EXHIBIT
2.1









AGREEMENT
AND PLAN OF MERGER




among




DEEP
DOWN, INC.




MAKO
TECHNOLOGIES, LLC




MAKO
TECHNOLOGIES, INC.




and




THE
SHAREHOLDERS OF MAKO TECHNOLOGIES, INC.




Dated as
of December 7, 2007












TABLE OF
CONTENTS




ARTICLE I THE
      MERGER
            3SECTION 1.01. The
      Merger
            3SECTION 1.02. Effective Time;
      Closing
            3SECTION 1.03. Effect of the
      Merger
            4SECTION 1.04. Articles of
      Organization and Operating Arrangement
            4SECTION 1.05. Directors and
      Officers
            4ARTICLE II CONVERSION OF COMPANY
      SECURITIES;EXCHANGE OF
      CERTIFICATES
            4SECTION 2.01. Conversion of
      Securities
            4SECTION 2.01. Merger
      Consideration
            5SECTION 2.03. Exchange of
      Certificates
            7SECTION 2.04. Stock
      Transfer Books
            8ARTICLE II1 REPRESENTATIONS AND
      WARRANTIES OF THE COMPANY
            9SECTION 3.1 Organization; Authority; Due
      Authorization
            9SECTION 3.2 No
    Violation
            10SECTION 3.3 Regulatory Approvals and Other
      Consents
            10SECTION 3.4 Title to
      Assets
            10SECTION 3.5 Financial
    Condition
            10SECTION 3.6 Tax
      Matters
            15SECTION 3.7 Compliance with Laws; Governmental
      Matters
            16SECTION 3.8 Litigation
            17SECTION 3.9 Property of the
      Company
            18SECTION 3.11. Labor and Employment
      Matters
            23SECTION 3.12. Pension and Benefit
      Plans
            25SECTION 3.13. Insurance
            27SECTION 3.30. Representations and Warranties on
      Closing
            32ARTICLE
      IV REPRESENTATIONS AND
      WARRANTIES OF PARENT AND MERGER SUB
            32ARTICLE V CONDUCT OF BUSINESSES
      PENDING THE MERGER
            34SECTION 5.01. Conduct of Business by
      the Company Pending the Merger
            34SECTION 5.02. Conduct of Business by
      Parent Pending the Merger
            35ARTICLE VI ADDITIONAL
      AGREEMENTS
            37SECTION
      6.01. Access to
      Information; Confidentiality
            37SECTION 6.02. Obligations of Merger
      Sub
            37SECTION 6.03. Further Action;
      Consents; Filings
            37SECTION 6.04. Plan of
      Reorganization
            38ARTICLE VII CONDITIONS TO THE
      MERGER
            38SECTION 7.01. Conditions to the
      Obligations of Each Party
            38SECTION 7.02. Conditions to the
      Obligations of Parent and Merger Sub
            38SECTION 7.03. Conditions to the
      Obligations of the Company
            41ARTICLE VIII TERMINATION, AMENDMENT
      AND WAIVER
            42SECTION 8.01. Termination
            42SECTION 8.02. Effect of
      Termination
            42SECTION 8.03. Amendment
            42




1




SECTION 8.04. Waiver
            43


SECTION 8.05. Expenses
            43ARTICLE
      IX INDEMNIFICATION
            43SECTION 9.01.
      Indemnification by the Company
            43ARTICLE X GENERAL
      PROVISIONS
            45SECTION 10.01. Survival
      of Representations, Warranties and Covenants
            45SECTION 10.02.
      Notices
            45SECTION 10.03. Certain
      Definitions
            46SECTION I0.04. Severability
            50SECTION 10.05. Assignment;
      Binding Effect; Benefit
            50SECTION
      10.06. Incorporation
      of Exhibits
            50SECTION 10.07.
      Specific Performance
            50SECTION 10.08. Governing Law;
      Forum
            51SECTION 10.09. Headings
            51SECTION
      10.10. Counterparts
            51SECTION 10.11. Entire
      Agreement
            51




EXHIBITS








A.
            Shares
      Owned by Shareholders and Cash, Notes and Common Stock to be received inMergerB.
            Add-Backs
      — SpecialPayments for the Benefit of ShareholdersC.
            Form
      of Investment Letter from ParentD.
            Form
      of Investment Letter from ShareholdersE.
            Form
      of Certificates of Common Stock of ParentF.
            Form
      of Opinion of Parent's CounselG.
            Form
      of Opinion of the Company's CounselH.
            Form
      of Agreement not to CompeteI.
            Form
      of Mutual Confidentiality AgreementJ.
            Form of Officers'
      Certificate of the CompanyK.
            Form of Officers'
      Certificate of ParentL.
            Form
      of Employment Agreement of Jacob J. MarcellM.
            Contracts Requiring
      Consent after ClosingN.
            Company Financing
      Guaranteed by Jacob J. Marcell0.
            Post-Closing
      Holdback Escrow Agreement





2







AGREEMENT
AND PLAN OF MERGER dated as of December 7, 2007 (this "Agreement") among Deep
Down, Inc., a Nevada corporation ("Parent"), Mako Technologies, LLC, a Nevada
limited liability company and a wholly owned subsidiary of Parent ("Merger
Sub"), Mako Technologies, Inc.. a Louisiana corporation (the "Company"), and the
undersigned owners of 100% of the issued and outstanding shares of capital stock
of the Company (the "Shareholders").




WITNESSETH




WHEREAS,
upon the terms and subject to the conditions of this Agreement and in accordance
with the Nevada Revised Statutes (the "NRS"), and Louisiana Revised Statutes
("LRS") Parent and the Company will enter into a business combination
transaction pursuant to which the Company will merge with and into Merger Sub
(the "Merger");




WHEREAS,
the Board of Directors of the Company (i) has determined that the Merger is
consistent with and in furtherance of the long-term business strategy of the
Company and fair to,and in the best interests of the Company and its shareholders and has
approved and adopted this Agreement, the Merger and the other transactions
contemplated by this Agreement and (ii) has recommended the approval of this
Agreement by the shareholders of the Company;




WHEREAS,
the Merger Consideration, as hereinafter defined, and components thereof,
remains unchanged from the terms agreed upon in the Letter of Intent dated June
21, 2007 executed by the parties. The maximum Merger Consideration Basis. as
hereinafter defined, for the year ended December 31, 2007 remains unchanged at
$2,400,000; and




WHEREAS,
for federal income tax purposes, the Merger is intended to qualify as a
reorganization under the provisions of section 368(a) of the United States
Internal Revenue Code of 1986, as amended (the "Code").




NOW,
THEREFORE, in consideration of the foregoing and the mutual covenants and
agreements herein contained, and intending to he legally bound hereby, Parent,
Merger Sub and the Company hereby agree as follows:




ARTICLE
I


THE
MERGER




SECTION
1.01. The
Merger. Upon the terms and subject to the conditions set forth in Article
VII, and in accordance with the NRS and LAS, at the Effective Time, as defined
below in Section 1.02. the Company shall be merged with and into the Merger Sub.
As a result of the Merger, the separate corporate existence of the Company shall
cease and the Merger Sub shall continue as the survivor of the Merger (the
"Surviving Entity").




SECTION
1.02. Effective
Time; Closing. As promptly as practicable and in no event later than the
second business day following the satisfaction or,if permissible, waiver of the
conditions set forth in Article VII (or such other date as may be agreed in
writing by each of the parties
hereto), the parties hereto shall cause the Merger to be consummated by filing
this Agreement or a certificate of merger or certificate of ownership and merger
(in any case, the "Certificate of Merger") with the Secretary of State of the
States of Nevada and Louisiana in such form as is required by, and executed in
accordance with, the relevant provisions of the NRS and LRS. The term "Effective
Time" means the date and time of the filing of the Certificate of Merger with
the Secretary of State of the States of Nevada and Louisiana (or such later time
as may be agreed in writing by each of the parties hereto and specified in the
Certificate of Merger). Immediately prior to the filing of the Certificate of
Merger. a closing will be held at the offices of Sonfield & Sonfield,
Houston, Texas (or such other place as the parties may agree). The parties may
transfer documents (except the Purchase Price) by electronic mail, facsimile or
overnight delivery and rely on facsimile signature pages with an overnight
follow-up of the originals.




3


SECTION
1.03. Effect of the
Merger. At the Effective Time, the effect of the Merger shall be as
provided in the applicable provisions of the NRS. Without limiting the
generality of the foregoing. and subject thereto, at the Effective Time, all the
property, rights, privileges, powers and franchises of the Company and Merger
Sub shall vest in the Surviving Entity, and all debts, liabilities, obligations.
restrictions, disabilities and duties of each of the Company and Merger Sub
shall become the debts, liabilities, obligations, restrictions, disabilities and
duties of the Surviving Entity.




SECTION
1.04. Articles of
Organization and Operating Arrangement.




(a) At the
Effective Time, the Articles of Organization of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Articles of Organization
of the Surviving Entity until thereafter amended as provided by law and such
Articles of Organization.




(b) At the
Effective Time, the Operating Arrangement of Merger Sub, as in effect
immediately prior to the Effective Time, shall, be the Operating Arrangement of
the Surviving Entity until thereafter amended as provided by law, the Articles
of Organization of the Surviving Entity and such Operating
Arrangement.




SECTION
1.05. Directors and
Officers. The member and officers of Merger Sub immediately prior to the
Effective Time shall be the member and officers of the Surviving Entity, each to
hold office in accordance with the Articles of Organization and Operating
Arrangement of the Surviving Entity.




ARTICLE
II


CONVERSION OF COMPANY
SECURITIES;EXCHANGE. OF
CERTIFICATES




SECTION
2.01. Conversion of
Securities. At the Effective Time, by virtue of the Merger and without
any action on the part of Parent, Merger Sub, the Company or the Shareholders,
100% of the shares of capital stock of the Company (the "Company Stock") issued
and outstanding immediately prior to the Effective Time (other than any Company
Stock to be cancelled pursuant to Section 2.02(d)) shall be canceled and shall
be converted into the right to receive the merger consideration.




4


SECTION
2.02. Merger
Consideration. The merger consideration (the "Merger Consideration")
shall be payable in two installments.




Section
2.02.1 The first installment shall be:




(a) Two
Million Nine Hundred Sixteen Thousand Six Hundred and Sixty Seven
Dollars ($2,916,667) shall be paid to Shareholders on the Closing Date in
immediately available federal funds to an account or accounts designated by
Shareholders. The amount of cash which each Stockholder will receive is set
forth in Exhibit "A" hereto;




(b) Certificates
representing restricted common voting shares of Parent's common
stock determined by dividing Two Million Six Hundred Twenty Five Thousand
Dollars ($2,625,000) by $1.35.




(c) Certificates
representing 4,129,630, restricted common voting shares of Parent's
common stock, $.001 par value per share (the "Common Stock") shall be delivered
to the Shareholders on the Closing Date. The number of shares of Company Stock
owned by Shareholders and the number of the shares of Common Stock which each
will receive is set forth in Exhibit "A" hereto; provided, however, that, if
between the date of this Agreement and the Effective Time the outstanding shares
of Parent Common Stock shall have been changed into a different number of shares
or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the number of shares Common Stock shall be correspondingly adjusted to the
extent appropriate to reflect such stock dividend. subdivision,
reclassification, recapitalization, split,combination or exchange
of shares; and




(d) each
Company Share held in the treasury of the Company and each Share owned by
Parent or any direct or indirect wholly owned subsidiary of Parent or of the
Company immediately prior to the Effective Time shall be cancelled and
extinguished without any conversion thereof and no payment or distribution shall
be made with respect thereto.




(e)Five hundred thousand
shares (500,000) of Parent's common stock shall be
delivered to the Escrow Agent pursuant to the terms of the Post-Closing Holdback
Escrow Agreement substantially in the form of Exhibit 0.




Section
2.02.2. The second installment of the Merger Consideration shall
be:




(a)determined by reference
to the financial performance of the business of the
Company for the calendar year ending December 31, 2007. On or before March 15,
2008 the Company's independent auditor will provide a certificate or letter
addressed to the Parent and the Shareholders, on the basis of review made in
accordance with generally accepted accounting standards, that does not
constitute an examination, setting forth the following with respect to the
Company's fiscal year ended December 31, 2007:




(i)
            statement
      of income related tothebusiness of the
      Company'soperations
      for the period covered thereby;




5




(ii)
              payments
      of interest related to debt of the
Company;




(iii)
              federal
      or state taxes based on income attributable to the Company's
      operations;




(iv)
              depreciation
      related to the Company's
assets;




(v)
              amortization
      related to the Company's
assets;




(vi)
              special
      payments through the Effective Time for the benefit of the Shareholders
      listed on Exhibit "B"
("Add-hacks");




(vii)
              any
      charges or expenses solely attributable to the Company being a subsidiary
      of Parent, or the Parent's arbitrary decision to defer income or prepay
      expenses;and




(viii)
            and
      charges or expenses solely attributable to closing and consummating the
      transaction contemplated by this
Agreement.




(b) the
Merger Consideration Basis shall be equal to the reported net income, described
in Section 2.02.2(a)(i) above, after adding items in subsections (ii) through
(viii) of the same section above, up to but not to exceed $2,400,000. The
"Deferred Merger Consideration Basis" shall be determined by deducting
$1,400,000 from the Merger Consideration Basis.




(c) the
amount shall he paid, offset only by amounts charged for failure to obtain
required consents as described in Section 7.02(j), on or before April 30, 2008
as follows:




(i)
              cash
      in an amount equal to $2.083333 for each $1.00 of Deferred Merger
      Consideration Basis, up to, but not to exceed,
  $2,083,333;




(ii)
              1.388889
      shares of Parent Common Stock for each $1.00 of Deferred Merger
      Consideration Basis, up to, but not to exceed, a total of 1,388,889
      shares; and




(iii)
              the
      number of shares of Common Stock equal to 3.306878 shares for each $1.00
      of Deferred Merger Consideration Basis, up to, but not to exceed 3,306,878
      shares.




Section
2.02.3. Resolution of Disputes.




(a)Expedited Arbitration. If
the determinations specified in paragraph 2.02.2(b) cannot be made in accordance
with the procedures outlined in Section 2.02 because of disputes between the
parties with respect thereto, such disputes shall be resolved by and through an
expedited arbitration ("Expedited Arbitration") proceeding to be conducted under
the auspices of the American Arbitration Association (or any like organization
successor thereto) at Houston, Texas, which is hereby made a part of this
Agreement. Such arbitration proceeding shall be conducted in as expedited a
manner as is then permitted by the commercial arbitration rules (formal or
inlbrmal) of the American Arbitration Association, and the arbitrator or
arbitrators in any such arbitration shall be certified public accountants. Both
the foregoing agreement of the parties to arbitrate any and all such claims, and
the results, determination, finding, judgment and/or
award rendered through such Expedited Arbitration, shall be final and binding on
the parties hereto and may be specifically enforced by legal
proceedings.




6


(b) Procedure.
Any such Expedited Arbitration may be initiated by written notice from either
party to the other which shall he a compulsory and binding proceeding on each
party. The Expedited Arbitration shall he conducted before a panel of one
arbitrator selected in accordance with the rules pertaining to expedited
arbitration. The costs of said arbitrator and the Expedited Arbitration shall be
borne equally by the parties hereto. Each party shall bear separately the cost
of their respective attorneys, witnesses and experts in connection with such
Expedited Arbitration. Time is of the essence of this Expedited Arbitration
procedure, and the arbitrator shall be instructed and required to render his
decision within ten (10) days following completion of the Expedited
Arbitration.




(c) Venue and
Jurisdiction. Any and all legal proceedings to compel Expedited Arbitration
hereunder or to enforce any award or judgment rendered thereby, shall be
governed in accordance with Section 10.08 hereunder.




SECTION 2.03.Exchange of
Certificates.




(a) Exchange
Procedures. At the Closing, the Company shall surrender to Parent
all certificates representing Company Stock (the "Certificates") delivered to it
(together with any stock transfer tax stamps required by reason of the payment
of the Merger Consideration to a person other than the registered holder of the
Certificate surrendered), together with such other customary documents as may
reasonably be required by Parent, in exchange for the Merger Consideration.
Immediately following the Effective Time, all Certificates surrendered to Parent
shall be canceled. Any shareholder of the Company whose Certificates are not
delivered at the Closing shall receive the Merger Consideration with respect to
such Certificates upon delivery to Parent after the Closing of such Certificates
and the other items required pursuant to the first sentence of this Section
2.03(a).




(b) Distributions
with Respect to Unexchanged Shares of Parent Common Stock. No
dividends or other distributions declared or made after the Effective Time with
respect to the Parent Common Stock with a record date after the Effective Time
shall he paid to the holder of any unsurrendered Certificate with respect to the
shares of Parent Common Stock represented thereby, and no cash payment in lieu
of any fractional shares shall be paid to any such holder pursuant to Section
2.03(d), until the holder of such Certificate shall surrender such
Certificate.




(c) No
Further Rights in Company Stock. All shares of Parent Common Stock
issued upon conversion of the Company Stock in accordance with the terms hereof
(including any cash paid pursuant to Section 2.03(b) or (d)) shall be deemed to
have been issued in full satisfaction of all rights pertaining to such Company
Stock.




(d) No
Fractional Shares. No certificate or scrip representing fractional shares of Parent
Common Stock shall be issued upon the surrender for exchange of Certificates,
and such fractional share interests will not entitle the owner thereof to vote
or to any other rights of a shareholder
of Parent. Each holder of a fractional share interest shall be paid an amount in
cash (without interest) equal to the product obtained by multiplying (i) such
fractional share interest to which such holder (after taking into account all
fractional share interests then held by such holder) would otherwise be entitled
by (ii) the average of the per share closing prices on the OTC Bulletin Board
(the "OTC") of shares of Parent Common Stock during the 20 consecutive trading
days ending on (and including) the trading day immediately preceding the date of
the Effective Time. As promptly as practicable after the determination of the
amount of cash, if any. to be paid to holders of fractional share interests, the
Parent shall forward payments to such holders of fractional share interests
subject to and in accordance with the terms of Sections 2.03(b).




7


(e)No Liability. Neither
Parent nor the Surviving Entity shall beliable to any holder of
Company Stock for any such Company Stock (or dividends or distributions with
respect thereto), or cash delivered to a public official pursuant to any
abandoned property, escheat or similar Law.




(f)Withholding Rights. Each
of theSurviving Entity and Parent shall be entitled
to deduct and withhold from the consideration otherwise payable pursuant to this
Agreement to any holder of Company Stock such amounts as it is required to
deduct and withhold with respect to the making of such payment under the Code,
or any provision of state, local or foreign tax law. To the extent that amounts
are so withheld by the Surviving Entity or Parent, as the case may be, such
withheld amounts shall be treated for all purposes of this Agreement as having
been paid to the holder of Company Stock in respect of which such deduction and
withholding was made by the Surviving Entity or Parent, as the case may
be.




(g)Lost Certificates. If any
Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by the Surviving
Entity, the posting by such person of a bond, in such reasonable amount as the
Surviving Entity may direct, as indemnity against any claim that may be made
against it with respect to such Certificate, the Parent will issue in exchange
for such lost, stolen or destroyed Certificate the Merger Consideration, any
cash in lieu of fractional shares of Parent Common Stock to which the holders
thereof are entitled pursuant to Section 2.02(d) and any dividends or other
distributions to which the holders thereof are entitled pursuant to Section
2.02(0.




SECTION
2.04. Stock
Transfer Books. At the Effective Time, the stock transfer books of the
Company shall be closed and there shall he no further registration of transfers
of Company Stock thereafter on the records of the Company. From and after the
Effective Time, the holders of Certificates representing Company Stock
outstanding immediately prior to the Effective Time shall cease to have any
rights with respect to such Company Stock, except as otherwise provided in this
Agreement or by Law.




8




ARTICLE
III


REPRESENTATIONS AND
WARRANTIES OF THE COMPANY




As an
inducement to Parent to enter into this Agreement and to consummate the
transactions contemplated hereby, the Company and Shareholders represent and
warrant toParent as
follows:




SECTION
3.1 Organization; Authority; Due Authorization.




SECTION
3.1.1Organization and Good Standing. The Company is a corporation
duly organized, validly existing and in good standing under the Laws of its
jurisdiction of incorporation; has all requisite power to own, lease and operate
its assets, properties and business and to carry on its business as conducted
during the twelve (12) month period prior to the date hereof, as now conducted
and as proposed to be conducted; and is duly qualified or licensed to do
business as a foreign corporation and is in good standing in every jurisdiction
in which the nature of its business or the location of its properties requires
such qualification or licensing, except for such jurisdictions where the failure
to so qualify or be licensed would not have any adverse effect on the
enforceability of any of the Material Contracts or the Company's ability to
bring lawsuits, or a Material Adverse Effect upon the condition (financial or
otherwise), assets, liabilities, Business, operations or prospects of the
Company, ortheCompany's ability to perform
fully its obligations under this Agreement and the other Company Documents.
Section 3.1.1 of the Company Disclosure Schedule sets forth all jurisdictions in
which the Company is qualified or licensed to do business as a foreign
corporation.




SECTION
3.1.2 Authority to Execute and Perform Agreements. The Company and its
Shareholders have all requisite power, authority and approvals required to enter
into, execute and deliver this Agreement and all of the other Company Documents
and to perform fully the
Company's obligationshereunder and thereunder.




SECTION
3.1.3 Due Authorization; Enforceability. The Company and its Shareholders have
taken all actions necessary to
authorize it to enter into and performfully its obligations under this
Agreement and all of the other Company Documents and to consummate the
transactions contemplated herein and therein. This Agreement is, and as of the
Closing Date, the other Company Documents will be, the legal, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms.




SECTION
3.1.4 Status and
Effect of Delivery of the Shares. Shareholders are the lawful owners of
the Company Stock and have good title thereto, freeand clear of all liens,
claims, security interests, pledges, encumbrances and equities of every kind.
Except for thisAgreement,
there are no outstanding rights, options, warrants, subscriptions or agreements
of any kind to acquire from Shareholders any of the Company Stock.




SECTION
3.1.5 Company
Stock. The Company Stock represents all of the issued and outstanding
shares of capital stock of the Company. The Company has 10,000 authorized and
200 issued and outstanding shares of common stock, no par value.




9


SECTION
3.2 No Violation. Except as disclosed in Section 3.2 of the Company Disclosure
Schedule, and subject to obtaining the necessary consents specified in Section
7.02(j), neither the execution or delivery by the Company or its Shareholders of
this Agreement or any of the Company Documents nor the consummation of the
transactions contemplated herein or therein will: (a) violate any provision of
the Articles of Incorporation, bylaws or other charter documents of the Company;
(b) violate, conflict with or constitute a default under, permit the termination
or acceleration of, or cause the loss of any rights or options under, any
Material Contract; (c) require any authorization, consent or approval of,
exemption or other action by, or notice to, any party to any Material Contract;
(d) result in the creation or imposition of any Lien or Other Encumbrance upon
any of the Assets which is of a character not permitted by Section 3.3 below; or
(e) violate or require any consent or notice under any Law or Order to which the
Company or any of its properties is subject.




SECTION
3.3 Regulatory Approvals and Other Consents. Section 3.3 of the Company
Disclosure Schedule sets forth a complete and accurate description of each
consent. approval, authorization, notice, filing, exemption or other
requirement, whether prescribed by the Articles of Incorporation, by-laws,
partnership agreement or other charter document of the Company, whether
prescribed by Law or Order or whether required pursuant to the terms of any
Material Contract, which must be obtained from any Person or which must
otherwise be satisfied by the Company in order that (i) the execution or
delivery by the Company of this Agreement or any of the Company Documents and
(ii) the consummation of the transactions contemplated herein or therein will
not cause any breach of the representations and warranties contained in Article
III. Except as set forth in Section 7.02(j), each such consent, approval,
authorization or other requirement will be obtained or satisfied prior to the
Closing.




SECTION
3.4 Title to Assets. Without limiting the representations and warranties as to
specific classes of Assets contained elsewhere herein, the Company has good and
marketable title to each of the Assets owned by it and the valid and enforceable
right to receive and/or use each of the Assets in which the Company has any
other interest, free and clear of all Liens and Other
Encumbrances except for (a) any Liens and Other Encumbrances disclosed in
Sections 3.4, 3.5.3, 3.5.4, 3.9.1, 3.9.2, 3.9.3 or 3.10 of the Company
Disclosure Schedule, (b) liens for current taxes not yet due and payable and (c)
minor liens or other encumbrances which will not Materially impair the value or
utility of any Material component of the Assets from and after the Effective
Time or the Company's ability to consummate the transactions contemplated
herein. The transfer of ownership contemplated by this Agreement will at the
Effective Time vest good and marketable title to. or the valid and enforceable
right to receive and/or use, each such Asset, free and clear of all Liens and
Other Encumbrances except those marked by an asterisk in Sections 3.4, 3.5.3,
3.5.4, 3.9.1, 3.9.2, 3.9.3 and 3.10 of the Company Disclosure Schedule and those
described in (b) and (c) above.




SECTION
3.5 Financial Condition.




SECTION
3.5.1 Financial Statements. Section 3.5.1 of the Company Disclosure Schedule
sets forth (1) the audited balance sheet of the Company as of June 30, 2007, the
related statements of income and retained earnings, and the related statements
of changes of financial position or cash flows for the period then ended,
compiled by the Company's independent certified public accountants, whose report
thereon is included therewith, (ii) the unaudited balance
sheet of the Company as of September 30, 2007, the related statements of income
and retained earnings, and the related statements of changes of financial
position or cash flows for the period then ended, compiled by the Company
accountants that do not conform to generally accepte accounting standards, and
(iii) the audited balance sheets and statements of income of the Company for the
twelve (12) month periods ended December 31, 2006. Said financial statements
(a) were prepared in accordance with the books and records of the Company; (b)
were prepared in accordance with




10




generally
accepted accounting principles consistently applied; (c) fairly present the
Company's financial condition and the results of its operations as of the relevant
dates thereof and for the periods covered thereby; (d) contain and reflect all
necessary adjustments and accruals for a fair presentation of the Company's
financial condition and the results of its operations for the periods covered by
said financial statements; and (e) with respect to contracts and commitments for
the sale of goods or the provision of services by the Company, contain and
reflect adequate reserves for all reasonably anticipated Material losses and
costs and expenses in excess of expected receipts.




SECTION
3.5.2 No Undisclosed Liabilities. Except for (i) those liabilities specifically
accrued or reserved against on the Balance Sheet (ii) to the Company's Knowledge
those current liabilities for trade or business obligations incurred since the
Balance Sheet Date in connection with the purchase of goods or services in the
ordinary course of the Business and consistent with past practices, (none of
which is, individually or in the aggregate, Material and none of which is for
breach of contract, breach of warranty, tort or infringement) (iii) those
liabilities arising under any Material Contract (none of which liabilities is
for breach of contract, breach of warranty, tort or infringement) or (iv) those
liabilities otherwise specifically disclosed in Section 3.5.2 of the Company
Disclosure Schedule (none of which liabilities is for breach of contract, breach
of warranty, tort or infringement), the Company has, as of the date hereof, no
direct or indirect indebtednesses, liabilities, claims, losses, damages,
deficiencies, obligations or responsibilities, known or unknown, liquidated or
unliquidated, accrued, absolute, contingent or otherwise, and whether or not of
a kind required by generally accepted accounting principles to be set forth on a
financial statement, which individually or in the aggregate are Material to the
condition (financial or otherwise), assets, liabilities, Business, operations or
prospects of the Company. The Company has no Knowledge of any circumstances,
conditions, events or arrangements which may hereafter give rise to any
liabilities of the Company except in the ordinary course of the Business or as
otherwise set forth in this Section 3.5.2.




SECTION
3.5.3 Inventories. All Material Inventories shown on the Balance Sheet and all
Inventories existing as of the date hereof consisted of, and consist of, items
of a quality and quantity useable and saleable in the ordinary course of the
Business without markdown or discount, were, and are, merchantable and fit for
their particular purpose, except for obsolete and slow-moving items and items
below standard quality (which in any event did not, and do not, exceed normal
commercial standards in amount), all of which had been, and have been. written
down on the books of the Company to the lower of cost or net realizable market
value or had been, and have been, provided for by adequate reserves. Except as
set forth in Section 3.5.3 of the Company Disclosure Schedule, all such
Inventories were, and are, owned by the Company free and clear of any Liens or
Other Encumbrances. No items included in such Inventories were, or are, held by
the Company on consignment from others. The amounts of all such Inventories
shown on the Balance Sheet were based on quantities determined by physical count
or measurement
taken on the Balance Sheet Date and valued at the lower of cost (determined on a
first-in, first-out basis) or market value and on a basis consistent with that
of prior years.




11


SECTION
3.5.4 Accounts Receivable. Section 3.5.4 of the Company Disclosure Schedule sets
forth a complete and accurate schedule of the Accounts Receivable as of the
Balance Sheet Date. as reflected in the Balance Sheet, together with an accurate
aging of the same. All Accounts Receivable accrued on the Balance Sheet and all
Accounts Receivable existing as of the date hereof resulted from valid sales in
the ordinary course of the Business and were, and are, subject to no valid
offsets or counterclaims. Except as set forth in Section 3.5.4 of the Company
Disclosure Schedule, all such Accounts Receivable were, and are, owned by the
Company free and clear of any Lien or Other Encumbrance. All Accounts Receivable
existing as of the Effective Time will be collected by Parent within one hundred
(180) days after the Effective Time at the aggregate recorded amount thereof as
shown on the Post-Closing Balance Sheet, except for an amount determined by
adding fifty thousand dollars ($50,000) to the reserves, if any, allocable
thereto shown on the Post-Closing Balance Sheet, and for these purposes, if more
than one invoice is outstanding at any time for any account debtor, the "first-
in. first-out" principle shall be applied in determining the invoice to which a
payment relates unless the payment by its terms specifies the invoice to which
it relates.




SECTION
3.5.5 Accounts Payable. Section 3.5.5 of the Company Disclosure Schedule sets
forth a true and correct aged list of all accounts payable of the Company as of
the Balance Sheet Date and as of the date hereof in excess of Ten Thousand
Dollars ($10,000) to any one payee. No account payable of the Company which has
arisen subsequent to the Balance Sheet Date and as of the date hereof has
exceeded Ten Thousand Dollars ($10,000), nor has the aggregate of such accounts
payable exceeded Fifty Thousand Dollars($50,000). All of the accounts payable on
the Balance Sheet, and all accounts payable of the Company as of the date
hereof, arose from bona fide purchases of goods or services in the ordinary
course of the Business.




SECTION
3.5.6 Absence of Certain Changes. Except as indicated in Section 3.5.6 of the
Company Disclosure Schedule, since the Balance Sheet Date, the Company has
conducted the Business only in the ordinary course consistent with its past
practices and has not:




(a) suffered
any change, event or condition which, in any case or in the aggregate, has had
or could reasonably be expected to have a Material Adverse Effect upon the
Company's condition (financial or otherwise), assets, liabilities, Business,
operations or prospects. the value or utility of the Assets, or the Company's
ability to consummate the transactions contemplated herein;




(b) suffered
any destruction, damage to or loss of any Asset (whether or not covered by
insurance) which could reasonably be expected to have a Material Adverse Effect
upon the condition (financial or otherwise), assets, liabilities, Business,
operations, or prospects of the Company, the value or utility of the Assets or
the Company's ability to consummate the transactions contemplated
herein;




12


(c) incurred
any obligation or liability or taken property subject to any liability, whether
absolute, accrued, contingent or otherwise and whether due or to become due,
except current liabilities for trade or business obligations incurred since the
Balance Sheet Date in connection with the purchase of goods or services in the
ordinary course of the Business and consistent with its prior practices, none of
which liabilities, in any event, involved a potential liability of the Company
in excess of Twenty Five Thousand Dollars ($25,000), individually, or One
Hundred Thousand Dollars ($100,000), in the aggregate;




(d) discharged
or satisfied any Lien or Other Encumbrance affecting any of the Assets other
than those then required to be discharged or satisfied, or paid any obligation
or liability, whether absolute, accrued, contingent or otherwise, and whether
due or to become due, other than current liabilities shown on the Balance Sheet
and current liabilities incurred since the Balance Sheet Date in connection with
the purchase of goods or services in the ordinary course of the Business and
consistent with its prior practices;




(e) mortgaged,
pledged or subjected any of the Assets to any Lien or Other
Encumbrance;




(f) sold,
transferred, leased to others or otherwise disposed of any of the Assets, except
for Assets sold or leased in the ordinary course of the Business consistent with
its past practices or immaterial amounts of other Tangible Personal Property not
required by the Business:




(g) made any
capital expenditures or capital additions or betterments in excess of an
aggregate of One Hundred Thousand Dollars ($100,0000) or entered into any lease
of capital equipment or property under which the annual lease charges exceed One
Million Dollars ($1,000,000) in the aggregate;




(h) amended
or terminated any Material Contract or any License or Permit or received any
notice of termination of any of the same:




(i) waived,
released or compromised any right or claim of the Company, except those
involving less than Ten Thousand Dollars ($10,000) in the
aggregate;




(j) declared
or made any payment of dividends or other distribution to its shareholders or
upon or in respect of any shares of its capital stock, or purchased, retired or
redeemed, or obligated itself to purchase, retire or redeem, any of its shares
of capital stock or other securities;




(k)issued or sold any shares
of its capital stock or other securities, or issued, granted or sold any
options, rights or warrants with respect thereto, or acquired any capital stock
or other securities of any Person or any interest in any business enterprise, or
otherwise made any loan or advance to or investment in any Person;




13


(l)encountered any labor
union organizing activity, suffered any actual or threatened employee strikes,
work stoppages, slow-downs or lock-outs, or any Material change in its relations
with its employees, agents, customers or suppliers or suffered any actual or
threatened wrongful discharge or other unlawful labor practice action or
proceeding;




(m) made any
change in the rate of compensation, commission, bonus or other direct or
indirect remuneration payable, or paid or agreed or orally promised to pay,
conditionally or otherwise, any bonus, extra compensation, pension or severance
or vacation pay, to any shareholder, director, officer, employee, salesman,
distributor or agent of the Company other than in the ordinary course of the
Business consistent with its past practices;




(n) instituted,
settled or agreed to settle any litigation, action, proceeding or investigation
before any court or governmental body relating to the Company or the Assets or
suffered any actual or threatened litigation, action, proceeding or
investigation before any court or governmental body relating to the Company or
the Assets;




(o) transferred
or granted any rights under, or entered into any settlement regarding the breach
or infringement of, any United States or foreign license, patent, copyright,
trademark, trade name, invention or similar rights, or modified any existing
rights with respect thereto;




(p) loaned
any monies to any Person or guaranteed any obligations of any
Person;




(q) failed to
replenish its Inventories in a normal and customary manner consistent with its
prior practices and prudent business practices prevailing in the industry, or
purchased or made any purchase commitment to purchase items of Inventory in
excess of the normal, ordinary and usual requirements of the Business or at any
price in excess of the then current market price or upon terms and conditions
more onerous than those usual and customary in the industry, or made any change
in its selling, pricing, advertising or personnel practices inconsistent with
its prior practices and prudent business practices prevailing in the
industry;




(r) changed
its accounting methods or practices (including, without limitation, any change
in depreciation or amortization policies or rates) or revalued any of its
assets;




(s) changed
its banking or safe deposit arrangements;




(t) entered
into any transaction, contract or commitment other than in theordinary course of the Business and consistent with its prior practices
or paid or agreed to pay any legal, accounting, brokerage, finder's fee, taxes
or other expenses in connection with, or incurred any severance pay obligations
by reason of this Agreement or the transactions contemplated herein;
or




14


(u)entered into any
agreement or made any commitment to take any of the types of action described in
subparagraphs (a) through (t) above.




SECTION
3.6 Tax Matters. Except as indicated in Section 3.6 of the Company Disclosure
Schedule:




(a) within
the times and in the manner prescribed by Law, the Company has filed all Tax
Returns which the Company is required to file, has paid or provided for all
Taxes shown thereon to be due and owing by it and has paid or provided for all
deficiencies or other assessments of Taxes, interest or penalties owed by it; no
taxing Authority has asserted any claim for the assessment of any additional
Taxes of any nature with respect to any periods covered by any such Tax Returns,
all Taxes which are required to be withheld or collected by the Company have
been duly withheld or collected and, to the extent required. have been paid to
the proper taxing Authority or properly segregated or deposited as required by
Law;




(b) each Tax
Return filed by the Company fully and accurately reflects its liability for
Taxes for such year or period and accurately sets forth all items (to the extent
required to be included or reflected in such returns) relevant to its future
liabilities for Taxes, including the tax bases of its properties and assets. The
provisions for Taxes payable reflected in the Financial Statements are fully
adequate and correct;




(c) No audit
of any Tax Return of the Company is in progress or, to the Knowledge of the
Company, threatened;




(d) no
extensions of time with respect to any date on which any Tax Return was or is to
be filed by the Company is in force;




(e)the Company has not
waived or extended any applicable statute of limitations relating to the
assessment of any Taxes;




(f)no issues have been
raised with the Company by any taxing authority which are currently pending in
connection with any Tax Returns. No Material issues have been raised in any
examination by any taxing Authority with respect to the Company which, by
application of similar principles, reasonably could he expected to result in a
proposed deficiency for any other period not so examined. There are no
unresolved issues or unpaid deficiencies relating to any such
examination;




(g) the
Company has not filed a consent pursuant to Section 341(0 of the Code nor has
agreed to have Section 341(0(2) of the Code applied to any disposition of a
Subsection (0 asset (as such term is defined in Section 341(0(4) of the
Code);




(h) the
Company has delivered to Parent true and correct copies of all federal and state
income Tax Returns of the Company for the last five complete fiscal
years;




15


(i) there is
no Tax sharing or other Tax-related agreement in effect among or between the
Company, on the one hand, and any other Person, on the other hand. The Company
is not subject to any partnership, joint venture or other arrangement which is
treated as a partnership for Federal or state income Tax purposes;




(j)none of
the shareholders of the Company is a "foreign person" as defined inSection 1445()(3) of the Code; and




(k)the Company will
not be required to recognize after the Effective Time any taxable income in
respect of accounting method adjustments required to be made under the Tax
Reform Act of 1986 or the Revenue Act of 1987 except to the extent such
recognition arises out of the transaction described in this Agreement or actions
by the Parent after the Effective Time.




SECTION
3.7 Compliance with Laws; Governmental Matters.




SECTION
3.7.1 General. The Company has in all Material respects complied with, and is
now in all Material respects in compliance with, all Laws and Orders applicable
to the Company or the Assets or the operation of the Business, and no Material
capital expenditures will be required in order to insure continued compliance
therewith. Section 3.7.1 of the Company Disclosure Schedule sets forth each
License and Permit, together with its date of expiration and a brief description
of its Material terms. Except for the Licenses and Permits already held by the
Company as disclosed in Section 3.7.1 of the Company Disclosure Schedule, no
other franchise, license, permit, order or approval of any Authority is Material
to or necessary for the conduct of the Business as previously conducted during
the twelve (12) month period prior to the date hereof, as presently conducted or
as proposed to be conducted. Each License and Permit is in full force and
effect; the Company is now and has at all times in the past been in all Material
respects in full compliance with each thereof, no violations are or have in the
last five (5) years been recorded by any Authority in respect of any thereof,
and no proceeding is pending or. to the Knowledge of the Company, threatened to
revoke, amend or limit any thereof. Except as disclosed in Section 3.7.1 of the
Company Disclosure Schedule, there are no pending or, to the Knowledge of the
Company, threatened proceedings by or before any Authority which involve new
special assessments, assessment districts, bonds, Taxes, condemnation actions,
Laws or Orders or similar matters which, if instituted, could reasonably be
expected to have a Material Adverse Effect upon the condition (financial or
otherwise), assets, liabilities, business or prospects of the Company, the value
or utility of the Assets or the Company's ability to consummate the transactions
contemplated herein.




SECTION
3.7.2 Environmental and Industrial Hygiene Compliance. Except as disclosed in
Section 3.7.2 of the Company Disclosure Schedule, (i) neither the Company nor
any of the Assets has ever been or is now in any Material respect in violation
of any applicable Environmental Laws or Orders; (ii) neither the Company nor any
third party has prior to the date hereof ever used, generated, manufactured,
stored or disposed of on, under or about the Assets or transported to or from
the Assets any flammable explosives, radioactive materials, hazardous wastes,
toxic substances or related materials; (iii) the Company has obtained and now
holds all permits, licenses and other authorizations which are required to be




16


held by
it under all applicable Environmental
Laws or Orders; (iv)the
Company is in compliance in all Material respects with all terms and conditions
of any and all required permits, licenses and authorizations and all other
limitations, restrictions, conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in all applicable Environmental
Laws and Orders, and any notice or demand letter issued, entered: promulgated or
approved thereunder; (v)no facts,
past or present events or conditions interfere with or prevent continued
Material compliance by the Company with, or give rise to any Material present or
potential legal, common law or statutory liability of the Company under, any
applicable Environmental Law or Order; (vi) there is no pending civil or
criminal litigation, notice of violation or administrative proceeding involving
the Company and relating in any way to any Environmental Law or Order (including
notices, demand letter or claims under RCRA, CERCLA and similar state or local
laws), other than rulemaking proceedings, if any; and (vii) there has been no
disposal by the Company, directly or indirectly, of any materials or wastes to,
on or in any site currently listed or formally proposed to be listed on the
National Priorities List under CERCLA or any site listed or formally proposed to
be listed as a major or priority cleanup site under any comparable state law.
For the purpose of this Section 3.7.2. hazardous materials shall include but not
be limited to substances now or at any time hereafter defined as "hazardous
substances," "hazardous materials," or "toxic substances" inCERCLA,
the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et seq. or
RCRA, as the same may be amended from time to time, or in the regulations
adopted and publications promulgated pursuant to said Laws from time to
time.




SECTION
3.7.3 Indemnity and Hold Harmless. To the extent of one hundred thousand dollars
($100,000) in the aggregate for a period of two years after the Effective Time,
the Company and its shareholders shall, from and after the Effective Time,
indemnify and hold harmless Parent and its respective shareholders, directors,
officers, employees, agents and attorneys, and any successors to the Company's
interest in any such affected property and their respective shareholders,
directors, officers, employees, agents and attorneys, from and against any and
all liabilities, claims, costs and expenses (including actual attorneys' fees
and court costs), directly or indirectly arising out of the presence, use,
generation. storage, or disposal of hazardous materials on any property of the
Company, whether the same was the fault of the Company or any prior owner or
operator of such affected property or any other person, including, without
limitation, all general, special, foreseeable or unforeseeable consequential
damages and the cost of any required or necessary repair, cleanup, or
detoxification and the preparation of any closure or other required plans,
whether or not such action is required or necessary prior to orfollowing transfer of title to any such affected property, and to the
full extent that such action is attributable, directly or indirectly, to the
presence or use, generation, storage, release, threatened release, or disposal
of hazardous materials by any person on any property of the Company prior to the
Effective Time.




SECTION
3.7.4 Other Violations. The Company is not in violation of any provision of the
Export Administration Amendments of 1977 or the Foreign Corrupt Practices Act of
1977.




17


SECTION
3.8 Litigation. Section 3.8 of the Company Disclosure Schedule sets forth an
accurate and complete description of every pending or, to the Knowledge of the
Company. threatened adverse claim, dispute, governmental investigation, suit,
action (including, without limitation,
nonjudicial real or personal property foreclosure actions), arbitration, legal,
administrative or other proceeding of any nature, domestic or foreign, criminal
or civil, at law or in equity, by or against or otherwise affecting the Company,
the Business or the Assets, other than collection actions tiled by the Company
and involving less than Fifty Thousand Dollars ($50,000). The Company has
delivered to Parent copies of all relevant court papers and other documents
relating to the matters referred to in Section 3.8 of the Company Disclosure
Schedule. Except as disclosed in Section 3.8 of the Company Disclosure
Schedule:




(a) no such
matter or matters, if decided adversely to the Company, could reasonably be
expected to have a Material Adverse Effect upon the condition (financial or
otherwise), assets, liabilities, Business, operations or prospects of the
Company, the value or utility of the Assets or the ability of the Company to
consummate the transactions contemplated herein;




(b) the
Company is not in default with respect to any Order by which it is bound or to
which its property is subject and there exists no Order enjoining or requiring
the Company to take any action of any kind with respect to the Business or the
Assets;




(c) neither
the Company nor, to the Knowledge of the Company, any officer, director or
employee of the Company, has been permanently or temporarily enjoined by any
Order from engaging in or continuing any conduct or practice in connection with
the Business or the Assets; and




(d) to the
Knowledge of the Company, no basis exists for any claim, investigation, suit or
proceeding which, if decided adversely to the Company, could reasonably be
expected to have a Material Adverse Effect upon the condition (financial or
otherwise), assets, liabilities, Business, operations or prospects of the
Company, the value or utility of the Assets or the Company's ability to
consummate the transactions contemplated herein.




SECTION
3.9 Property of the Company.




SECTION
3.9.1 Real Property. Section 3.9.1 of the Company Disclosure Schedule sets
forth, as of the date hereof, (i) a true and complete description of all of the
Real Property which description includes a legal description of each parcel of
the Real Property and the nature of the interest therein of the Company; (ii) an
identification of all Contracts or Other Agreements together with all amendments
thereto, under which the Company has any interest or estate in any of the Real
Property; (iii) an identification of all options held by the Company and all
contractual obligations on the part of the Company to purchase or acquire any
interest or estate in any of the Real Property; (iv) an identification of all
options granted by the Company and all contractual obligations on the part of
the Company to sell or dispose of any interest or estate in any of the Real
Property; and (v) a description of any appraisal in the possession of the
Company which has valued any such interest or estate in any of the Real Property
within the last ten (10) years. The Company has heretofore delivered to Parent
copies of the most recent title reports, surveys, title policies and appraisals
available to it with respect to each such interest or estate in
the Real Property. Except as disclosed in Section 3.9.1 of the Company
Disclosure Schedule, as of the date hereof:




18


(a) the
Company has good and marketable title in fee simple to each parcel of the Real
Property described in Section 3.9.1 of the Company Disclosure Schedule as owned
by it in fee, and a right of prior and continuing possession to each other
parcel of the Real Property, whether such right arises by virtue of a leasehold
estate, easement, license or otherwise, in all cases free and clear of all Liens
and Other Encumbrances excepting only matters of record and mechanic's or
materialmen's liens incurred in the ordinary course of the Business in respect
of obligations which are not yet overdue (none of which interfere with the full
use of any of the Real Property or any improvements thereto in the conduct of
the Business or will materially affect the market value thereof from and after
the Effective Time) and the lien of current state or local real property taxes,
a lien not yet due and payable. Notwithstanding the foregoing, however, the
Company shall have no liability for any breach of the foregoing representation
which is covered by title insurance pursuant to Section 8.5 unless, and then
only to the extent that, the title company does notindemnify
Parent with respect thereto pursuant to such policies of title
insurance;




(b) the
Company has received no notice that a lessor, grantor, licensor or optionor (as
applicable) under any of such leases, subleases, easements, licenses, agreements
or options intends to cancel or terminate any of the same or to exercise or not
to exercise any option thereunder; the Company has not received any notice that
any landlord, grantor, licensor or optionor from whom the Company has acquired
an interest or estate in the Real Property is in default of any mortgage,
indenture, trust deed, deed of trust or other covenant or agreement relating to
the Real Property; the Company has not received any notice of any foreclosure,
forcible entry, detainer, ejectment or other suit or action brought with respect
to any parcel of the Real Property by any third party which could, if
successful, result in the loss or possessory rights to such Real Property by the
Company or any person or entity by or through  which
the Company holds an interest in such Real Property; and each master lease,
license, easement, and option under which the Company is a sublessee,
sublicensee, easement holder or optionee is a valid and binding obligation of
the master lessor. licensor, grantor or optionor, as the case may be, under
which the sublessor, sublicensor, grantor or optionor maintains a valid
estate;




(c) all of
the buildings, fixtures and other improvements constituting a part of the Real
Property are in good operating condition and repair, free from termites, dry
rot, other fungi and other forms of deterioration, and any and all damage
resulting therefrom, and the operation thereof as conducted during the twelve
(12) month period prior to the date hereof, as presently conducted and as
proposed to be conducted is not in any Material respect in violation of any
applicable building code, zoning ordinance or other Law or without limitation,
applicable environmental protection and occupational health and safety
Laws;




(d) the
Company holds valid and effective certificates of occupancy covering all
buildings and improvements constituting a part of the Real Property and holds
valid and effective underwriters' certificates relating to electrical work,
zoning, building, housing, safety,
fire and health approvals and all other permits and licenses required by
applicable Law relating to the operation thereof;




19


(e) there are
no Material condemnation or rezoning proceedings pending or threatened against
or relating to any of the Real Property, no Material limited term zoning
variances or non-conforming or conditional uses or improvements relating thereto
and no tenants or occupants of any thereof having any rights of occupancy as
against the Company;




(f) the
Company has not experienced during the three (3) years preceding the date hereof
any Material interruption in the delivery of adequate quantities of any
utilities (including. without limitation, electricity. natural gas, potable
water, water for cooling or similar purposes and fuel oil) or other public
services (including, without limitation, sanitary and industrial sewer service)
required by the Company in the operation of the Business; and




(g)each parcel of the Real
Property has unqualified access to public roads and to all utilities, including
electricity, sanitary and storm sewer, potable water, natural gas and other
utilities used in the operation of the Business.




SECTION
3.9.2 Tangible Personal Property. Section 3.9.2 of the Company Disclosure
Schedule sets forth, as of the date hereof, (i) a description, including the
location, of each item of the Tangible Personal Property owned by the Company
having either a depreciated hook value or estimated fair market value per unit
in excess of Twenty Five Thousand Dollars ($25,000), or not owned by the Company
but in the possession of or used in the Business and having rental payments
therefor in excess of One Hundred Thousand Dollars ($100,000) per year; and (ii)
a description of the owner of, and any Contract or Other Agreement relating to
the use of each such item of the Tangible Personal Property not owned by the
Company and the circumstances under which such property is used. Except as
disclosed in Section 3.9.2 of the Company Disclosure Schedule, as of the date
hereof:




(a) the
Company has good and marketable title to each item of the Tangible Personal
Property, free and clear of all Liens and Other Encumbrances except for liens,
if any, for personal property taxes not due and liens of repairmen or bailees or
other similar liens incurred in the ordinary course of the Business in respect
of obligations which are not overdue;




(b) each item
of the Tangible Personal Property is in good operating condition and repair,
usable in the ordinary course of business, and the operation thereof as
conducted during the twelve (12) month period prior to the date hereof, as
presently conducted and as proposed to be conducted is not in any Material
respect in violation of any applicable building code, zoning ordinance or other
Law including, without limitation, applicable environmental protection and
occupational health and safety Laws and regulations; and




20




(c)during the past three (3)
years, there has not been any significant interruption in the operations of the
Company due to inadequate maintenance of any item of the Tangible Personal
Property.




SECTION
3.9.3 Intangible Personal Property. Section 3.9.3 of the Company Disclosure
Schedule sets forth, as of the date hereof, (i) a true and accurate
identification of each registered and unregistered fictitious business name,
trademark, service mark, trade name and slogan, and each registration and
application for any of the foregoing, constituting a part of the Intangible
Personal Property; (ii) a true and complete schedule of each statutory, common
law and registered copyright, and each registration and application therefor
constituting a part of the Intangible Personal Property; (iii) a true and
complete schedule of each patent and associated invention, industrial model,
process and design, technical information, know-how and operating, maintenance
or other manual and each registration and application for any of the foregoing,
constituting a part of the Intangible Personal Property; (iv) each item of
"software" and associated documentation constituting a part of the Intangible
Personal Property; (v) a true and complete list, without extensive or revealing
descriptions. of each trade secret constituting a part of the Intangible
Personal Property, including each related process or item of know-how or other
technical data, and including, as to each such trade secret, the specific
location of each writing, computer program or other tangible medium containing
its complete description, specifications, source codes, charts. procedures,
manuals and other descriptive material relating to it; and (vi) a true and
complete list of each Contract or Other Agreement to which the Company is a
party either as licensee or licensor relating to any item of the Intangible
Personal Property. The Company's transfer to Parent of all of its right, title
and interest in and to all items of the Intangible Personal Property will not
adversely affect in any manner the nature or usefulness thereof in the hands of
Parent. Except as indicated in Section 6.9.3 of the Company Disclosure Schedule,
as of the date hereof:




(a) the
Company is the owner of all right, title and interest in and to each item of the
Intangible Personal Property, free and clear of all Liens and Other
Encumbrances;




(b) all
patents, copyrights and other state and federal registrations and all
applications therefor listed in Section 3.9.3 of the Company Disclosure Schedule
are valid and in full force and effect and are not subject to any Taxes,
maintenance fees or actions falling due within ninety (90) days after the date
hereof;




(c) there are
no pending claims, actions, judicial or other adversary proceedings, disputes or
disagreements involving the Company concerning any item of the Intangible
Personal Property, and, to the Knowledge of the Company, no such action,
proceeding, dispute or disagreement is threatened;




(d) the
Company has the right and authority to use each item of the Intangible Personal
Property in perpetuity in connection with the conduct of the Business; such use
did not and will not conflict with, infringe upon, or violate any patent or
other proprietary right of any other Person, and the Company has not infringed
and is not now infringing any proprietary right belonging to any other
Person;




21


(e) with
respect to each trade secret comprising a part of the Intangible Personal
Property, such trade secret is valid and protectible, and such trade secret's
documentation is current, accurate, and sufficient in detail and content to
identify and explain it. and to allow its full and proper use without reliance
on the special knowledge or memory of others;




(f) the
Company has taken all reasonable security measures to protect the secrecy,
confidentiality and value of its trade secrets; and




(g)all trade secrets of the
Company are presently valid and protectible, and are not part of the public
knowledge or literature, nor to the Knowledge of the Company have they been
used, divulged or appropriated for the benefit of any Person other than the
Company or to the detriment of the Company.




SECTION
3.9.4 Necessary Properties. As of the date hereof, the Assets, include all of
the assets, real properties, tangible personal properties and intangible
properties necessary for the conduct of the Business as conducted during the
twelve (12) month period prior to the date hereof, as presently conducted and as
proposed to he conducted and include substantially all of those properties
actually used in the conduct of the Business during the twelve (12) month period
prior to the date hereof.




SECTION
3.10 Agreements. Section
3.10 of the Company Disclosure Schedule sets forth a true and correct list of
each Contract and Other Agreement now in effect except (i) any Contract or Other
Agreement which is specifically identified in Sections 3.9.1, 3.9.2, 3.9.3,
3.11. 3.12 or 3.13 of the Company Disclosure Schedule or which would be required
to be disclosed therein but for specific exemptions contained in any of such
Sections; (ii) purchase or sales orders made in the ordinary course of the
Business and notinvolving a commitment for a duration greater than six (6) months or an
aggregate amount in excess of Fifty Thousand Dollars($50,000); and (iii) any
other Contract or Other Agreement made in the ordinary course of the Business
and not providing for a duration in excess of six (6) months or involving
aggregate payments or potential liabilities in excess of One Hundred Thousand
Dollars ($100,000). Except as disclosed in Section 3.10 of the Company
Disclosure Schedule, as of the date hereof:




(a) each
Material Contract is the valid and binding obligation of the other contracting
party, enforceable in all Material respects in accordance with its terms against
the other contracting party and is in full force and effect; and all rights of
the Company thereunder are owned free and clear of any Lien or Other
Encumbrance;




(b) no other
contracting party to any Material Contract is now in Material breach thereof or
has breached the same in any Material respect within the twelve (12) month
period prior to the date hereof; the Company has no Knowledge of any anticipated
Material breach thereof by any such party; and there are not now, nor have there
been in the twelve (12) month period prior to the date hereof, any disagreements
or disputes between the Company and any other party toany Material Contract
relating to the validity
or interpretation of such Material Contract or to the performance by any party
thereunder;




22


(c)the
Company has fulfilled all Material obligations required pursuant to eachMaterial
Contract to have been performed by it prior to the date hereof, and the Companyhas no
reason to believe that the Company will not be able to fulfill, when due, all of
itsobligations under each Material Contract which remain to be performed
after the date hereof;




(d) the
Company has not received any notice that any party to any Material Contract
intends to cancel or terminate any such Material Contract or to exercise or not
to exercise any option thereunder;




(e) the
Company is not under any Material liability or obligation with respect to the
return of inventory or products sold by the Company which are in the possession
of distributors, wholesalers, retailers or customers;




(f) the
Company is not a party to, nor bound by. any Contract or Other Agreement or any
provision of its Articles of Incorporation or By-laws which (i) restricts the
conduct of the Business anywhere in the world or (ii) contains any unusual or
burdensome provisions which could reasonably be expected to have a Material
Adverse Effect upon the condition (financial or otherwise), assets, liabilities,
Business, operations or prospects of the Company, the value or utility of the
Assets or the ability of the Company to consummate the transactions contemplated
herein;




(g) the
Material Contracts include all of the contracts and agreements necessary for the
conduct of the Business as conducted during the twelve (12) month period prior
to the date hereof, as presently conducted by the Company and as proposed to be
conducted, and include substantially all of the Contracts and Other Agreements
actually in force during the twelve (12) month period prior to the date hereof;
and




(h) Except as
contemplated in this Agreement, the Company has not engaged in the past twelve
(12) months in any discussion with any Person or Persons (1)regarding the consolidation
or merger of the Company with or into any such Person or Persons, (ii) regarding
the sale, conveyance or disposition of all or substantially all of the assets of
the Company, or a transaction or series of related transactions in which more
than 50 percent of the voting power of the Company would be disposed of, or
(iii) regarding any other form of acquisition, liquidation, dissolution or
winding up of the Company.




SECTION
3.11Labor and Employment Matters.




SECTION 3.11.1 Labor
Agreements. Section
3.11.1 of the Company DisclosureSchedule
sets fortha true and current list of all of the Labor Agreements
now ineffect. Section 3.11.1 of the Company Disclosure Schedule also includes a
true and complete schedule listing the names, total annual compensation, total
accrued vacation and other fringe benefits of each person employed by the
Company presently receiving compensation aggregating in excess of Seventy
Five Thousand Dollars ($75,000) per year. Except as disclosed in Section 3.11.1
of the Company Disclosure Schedule, as of the date hereof




23


(a) all
employees of the Company are employees at will and the employment of each
employee of the Company may be terminated immediately by the Company, except as
otherwise provided by statute or decisional authority;




(b) to the
Knowledge of the Company, no key executive employee of the Company and no group
of employees of the Company has plans to terminate his, her or its employment at
or prior to the Closing, whether or not as a result of the transactions
contemplated herein; and




(c)the Company has no
Material labor relations problems.




SECTION
3.11.2 Compliance With Labor Laws and Agreements. Except as disclosed in Section
3.11.2 of the Company Disclosure Schedule, the Company has complied in all
Material respects with all Labor Agreements and all applicable Laws and Orders
relating to the employment of labor, including those related to wages, hours,
collective bargaining and the payment and withholding of Taxes and other sums as
required by appropriate Authorities and has withheld and paid to the appropriate
Authorities, or is holding for payment not yet due to such Authorities, all
amounts required to be withheld from such employees of the Company and is not
liable for any arrears of wages, Taxes, penalties or other sums for failure to
comply with any of the foregoing. No present or former employee, officer or
director of the Company has, or will have at the Effective Time, any claim
against the Company for any matter, including but not limited to (i) overtime
pay for work done through the Effective Time; (ii) wages or salary for the work
done through the Effective Time; (iii) vacation time off or pay in lieu of
vacation time off for the period through the Effective Time; (iv) any violation
of any statute, ordinance or regulation relating to minimum wages or maximum
hours, workplace conditions, or any other matter; or (v) injuries or other
damages which are not fully covered by the Company's insurance policies. Except
as disclosed in Section 3.11.2 of the Company Disclosure Schedule. as of the
date hereof, there is no:




(a) unfair
labor practice complaint against the Company pending before the National Labor
Relations Board or any state or local agency;




(b) pending
labor strike or other Material labor trouble affecting the Company;




(c) Material
labor grievance pending against the Company;




(d) pending
representation question respecting the employees of the Company; or




(e)pending arbitration
proceedings arising out of or under any collective bargaining agreement to which
the Company is a party.




In
addition, to the Knowledge of the Company: (i) none of the matters specified in
clauses (a) through (e) above is threatened against the Company; (ii) no union
organizing activities
have taken place with respect to the Company; (iii) no basis exists for which a
claim may be made under any collective bargaining agreement to which the Company
is a party; and (iv) all key employees of the Company are in good
health.




24


SECTION
3.12 Pension and Benefit Plans. All accrued obligations of the Company
applicable to its employees, whether arising by operation of Law, by contract,
by past custom or otherwise, for payments by the Company to trusts or other
funds or to any governmental agency, with respect to unemployment compensation
benefits, social security benefits or any other benefits for its employees with
respect to the employment of said employees through the date hereof have been
paid or adequate accruals therefor have been made on the Books and Records. All
reasonably anticipated obligations of the Company with respect to such
employees, whether arising by operation of Law, by contract, by past custom, or
otherwise, for salaries, vacation and holiday pay, sick pay, bonuses and other
forms of compensation payable to such employees in respect of the services
rendered by any of them prior to the date hereof have been or will be paid by
the Company prior to the Effective Time or adequate accruals therefor have been
made in the Financial Statements. Except as disclosed in Section 3.12 of the
Company Disclosure Schedule, as of the date hereof:




(a) Neither
the Company, nor any of its ERISA Affiliates maintains or has any obligations to
contribute to, or has in effect or has committed to adopt, any Pension Plan or
any Welfare Plan;




(b) Each
ERISA Plan conforms in all Material respects to all applicable Laws and Orders,
including ERISA and the applicable provisions of the Code. All notices, reports,
returns, applications and disclosures have been timely made which are required
to be made to the Internal Revenue Service, the U.S. Department of Labor, the
Pension Benefit Guaranty Corporation, any participants in the ERISA Plans, any
trustee, or any insurer with respect to the ERISA Plans;




(c) The
Company and its ERISA Affiliates have made or provided for (with fully-funded
reserves) all contributions heretofore required to have been made under all of
the ERISA Plans, and will, by the Closing Date. have made or provided for (with
fully-funded reserves) all contributions required to be made on or before the
Closing Date under all such plans;




(d) No ERISA
Plan nor any trust created thereunder, nor any trustee or administrator thereof
has engaged in a transaction which may subject any of such ERISA Plans, any such
trust, or any party dealing with such ER ISA Plans or any such trust, to the Tax
or penalty on prohibited transactions imposed by Section 4975 of the Code or to
a civil penalty imposed by Section 502 of ERISA;




(e)There are no Material
actions, claims or lawsuits which have been asserted or instituted against the
assets of any of the trusts under the ERISA Plans, and to the Knowledge of the
Company. no basis for such action, claim or lawsuit exists, and no such action,
claim or lawsuit has been threatened;




25


(f)The Company has not
agreed to indemnify any other party for any liabilities or expenses which have
been or may in the future be incurred by or asserted against such other party in
respect of any ERISA Plan:




(g) Each
Pension Plan constituting one of the ERISA Plans is qualified under Section 401
of the Code, each of the trusts maintained with respect thereto is exempt from
federal income taxation under Section 501 of the Code, and nothing has occurred
which would cause the loss of such qualification or exemption or the imposition
of any penalty under Section 4971 of the Code;




(h) The
assets of each Pension Plan constituting one of the ERISA Plans are sufficient
to pay all liabilities of the plan, including, without limitation, all
liabilities to pay benefits to any past or present participant or beneficiary in
such plan, any expense incurred in administering the plan, and any liabilities
for Taxes which may be imposed on the plan or on any trust maintained in
connection with the plan;




(i) The value
of all accrued benefits under each Pension Plan constituting one of the ERISA
Plans which is a "defined benefit plan" within the meaning of Section 3(35) of
ERISA, including each "multi-employer plan" within the meaning of Section 3(37)
of ERISA, does not exceed, on an accrual basis, the aggregate value of the
assets of each such plan;




(j) There has
been no "reportable event," within the meaning of Section 4043(b) of ERISA, with
respect to any Pension Plan which constitutes one of the ERISA Plans since the
effective date of Section 4043(b) of ERISA;




(k)Neither the Company nor
any of its ERISA Affiliates has any liability to the Pension Benefit Guaranty
Corporation pursuant to Title IV of ERISA in respect of any Pension Plan
constituting one of the ERISA Plans;




(l)Neither the
Company nor any of its ERISA Affiliates maintains or has any obligation to
contribute to any multi-employer plan;




(m) Neither
the Company nor any of its ERISA Affiliates has terminated a defined benefit
plan or multi-employer plan or suffered or otherwise caused a "complete
withdrawal" or "partial withdrawal" as such terms are respectively defined in
Sections 4203 and 4205 of ERISA from any multi-employer plan. Since Apri
11, 1979, neither the Company, nor any of its ERISA Affiliates has
complied with Section 4204 of ERISA in order to avoid any such "complete
withdrawal" or "partial withdrawal;"




(n) Neither
the Company nor any of its ERISA Affiliates has any unpaid liability in respect
of any employee for any contributions andlor premiums due under any Welfare Plan
constituting one of the ERISA Plans;




26


(o) Neither
the Company nor any of its ERISA Affiliates has any liability as to any benefits
to which any employee may be entitled under any Welfare Plan constituting one of
the ERISA Plans, whether for benefits due or claims filed;




(p) True,
correct and complete copies of the following documents, with respect to each of
the ERISA Plans, have been delivered to Parent:




(i) Each
ERISA Plan document, employment contract, policy, procedure or other governing
instrument relating to a Plan, including all amendments, supplements, collective
bargaining agreements, letters, memoranda, understandings and any other document
reasonably necessary to reflect the terms and conditions of each ERISA
Plan.




(ii) The most
recent summary plan description of each ERISA Plan for which a summary plan
description is required under ERISA and summaries of Material modifications
thereto.




(iii) All
instruments under which the assets of any ERISA Plan are held or managed and
benefits provided. including, but not limited to, insurance contracts, trust
agreements, custodial contracts and investment management
agreements.




(iv) The two
most recent Forms 5500, 5500-C or 5500-R for each ERISA Plan for which such
filing is required, with all attachments and schedules thereto.




(v) The two
most recent annual financial statements for each ERISA Plan, if not included
with such Form 5500 (5500-C or5500-R).




(vi) The most
recent actuarial valuation report for each ERISA Plan (as
applicable).




(vii)With respect to each
ERISA Plan that has received a determination letter under Section 401(a) of the
Code, and any voluntary employee benefit association trust that has received a
determination letter under Section 501(c) of the Code, the most recent Internal
Revenue Service determination letter (including any letter concerning the
tax-exempt status of any trust under Section 501(a) of the Code), the
application submitted
when requesting such determination letter, and any subsequently filed
determination letter request; and




(q)The Company does not
maintain any health or life insurance plan that provides for continuing benefits
or coverage for any participant or any spouse, dependent or beneficiary under
such plan after termination of employment, or other than may be required under
Section 4980B of the Code and regulations thereunder ("COBRA"). The Company is
in compliance with the COBRA notice and continuation coverage requirements with
respect to plans maintained by the Company.




SECTION
3.13 Insurance. Section 3.13 of the Company Disclosure Schedule sets forth a
true and correct list of all policies or binders of fire, liability, workers'
compensation, vehicular or other
insurance held by or on behalf of the Company specifying the insurer, the policy
number or covering note number with respect to binders, and describing each
pending claim thereunder of more than Fifty Thousand Dollars ($50,000). Such
policies and binders are in full force and effect and are in all Material
respects in accordance with the




27


customary
insurance requirements for the industry of the Company and in compliance with
all applicable Laws and Orders. The Company is not in any Material respect in
default, nor has it during the last five (5) years ever been in
any Material respect in default, with respect to any provision contained in any
suchpolicy or binder or has failed to give any notice or present any
claim under any such policy or binder in due and timely fashion. There are no
outstanding unpaid claims under any such policy or binder. The Company has not
received a notice of cancellation or non-renewal of any such policy or binder.
The Company has no Knowledge of any inaccuracy in any application for such
policies or binders, any failure to pay premiums when due, or any similar state
of facts which may form the basis for termination of any such insurance. The
Company has never been refused any insurance with respect to its properties or
operations, nor has its insurance coverage ever been limited. No such policy is
terminable or cancelable by the insurer by virtue of the consummation of the
transactions contemplated herein.




SECTION
3.14 Suppliers and
Customers. Section 3.14 of the Company Disclosure Schedule is a correct
and current list of all customers of the Business who purchased more than One
Hundred Thousand Dollars ($100,000) of products or services from the Company
during its last fiscal year, together with summaries of thesales made to each such
customer during the Company's last fiscal year. Except as disclosed in Section
3.14 of the Company Disclosure Schedule, no single supplier or customer of the
Company is of Material importance to the Company. The relationships of the
Company with its suppliers and customers are good commercial working
relationships and no person who was a Material supplier or customer of the
Company at any time since the Balance Sheet Date has canceled or otherwise
terminated, or threatened to cancel or otherwise terminate, its relationship
with the Company or has since such date decreased or limited materially, or
threatened to decrease or limit materially, its services, supplies or materials
to the Company or its purchases of the services or products of the Company. The
Company has no Knowledge that any such supplier or customer intends to cancel or
otherwise modify its relationship with the Company or to decrease materially or
limit its services or products to the Company or its purchases of the services
or products of the Company. The acquisition of the Assets by Parent will not, to
the Knowledge of the Company, adversely affect the relationship of the Business
with any such supplier or customer.




SECTION
3.15 Customer
Warranties. There are not pending, nor, to the best Knowledge of the
Company, threatened, any claims under or pursuant to any warranty, whether
expressed or implied, on products or services sold prior to the date of this
Agreement by the Company that are not disclosed or referred to in the Balance
Sheet and which are not fully reserved against.




SECTION
3.16 Products
Liability.




SECTION
3.16.1 Claims and Occurrences. Except as disclosed in Section 3.16 of the
Company Disclosure Schedule, (i) there is no claim now pending or, to the
Knowledge of the Company, threatened by or before any Authority alleging any
defect in any product manufactured, shipped, sold or delivered by the Company or
alleging, with respect thereto, any




28




failure
of the Company to warn or any breach by the Company of any implied warranties or
representations, nor is there any valid basis for any such claim; (ii) to the
Knowledge of the Company, there has not within the last five (5) years been any
product recall or post-sale warning or similar action (collectively "Recall")
conducted with respect to any product manufactured, shipped. sold or delivered
by the Business, or any investigation by any Authority concerning whether to
undertake or not undertake any Recalls; and (iii) within the last five (5) years
there have been no Material defects in, failures to warn, or breaches of express
or warranties or representations with respect to, any product manufactured,
shipped, sold or delivered by the Company. For purposes of this Section 3.16.1
"Occurrence" shall mean any occurrence which is caused or allegedly caused by
any defect in, or failure to warn or any breach of express or implied warranties
or representations with respect to, a product manufactured, shipped, sold or
delivered by the Company which results or is alleged to have resulted in injury
or death to any person or damage to or destruction of property (including damage
to or destruction of the product itself) or other consequential
damages.
  SECTION
3.16.2 Compliance With
Standards. All manufacturing standards applied, testing procedures used,
and product specifications disclosed to customers by the Company comply in all
Material respects with all applicable Laws and Orders.
  SECTION
3.17 Potential
Conflicts of Interest. Except as disclosed in Section 3.17 of the Company
Disclosure Schedule, no officer, director or shareholder of the Company, no key
employee of the Company and no Affiliate of any of the foregoing (a) owns,
directly or indirectly, any interest in (excepting not more than a 1 percent
shareholding for investment purposes in securities of publicly held and traded
companies), or is an officer, director, employee or consultant of, any Person
which is a competitor, lessor, lessee, customer or supplier of the Company; (b)
holds a beneficial interest in any Contract or Other Agreement of the Company
(other than stock options and other contracts, commitments or agreements between
the Company and such persons in their capacities as employees, officers or
directors of the Company); (c) owns, directly or indirectly, in whole or in
part, any tangible or intangible property (including, without limitation any
patent, trademark, trade name, service mark, franchise, invention, permit,
license, trade secret or confidential information) which the Company is using or
the use of which is necessary for its conduct of the Business; or (d) has any
cause of action or other claim whatsoever against the Company, except for claims
in the ordinary course of the Business for salaries, reimbursement of expenses
and employee benefits which are not unusual in amount.
  SECTION
3.18 Certain
Transactions. Except as disclosed in Section 3.18 of the Company
Disclosure Schedule, all purchases and sales or other transactions, if any,
between the Company, on the one hand, and any officer, director, shareholder or
key employee or Affiliate thereof, on the other hand, within the five (5) years
immediately preceding the date hereof have been made
on the basis of prevailing market rates and terms such that from the perspective
of the Company, all such transactions have been made on terms no less favorable
than those which would have been available from unrelated third
parties.
  SECTION
3.19 Powers of
Attorney and Suretvships. Except as disclosed in Section 3.19 of the
Company Disclosure Schedule, the Company has no general or special powers of
attorney outstanding (whether as grantor or grantee thereof) nor any obligation
or liability (whether Plan and
Agreement of Merger 29 actual,
accrued, accruing, contingent or otherwise) as guarantor, surety, co-signer,
endorser, co- maker, indemnitor or otherwise in respect of the obligation of any
Person.
  29
  SECTION
3.20 Absence of
Foreign or Enemy Status; Sensitive Payments.
  (a)  The
Company is not a "national" of a "designated foreign country" (or a Person defined as a "designated foreign
country") within the definitions in the Foreign,Cuban orIranian Assets Control
Regulations of the United States Treasury Department, 31 CFR, Subtitle B,
Chapter V, as amended, or any regulation or ruling issued
thereunder.
  (b)  Neither
the Company nor any person associated therewith or acting on behalf thereof has
used any corporate funds for unlawful contributions, gifts, entertainment or
other unlawful expenses relating to political activity or otherwise; made any
direct or indirect unlawful payment to government officials or employees from
corporate funds for any such payment theretofore made; established or maintained
any unlawful or unrecorded fund of corporate monies or other assets; made any
false or fictitious entries on the books or records of the Company; made any
bribe, rebate, payoff, influence payment. kickback or other unlawful payment; or
made any Material favor or gift which is not deductible for federal income Tax
purposes.
  SECTION
3.21 Federal Reserve
Board Regulations. The Company does not own any "margin security" as such
term is defined in Regulation G of the Board of Governors of the Federal Reserve
System (12 CFR Part 207), as amended.
  SECTION
3.22 investment
Company Act, Public Utility Holding Company Act,Federal Power Act,
Etc. The Company is not subject to regulation under The Public Utility
Holding Company Act of 1935, The Federal Power Act, The Interstate Commerce Act,
The Investment Company Act of 1940 or any other Law or Order restricting the
transfer of the Assets.
  SECTION
3.23 Changes to
Certain Contracts. Except as disclosed in Section 3.23 of the Company
Disclosure Schedule, since June 21 of 2007, (the date of the letter of intent
between Parent and the Company with respect to the transactions contemplated
herein), there have been no Material modifications or amendments to any Contract
or Other Agreement between the Company, on the one hand, and any officer,
director, employee or shareholder of the Company, on the other hand, which would
benefit, directly or indirectly, any such officer, director, employee or
shareholder.
  SECTION
3.24 Banking
Facilities. Section 3.24 of the Company Disclosure Schedule contains a true and completelist of:
  (a) each bank, savings and loan or
similar financial institution in which theCompany has an account or safety
deposit box and the numbers of the accounts or safety deposit boxes maintained
bythe Company thereat; and Plan and
Agreement of Merger 30
  30
  (b) the
names of all persons authorized to draw on each such account or to have access
to any such safety deposit box facility, together with a description of the
authority (and conditions thereof, if any) of each such person with respect
thereto.
  SECTION
3.25 Absence of
Adverse Changes. Other than facts or contingencies affecting the oil and
gas industry generally, the Company does not know or have reason to know of any
Material facts or contingencies which could reasonably be expected to have a
Material Adverse Effect upon the condition (financial or otherwise) assets,
liabilities. Business, operations or prospects of the Company, the value or
utility of the Assets, or the ability of the Company to consummate the
transactions contemplated herein.
  SECTION
3.26 No
Broker. No broker, finder, agent or similar intermediary has acted for or
on behalf of the Company in connection with this Agreement or the transactions
contemplated hereby, and no broker, finder, agent or similar intermediary is
entitled to any broker's, finder's or similar fee or other commission in
connection therewith based on any agreement, arrangement or understanding with
the Company.
  SECTION 3.27JDELIBERATLY
OMITTED'
  SECTION
3.28 Full
Disclosure. The Company has heretofore made all of the Books and Records
available to Parent for its inspection and has heretofore delivered to Parent
copies of all agreements and documents referred to in the Company Disclosure
Schedule. All documents and other papers delivered to Parent by or on behalf of
the Company in connection with this Agreement
and the transactions contemplated herein are accurate, complete and authentic.
Furthermore, the information furnished to Parent by or on behalf of the Company
in connection with this Agreement and the transactions contemplated herein does
not contain any untrue statement of a Material fact and does not omit to state
any Material fact necessary to make the statements made, in the context in which
they are made, not false or misleading. There is no fact which the Company has
not disclosed to Parent in writing which could reasonably be expected to have a
Material Adverse Effect upon the condition (financial or otherwise), assets,
liabilities, business, operations, properties or prospects of the Company, the
value or utility of the Assets or the ability of the Company to consummate the
transactions contemplated herein.
  SECTION
3.29 Information
for Parent's Shareholders. The Company will provide a description of the
businesses and properties of the Company prepared by the Company for inclusion
in Parent's current report to be filed with the SEC for the purpose, among
others, of disclosing the execution and delivery of this Agreement. The Company
acknowledges that financial statements will also be used in that current report
and that potential liability to Parent may arise out of such use. Neither the
description of the business and properties of the Company nor the financial
statements contain any untrue statement of a Material fact or omit to state any
Material fact necessary to make the statements or information therein not
misleading. The Company shall, upon Parent's request, furnish to the Company
such additional information regarding the Company's business and properties as
Parent may require for inclusion in that current report. The information set
forth in Section 3.29 of the Company Disclosure Schedule, as supplemented by any
additional information that the Company may furnish under this Section 3.29,
will not contain any untrue statement of a Material fact or omit to state a
Material fact necessary to prevent that current report from being
misleading.
  31
  SECTION
3.30 Representations and Warranties on Closing. The representations and
warranties contained in this Article III shall be true and complete in all
Material respects at and as of the Effective Time with the same force and effect
as though such representations and warranties had been made at and as of the
Effective Time, except as affected by the transactions contemplated in this
Agreement.
  ARTICLE
IV
 REPRESENTATIONS AND
WARRANTIES OF PARENT AND MERGER SUB
  As an
inducement to Shareholders to enter into this Agreement and to consummate the
transactions contemplated hereby, Parent and Merger Sub represent and warrant to
the Company and Shareholders as follows. All such representations and warranties
shall survive the Closing for a period of six months and thereafter terminate
except the representation in Section 4.2 which shall survive
indefinitely.
  SECTION
4.1 Authority.
The execution, delivery and performance of this Agreement by Parent and Merger
Sub does not require any consent or authorization by any other person which
consent has been obtained. This Agreement is, and each other agreement or
instrument of Parent and Merger Sub contemplated hereby will be the legal, valid
and binding agreement of Parent and Merger Sub each enforceable in accordance
with its respective terms except for the Enforceability Exceptions.
  SECTION
4.2 Investment
Representation. The Merger Sub (i) is combining with the Company, for its
own account for investment only and not with a view towards, or for resale in
connection with, and public sale or distribution of the Company, except pursuant
to sales registered or exempted under the 1933 Act. The Merger Sub is an -accredited
investor" as that term is defined in Rule 501(a) of Regulation D. The Merger Sub
understands that the business combination is being entered into in reliance on
specific exemptions from the registration requirements of United States federal
and state securities laws and that the Shareholders are relying in part upon the
truth and accuracy of, and the Parent's and Merger Sub's compliance with, the
representations, warranties, agreements, acknowledgments and understandings of
the Parent and Merger Sub set forth herein. The Parent and Merger Sub understand
that no United States federal or state agency or any other government or
governmental agency has passed on or made any recommendation or endorsement of
the business combination or the fairness or suitability thereof nor have such
authorities passed upon or endorsed the merits of the business
combination.
  SECTION 4.3Covenant to
Register.
  (a) For
urposes of this Section, the following definitions shall apply:
  (i) The
terms -register,"
"registered," and "registration" refer to a registration under the Securities
Act, effected by preparing and filing a registration statement
or similar document in compliance with the Securities Act, and the declaration
or ordering of effectiveness of such registration statement, document or
amendment thereto.
  32
  (ii)  The term
"Registerable Securities" means the shares of the Parent's Common Stock issued
to the Shareholders pursuant to this Agreement and any securities of the Parent
or securities of any successor corporation issued as, or issuable upon the
conversion or exercise of any warrant, right or other security that is issued as
a dividend or other distribution with respect to, or in exchange for, or in
replacement of, the Common Stock.
  (iii)  The term
"holder of Registerable Securities" means the Shareholders and any permitted
assignee of registration rights.
  (b) Now
therefore
  (i)  The
Shareholders shall be entitled to require the Parent to use its best efforts to
file a registration statement with the SEC for one Piggyback Registration (as
defined herein), provided that at the time of the request for the Piggyback
Registration (a) the Shareholders, in the aggregate. still own in excess of
1,000,000 Shares of Registerable Securities which have been issued and (b) the
Parent shall not be required to effect any such registrations prior to the first
to occur of (x) December 31, 2008 or (y) six months following the effectiveness
of a registration statement covering an underwritten public offering of
securities of the Parent under the Securities Act (other than a registration
statement relating to the sale of securities to employees of the Parent pursuant
to a stock option, stock purchase or similar plan or a SEC Rule 145
transaction). Within ten days after receipt of any request pursuant to this
Subsection (b)(i), the Parent will give written notice of such request to allother holders of Registerable Shares and will include in such
registration (as part of such Piggyback Registration) all Rcgisterable Shares
with respect to which the Parent has received written requests for inclusion
therein within 15 days after the receipt of the Parent's notice.
  (ii)  Notwithstanding
anything to the contrary contained herein, the Parent shall not he required to
seek to cause a registration statement to become effective pursuant to
Subsection (b)(i) if the Parent shall furnish to the Shareholder a certificate
signed by the President of the Parent stating that in the good faith judgment of
the board of directors it would be materially detrimental to the Parent or its
stockholders for a registration statement to be filed at such time, or that it
would require disclosure of Material nonpublic information relating to the
Parent which, in the reasonable opinion of the board of directors, should not be
disclosed, then the Parent's obligation to use all reasonable efforts to
register, qualify or comply under this Section 3.3 shall be deferred fbr a
period not to exceed ninety (90) days from the date of receipt of written
request from such holder of Registerable Securities; provided, however, that the
Parent may not utilize this deferral right more than once in any twelve month
period.
  33
  (iii)  The
Parent shall not be obligated to effect a Piggyback Registration under
Subsection (b)(i) above: (A) if all of the Registerable Securities held by the
holder of Registerable Securities which are demanded to be covered by the
Piggyback Registration are, at the time of such demand, included in an effective
registration statement; (B) if all or a part of the Registerable Securities may
be sold under Rule 144(b) of the Securities Act and the Parent's transfer agent
has accepted an instruction from the Parent to such effect; or (C) at any time
after which the Shareholders cease to be affiliates for purposes of Rule 144
under the Exchange Act.
  (iv)  the
Parent may suspend the effectiveness of any such registration effected pursuant
to this Subsection (b): (A) in the event and for such period of time as, such a
suspension is required by the rules and regulations of the Securities and
Exchange Commission ("SEC"); or (B) for a period not exceeding forty five (45)
days in the aggregate if there exists at the time Material non-public
information relating to the Parent which, in the reasonable opinion of the
Parent, should not be disclosed publicly. The Parent will use its best efforts
to cause such suspension to terminate at the earliest possible
date.
  ARTICLE
V
 CONDUCT OF BUSINESSES
PENDING THE MERGER
  SECTION
5.01. Conduct of
Business by the Company Pending the Merger. The Company agrees that,
between the date of this Agreement and the Effective Time, except as
contemplated by any other provision of this Agreement, unless Parent shall
otherwise consent in writing:
  (a)  the
businesses of the Company and the Company Subsidiaries shall be conducted only
in, and the Company and the Company Subsidiaries shall not take any action
except in, the ordinary course of business and in a manner consistent with past
practice; and
  (b)  the
Company shall use its reasonable best efforts to preserve substantially intact
its business organization, to keep available the services of the current
officers, employees and consultants of the Company and the Company Subsidiaries
and to preserve the current relationships of the Company and the Company
Subsidiaries with customers, suppliers and other persons with which the Company
or any Company Subsidiary has significant business relations.
  By way of
amplification and not limitation, except as contemplated by this Agreement,
neither the Company nor any Company Subsidiary shall, between the date of this
Agreement and the Effective Time, directly or indirectly, do, or propose to do,
any of the following without the prior written consent of Parent:
  (a) amend
or otherwise change its Articles of Incorporation or By-Laws or equivalent
organizational documents;
  34
  (b)  issue,
sell, pledge, dispose of, grant, encumber, or authorize the issuance, sale,
pledge, disposition, grant or encumbrance of, (i) any shares of its capital
stock of any class, or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of such capital stock, or any other
ownership interest (including, without limitation, any phantom interest), of the
Company or any Company Subsidiary or (ii) any Material assets of the Company or
any Company Subsidiary, except in the ordinary courseof business and
in a manner consistent with past practice;
  (c)  declare,
set aside, make or pay any dividend or other distribution, payable in cash,
stock, property or otherwise, with respect to any of its capital
stock;
  (d)  reclassify,
combine, split, subdivide or redeem, purchase or otherwise acquire,
directly or indirectly, any of its capital stock;
  (e) (i)acquire
(including, without limitation, by merger, consolidation, or acquisition
of stock or assets) any interest in any corporation, partnership, other business
organization or any division thereof or any assets, other than acquisitions of
assets in the ordinary course of business consistent with past
practice:
  (ii)  incur any
indebtedness for borrowed money or issue any debt securities
or assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person, or make any loans or advances,
except for indebtedness incurred in the ordinary course of business and
consistent with past practice;
  (iii)  enter
into any contract or agreement Material to the business, results
of operations or financial condition of the Company and the Company Subsidiaries
taken as a whole other than in the ordinary course of business, consistent with
past practice; or
  (iv)enter
into or amend any contract, agreement, commitment or arrangement
that, if fully performed, would not be permitted tinder this Section
5.01(e);
  (f)  increase
the compensation payable or tobecome payable to its employees, except for increases in accordance with
past practices, or grant any severance or termination pay to, or enter into any
employment or severance agreement with, any director or employee of the Company
or any Company Subsidiary, except for employment or severance agreements in
accordance with past practice, or establish, adopt, enter into or amend any
collective bargaining, bonus, profit sharing. thrift,compensation, stock option. restricted stock,pension,
retirement, deferred compensation, employment, termination, severance or other
plan, agreement. trust, fund, policy or arrangement for the benefit of any
director or employee; or
  (g)  take any
action, other than reasonable and usual actions in the ordinary course of
business and consistent with past practice, with respect to accounting policies
or procedures.
  SECTION
5.02. Conduct of
Business by Parent Pending the Merger. Parent agrees that, between the
date of this Agreement and the Effective Time, except as contemplated by any
other provision
of this Agreement, unless the Company shall otherwise consent in writing (such
consent not to be unreasonably withheld or delayed):
  35
  (a)  the
business of the Parent and the Parent Subsidiaries shall be conducted only in,
and Parent and the Parent Subsidiaries shall not take any action except in the
ordinary course of business and in a manner consistent with past practice;
and
  (b)  Parent
shall use its reasonable best efforts to preserve substantially intact its
business organization, to keep available the services of the current officers,
employees and consultants of Parent and the Parent Subsidiaries and to preserve
the current relationships of Parent and the Parent Subsidiaries with customers,
suppliers and other persons with which Parent or any Parent Subsidiary has
significant business relations.
  By way of
amplification and not limitation, except as contemplated by this Agreement,
neither Parent nor any Parent Subsidiary shall, between the date of this
Agreement and the Effective Time, directly or indirectly, do, or propose to do,
any of the following without the prior written consent of the Company (such
consent not to beunreasonably withheld):
  (a)  amend or
otherwise change its Articles of Incorporation or By-Laws or equivalent
organizational documents;
  (b)  issue,
sell, pledge, dispose of. grant, encumber, or authorize the issuance, sale,
pledge, disposition, grant or encumbrance of (i) any shares of its capital stock
of any class, or any options, warrants, convertible securities or other rights
of any kind to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of Parent or any
Parent Subsidiary (except for the issuance of shares of Parent Common Stock
issuable pursuant to the Parent Stock Options outstanding on the date of this
Agreement or the issuance in the ordinary course of business and consistent with
past practice, or (ii) any Material assets of Parent or any Parent Subsidiary,
except in the ordinary course of business and in a manner consistent with past
practice;
  (c)  declare,
set aside, make or pay any dividend or other distribution, payable in cash,
stock, property or otherwise, with respect to any of its capital
stock;
  (d)  reclassify,
combine, split, subdivide or redeem, purchase or otherwise acquire,
directly or indirectly, any of its capital stock;
  (e)(i) acquire
(including, without limitation, by merger, consolidation, or acquisition
of stock or assets) any interest in any corporation, partnership. other business
organization or any division thereof or any assets, other than acquisitions of
assets in the ordinary course of business consistent with past
practice;
  (ii)
incur any indebtedness for borrowed money or issue any debt securities or
assume, guarantee or endorse, or otherwise as an accommodation become
responsible for, the obligations of any person, or make any loans or advances,
except for indebtedness incurred in the ordinary course of business and
consistent with past practice;
  36
  (iii)  enter
into any contract or agreement Material to the business, results of operations
or financial condition of Parent and the Parent Subsidiaries taken as a whole
other than in the ordinary course of business, consistent with past practice;
or
  (iv)  enter
into or amend any contract, agreement, commitment or arrangement that, if fully
performed, would not be permitted under this Section 5.02(e);
  (f) take
any action, other than reasonable and usual actions in the ordinary course of
business and consistent with past practice, with respect to accounting policies
or procedures.
  ARTICLE
VI
 ADDITIONAL
AGREEMENTS
  SECTION
6.01. Access to
Information; Confidentiality. Each party hereto agrees that it shall
treat in confidence all documents. materials and other information which it
shall have obtained regarding any other party during the course of the
negotiations leading to the consummation of the transactions contemplated
hereby, the investigation provided for herein and the preparation of this
Agreement and other related documents. and, in the event the transactions
contemplated hereby shall not be consummated, all copies of non-public documents
and material which have been furnished in connection therewith shall he promptly
returned to the party furnishing the same, shall continue to be treated as
confidential information and shall not be used for the benefit of the party who
returned such confidential information.
  SECTION
6.02. Obligations of
Merger Sub. Parent shall take all action necessary to cause Merger Sub to
perform its obligations under this Agreement and to consummate the Merger on the
terms and subject to the conditions set forth in this Agreement.
  SECTION
6.03. Further Action;
Consents; Filings. Upon the terms and subject to the conditions hereof,
each of the parties hereto shall use its reasonable best efforts to (i) take, or
cause to be taken, all appropriate action and do, or cause to be done, all
things necessary, proper or advisable under applicable law or otherwise to
consummate and make effective the Merger and the other transactions contemplated
by this Agreement, (ii) obtain from Governmental Entities any consents,
licenses, permits, waivers, approvals, authorizations or orders required to be
obtained or made by Parent or the Company or any of their subsidiaries in
connection with the authorization, execution and delivery of this Agreement and
the consummation of the Merger and the
other transactions contemplated by this Agreement and (iii) make all necessary
filings, and thereafter make any other required submissions, with respect to
this Agreement, the Merger and the other transactions contemplated by this
Agreement required under (A) the Exchange Act and the Securities Act and the
rules and regulations thereunder and any other applicable federal or state
securities laws and (B) any other applicable Law. The parties hereto shall
cooperate with each other in connection with the making of all such filings,
including by providing copies of all such documents to the nonfiling party and
its advisors prior to filing and, if requested, by accepting all reasonable
additions, deletions or changes suggested in connection therewith.
  37
  SECTION
6.04, Plan of
Reorganization. This Agreement is intended to constitute a "plan of
reorganization" within the meaning of section 1.368-2(g) of the income tax
regulations promulgated under the Code. From and after the date of this
Agreement and until the Effective Time, each party hereto shall use its
reasonable best efforts to cause the Merger to qualify, and will not knowingly
take any action, cause any action to be taken, fail to take any action or cause
any action to fail to be taken which action or failure to act could prevent the
Merger from qualifying, as a
reorganization under the provisions of section 368(0 I )(A) of the Code.Following the Effective
Time, neither Merger Sub, as the survivor of the Merger, Parent nor anyof their affiliates shall
knowinglytake any action, cause any action to be taken, fail to take any
action or cause any action to fail to be taken, which action or failure to act
could cause the Merger to fail to qualify as a reorganization under section
368(a)(1)(A) of the Code.
  ARTICLE
VII
 CONDITIONS TO THE
MERGER
  SECTION
7.01. Conditions to
the Obligations of Each Party. The obligations of theCompany, Parent and Merger
Sub to consummate the Merger are subject to the satisfaction or waiver (where
permissible) of the following conditions:
  (a)  this
Agreement and the issuance of the Merger Consideration pursuant to the terms
of the Merger, as the case may be, contemplated hereby shall have been approved
and adopted by the requisite affirmative vote of the Company and the
shareholders of Company in accordance with the LRS and Company's Articles of
Incorporation;
  (b)  no
Governmental Entity or court of competent jurisdiction located or having
jurisdiction in the United States shall have enacted, issued, promulgated,
enforced or entered any law, rule. regulation. judgment, decree, executive order
or award (an "Order") which is
then in effect and has the effect of making the Merger illegal or otherwise
prohibiting consummation of the Merger;
  (c) all
consents, approvals and authorizations legally required tobe obtained to
consummate the Merger shall have been obtained from and made with all
Governmental Entities; and
  SECTION
7.02. Conditions to
the Obligations of Parent and Merger Sub. The obligations of Parent and
Merger Sub to consummate the Merger are subject to the satisfaction or waiver
(where permissible) of the following additional conditions:
  (a)  The
representations and warranties by the Company and Shareholders contained in this
Agreement or in any certificate or document delivered to Parent pursuant to the
provisions hereof shall be true in all Material respects at and as of the time
of Closing as though such representations and warranties were made at and as of
such time.
  (b)  The Company and Shareholders shall have
performed and complied with allcovenants, agreements,and
conditions required by this Agreement to be performed or complied with by it
prior to or at the Closing:
  38
  (c)  The
Shareholders shall have delivered to Parent an "investment letter", in the form
attached as Exhibit "D", setting out that the shares being acquired by
Shareholders are restricted shares and are being acquired for investment
purposes only, and not with a view to public resale or
distribution.
  (d)  Shareholders shall have delivered to
Parent duly executed Agreements not toCompete and a Mutual Confidentiality
Agreement in the form attached as Exhibit "H" andExhibit-I"
respectively.
  (f)  the
Company shall have delivered all of the exhibits and schedules required herein
to Parent and such exhibits and schedules shall have been acceptable to Parent,
in its sole and absolute discretion.
  (g)  the
Company shall have delivered to Parent an opinion of the Company's counsel,
substantially in the form of Exhibit "G" hereto.
  (h)  There
shall be delivered to Parent a certificate executed by the President and Chief
Executive Officer of the Company, to the effect that all of the representations
and warranties of the Company set forth herein are true and complete in all
Material respects as of the Closing Date, and that the Company has complied in
all Material respects with its covenants and agreements set forth therein
required to be complied with it by the Closing substantially in the form of
Exhibit "J" hereto.
  (i)  Parent
shall have obtained financing in the net amount of not less than Three Million
and Five Hundred Thousand Dollars ($3,500,000) upon terms satisfactory to Parent
in Parent's sole and absolute discretion.
  (j)  Except as
set out on Exhibit M, all consents required for contracts in effect at the
Effective Time, permits and approvals from regulatory agencies or government
authorities and from parties to any contract which may be required in connection
with the consummation of the transactions contemplated hereby or the continuance
of such contract after the Closing Date shall have been obtained upon terms and
conditions satisfactory to Parent. To the extent the required consent of any of
the customer contracts listed on Exhibit M are not obtained on or before April
30, 2008, the second installment of the Merger Consideration shall be reduced by
the amount of $1,000,000 for each such contract for which the required approval
has not been obtained. The reduction, if any, shall be prorated among the
Shareholders in the same proportions and among the Merger Consideration on the
same basis as described in Section 2.02.
  (k)  There
shall he delivered to Parent: (i) the audited balance sheets of the Company as
of December 31, 2006, and the unaudited balance sheets as of June 30, 2007. the
related statements of income and retained earnings, and the related statements
of changes of financial position or cash flows, as the case may be, for the
fiscal years then ended, unconditionally certified by a registered independent
certified public accounting firm acceptable to Parent and (ii) the unaudited
balance sheets and statements of income of the Company for the period ended no
earlier than forty-five (45) days prior to the Closing Date, as prepared by
management of theCompany.
  (1)
Parent shall have received from the registered independent certified public
accountants for the Company, a certificate or letter, dated as of the Closing
Date, and addressed to Parent and its lenders, setting forth the following with
respect to the period from the date of the
Company's most recent audited financial statements to a date not more than
forty-five calendar days before the Closing Date.
  39
  (i)  They have
read all of the Company's unaudited financial statements covering such
period.
  (ii)  They have
made inquiries of the officers of the Company who have responsibility for
financial matters as to:
  (A)  whether
such unaudited financial statements are fairly presented in conformity with
generally accepted accounting principles on a basis consistent with that of the
Company's audited financial statements; and
  (B)  whether
there has been any change in the Company's net assets as compared with amounts
shown on the most recent audited balance sheet included in the financial
statements, other than changes in the ordinary course of the business and
changes contemplated by this Agreement.
  (iii) On
the basis of such review, that does not constitute an examination made in
accordance with generally accepted auditing standards:
  (A)  nothing
came to their attention which causes them to believe that during such period
there has been any change in the Company's assets or liabilities, other than
changes in the ordinary course of the business and changes contemplated by this
Agreement; and
  (B)  as of the
date of the most recent unaudited financial statements of the Company, had a
consolidated net worth of not less than that shown on the audited balance
sheet.
  Parent
and its lenders shall further have been advised by Parent's accountants that, on
the basis of their "businessman's review" of the properties and condition of the
Company as Parent may deem desirable:
  (i)  the
Company's accounting procedures conform substantially to generally accepted
accounting principles applied on a consistent basis; and
  (ii)  nothing
came to their attention which was inconsistent with the information contained
in
thecertificate or letter from the Company's accountant described in this
Section.
  (m)  Parent
shall have satisfied itself, after receipt and consideration of the information
requested from the Company and Shareholders and after Parent and its
representatives have completed the review of the business contemplated by this
Agreement, that none of the information revealed thereby or in the financial
statements has, since the balance sheet date, resulted in, or in the opinion of
Parent may result in, a materially adverse change in the condition (financial or
otherwise), assets, properties, business or prospects of the
Company.
  (n)  As soon
as practicable after the Closing Date, the Company shall cause an independent
certified public accountants, to audit the books and records of the Company as
of the Effective Time and to prepare a certified balance sheet asof the Effective Time ("Post- Closing Balance Sheet"). Such Post-Closing
Balance Sheet shall (i) present fairly, in accordance with generally accepted
accounting principles consistently applied, the financial position of the Company
as of such time, and (ii) make full and adequate provision for all reserves,
liabilities and obligations (fixed or contingent) of the Company as of such
time, to the extent such liabilities, alone or in the aggregate. are required to
be reflected or reserved against in accordance with generally accepted
accounting principles, consistently applied. The costs of preparation of the
Post-Closing Balance Sheet and determination shall be borne by the
Parent.
 40
  (o) the
Company shall have delivered the employment agreement of Jacob Marcell
substantially in the form of Exhibit "L."
  SECTION
7.03. Conditions to
the Obligations of the Company. The obligations of the Company to
consummate the Merger are subject to the satisfaction or waiver (where
permissible) of the following additional conditions:
  (a)  The
representations and warranties by or on behalf of Parent and Merger Sub
contained in this Agreement or in any certificate or document delivered to the
Company or Shareholders pursuant to the provisions hereof shall be true in all
Material respects at and as of the time of Closing as though such
representations and warranties were made at and as of such time.
  (b)  Parent
and Merger Sub shall have performed and complied with all covenants, agreements,
and conditions required by this Agreement to be performed or complied with by it
prior to or at the Closing;
  (c)  The
certificates representing the shares of Common Stock delivered to Shareholders
shall conform in all Material respects to the form of such certificates attached
as Exhibit "E".
  (d)  All
instruments and documents delivered to the Company and Shareholders pursuant to
the provisions hereof shall be reasonably satisfactory to legal counsel for the
Company and Shareholders.
  (e)  Parent
shall have delivered to Shareholders an "investment letter", in the form of
Exhibit "C", setting out that the shares being acquired by Parent are restricted
shares and are being acquired for investment purposes only, and not with a view
to public resale or distribution.
  (f)  Parent
shall have delivered to the Company and Shareholders an opinion of Parent's
counsel in the form of Exhibit "F".
  (g)  There
shall be delivered to the Shareholders an officer's certificate, signed by
Ronald E. Smith. President of Parent, to the effect that all of the
representations and warranties of the Parent set forth herein are true and
complete in all Material respects as of the Closing Date, and that the Parent
has complied in all Material respects with its covenants and agreements set
forth herein required to be complied with by the Closing substantially in the
form of Exhibit "K" hereto.
  (h) Parent shall have delivered the
employment agreement of Jacob Marcelsubstantially in the form of Exhibit
"L" and a Mutual Confidentiality Agreement in the form attached as
Exhibit "r".
  (i) Jacob
J. Marcell shall have been released from his personal guarantee of the Company
financing described on Exhibit N, or Parent will indemnify Jacob J. Marcell
against any demands for principal or interest payments related
thereto.
  41
  ARTICLEVIII
 TERMINATION, AMENDMENT AND
WAIVER
  SECTION
8.01. Termination. This
Agreement may be terminated and the Merger and the other transactions
contemplated by this Agreement may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of this
Agreement and the transactions contemplated by this Agreement, as
follows:
  (a)  by mutual
written consent duly authorized by the Boards of Directors of each of
Parent and the Company;
  (b)  by either
Parent or the Company if the Effective Time shall not have occurred
on or before December 7, 2007; provided, however,
that the right to terminate this Agreement under this Section 8.01(b) shall not
be available to any party whose failure to fulfill any obligation under this
Agreement has been the cause of, or resulted in, the failure of the Effective
Time to occur on or before such date;
  (c)  there
shall be any Order which is final and nonappealable preventing the consummation
of the Merger;
  (d)  by Parent
upon a breach of any Material representation, warranty, covenant
or agreement on the part of the Company set forth in this Agreement, or if any
representation or warranty of the Company shall have become untrue, in either
case such that the conditions set forth inSection 7.02(a) and Section
7.02(h) would not be satisfied ("TerminatingCompany Breach"): provided,
however, that, if such Terminating Company Breach is curable by the
Company through the exercise of its best efforts and for so long as the Company
continues toexercise such
best efforts, Parent may not terminate this Agreement under this Section
8.01(d).
  SECTION
8.02. Effect of
Termination. Except as provided in Section 10.01. in the event of
termination of this Agreement pursuant to Section 8.01, this Agreement shall
forthwith become void, there shall he no liability under this Agreement on the
part of Parent, Merger Sub or the Company or any of their respective officers or
directors, and all rights and obligations of each party hereto shall cease,
provided,
however, that nothing herein shall relieve any party from liability for
the willful breach of any of its representations, warranties, covenants or
agreements set forth in this Agreement.
  SECTION
8.03. Amendment. This
Agreement may be amended by the parties hereto by action taken by or on behalf
of their respective Boards of Directors at any time prior to the Effective Time;
provided,
however, that, after the approval of this Agreement by the shareholders
of the Company, no amendment may be made which would reduce the amount orchange the type of
consideration intowhich
each Share shall he converted upon consummation of the Merger. This Agreement
may not be amended except by an instrument in writing signed by the parties
hereto.
  42
  SECTION
8.04. Waiver.
At any time prior to the Effective Time, any party hereto may (a) extend the
time for the performance of any obligation or other act of any other party
hereto, (h) waive any inaccuracy in the representations and warranties contained
herein or in any document delivered pursuant hereto, and (c) waive compliance
with any agreement or condition contained herein. Any such extension or waiver
shall be valid if set forth in an instrument in writing signed by the party or
parties to be bound thereby.
  SECTION
8.05. Expenses.
All Expenses (as defined below) incurred in connection with this Agreement and
the transactions contemplated by this Agreement shall be paid by the party
incurring such expenses, whether or not the Merger or any other transaction is
consummated. "Expenses" as used in
this Agreement shall include all reasonable out-of-pocket expenses (including,
without limitation, all fees and expenses of counsel, accountants, investment
hankers, experts and consultants to a party hereto and its affiliates) incurred
by a party or on its behalf in connection with or related to the authorization,
preparation, negotiation, execution and performance of this Agreement and all
other matters related to the closing of the Merger and the other transactions
contemplated by this Agreement. The expense of the independent audit of the
Company's financial statements is incurred by the Parent.
  ARTICLE
IX
 INDEMNIFICATION
  SECTION
9.01. Indemnification by the Company.
The Shareholders severally in proportion
to their respective interest in the Merger Consideration, and not jointly, to
the extent and only to the extent of the Escrow Shares as defined in the
Post-Closing Holdback Escrow Agreement, the form of which is attached as Exhibit
0, shall indemnify, defend and hold harmless (i) Parent, (ii) each of Parent's
Affiliates, assigns and successors in interest to the Business and the Assets
and (iii) each of their respective shareholders, directors, officers, employees,
agents, attorneys and representatives, from and against any and all Losses which
may be incurred or suffered by any such party and which may arise out of or
result from:
  (a)  provided
Parent's claim therefor is instituted by written notice within the time period
specified in Section 10.01, any breach of any representation, warranty, covenant
or agreement of the Company contained in this Agreement or in any other Company
Document, including, without limitation, any attempt (whether or not successful)
by any Person to cause or require Parent to pay, perform or discharge any debt,
obligation, deficiency, liability or commitment the existence of which
constitutes a breach of any such representation, warranty, covenant or
agreement;
  (b)  any
litigation, arbitration, governmental investigation, suit, action or other
proceeding referred to at Section 3.8 and any liability disclosed in Section
3.5.2of the Company Disclosure Schedule. other than those specifically assumed
by the Parent;
  (c) any
Tax obligation of the Company, other than those paid or accrued and those, if
any, specifically assumed by Parent;
  43
  (d)  any other
debt, liability or obligation of the Company, direct or indirect, fixed,
contingent or otherwise, now or as of the Effective Time known or unknown, and
whether or not then due or payable, which exists at or as of the Effective Time
or which arises after the Effective Time but which is based upon or arises from
any act, omission, transaction, circumstance, sale of goods or services, state
of facts or other condition which occurred or existed on or before the Effective
Time, except to the extent the same are both (i) liabilities reflected or
reserved against on the face of
the Balance Sheet (excluding the notes thereto),or current liabilities
for trade or business obligations incurred since the Balance Sheet Date in
connection with the purchase of goods or services in the ordinary course of the
Business and consistent with past practices, (none of which is, individually or
in the aggregate, Material and none of which is for breach of contract, breach
of warranty, tort or infringement) or liabilities or obligations arising under
any Material Contract (none of which liabilities or obligations is for breach of
contract, breach of warranty, tort or infringement) or liabilities or
obligations otherwise incurred after the Balance Sheet Date in the ordinary
course of the Business consistent with past practices and in conformity with the
representations, warranties and covenants contained in this Agreement and (ii)
expressly assumed by Parent; and
  (e)  any and
all actions, suits, proceedings, claims, demands, assessments, judgments,
costs and expenses, including, without limitation, legal fees and expenses,
incurred in enforcing this indemnity.
  Notwithstanding
the foregoing, however, the Company shall be required to indemnify the
indemnified parties hereunder only if and then only to the extent that, the
Losses (other than Losses arising from breaches of the Company's
representations, warranties or covenants contained in Sections 3.6, 3.7.2, 3.19
and 6.07 which Losses shall be indemnifiable in full as and when incurred)
exceed Fifty Thousand Dollars ($50.000).
  SECTION
9.02 Indemnification
by Parent. Provided the Company's claim therefor is instituted by written
notice within the time period specified in Section 10.01, Parent shall
indemnify, defend and hold harmless the Company from and against any Losses
arising out of or due to (i) a breach of any representation, warranty, covenant
or agreement of Parent contained in this Agreement or in any Parent Document;
(ii) any liability or obligation assumed by Parent; and (iii) any claim, suit,
action or proceeding which pertains to the ownership, organization, operation or
conduct of the Business by Parent after the Closing (other than a claim, suit,
action or proceeding the likelihood of which should have been disclosed by the
Company pursuant to any provision of this Agreement) or to the other affairs of
Parent prior to or after the Closing, or which pertains in any way, or arises
out of, the formation, syndication, capitalization or funding of Parent,
including, without limitation, any actual or alleged misstatement or omission of
Material fact in connection with said formation, syndication, capitalization or
funding of Parent. Notwithstanding the foregoing, however, Parent shall he
required to indemnify the Company only if, and then only to the extent that, any
such Losses exceed One Hundred Thousand Dollars ($100,000).
  44
  ARTICLE
X
 GENERAL
PROVISIONS
  SECTION
10.01.Survival of
Representations, Warranties and Covenants.Notwithstanding any right of
Parent to fully to investigate the affairs of the Company and notwithstanding
any knowledge of facts determined or determinable by Parent pursuant to such
investigation or right of investigation, Parent shall have the right to rely
fully upon the representations, warranties, covenants and agreements of the
Company contained in this Agreement or in any Company Document. With the sole
exception of those covenants which are to be performed by the Company after the
Closing (which shall survive until a claim thereon is barred by the applicable
statute of limitations), each representation, warranty, covenant and agreement
of the Company contained herein or in any Company Document shall survive the
execution and delivery of this Agreement and the Closing and shall thereafter
terminate and expire on the second anniversary of the Closing Date, except that
the agreements set forth in Articles I and II and Sections 6.03, 6.04, 6.05 and
this Article IX shall survive the Effective Time, those set forth in Sections
10.02 and 10.05 and this Article IX shall survive termination and the
representations and warranties of the Company contained in Sections 3.6, 3.7.2
and 3.19 shall terminate and expire ninety (90) days after the expiration of the
statute of limitations applicable to claims by third parties against Parent in
respect of the matter or matters which are the subject of said representations
and warranties, unless, or before such date, Parent has delivered to the Company
a written notice of a claim with respect to such representation, warranty,
covenant or agreement.
  SECTION
10.02. Notices.
All notices, requests, claims, demands and other communications hereunder shall
be in writing and shall he given (and shall be deemed to have been duly given
upon receipt) by delivery in person, by cable, telecopy, facsimile, telegram or
telex or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 10.02):
  if to
Parent or Merger Sub:
  Deep
Down, Inc.
 15473
East Freeway
 Channelview,
Texas 77530
 Attn:
Robert E. Chamberlain, Jr., Chairman
 Facsimile:
(281) 862-2522
  with
a copy to (which shall not constitute notice to such party):
  Sonfield
8z Sonfield
 770 South
Post Oak Lane, Suite
435
 Houston,
Texas 77056-1913
 Attn:
Robert L. Sonfield, Jr., Esq.
 Telephone:
713-877-8333
 Fax:
713-877-1547
 Email:
Robert@sonfield.com
  45
  if to the
Company:
  Mako
Technologies, Inc.
 P.O. Box
3186
 125 Mako
Lane
 Morgan
City, LA 70381
 Attn: Mr.
Jacob J. Marcell, President & CEO
 Facsimile:
(985) 385-0056
  with
a copy to (which shall not constitute notice to the Company):
  King,
LeBlanc & Bland P.L.L.
 201 St.
Charles Ave, 45th Floor
 New
Orleans, Louisiana 70170
 Attn:
David S. Bland, Esq.
 Telephone:
504.582.1317
 Fax:
504.582.1233
 Email:
dbland@klb-law.com
  if to
Ocean Specialists Inc.:
  Ocean
Specialists Inc.
 8502 SW
Kansas Ave.
 Stuart,
FL 34997
 Attn: Mr.
Kevin Peterson, CEO
 Facsimile:
772.219.3010
  SECTION
10.03. Certain
Definitions.
  For
purposes of this Agreement, the term:
  "Accounts
Receivable" shall mean all accounts, notes, accounts receivable, contract
rights, drafts, and other forms of claims, demands, instruments, receivables and
rights to the payment of money or other forms of consideration, whether for
goods sold or leased, services performed or to be performed, or otherwise, owned
by the Company or in which the Company has any interest, together with all
guarantees, security agreements and rights and interests securing the
same.
  "Affiliate"
shall mean with respect to any Person (i) a Person directly or indirectly
controlling, controlled by or under, control with such Person; (ii) a Person
owning or controlling 10% or more of the outstanding voting securities of such
Person; or (iii) an officer, director or partner or member of the immediate
family of an officer, director or partner of such Person. When the Affiliate is
an officer, director or partner or member of the immediate family of an officer,
director or partner of such Person, any other Person for which the Affiliate
acts in that capacity
shall also be considered an Affiliate. For these purposes, control means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of a person, whether its the ownership of voting
securities, by contract or otherwise.
  46
  "Assets"
shall mean all of the Business, goodwill, assets, properties and rights of every
nature. kind and description, whether tangible or intangible, real, personal or
mixed, wherever located and whether or not carried or reflected on the hooks
and
records of the Company,which are owned by the Company or in which the
Company has any interest (including the right to use)
  "Authority"
shall mean any governmental, regulatory or administrative body, agency or
authority, any court of judicial authority, any arbitrator or any public,
private or industry regulatory authority, whether international, national,
Federal. state or local.
  "Balance
Sheet" shall mean the balance sheet contained in the Financial Statements.
"Balance Sheet Date" shall mean June 30. 2007.
  "Books
and Records" shall mean all books and records, ledgers, employee records,
customer lists, files, correspondence, and other written records of every kind
owned by the Company or in which the Company has any interest, other than those,
if any, which constitute Excluded Assets or relate exclusively to the Excluded
Assets.
  "Business"
shall mean the business conducted by the Company using the Assets, as currently
constituted and operated and as the same continues to be constituted and
operated until the Closing.
  "Company
Disclosure Schedule"
shallmean the schedule, dated of even date herewith, delivered to Parent
and executed by the Company. The Company Disclosure Schedule shall be considered
a part of this Agreement.
  "Company
Documents" shall mean this Agreement and all other agreements, instruments and
certificates to be executed by the Company in connection with this
Agreement.
  "Control" (including
theterms "controlled by" and
"under common control
with")means the possession, directly or indirectly or as trustee or
executor, of the power to direct or cause the direction of the management and
policies of a person, whether through the ownership of voting securities, as
trustee or executor, by contract or credit arrangement or
otherwise;
  "Environmental
Laws and Orders" shall mean collectively, all Laws and Orders relating to
industrial hygiene, occupational safety conditions or environmental conditions
on, under or about property, including, without limitation, RCRA, CERCLA and all
other Laws and Orders relating to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or industrial, hazardous or
toxic materials or wastes into the environment (including ambient air, surface
water, ground water, land surface or sub-surface strata) or otherwise relating
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of pollutants, contaminants, chemicals or industrial
hazardous or toxic materials or wastes.
  47
  "ERISA"
shall mean the Employee Retirement Income Security Act of 1974, as the same may
hereafter be amended from time to time. Any reference to a specific section of
ERISA shall refer to the cited provision as the same may be subsequently amended
from time to time, aswell as to any successor provision(s).
  "ERNA
Affiliate" shall mean any entity
that is a member of a group of which theCompany is a member and whichis
under common control with the Company, within the meaning of the regulations
promulgated under Section 414 of the Code.
  "ERISA
Plans" shall mean, collectively, all Pension Plans and all Welfare Plans
required to be disclosed in Section 6.12 of the Company Disclosure
Schedule.
  "Financial
Statements" shall mean the unaudited balance sheet specified in Section
3.5.1.
  "Hart-Scott-Rod
ino Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
the same may hereafter be amended from time to time.
  "Knowledge"
shall mean, with respect to the Company, theactual knowledge of each of
its directors, executive officers and key employees, the knowledge that each
such person would have acquired upon diligent inquiry and the knowledge that is
imputed to each such person and/or the Company by operation of Law.
  "Labor
Agreements" shall mean, collectively, (i) all employment agreements, collective
bargaining agreements or other labor agreements to which the Company is a party
or by which it or any of its properties is bound; (ii) all pension, profit
sharing, deferred compensation, bonus, stock option, stock purchase, savings,
retainer, consulting, retirement, welfare or incentive plans or contracts
(including ERISA Plans) to which the Company is a party or by which it or any of
its properties is bound; and (iii) all plans or agreements under which "fringe
benefits" (including, but not limited to, hospitalization plans or programs,
medical insurance, vacation plans or programs, sick plans or programs and
related benefits) are afforded to any employees of the Company; other than
those, if any, which constitute Excluded Assets or relate exclusively to
employees who are employed with respect to the Excluded Assets.
  "Law"
shall mean any law, statute, regulation, ordinance, requirement, announcement or
other binding action or requirement of an Authority.
  "Licenses
and Permits" shall mean all licenses and permits issued to the Company or in
which the Company has any interest (including the right to use), other than
those, if any, which constitute Excluded Assets or relate exclusively to the
Excluded Assets.
  "Lien or
Other Encumbrance" shall mean any lien, pledge, mortgage, security interest,
lease. charge, conditional sales contract, option, restriction, reversionary
interest, right of first refusal, voting trust arrangement, preemptive right,
claim under bailment or storage contract, easement or any other adverse claim or
right whatsoever.
  48
  "Losses"
shall mean all damages, awards. judgments, payments. diminutions in value and
other losses, however suffered or characterized, all interest thereon, all costs
and expenses of investigating any claim, lawsuit or arbitration and any appeal
therefrom, all actual attorneys' fees incurred in connection therewith, whether
or not such claim, lawsuit or arbitration is ultimately defeated and, subject to Section 14.4
hereof, all amounts paid incident to any compromise orsettlement of any
such claim, lawsuit or arbitration.
  "Market
Price" means the VWAP of the Parent's Common Stock during the five consecutive
trading days immediately preceding the Closing Date.
  "Material
Adverse Change" or "Material Adverse Effect" or other similar phrase including
the word "material" with respect to the condition (financial or otherwise)
assets, liabilities, Business, operations or prospects of the Company shall mean
any adverse change or effect or potential adverse change or effect, or any
series thereof, involving more than one hundred thousand dollars ($100,000) in
the aggregate.
  "Material
Contracts" shall mean, collectively, the Contracts and Other Agreements which
are required to he identified anywhere in the Company Disclosure Schedule by the
terms and provisions of this Agreement.
  "Order"
shall mean any decree, order, judgment, writ, award, injunction, rule or consent
of or by an Authority.
  "Pension
Plan" shall mean any employee pension benefit plan within the meaning of Section
3(2) of ERISA.
  "Person"
shall mean any entity, corporation, company, association, joint venture, joint
stock company, partnership, trust, organization, individual (including personal
representatives, executors and heirs of a deceased individual), nation, state,
government (including agencies. departments. bureaus, boards, divisions and
instrumentalities thereof), trustee, receiver or liquidator.
  "Post-Closing
Balance Sheet" shall have the meaning specified at Section 7.02(n)
hereof.
  "Person"
means an individual, corporation, partnership, limited partnership, syndicate,
person (including, without limitation. a "person"
as defined in section 13(d)(3) of the Exchange Act), trust, association or
entity or government, political subdivision, agency or instrumentality of a
government; and
  "RCRA"
shall mean the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section
6901, et. seq. as the same may be amended from time to time.
  "Real Property" shall mean,
collectively, all real properties owned by the Company or inwhich the Company has any interest or
estate (including the right to use), together with allbuildings, fixtures, trade fixtures,
plant and other improvements located thereon or attachedthereto; all of the Company's rights
arising out of ownership or use thereof (including air,
water, oil and
mineral rights); and all subleases, franchises, licenses, permits, easements and
rights-of­way which are appurtenant thereto "subsidiary"
or "subsidiaries"
of any person means any corporation, partnership, joint ventureor other legal
entity of which such person (either alone or through or together with any other
subsidiary) owns, directly or indirectly, more than 50% of the stock or other
equity interests, the holders of which are generally entitled to vote for the
election of the board of directors or other governing body of such corporation
or other legal entity.
  49
  "Tax
Returns" shall mean, collectively all Federal, state, foreign and local tax
reports, returns, information returns and other related documents required to be
filed by any relevant taxing Authority.
  "Taxes"
shall mean, collectively all taxes. including without limitation, income, gross
receipts, net proceeds, alternative, add-on, minimum, ad valorem, value added,
turnover, sales, use. property, personal property (tangible and intangible),
stamp, leasing, excise, duty, franchise, transfer, license, withholding,
payroll, employment, fuel, excess profits, environmental, occupational, interest
equalization, windfall profits and severance taxes. and all other like
governmental charges.
  "VWAP"
means the volume weighted average price of the Parent's Common Stock as quoted
by Bloomberg, LP.
  SECTION
10.04. Severability.
If any term or other provision of this Agreement is invalid, illegal or
incapable of being enforced by any rule of Law or public policy, all other
conditions and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated by this Agreement is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced. the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement be consummated as
originally contemplated to the fullest extent possible.
  SECTION
10.05.Assignment;Binding
Effect; Benefit. Neither this Agreement nor any of the rights, interests
or obligations hereunder shall be assigned by any of the parties hereto (whether
by operation of law or otherwise) without the prior writtenconsent of the
other parties. Subject to the preceding sentence, this Agreement shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns.
  SECTION
10.06. Incorporation
ofExhibits.AllExhibits attached hereto
and referred to herein are hereby incorporated herein and made a part hereof for
all purposes as if fully set forth herein.
  SECTION
10.07. Specific
Performance. The parties hereto agree that irreparable damage would occur
in the event any provision of this Agreement was not performed in accordance
with the terms hereof and that the parties shall be entitled to specific
performance of the terms hereof, in addition to any other remedy at law or in
equity.
  50
  SECTION
10.08. Governing Law;
Forum. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of Texas.
  SECTION
10.09. Headings. The
descriptive headings contained in this Agreement are included for convenience of
reference only and shall not affect in any way the meaning or interpretation of
this Agreement.
  SECTION
10.10. Counterparts. This
Agreement may be executed and delivered, including by facsimile transmission or
electronic mail, in one or more counterparts, and by the different parties
hereto in separate counterparts, each of which when executed and delivered shall
be deemed to be an original but all of which taken together shall constitute one
and the same agreement.
  SECTION
10.11. Entire
Agreement. This Agreement, including the Annexes and Exhibits,
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersede all prior agreements and understandings among the
parties with respect thereto. No addition to or modification of any provision of
this Agreement shall he binding upon any party hereto unless made in writing and
signed by all parties hereto.
  THE
REMAINDER OF THIS PAGE LEFT BLANK
   51
  SIGNATURE
PAGE TO AGREEMENT AND PLAN OF MERGER
  IN
WITNESS WHEREOF, Parent, Merger Sub, the Company and Shareholders have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authed.
    DEEP DOWN,
      INC./s/
      Robert E. Chamberlain, Jr.
                Robert
      E. Chamberlain, Jr.
                Chairman
      of the BoardMAKO TECHNOLOGIES,
      INC.
              
              OCEAN SPECIALISTS
      INC./s/
      Jacob J. Marcell
                Jacob
      J. Marcell
                President
      & CEO
              
              /s/
      Kevin Peterson
                Kevin
      Peterson, CEO
                Corporate
      Shareholder of Mako Technologies, Inc.MAKO TECHNOLOGIES,
      LLCBy:
      Deep Down, Inc.
                Managing Member/s/
      Robert E. Chamberlain, Jr
                Robert
      E. Chamberlain, Jr
                Chairman
      of the Board
              
              /s/
      Jacob J. Marcell
                Jacob
      J. Marcell
                Individual
      Shareholder of Mako Technologies, Inc./s/
      Barry J. Dufrene
                Barry J.
      Dufrene
              
              /s/
      Robert J. Marcell
                Robert J.
      Marcell