AGREEMENT
AND PLANOF
REORGANIZATION
  This
Agreement and Plan of Reorganization ("Agreement") is made and entered into as
of this day of March
2007 by and among Deep Down, Inc., a Nevada corporation (the "Buyer"),
ElectroWave (USA), Inc., a Nevada corporation ("Merger Sub"), ElectroWave (USA)
Inc., a Texas corporation (the "Settee), Pinemont IV, Martin L. Kershman and
Ronald W. Nance (individually a "Shareholder" and collectively the
"Shareholders").
  RECITALS
  A.  Seller is
engaged in the business of providing products and services in the field of
electrical and electronic
monitoring & control systems for energy, military and commercial business
sectors(the
"Business");
  B.  Seller
desires to transfer substantially all of its assets to Merger Sub, and Buyer
desires to acquire those
assets and assume certain specified liabilities, on the terms and subject to the
conditions hereinafter set forth; and
  C.  The
Buyer, the Seller and the Shareholders are executing and delivering this
Agreement in reliance upon an
exemption from securities registration afforded by the provisions of Section
4(2), Section 4(6) and/or Regulation D ("Regulation D") as promulgated by the
United States Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "1933 Act").
  D.  Seller
has agreed to distribute, among other things, shares of its Series H preferred
stock (the "Shares")
of Buyer acquired pursuant to this Agreement to its stockholders as part of the
dissolution and liquidation of Seller, which dissolution and liquidation shall
be conducted in accordance with the laws of the State of Texas, and its articles
of incorporation and bylaws.
  E.It is intended
that the transactions contemplated by this Agreement shall qualify as a tax-free reorganization
within the meaning of Section 368(a)(1)(C) of the Internal Revenue Code of 1986,
as amended (the "Code"), and be treated for financial reporting purposes as a
pooling of interests.
  NOW,
THEREFORE, in consideration of the premises and the respective warranties,
representations, covenants and agreements hereinafter set forth, Seller and
Buyer hereby mutually agree as follows:
  1. Purchased
Assets. Seller agrees to assign, transfer and deliver to Merger Sub, and
Merger Sub agrees to
acquire from Seller, on the Closing Date (as defined in section4 hereof),
all of the right, title and interest of Seller in andto all of the following
assets (the "Purchased Assets") which are owned and/or used by Seller in
connection with the Business, free and clear ofall security interests,
liens, claims and other encumbrances other than to Capital One:
  all of
the Business, goodwill, assets, properties and rights of everynature, kind and
description, whether tangible or intangible, real, personal or mixed, wherever
located and whether or not carried or reflected an the books and records of the
Company, which are owned by the Company or in which the Company has any interest
(including the right to use), cash and marketable securities, licenses, accounts
receivable, prepaid expenses, inventory, equipment including all phone systems,
fixtures and furniture, customer and supplier lists, phone numbers, trademarks,
Vadenantes, corporate names, service marks, trade secrets, proprietary data, and
other intellectual property rights, leases and contracts set forth as Assumed
Liabilities, and books and records.
  2. Liabilities
Assumed by Buyer.Buyer and Seller agree that Merger Sub shall not
assume, nor shall
Merger Sub in any way be responsible for, any liability, obligation, claim or
commitment, contingent, actual or otherwise, known or unknown, of Seller or any
of its shareholders, directors, officers, employees or agents, it being
expressly understood and agreed that Seller shall continue to be responsible for
any and all liabilities, obligations, clans or commitments of Seller or the
Business entered into on or prior to the Closing Date, including but not limited
to, any sales, income, payroll or other taxes, obligations to other creditors
including vendors, employees and
   1
  customers
or other liabilities, obligations, claims or commitments of the Seller incurred
m connection with the transactions contemplated hereby. Notwithstanding the
preceding sentence, Buyer agrees that it will, on the Closing Date, assume and
agree to perform and discharge solely and only the following liabilities,
obligations, claims or commitments of Seller (the "Assumed Liabilities"): (a)
trade accounts payable recorded on Seller's balance sheet as of the Closing
Date, (b) all indebtedness to Capital One Bankas of the Closing Date, provided that all shareholder guaranwes shall be
released at Closing. (c) payables to Ramage Milby in the amount of
$14,415.00 paid at Closing, and (e) leases of real and personal property and
binding contracts.
  3. Purchase
Price and Payment. The purchase price (the "Purchase Price") for the
Purchased Assets and Assumed Liabilities shall be payable as
follows:
  (a) 250
shares of Series H redeemable convertible preferred stock of Buyer with the
following principal characteristics:
  (i)  Redeemable,in
whole or in part, by Buyer at any time after tea days notice at a price of
$1,000 per share. Upon notice of redemption, Holder will have 30 days to elect
to convert as indicated in paragraph 3(aXii) below.
  (ii)  Convertible bySeller at anytime prior to redemption by Seller into up to 500,000 shares of common
stock of Deep Down, Inc.,at a conversion price of $.50 per common share
(adjusted tbr any
stocksplit or other capital adjustments).
  (iii)
Holders of shares of Series H redeemable convertible preferred stock will be entitled
to vote on all issues that holders of common stock are entitled to vote on with
holders of common stock. The number of votes each Holder is entitled to shall
equal the number of shares of common stock into which the Series H redeemable
convertible preferred stock held is convertible.
  (b) Up
to an additional 750 shares ("Earn-Out Shares") of the same series of redeemable convertible
preferred stock described in subparagraph (a) above may be earned based upon the
future financial performance of the Business as follows:
  (i)  One share
of preferred stock for each $2,000 of net income for the fiscal year
e nded
December 31, 2007.
  (ii)  One share
of preferred stock for each $1,500 increase in net income for the fiscal year
ended December 31, 2008 over the net income for the fiscalyear
ended December 31, 2007.
  (iii)  One share
of preferred stock
for each$1,000 increase in net income for the fiscal year
ended December 31, 2009 over the net income for the fiscal year ended December 31,
2008.
  (iv)  The conversionprice of the Earn-Out Shams will bedetermined atthe time of issuance
in the greater of: (i) 5.50 per share, or (ii) 20% above the volume weighted
average price of the last reported trades for the 20 trading days immediately
prior to December 31 of the respective year for which the shares are
issued.
  (v)Buyershall
establish ElectroWave (USA) Inc., a Nevada Corporation, to conduct
the Business, and all opportunities related to the Business shall be conducted
through said new entity. Deep Down, Inc. will not sell EtectroWave(USA) prior to December
31, 2008.
  2
  (c)  Additional
amounts shall be paid within 10 days of receipt (along with an accounting) from the
proceeds, if any, of the sale or license of technology acquired by Buyer from
Seller to an entity generally referred to as the Kelly Group. The net proceeds
as, if and when received shall be distributed in equal shares to: (i) Seller,
(ii) Buyer, and(iii) a reserve account established by Buyer to be used exclusively for
the development, upgrade and enhancement of the technology for the nonexclusive
benefit of the Kelly Group.
  This
purchase price is based on the Net Working Capital (as hereinafter defined) of
Seller as of the Closing Date being not less than
the NetWorking Capital at December 31, 2006. Therefore, the purchase
price shall be adjusted on a dollar-for-dollar basis downward in the event the
Net Working Capital of Seller as of the Closing is less than the Net Working
Capital at December 31, 2006. For purposes of this Agreement, "Net working
Capital" means the net working capital of Seller (i.e., total current assets
less total current liabilities), further reduced by any long-term debt of
Seller, as determined in accordance with generally accepted accounting
principles, consistently applied.
  The Net
Working Capital of Seller shall be determined at the time of Closing or within
thirty (30) days after the Closing by the parties, in accordance with the terms
of this Agreement. In the event the parties are unable to agree on or calculate
the Net Working Capital of Seller as of the Closing or within 30 days after the
Closing, the Net Working Capital shall be determined subsequently by Malone
& Bailey, PC in accordance with the terms of this Agreement,which
determination (the "Malone & Bailey Determination") shall be final and
binding on the parties unless Seller elects within 30 days from the date of the
Malone & Bailey Determination to submit same to arbitration.
  The
parties shall agree on or prior to the Closing to allocate the Purchase Price
among the Purchased Assets in accordance with section 1060 of the Internal
Revenue Code of 1986, as amended, and not to take any inconsistent position on
any tax return or filing.
  Purchaser
shall obtain a stepped-up basis in all of the assets of Seller, no
cash-to-accrual liability to Purchaser or Seller shall be createdupon the sale of the Purchased Assets, and all deferred taxes on the
books of Seller shall have been eliminated.
  It is
known to the parties that after the Closing Date Seller may dissolve as a
corporation and liquidate by distributing the certificates representing the
preferred stock received at the Closing as well as the future right to receive
the Earn-Out Shares and any future payments to the Shareholders in such
proportions as they may agree. In such event, Seller and the Shareholders shall
execute an agreement to indemnify and protect from liability the Buyer and its
officers, directors, consultants, attorneys and affiliates from any liability or
claim in connection with such distribution. In addition, in the event any
Earn-Out shares are issued to any of the Shareholders individually, any such
Shareholder shall execute a purchaser repiesentatkan letter as a condition to
receipt of such shares.
  (d)  The
parties hereby acknowledge and agree that:
  (i) the
transactions contemplated hereby shall be treated for all purposes
as:
  (1) the
acquisition by Buyer of the Purchased Assets solely in consideration of the
issuance by Buyer to Seller of the Shares and the assumption by Merger Sub of
the Assumed Liabilities; and
  (2) a
tax-free reorganization udder Sections 368(aX )(C) and 368(a)(2XC) of the Code
and any other applicable federal and state laws;
  (ii) this
Agreement shall constitute a "plan of reorganization" for purposes of Section
368(a) of the Code; and
  (iii)
immediately following the Closing, Buyer will have exclusive dominion and
control over the Assets and Buyer shall exercise to dominion and control to
direct Seller to transfer and deliver all of the Purchased Assetsdirectly to
Merger Sub.
  3
   4. Closing.
  A.  The
Closing ("Closing" or "Closing Date") of the transactions contemplated hereby
shall take
place at the office of Sonfield & Sonfield, 770 South Post Oak Lane, Suite
435, Houston, Texas, at 10 a.m. Houston
time on the earlier of five days after the conditions to Closing aresatisfied or 60 days after the date of execution of this Agreement, or at
such other place, time or date as shall be mutually agreed upon by Seller and
Buyer, including an "attorney escrow closing by mail".
  B.  At the
Closing, Seller shall deliver to Buyer the following:
  (i)  such bill
of sale or other good and sufficient instruments of assignment, transfer and
conveyance as Buyer shall reasonably request, to convey and to transfer to Buyer
all tight, title and interest of Seller in the Purchased Assets to Buyer, free
and cleat of all security interests, liens, claims and encumbrances other than
the Capital One lien unless same is discharged by Buyer at Closing;
  (ii)  all
appropriate instruments granting to Buyer the right to the use of the corporate and
tradename "ElectroWave," "ElectroWave USA" and all other tradenames and
trademarks owned or used by Seller in connection with the Business, together
with Articles of Amendment to Seller's Articles of Incorporation changing
Seller's corporate name to a name not confusingly similar to "ElectroWave" or
"ElectoWave USA";
  (iii)  assignment
agreement covering the Seller's intellectual property rights;
  (iv)  such
other instrument or instruments of transfer, if any, as shall be necessary or appropriate
to vest in the Buyer good and marketable title to the Purchased
Assets;
  (v)  delivery
of Required Consents (as defined in section 7(b); and
  (vi)  delivery
of all UCC-3 termination statements and all other documents and instruments
necessary to release and discharge all liens, claims, security interests and
other encumbrances on all Purchased Assets other than the Capital One lien
unless same is discharged by Buyer at Closing.
  C.At the Closing,
Buyer shall deliver to Seller the following:
 (i)
certificates representing 250 shares of preferred stock;
  (ii) the
employment agreements described in Section 9(c);
  (iii)
anassumption agreement to assume the Assumed
Liabilities;
  (iv)  the
Earn-Out Escrow Agreement executed by the Escrow Agent (the cost of which
Escrow Agent shall be borne by Buyer) and Seller,
  (v)  certificates
representing 750 shares of preferred stock to asthe Escrow Agent
pursuant to the
Earn-Out
EscrowAgreement; and
  (vi) a
release of all shareholder guarantees related to the Bank One loan.
  D.Theparties hereto
shall use their reasonable best efforts to cause the transactions contemplated
hereby to be treated for all purposes andto be recognized as a tax-free reorganization under Section 368(a)(1)(C)
of the Code and anyother applicable state or federal law. Seller hereby covenantsand agrees that, following the Closing, it will promptly effect its
complete liquidation and distribute  all of its remaining assets
(including the Shares) to its
stockholdersin accordance with the Texas Business Corporation Act
("T13CA") and its ankles of incorporation and by-laws.
   4
    5. Representations,
Warranties and Covenants of Seller. Seller hereby represents and
warrants, and from
and after this date, covenantsto Buyer
as follows:
  (a) Organization and
Authority. Seller
is a corporation, duly organized, validly existing, and in goodstanding under
the laws of its stare of incorporation and has all requisite corporate power and
authority to carry on its business as it is presently being conducted,to enter
into this Agreement, and to carry out and perform the transactions contemplatedhereby. Prior to the Closing Date, the execution, delivery and
performance of this Agreement by Seller shall be dulyauthorized
and approved by its shareholders and its Board of Directors, and will not
violate its Articles of Incorporating, By-Laws, or any agreement to which it is
a party or by which it is boundor any
law, rule, regulation or court order. This Agreement, and all other instruments,
documents and agreements to be delivered by Seller in connection therewith, are
the legal, valid and binding obligation of Seller enforceable in accordance with
its, and their, terms.
  (b)
Title. Seller has good
andmarketable title to all of thepurchased
Assets, free and
clear of any
liabilities, obligations, claims, security interest, liens or encumbrances other
than to Capital One.
  (c) FinancialStatements. All financial
statements(including balance sheets, income and cash flow
statements) previously delivered to Buyer by Seller fairly present the financial
condition of Seller for the time period presented. Allsuch financialstatements have been prepared in conformity with generally accepted
accounting principles consistently applied ("GAA.P") (except (i) that such
statements are on the cash basis method of accounting and (ii) for interim
statements which are subject to normal year-end adjustments) and present fairly
in all uuderial respects the financial condition and results of operations of
the Seller for the respective periods indicated.
  (d) No MaterialLiabilities. Seller is not subject to any material
Liability (including, without limitation,
unasserted claims whether known or unknown), whether absolute, contingent,
accrued or otherwise, which is notshown or which
is in excess of amounts shown or reserved for in the respective balance sheets,
other than (a) liabilities of the same nature as those
setforth in such balance sheet and incurred in the ordinary
courseof Seller's business after the date indicated and (b) those items
not required to be accrued, footnoted or otherwise reserved for or disclosed
under GAAP on a cash basis.
  (e) No
Material Adverse Change. Since December 31, 2006 there has been (i) no
material adverse change in the
Seller or the Business,or its financial condition orprospects except as noted in thefinancialstatements set forth in section 5(c), and (ii) no material damage, destruction, loss
or claim,whether or not covered by insurance, or condemnation or othertaking
adversely affecting in any material respect the assets or properties of the
Seller or the Business. Since December 31, 2005 the Seller has conducted its
business only in the ordinary course and in conformity with past
practice.
  (f) Taxes. Seller has
timely filed all required federal, etate, county and local income, excise, withholding,
property, sales, use, franchise and other tax returns, declarations and reports
which are required to be filed on or before the date hereof and has paid or
reserved for all taxes which have become due pursuant to such returns or
pursuant to any assessment which has become payable except for taxes which it
has contested in good faith.
  (g) Litigation.
Except as disclosed by Seller to Purchaser, there is no litigation or proceeding orgovernmental investigation pending
or to the knowledge of Seller, tisreatened against Seller or relating to the PurchasedAssets or the Business.
  (h) Compliance
with Laws. Since December 31, 2004, Seller has complied in all material respects
with all federal, stateand local laws, statutes, rulers,
regulations, ordinances and codes,and has received no written notice from anygovernmental
agency asserting that a violation hasor may have occurred.
  (i) No
Defaults. All leases, agreements and other contracts constituting she
Assumed Liabilities
are in full force and effect, with no default or breach existing (other than as
to Capital One) orwhich would occur but for the existence of notice or the lapse of
time.
   5
   (j) Equipment. Each item
of tangible equipment comprising the Purchased Assets is in working
order and repair, ordinary wear and tear excepted.
  (k) Completeness of
Assets. The Purchased Assets, except for the Excluded Assets, comprise all of
the assets which are necessary to conduct the Business in the manner that it has
been previously conducted.
  (l) Information on
Buyer. The Seller has been furnished with or has had access at the EDGAR
Website of the Commission to the Buyer's filings made withthe Commission available at the
EDGAR website (hereinafter referred to collectively as the "Reports"). In
addition, the Seller and the Shareholders have received in writing from the
Buyer such other information concerning its operations, financial condition and
other matters as the Seiler or the Shareholders have requested in writing (such
other information is collectively, the "Met Written Information"), and
considered all factors the Seller deems material in deciding on the advisability
of investing in the preferred stock.
  (m) Information on
Seller. The Shareholders and the Seller are, and will be at the time of
the conversion
of the preferred stock, "accredited investors", as such term is defined in
Regulation D promulgated by the Commission under the 1933 Act, is experienced in
investments and business matters, has made investments of a speculative nature
and has purchased securities of United States publicly-owned companies in
private placements in the past and, with its representatives, has such knowledge
and experience in financial, tax and other business matters as to enable the
Seller and the Shareholders to ntill7P the information made available by the
Buyer to evaluate the merits and risks of and to make an informed investment
decision with respect to the proposed acquisition of the preferred stock, which
represents a speculative investment. The Seller has the authority and is duly
and legally qualified to purchase and own the Securities. The Seller is able to
bear the risk of such investment for an indefinite period and to afford a
complete loss thereof.
  (n) Acquisition of Preferred
Stock. On the Closing Date, the Seller will acquire the preferred stock as
principal for its ownaccount for investment only and not
with a view toward, or for resale in connection with, the public sale or any
distribution thereof except in connection with the dissolution and liquidation
of Seller,
  (o)  Compliance with Securities Act. The
Seller understands and agrees that the Securities have notbeen registered under the 1933
Act or any applicable state securities laws, by reason of their issuance in a
transaction that does not require registration under the 1933 Act (based inpart on the accuracy Of the
representations and warranties of Seller contained herein), and that such
Securities must be held indefinitely unless a subsequent disposition is
registered under the 1933 Act or any applicable state securities laws or is
exempt from such registration.
  (p) Certificate Legend.
The certificates representing shares of preferred stock shall be the following
or similar legend:
  The
shares represented by this certificate have not been registered under the
Scarifies Act of 1933, as amended These shares may not be sold or offered for
salt in the absence of an elective registration statement under such securities
art or an opinion of counsel reasonably satisfactory to Deep Down, Inc. that
such registration is not required
  (q) CommunicationofOffer. The offer to
sell the preferred stock was directly communicated to the
Seller by the Buyer. At no time was the Seller presented with or solicited by
any leaflet, newspaper or magazine article, radio or television advertisement,
or any other form of general advertising or solicited or invited toattend a promotional meeting otherwise than in connection and
concurrently with such communicated offer.
  6. Representations, Warranties
and Covenants of Buyer. Buyer hereby represents and warrants, and from
and after this date covenants to Buyer as follows:
  6
   Organization and
Authority. Buyer is a corporation, duly organized, validly existing, and
in good standing under the laws of its state of incorporation and has all
requisite corporate power and authority to carry on its business as it is
presently being conducted, to enter into this Agreement, and to carry out and
performthe
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Buyer has been duly authorized and approved by its Board of
Directors, and will not violate its Articles of Incorporation, By-Laws, or any
agreement to which it is a party or by which it is bound or any law, rule,
regulation or court order. This Agreement, and all other instruments, documents
and agreements to be delivered by Buyer in connection therewith, are the legal,
valid and binding obligation of Buyer enforceable in accordance with its, and
their, terms.
  7.Actions
Prior tothe
ClosingDate.
The respective parties hereto covenant and agree to take the following
actions betweenthe
date hereof and the Closing Date:
  (a) Investigation
of Seller by the Buyer. Seller shall afford to the officers, employees
and authorized
representatives (including, without limitation, independent public accountants
and attorneys) of the Buyer a full and complete opportunity to conduct and
complete its acquisition review and analysis of the Purchased Assets and Assumed
Liabilities (the "Acquisition Review"), including a review ofSeller's books
and records, financial information, contracts and agreements (including all
non-competition and non-solicitation covenants binding on Seller or its
employees), inspection and review of the physical operations of the Seller's
business, and the right to contact and communicate with Seller's vendors,
creditors, customers, employees, independent contractors and others having a
business relationship with Seller. Buyer agrees that it will keep and maintain
any and all information obtained by it, its agents, and counsel, confidential,
and will not make use of any such information other than for its evaluation of
the proposed transaction.
  (b) Consents
and Approvals. Seller shall use its best efforts promptly to obtain all
consents and
amendments from parties to leases, contracts, licenses and other agreements
which require consent, together with estoppel letters from parties to material
agreements (the "Required Consents").
  (c) Exclusive
Dealing, Seller, Shareholders and their respective affiliates shall deal exclusively
with the Buyer with respect to the sale of the Purchased Assets and the
Business. Seller shall not solicit, encourage or entertain offers or inquiries
(nor shall Seller or any of its affiliates authorize or permit any director,
officer, employee, attorney, accountant or other representative or agent to
solicit, encourage or entertain offers or inquiries) from other possible
acquiring companies, persons or entities, provide information to or participate
in any discussions or negotiations with any companies, persons or entities with
a view to an acquisition of all or substantially all of Seller's assets or stock
or any interest therein.
  (d) Seller's
Employees, On and as of the Closing Date, Seller will take all action
necessary to terminate
the employees of the Business and shalt pay such employees all sums (whether
payroll, bonus, severance, vacation or otherwise) due to them through the close
of business on the Closing Date. Prior to Closing, Buyer, may at its sole
discretion, interview and discuss employment opportunities with Seller's
employees and within ten (10) days prior to Closing, Buyer may offer employment
to any of Seller's employees on terms and conditions unilaterally determined by
Buyer, effective on the Closing Date.
  (e) Non-Compete/Non-Solicitation.
The Seller, the Shareholders, and their respective affiliates,
shalt not, individually or as a consultant, shareholder, partner, venturer,
director, officer, agent or otherwise, engage. in any ofthe following
actions:
  (i)  for a
five (5) year period after their respective terms of employment, solicit, call on or
contact any past (within the past 12 months) or present customers, suppliers or
employees of Seller with respect to the Business; or
  (ii)  for a
five (5) year period after their respective terms of employment, engage in any
activity competitive with the Business as now conducted anywhere in the world
(provided that in the case of Martin Kershman and Ronald W. Nance, said covenant
shall COI:lel:1W duringthe period that they receive severance pay).
  7
   In
addition, Seller shall keep and maintain all confidential and proprietary
information of Seller, including without limitation, financial statements,
customer and supplier lists, pricing information, sales and purchases margins
and practices, methods of telephone solicitation and similar Information
regarding the business and affairs of Seller, confidential and shall not disclosesuch information to any third person or exploit such information
personally except as required under law, or if such information is in the public
domain.
  Seller
understands and
agrees thatthissection is critical tothis Agreement, and in the event that Sellercommitsa breach of this
section, Buyer shallhavethe non-exclusive right and remedy tohave this section specifically enforced to the event permitted by any
court of competent jurisdiction, it being acknowledged and agieed that any
breach or threatened breach will cause immediate irreparable injury to Buyer and
that monetarydamages will not provide an adequate remedy at law. If any of the
provisions contained herein are construed to be invalid or unenforceable in any
jurisdiction, (x) the same shall not affect the remainder of the provisions or
the enforceability thereof, which shall be given full force and effect and (y)
the court making such determination shall have the power to reform the duration
and/or scope of such section.
  8. Conditions Precedent to
Obligations of Seller.. The obligations of the Seller under this Agreement
shall be subject to the satisfaction, on or prior to the ClosingDale, of the conditions set forth
below.
  (a) No Misrepresentation or
Breach ofRepresentations, Warranties and
Covenants.There Shall
have been no breach by Buyer in the perfarmance of any of its covenants and
agreements herein; each of the representations and warranties of Buyer contained
or referred to herein shall be true and correct in all material respects on the
Closing Date asthough made on the Closing Date, except for changes therein specifically
permitted by this Agreement or resulting from any transaction
expressly consented toin wilting by the Seiler; andthere
shall have been delivered to the Seller a certificate or certificates to that
effect,dated
the Closing Date, signed by the Buyer, by its President
  (b) Corporate Action.
Buyer shall have taken all corporate action necessary to approve the transactions
contemplated by this Agreement, and Buyer shall have furnished the Seller with
certified copies of the resolutions adopted by the Board of Directors and the
Sole Shareholder of Buyer, in form and substance reasonably satisfactory tocounsel for the Seller, in connection with such
transactions.
  (c) No Restraint or
Litigation. No action, suit, investigation or proceeding shall have been instituted
or threatened by any third party, governmental or regulatory agency torestrain,prohibit orotherwise challenge the legality or validity of the transactions
contemplated hereby.
  (d) Other Documentation.
Seller shall have
received allof the documents andshowings required
to be delivered by the Buyer at the Closing pursuant tosection 4(C).
  9.Condition Precedent to
Obligations of Buyer. Tbe obligations of the Buyer under this Agreementshall be
subject to the satisfaction, on or prior to the Closing Date, of the conditions
set forth
below.
  (a) No Misrepreseatation or
Breach ofWarranties and
Covenants. There shall have been no breachby Seller in the performance of any ofits covenants and agreements herein; each of the representations and
warranties of Seller contained or refenad to herein shall be true and correct in
all material respects on the Closing Date as though made on theClosingDate, except for changes therein specifically permitted by this Agreement
or resulting from any transaction expressly consented to in willing by the
Buyer; and there shall have been delivered to the Buyer a certificate or
certificates to that effect, dated the Closing Date, signed by the Seller, by
itsPresident
  (b) Corporate Action.
Seller shall have taken all corporate action necessary to approve the transactionscontemplated by thisAgreement,
andSeller
shall have furnished the Buyer with certified copies of the resolutions adoptedby the Board of Directors and the Sole Shareholder of Seller, in form and
substancereasonably satisfactory to counsel for the Buyer, in connection with such
transactions.
  (c)No
Restraint orLitigation. No action, suit, investigation or proceeding shall have been instituted
or threatenedby any third party, governmental or regulatory agency to restrain,
prohibit or otherwise challenge the legality or validityof thetransactions
contemplated hereby.
   8
   (d) Financial
Statements. Seller shall afterClosing at
Buyer's expense furnish to Buyer (1) the audited
balance sheets of the Company as of December 31, 2005 and December 31, 2006, the
related statements of income and retained earnings, and the related statements
of changes of financial position or cash flows, asthe case may be,
for the fiscal years then ended, certified by Malone & Bailey, PC,
registered independent certified public aceortntats, to the effect that said
financial statements (a) are prepared in accordance with the books and recordsof the
Seller;(b)
are prepared in
accordance with generallyaccepted accounting principles
consistently applied; (c) fairly present the Seller's financial condition and
the resultsof itsoperations
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 Seller's financial condition and the results of its
operations for theperiods
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
Seller, contain andreflect adequate reserves for all reasonably anticipated material losses
and costs and expenses in excess of expected receipts.
  (e)
Employment Agreements. Martin
L. Kerslunan and Ronald W, Nance (collectively referred
to herein as "Key Employees") shall have entered into 5 year employment
agreements with Purchaser with no termination otherthan for cause. Such employment agreementsshall be
delivered at the Closing, provide a base monthly salary of $10,000 (including
automobile allowance), participation in the annual bonus pool and otherwise be
in form and substance mutually satisfactory to Purchaser and the Key Employees,
In addition, Mr. Kershman's and Mr. Nance's employment agreements will contain
the customary confidentiality agreement and during the term of said Employment
Agreementsand during the period they are paid severance, they will not (i)
participate or engage in the underwater oil service business or the Business of
the Seller within a one hundred (100) mile radius of any office of Purchaser are
any of its customer, (ii) service or solicit any
customers of Purchaser, or (iii) hireany employees of Selleror
Purchaser.
  (f) Confidentiality and
Non-Competition Agreement. Albert P. Keller shallhave
executed a confidentiality
agreement and agree that for a period of five (5) years from the date of Closing
he will not (i) participate or engagein the
underwater oil service business or the Business of the Seller within a onehundred (100)mile
radius of any office of Purchaser are any of its customer, (ii) service or
solicit any customers of Purchaser, or (iii) hire any employees of Seller or
Purchase
  (g) Employee Inventions
Agreement, The Key Employees shall have executed an agreement to holdin
strictest confidence and not disclose, use, lecture upon, or publish any of the
Buyer's Proprietary Information (as defined) and assign to the Buyerany rights either Key Employeemay have
or acquire in such Proprietary Information and confirm that all Proprietary
Information shall be the sole property of theBuyer and its
assigns.
  (h)
Assignment of Intellectual Property
Rights. Buyer shall have
received a Technology Assignment
Agreement covering exclusively throughout the world, all right, title, and
interest in and toall intellectual property of owned or claimed bySeller or
Shareholders in consideration for a payment of 5% of gross sales related to such
technology for a period of five years following the Closing.which payment shallbe paid monthly.Seller and its representatives shall have the right to audit all relevant
books and records only as it relates to such payment.
  (l) AcquisitionReview.Buyer shall have been
satisfied, in its own discretion, with its Acquisition
Review.
  (i) Other
Documentation.Buyer shall
have received all of the documents and showings required
to be delivered by the Seller at the Closing pursuant to section 4(B).
  10. 
Mutual
Indemnification.
  A. Seller
hereby agrees to indemnify and hold theBuyer, and its
shareholder;
directors, officers,
employees and agents, harmless from and against any and all claims, suits,
actions, judgments, liability, losses, damages, fines, penalties, costs and
expenses, including without limitation, reasonable attorney' fees and costs
arising out of or relating to any event, condition, contract, obligation, ace
omission. non-fulfillment, non- Assumed Liability, breach, inaccuracy or
non-fulfillment of any representation, warranty, covenant or agreement with respecttoany of the terms
of this Agreement, and any agreement between Seller and/or Shareholders and any
  9
   person.
Seller acknowledges and agrees that Buyer may withhold from andoffset any
Earn-Out Shares due under this Agreement.
  B. Buyer
hereby agrees to indemnify and hold harmless the Seller, and its shareholders, directors,
officers, employees and agents, from and against any
andallclaims, suits, actions, judgments, liability, lessee, damages, fines,
penalties, costs and expenses, including without limitation, reasonable
attorneys' fees and costs arising out of or relating to any event, condition.
contract,
obligation, act, omission,non-fulfillment, Assumed Liability, breach or
misrepresentation of warranty, representation, covenant or agreement with
respect to any of the terms of this Agreement or any matter which accrues after
Closing.
  OtherProvisions.
  A. All
notices for which provision is made in this Agreement shall be given in writing
either by actual
delivery of the notice into the hands of the party entitled to the notice or by
mailing the notice by registered or certified mail, return receipt requested, in
which case the notice shall be deemed to be given on the date of its mailing,
addressed as follows:
  If to
Seller
  ElectroWave
(USA) Inc ,
 6125 W.
Sam Houston Pkwy N.. Ste 406,
 Houston,
TX 77041 USA
 Atm:
Martin L. Kershman, President
 Facsimile:
713.896.7722
  If to
Buyer;
  Deep
Down, Inc.
 15473
East Freeway
 Channelview,
Texas 77530
 Attn:
John C. Siedhoff Chief Financial Officer
 Facsimile:
(281) 862-2522
  with
a copy to (which shall net eonstinae notice to Deep Down):
  Robert L.
Sonfield, Jr., Esq.
 Sonfield
& Sonfield
 770 South
Post Oak Lane, Suite 435
 Houston,
Texas 77056-1937
 Facsimile:
(713) 877-1547
  B.  The terms
and provisions hereof shall inure to the benefit of and be binding upon the undersigned
and each of them and their respective successors and assigns.
  C.  The
invalidity or unenforceebility of any of the provisions hereof shall not affect
the validity
or enforceability of the remainder hereof.
  D.  This
Agreement together with all of the Exhibits, Schedules and other documents
referred to herein
constitutes the entire Agreement between the parties with reference to the
subject matter hereof and supersedes all prior agreements and understandings,
whether written or oral, regarding the subject matter hereof, and may only be
changed or modified in writing.
  E.  Each
party shall bear its own fees and expenses, including any investment banking
fees. Purchaser
acknowledges and agrees that neither Seller or Shareholders shall be liableforanyfees or expenses due or payment to
any broker by reason of the transactions contemplated by the
Agreement.
  F. All of
the representations, warranties, covenants, agreements, terms and provisions of
this Agreement
shall survive the Closing Date.
  10
    Each party to this
Agreement agrees that he will not make any public disclosure of this Agreement
or theexecution of the Agreementwithout the
others prior approval.Prior to iscning any press release or public statementconcerning the
transactions represented herein, a copy shall be made available to the other
parties fortheir comments. If the proposed transactions are not
consummated for any reason whatsoever, the respective parties hereto shall keep
confidential any information (unless ascertainable from public or publishedinformation or trade sources) concerning the business or operations of the parties
hereto.
  This
Agreement is intended to be performed in the State of Texas and shallbe governed
by and construedand enforced
in accordance with the laws of that state.
  This
Agreement is intended for the benefit of the parties hereto and is not intendedto benefit any third party.
  IN
WITNESS WHEREOF, the parties hereto have executed this Agreement, as of the
date andyear firstabove written.
   BUYER:DEEP
      DOWN, INC.By:
      /s/ Ronald E. SmithRonald
      E. Smith, Chief Executive OfficerMERGER
      SUB:ELECTROWAVE
      (USA) INC.,a
      Nevada corporationBy:
      /s/ John C. SiedhoffJohn
      C. Siedhoff, Chief Financial OfficerSELLER:ELECTROWAVE
      (USA) INC.By:
      /s/ Martin L. KershmanMartin
      L. Kershman, PresidentSHAREHOLDERS:Pinemont
      JVBy:
      /s/ Albert P. KellerAlbert
      P. Keller/s/
      Martin L. KershmanMartin
      L. Kershman/s/
      Ronald W. NanceRonald
      W. Nance