. Chamberlain
      will also be entitled to $1,000 per month as an expense allowance to pay for the cost of a
      vehicle, insurance, gasoline, maintenance, repairs and other unanticipated
      costs.

            

    

     

    ARTICLE III

     

    TERMINATION

     

    
      	
              3.1

            	
              If the Consultant willfully
      breaches or habitually neglects the duties which he is required
      to perform under the terms of the
      Agreement, the Company may at its option terminate this Agreement by
      giving written notice of termination to the
    Consultant.

            

    

    

    
      	
              3.2

            	
              Willfully breaches is defined as
      misappropriation of Company' s assets, being intoxicated or under the influence of drugs or
      alcohol while on the job, being convicted of a felony, or not willingly corning to
      work.

            

    

     

    ARTICLE IV

     

    NON-COMPETITION BY
CONSULTANT

    

    
      	
              4.1

            	
              Consultant agrees that this
      covenant is a separate contract in and of itself. In the event
      that any of the prior clauses of this
      contract should fail, this separate contract shall be binding upon the parties. Consultant
      covenants and agrees that during his consultancy with Company and upon termination of
      their engagement, whether by termination of this Agreement, by wrongful discharge,
      or otherwise, Consultant shall not directly or indirectly, within Texas, enter into or engage
      generally in direct competition with the Company's business, as a Consultant in any
      business providing identical services as Company or own a business which provides
      identical services as Company either individually or as a Consultant, officer, director,
      independent contractor, or shareholder or otherwise, during the term of this Agreement or for
      three (3) months after termination. This covenant on the part of Consultant shall be construed
      as an agreement independent of any other provision of this Agreement; and the existence of
      any claim or cause of action of Consultant against
      Company, whether
      predicated on this Agreement or otherwise, shall not constitute a
      defense to the
      enforcement by Company of this section. Company shall be entitled to such
      extra remedies as injunctions, stays or restraining orders to enforce its rights
      hereunder.

            

    

    

    
      
        
           

        

        
          Page 2 of
4

          
            

          

        

        
           

        

      

    

    

    
      	
              4.2

            	
              The Consultant will not solicit or
      divert or attempt to solicit or divert, any business, patronage, or clients of the
      Company from the Company to himself or a competitor or rival of
      Company for three (3)
      months from the date of Consultant's withdrawal or termination from
      the
      Company,

            

    

    

    
      	
              4.3

            	
              During the term of this Agreement,
      the Consultant will not communicate or divulge to or forthe benefit of any competitor or
      rival of the Company, any of the trade secrets or
      processes of the
      Company including client list or pricing information, and used by the
      Company. Notwithstanding the foregoing,
      upon termination of this Agreement and the Non-Compete period, Consultant shall not be
      prohibited from contacting any prospective client or determine appropriate pricing for
      any products and/or services on behalf of any new Company.

            

    

    

    
      	
              4.4

            	
              The Consultant states that he has
      read this Agreement in full and understands the termsand language in Article IV. The
      Consultant has had outside counsel of his choosing review the Covenant of Noncompete and
      counsel has explained all terms and conditions to him. The Consultant swears that he is
      not under any duress or coercion to enter this Covenant of
      Noncompete, but is
      doing it of his own free will in order to gain the experience, specialized
      training and
      especially the extra compensation offered by
    Company.

            

    

    

    
      	
              4.5

            	
              Confidentiality of this business
      is very important as the nature of the business is
      securing the customers confidence.
      Therefore, Consultant may not directly or indirectly make known
      to any person, firm
      or corporation the names, addresses or any information pertaining to or
      regarding any
      customer of the Company during or after termination of
      employment through the end of the Non-Compete
    period.

            

    

    

    ARTICLE V

     

    GENERAL PROVISIONS

    

    
      	
              5.1

            	
              Any notices to be given hereunder
      by either party to the other may be effected either by personal delivery in writing or by
      mail, registered or
      certified, postage prepaid with return receipt requested. Mailed notices
      shall be addressed to the parties at the address appearing in the introductory
      paragraph of this Agreement, but each party may change her address by written notice in
      accordance with the
      paragraph. Notices delivered personally shall be deemed communicated as of
      actual receipt; mailed notices shall be deemed communicated as of three (3) days
      after mailing.

            

    

    

    
      	
              5.2

            	
              This Agreement supersedes any and
      all other agreements, either oral or written, between the parties hereto with respect to
      the employment of the Consultant by the Company and contains all of the covenants and
      agreements between the parties with respect to such employment in any
      manner whatsoever.
      Any changes or amendments must be in writing, signed by all the parties, or they
      are null and void.

            

    

    

    
      
        
           

        

        
          Page 3 of
4

          
            

          

        

        
           

        

      

    

    
 

    

    
      	
              5.3

            	
              This Agreement shall be governed
      by and construed in accordance with the laws of the State of Texas and enforceable in
      Houston, Texas

            

    

    

    
      	
              5.4

            	
              Where context and circumstances
      require, the gender of all words used in this contract shall include the masculine, feminine
      and neuter.

            

    

    

    EXECUTED
in Harris County, Texas on
the day and year first above written.

     

    
       

      
        	 	

                COMPANY:

                 

                 

                DEEP DOWN,
INC.

                 

                By:   /s/
      Ronald E.
      Smith

                Name:    
      Ronald E. Smith 

                Title:     
      President &
      CEO

                 

                

                CONSULTANT:

                 

                STRATEGIC
      CAPITAL SERVICES, INC.

                

                /s/
      Robert E. Chamberlain, Jr.

                Name:    
      Robert E. Chamberlain, Jr.

                Title:     
      President

              

      

       

    

     

     

    Page 4 of 4

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