deepdown_ex1012.htm


    EXHIBIT 10.12


    


     

    EMPLOYMENT
AGREEMENT

     

    This
Employment Agreement (the “Agreement”) is made and entered into as of June 5,
2008 by and between Flotation Technologies,
Inc., a Maine corporation (the “Company”), and David A. Capotosto
(“Executive”).

     

    RECITALS

     

    The
Company owns and operates a business which engineers, designs and manufacturers
deepwater buoyancy systems, using high-strength Flotec syntactic foam and
polyurethane elastomers (the “Business”) to customers worldwide. The Company
desires to employ Executive, and the Executive desires to accept such
employment, on the terms and subject to the conditions set forth in this
Agreement.

     

    In
consideration of the mutual promises set forth in this Agreement the parties
hereto agree as follows:

     

    ARTICLE
I

    Term of
Employment

     

    1.01           Subject
to the provisions of Article V, and upon the terms and subject to the conditions
set forth in this Agreement, the Company will employ Executive for the
three-year period beginning on the date first written above (the “Commencement
Date”) and ending on the third anniversary of the Commencement
Date.

     

    ARTICLE
II

    Duties

     

    2.01(a) During
the term of employment, Executive will:

     

    (i)           Promote
the interests, within the scope of his duties, of the Company and devote his
full working time and efforts to the Company’s business and
affairs;

     

    (ii)           Serve
as President of the Company, reporting directly to the Vice President of
Operations of Deep Down, Inc., the sole shareholder of the Company (the
“Parent”) or other person designated by the Parent; and

     

    (iii)           Perform
the duties and services consistent with the title and function of such office,
including without limitation, those, if any, set forth in the bylaws of the
Company or as specifically set forth from time to time by the Company’s Board of
Directors (the “Board”).

     

    (b)           Notwithstanding
anything contained in clause 2.01(a)(i) above to the contrary, nothing contained
herein or under law shall be construed as preventing Executive from (i)
investing Executive’s personal assets in such form or manner as will not require
any services on the part of Executive in the operation or the affairs of the
companies in which such investments are made and in which his participation is
solely that of a passive investor (provided that he, collectively with his
family and affiliated interests (or persons constituting a “group” under the
federal securities laws) will not exceed 5% of any company’s voting securities);
and (ii) engaging (not during normal business hours) in any other professional,
civic, or philanthropic activities, provided that Executive’s investments or
engagement does not result in a violation of his covenants under this Section or
Article VI hereof.

    


    
      
        
           


        

        
          
          

          
            

          

        

        
           


        

      

    

    


     

    ARTICLE
III

    Base
Compensation

     

    3.01           The
Company will compensate Executive for the duties performed by him hereunder by
payment of a base salary at the rate of One Hundred Fifty Thousand ($150,000.00)
per annum (the “Base”), payable in accordance with customary payroll procedures
of the Company, subject to customary withholding for federal, state, and local
taxes and other normal and customary withholding items.

     

    3.02           Bonus.  In
addition to the Base, the Company (a) shall pay to Executive a bonus (the
“Non-Discretionary Bonus”) quarterly upon closing of the Company income and
expense accounting for the quarter, equal to one percent (1%) of the Company’s
net profit before interest, taxes, goodwill charges and any management fees
charged by the Parent; and (b) may pay to the Executive a bonus (the
“Discretionary Bonus”) (the Non-Discretionary Bonus and Discretionary Bonus are
sometimes collectively referred to as the “Bonus”) of any amounts deemed
reasonable and appropriate by the Company’s Board of Directors based on the
quality and nature of Executive’s services and the performance of the Company
during such year.

     

    ARTICLE
IV

    Reimbursement and Employment
Benefits

     

    4.01           Health and Other
Medical. Executive shall be eligible to participate in all health,
medical, dental, and life insurance employee benefits as are available from time
to time to other key executive employees (and their families) of the Company and
the Parent, including a Life Insurance Plan, Medical and Dental Insurance Plan,
and a Long Term Disability Plan (the “Plans”). The Company shall pay 100% of all
premiums with respect to Executive for such Plans. Executive may purchase
additional insurance for members of his immediate family.

     

    4.02           Vacation. Executive
shall be entitled to five (5) weeks (200 hours) of vacation per year, to be
taken in such amounts and at such times as shall be mutually convenient for
Executive and the Company. Except as set forth in the previous sentence, the
Company’s standard policies and practices regarding vacation time will apply to
Executive.

     

    4.03           Performance Enhancing
Items. Executive shall be entitled to receive from the Company a monthly
car allowance of up to One Thousand Dollars ($1,000) per month.

     

    4.04           Reimbursable
Expenses. The Company shall in accordance with its standard policies in
effect from time to time reimburse Executive for all reasonable out-of-pocket
expenses actually incurred by him in the conduct of the business of the Company
provided that Executive submits all substantiation of such expenses to the
Company on a timely basis in accordance with such standard policies and further
provided that Executive receives prior approval for all individual expenditures
in excess of $500.

     

    4.05           Savings Plan.
Executive will be eligible to enroll and participate, and be immediately vested
in, all Company savings and retirement plans, including any 401(k) plans, as are
available from time to time to other key executive employees.

     

    4.06           Common Stock Purchase
Options, Upon closing of the purchase of 100% of the equity interests of
the Company by the Parent, Executive will be issued an incentive stock option,
as defined in the Internal Revenue Code of 1986, as amended, to purchase up to
200,000 common shares, par value $.001, of Parent.  The exercise price
of the incentive stock options will be equal to the fair market value of
Parent’s common stick, determined with reference to the price of the last sale
of Parent common stock as reported by the Electronic Bulletin Board on the day
of closing of the purchase and sale.  One-third of the original number
of options may be exercised respectively on the first, second and third
anniversary of the closing of the purchase and sale.  The options will
expire three years and three months after the closing of the purchase and
sale.

    


    
      
        
           


        

        
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    ARTICLE
V

    Termination

     

    5.01           Events of
Termination. This Agreement, Executive’s compensation under Article III,
and any and all other rights of Executive under this Agreement or otherwise as
an employee of the Company will terminate (except as otherwise provided in this
Article V):

     

    
      	
               
      

            	
              (a)

            	
              upon
      termination of this Agreement by the Executive without Good
      Reason;

            


    

     

    
      	
               
      

            	
              (b)

            	
              upon
      the death of Executive;

            


    

     

    
      	
               
      

            	
              (c)

            	
              upon
      the disability of Executive (as defined in Section
  5.02);

            


    

     

    
      	
               
      

            	
              (d)

            	
              for
      “Cause” (as defined in Section 5.03), immediately upon notice from the
      Company to Executive, or at such later time as such notice may specify;
      or

            


    

     

    
      	
               
      

            	
              (e)

            	
              for
      “Good Reason” (as defined in Section [   ]) upon not less
      than thirty days’ prior notice from Executive to the
    Employer.

            


    

     

    5.02           Definition of
Disability.  For purposes of Section 5.01, Executive will be
deemed to have a "disability" if, for physical or mental reasons, Executive is
unable to perform the essential functions of  Executive's duties under
this Agreement for 60 consecutive days, or 120 days during any twelve-month
period, as determined in accordance with this Section 5.02. The disability of
Executive will be determined by a medical doctor selected by written agreement
of the Company and Executive upon the request of either party by notice to the
other. If the Company and Executive cannot agree on the selection of a medical
doctor, each of them will select a medical doctor and the two medical doctors
will select a third medical doctor who will determine whether Executive has a
disability. The determination of the medical doctor selected under this Section
5.02 will be binding on both parties. The Executive must submit to a reasonable
number of examinations by the medical doctor making the determination of
disability under this Section 5.02, and the Executive hereby authorizes the
disclosure and release to the Company of such determination and all supporting
medical records. If Executive is not legally competent, Executive's legal
guardian or duly authorized attorney-in-fact will act in Executive's stead,
under this Section 5.02, for the purposes of submitting the Executive to the
examinations, and providing the authorization of disclosure, required under this
Section 5.02.

     

    5.03           Definition of
“Cause.”  The term “Cause” shall mean the
following:

     

    (a)           Any
violation by Executive of any material provision of this Agreement (including
without limitation any violation of any provision of Sections 6.01, 6.02 or 6.03
hereof any and all of which are material in all respects), upon notice of same
by the Company describing in detail the breach asserted and stating that it
constitutes notice pursuant to this Section 5.03(a), which breach, if capable of
being cured, has not been cured to the Company’s sole and absolute satisfaction
within 30 days after such notice (except for breaches of any provisions of
sections 6.01, 6.02 or 6.03 which are not subject to cure or any
notice);

    


    
      
        
           


        

        
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    (b)           Embezzlement
by Executive of funds or property of the Company;

     

    (c)           Habitual
absenteeism, bad faith, fraud, refusal to perform his duties, gross negligence
or willful misconduct on the part of Executive in the performance of his duties
as an employee of the Company, provided that the Company has given written
notice of and an opportunity of not less than 30 days to cure such breach, which
notice describes in detail the breach asserted and stating that it constitutes
notice pursuant to this Section 5.03(c), provided that no such notice or
opportunity needs to be given if (x) in the judgment of the Company’s Board of
Directors, such conduct is habitual or would unnecessarily or unreasonably
expose the Company to undue risk or harm or (y) one previous notice had already
been given under this section or under section (i) above; or

     

    (d)           A
felonious act, conviction, or plea of nolo contendere of Executive
under the laws of the United States or any state (except for any conviction or
plea based on a vicarious liability theory and not the actual conduct of the
Executive).

     

    5.04           Definition of “Good
Reason.”  For purposes of Section 5.01(e), the phrase “Good
Reason" means any of the following: (a) The Company’s material breach of this
Agreement; (b) the assignment of Executive without his consent to a position,
responsibilities, or duties of a materially lesser status or degree of
responsibility than his position, responsibilities, or duties at the
Commencement Date; or (c) the relocation of the Company’s principal executive
offices outside the Biddeford, Maine area; or (d) the requirement by the Company
that Executive be based anywhere other than the Company’s principal executive
offices, in either case without Executive's consent.

     

    5.05           Termination
Pay.  Effective upon the termination of this Agreement, the
Company will be obligated to pay Executive (or, in the event of his death, his
designated beneficiary as defined below) only such compensation as is provided
in this Section 5.05 (the “Severance”).
For purposes of this Section 5.05, Executive’s designated beneficiary will be
such individual beneficiary or trust, located at such address, as Executive may
designate by notice to the Company from time to time or, if Executive fails to
give notice to the Company of such a beneficiary, Executive's estate.
Notwithstanding the preceding sentence, the Company will have no duty, in any
circumstances, to attempt to open an estate on behalf of Executive, to determine
whether any beneficiary designated by Executive is alive or to ascertain the
address of any such beneficiary, to determine the existence of any trust, to
determine whether any person or entity purporting to act as Executive's personal
representative (or the trustee of a trust established by Executive) is duly
authorized to act in that capacity, or to locate or attempt to locate any
beneficiary, personal representative, or trustee.

     

    (a)           Termination by Executive
without Good Reason.  If Executive terminates this Agreement
without Good Reason, the Company will pay Executive the full amount of unpaid
Base compensation and accrued but unpaid benefits, including any vacation pay,
earned by Executive pursuant to this Agreement through and including the
effective date of termination of this Agreement (the “Termination
Date”).

     

    (b)           Termination by Executive for
Good Reason.  If Executive terminates this Agreement for Good
Reason, the Company will pay Executive (i) the Executive's Base compensation for
the remainder, if any, of the calendar month in which such termination is
effective and for six (6) consecutive calendar months thereafter, and (ii) that
portion of the Executive's Bonus, if any, for the fiscal year during which the
termination is effective, prorated through the Termination Date.

     

    (c)           Termination by the Company
for Cause. If the Company terminates this Agreement for Cause, Executive
will be entitled to receive his Base compensation only through the Termination
Date, but will not be entitled to any Bonus for the fiscal year during which
such termination occurs or any subsequent fiscal year.

    


    
      
        
           


        

        
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    (d)           Termination upon
Disability.  If this Agreement is terminated by either party as
a result of Executive’s disability, as determined under Section 5.02, the
Company will pay Executive his Base compensation through the remainder of the
calendar month during which such termination is effective, and for the lesser of
(i) six (6) consecutive months thereafter, or (ii) the period until disability
insurance benefits commence under the disability insurance coverage furnished by
the Company to the Executive.

     

    (e)           Termination upon
Death.  If this Agreement is terminated because of the
Executive’s death, Executive will be entitled to receive his Base compensation
through the end of the calendar month in which his death occurs, and that part
of Executive’s Bonus compensation, if any, for the fiscal year during which his
death occurs, prorated through the end of the calendar month during which his
death occurs.

     

    (f)           Benefits. If this
Agreement is terminated pursuant to Sections 5.05(a), (b) or (d), Executive
shall retain the benefits provided in Article IV of this Agreement for the
lesser of (i) three months, or (ii) the remainder of the term of this Agreement
as set forth in Section 1.01.

     

    5.06           General.

     

    (a)           Termination
of this Agreement shall not affect the obligations of Executive under Article VI
hereof that, pursuant to the express provisions of this Agreement, continue in
full force and effect.  Upon termination of this Agreement for any
reason, Executive shall promptly deliver to the Company all Company property
including without limitation all writings, records, data, memoranda, contracts,
orders, sales literature, price lists, client lists, data processing materials,
and other documents, whether or not obtained from the Company or any Affiliate,
which pertain to or were used by Executive in connection with his employment by
the Company or which pertain to any Affiliate, including, but not limited to,
Confidential Information, as well as any automobiles, computers or other
furniture, fixtures or equipment which were purchased by the Company for
Executive or otherwise in Executive’s possession or control.

     

    (b)           The
Severance shall be paid, at Company’s option, either (x) in a lump sum within
ten (10) days after the Termination Date with such payments discounted by the
U.S. Treasury rate most closely comparable to the applicable time period left in
the Agreement or (y) as and when normal payroll payments are made. Executive
expressly acknowledges and agrees that the payment of Severance to Executive
hereunder shall be liquidated damages for and in full satisfaction of any and
all claims Executive may have relating to or arising out of Executive’s
employment or termination of Executive’s employment by the Company or relating
to or arising out of this Agreement and the termination thereof, including,
without limitation, those causes of action arising under the Age Discrimination
in Employment Act of 1967, as amended, 29 U.S.C. §621 et seq., Title VII of the
Civil Rights Act of 1964, as amended, 42 U.S.C. §2000e et seq., the Americans with
Disabilities Act of 1990, as amended, 42 U.S.C. §12101 et seq., the Fair Labor
Standards Act of 1938, as amended, 29 U.S.C. §201 et seq., the Civil Rights Act
of April 9, 1866.1 42 U.S.C. §1981 et seq., the National Labor
Management Relations Act, 29 U.S.C. §141 et seq., the Occupational
Safety and Health Act, 29 U.S.C. §651 et seq., and the Family
Medical Leave Act of 1993, 29 U.S.C. §2601 et seq. Notwithstanding the
foregoing, Executive’s right to receive Severance Pay is contingent upon
Executive not violating any of his on-going obligations under this
Agreement.

    


    
      
        
           


        

        
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    5.07           Representations.
Executive represents, warrants, and covenants to Company that (a) there is no
other agreement or relationship which is binding on him which prevents him from
entering into or fully performing under the terms hereof and (b) the Company may
contact any past, present, or future entity with whom he has a business
relationship and inform such entity of the existence of this Agreement and the
terms and conditions set forth herein.

     

    ARTICLE
VI

    Covenants

     

    6.01           Competition/Solicitation.
(a) During the term of this Agreement and for a period of twenty-four (24)
months after termination of this Agreement, regardless of the reason, Executive
hereby covenants and agrees that he shall not, directly or indirectly, except in
connection with his duties hereunder or otherwise for the sole account and
benefit of the Company, whether as a sole proprietor, partner, member,
shareholder, employee, director, officer, guarantor, consultant, independent
contractor, or in any other capacity as principal or agent, or through any
person, subsidiary, affiliate, or employee acting as nominee or agent, except
with the consent of the Company:

     

    (i)           Conduct
or engage in, or be interested in or associated with, any person or entity
anywhere in North America (plus any such additional geographical markets to
which the Company may have expanded during the course of Executive‘s employment)
other than the Company and its affiliates which conducts or engages in the
Business (plus any such additional product or service markets to which the
Company may have expanded during the course of Executive‘s
employment);

     

    (ii)           Solicit,
attempt to solicit, or accept business from, or cause to be solicited or have
business accepted from, any then-current customers of Company, any persons or
entities who were customers of the Company within the 180 days preceding the
Termination Date, or any prospective customers of the Company for whom bids were
being prepared or had been submitted as of the Termination Date; or

     

    (iii)           Induce,
or attempt to induce, hire or attempt to hire, or cause to be induced or hired,
any employee of the Company, or persons who were employees of the Company within
the 180 days preceding the Termination Date, to leave or terminate his or her
employment with the Company, or hire or engage as an independent contractor any
such employee of the Company.

     

    (b)           Notwithstanding
the foregoing, Executive shall not be prevented from (i) investing in or owning
up to two percent (2%) of the outstanding stock of any corporation engaged in
any business provided that such shares are regularly traded on a national
securities exchange or in any over-the-counter market or (ii) retaining any
shares of stock in any corporation which Executive owned before the date of his
employment with the Company.

     

    6.02           Confidential
Information. Executive acknowledges that in his employment he is or will
be making use of, acquiring, or adding to the Company’s confidential information
which includes, but is not limited to, memoranda and other materials or records
of a proprietary nature; technical information regarding the operations of the
Company; and records and policy matters relating to finance, personnel, market
research, strategic planning, current and potential customers, lease
arrangements, service contracts, management, and operations. Therefore, to
protect the Company’s confidential information and to protect other employees
who depend on the Company for regular employment, Executive agrees that he will
not in any way use any of said confidential information except in connection
with his employment by the Company, and except in connection with the business
of the Company he will not copy, reproduce, or take with him the original or any
copies of said confidential information and will not directly or indirectly
divulge any of said confidential information to anyone without the prior written
consent of the Company.

    


    
      
        
           


        

        
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    6.03           Inventions. All
discoveries, designs, improvements, ideas, and inventions, whether patentable or
not, relating to (or suggested by or resulting from) products, services, or
other technology of the Company or any Affiliate or relating to (or suggested by
or resulting from) methods or processes used or usable in connection with the
business of the Company or any Affiliate that may be conceived, developed, or
made by Executive during employment with the Company (hereinafter “Inventions”),
either solely or jointly with others, shall automatically become the sole
property of the Company or an Affiliate. Executive shall immediately disclose to
the Company all such Inventions and shall, without additional compensation,
execute all assignments and other documents deemed necessary to perfect the
property rights of the Company or any Affiliate therein. These obligations shall
continue beyond the termination of Executive’s employment with respect to
Inventions conceived, developed, or made by Executive during employment with the
Company. The provisions of this Section 6.03 shall not apply to any Invention
for which no equipment, supplies, facility, or trade secret information of the
Company or any Affiliate is used by Executive and which is developed entirely on
Executive’s own time, unless (a) such Invention relates (i) to the business of
the Company or an Affiliate or (ii) to the actual or demonstrably anticipated
research or development of the Company or an Affiliate, or (b) such Invention
results from work performed by Executive for the Company.

     

    6.04           Non-Disparagement.
For a period commencing on the Commencement Date and continuing indefinitely,
Executive hereby covenants and agrees that he shall not, directly or indirectly,
defame, disparage, create false impressions, or otherwise put in a false or bad
light the Company, its products or services, its business, reputation, conduct,
practices, past or present employees, financial condition or
otherwise.

     

    6.05           Blue Penciling. If at
the time of enforcement of any provision of this Agreement, a court shall hold
that the duration, scope, or area restriction of any provision hereof is
unreasonable under circumstances now or then existing, the parties hereto agree
that the maximum duration, scope or area reasonable under the circumstances
shall be substituted by the court for the stated duration, scope, or
area.

     

    6.06           Remedies. Executive
acknowledges that any breach by him of the provisions of this Article VI of this
Agreement shall cause irreparable harm to the Company and that a remedy at law
for any breach or attempted breach of Article VI of this Agreement will be
inadequate, and agrees that, notwithstanding section 9.01 hereof, the Company
shall be entitled to exercise all remedies available to it, including specific
performance and injunctive and other equitable relief, without the necessity of
posting any bond, in the case of any such breach or attempted
breach.

     

    ARTICLE
VII

    Assignment

     

    7.01           Assignment. This
Agreement shall be binding upon and inure to the benefit of the successors and
assigns of the Company and shall relieve the Company of its obligations
hereunder if the assignment is pursuant to a Change in Control (as defined
herein).  Neither this Agreement nor any rights hereunder shall be
assignable by Executive and any such purported assignment by him shall be
void.

    


    
      
        
           


        

        
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    7.02           Change
of Control.
A  “Change in Control” shall be deemed to have occurred at such
time as (i) any person or entity (or person or entities which are affiliated or
acting as a group or otherwise in concert) is or becomes the beneficial owner,
directly or indirectly, of securities representing 50% or more of the combined
voting power for election of directors of the then outstanding securities of the
Company (other than shareholders which own greater than fifty percent (50%) of
the stock of the Company as of the effective date of this Agreement); (ii) the
shareholders of the Company approve any merger or consolidation as a result of
which its equity interests shall be changed, converted, or exchanged (other than
a merger with a wholly-owned subsidiary of the Company) or any liquidation of
the Company or any sale or other disposition of all or substantially all of the
assets or earning power of the Company; or (iii) the shareholders of the Company
approve any merger or consolidation to which the Company is a party as a result
of which the persons who were shareholders of the Company immediately before the
effective date of the merger or consolidation shall have beneficial ownership of
less than 50% of the combined voting power for election of directors or the
equivalent of the surviving corporation following the effective date of such
merger or consolidation; provided, however, that no Change in Control shall be
deemed to have occurred as a result of the sale or transfer of equity interests
of the Company to an employee benefit plan sponsored by the Company or an
affiliate thereof or if the new employer offers to employ the Executive on
substantially the same terms and conditions as set forth in this Agreement
(except that the Base shall not be reduced below the then-existing
Base)

     

    ARTICLE
VIII

    Entire
Agreement

     

    This Agreement constitutes the entire
understanding between the Company and Executive concerning his employment by the
Company or subsidiaries and supersedes any and all previous agreements between
Executive and the Company or any of its affiliates or subsidiaries concerning
such employment, and/or any compensation, bonuses or incentives.  Each
party hereto shall pay its own costs and expenses (including legal fees) except
as otherwise expressly provided herein incurred in connection with the
preparation, negotiation, and execution of this Agreement.  This
Agreement may not be changed orally, but only in a written instrument signed by
both parties hereto.

     

    ARTICLE
IX

    Applicable Law;
Miscellaneous

     

    9.01           Governing Law. This
Agreement shall be governed by and construed in accordance with the laws of the
State of Texas. All actions brought to interpret or enforce this Agreement shall
be brought in federal or state courts located in Houston,
Texas.  Notwithstanding the foregoing, at the sole option of the
Company, all controversies under this Agreement may be subject to resolution by
arbitration.  Without limiting the generality of the foregoing, the
following shall be considered controversies for this purpose: (i) all questions
relating to the interpretation or breach of this Agreement; (ii) all questions
relating to any representations, negotiations, and other proceedings leading to
the execution of this Agreement; and (iii) all questions as to whether the right
to arbitrate any such question exists.  Any party may, without
inconsistency with this Agreement, seek from a court any interim or provisional
relief that may be necessary to protect the rights or property of that party,
pending the establishment of the arbitral tribunal (or pending the tribunal’s
determination of the merits of the controversy).  The tribunal shall
have authority to make the final determination of the rights of the parties,
including authority to make permanent, modify, or dissolve any judicial order
granting such provisional relief.  The Company, if it desires
arbitration, shall so notify the other parties, identifying in reasonable detail
the matters to be arbitrated and the relief sought.  Arbitration shall
be before a three-person tribunal of neutral arbitrators, consisting of
attorneys with at least ten (10) years’ experience in commercial law. The
American Arbitration Association (“AAA”) shall submit a list of persons meeting
the criteria outlined above, and the parties shall mutually agree upon the three
arbitrators. If the parties fail to select arbitrators as required above within
twenty (20) days after delivery of notice from the party desiring arbitration,
the AAA shall appoint the arbitrator or arbitrators that have not been selected
by the parties. The arbitrators shall be entitled to a fee commensurate with
their fees for professional services requiring similar time and effort. All
matters arbitrated hereunder shall be arbitrated in Houston, Texas, and shall be
governed by Texas law, exclusive of its conflicts-of-laws rules.  The
arbitrators shall conduct a hearing no later than sixty (60) days after
designation of the tribunal, and a decision shall be rendered by the arbitrators
within thirty (30) days after the hearing.  At the hearing, the
parties shall present such evidence and witnesses as they may choose, with or
without counsel.  Adherence to formal rules of evidence shall not be
required but the arbitration panel shall consider any evidence and testimony
that it determines to be relevant, in accordance with procedures that it
determines to be appropriate.  Any award entered shall be made by a
written opinion stating the reasons for the award made.  The
arbitrators may award legal or equitable relief, including but not limited to
specific performance.  The arbitrators are not empowered to award
damages in excess of compensatory damages, and each party irrevocably waives any
right to recover such damages with respect to any dispute resolved by
arbitration.  This submission and agreement to arbitrate shall be
specifically enforceable. Arbitration may proceed in the absence of any party if
notice of the proceedings has been given to such party.  The parties
agree to abide by all awards rendered in such proceedings.  Such
awards shall be final and binding on all parties.  Each party shall
continue to perform its obligations under this Agreement pending conclusion of
the arbitration.  No party shall be considered in default hereunder
during the pendency of arbitration proceedings relating to such default. The
arbitrators’ fees and other costs of the arbitration shall be borne by the party
against which the award is rendered, except as the arbitration panel may
otherwise provide in its written opinion.

    


    
      
        
           


        

        
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    9.02           Attorneys’ Fees. In
addition to all other rights and benefits under this Agreement, each party
agrees to reimburse the other for, and indemnify and hold harmless such party
against, all costs and expenses (including attorney’s fees) incurred by such
party (whether or not during the term of this Agreement or otherwise), if and to
the extent that such party prevails on or is otherwise successful on the merits
with respect to any action, claim or dispute relating in any manner to this
Agreement or to any termination of this Agreement or in seeking to obtain or
enforce any right or benefit provided by or claimed under this Agreement, taking
into account the relative fault of each of the parties and any other relevant
considerations.

     

    9.03           Indemnification of
Executive. The Company shall indemnify and hold harmless Executive to the
full extent authorized or permitted by law with respect to any claim, liability,
action, or proceeding instituted or threatened against or incurred by Executive
or his legal representatives and arising in connection with Executive’s conduct
or position at any time as a director, officer, employee, or agent of the
Company or any subsidiary thereof.  The Company shall not change,
modify, alter, or in any way limit the existing indemnification and
reimbursement provisions relating to and for the benefit of its directors and
officers without the prior written consent of Executive, including any
modification or limitation of any directors and officers liability insurance
policy.

     

    9.04           Waiver. No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a continuing waiver or a waiver of any similar
or dissimilar provisions or conditions at the same or at any prior or subsequent
time. No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party hereto
which are not set forth expressly in this Agreement.

     

    9.05           Unenforceability. The
invalidity or unenforceability of any provision or provisions of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.

    


    
      
        
           


        

        
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    9.06           Counterparts. This
Agreement may be executed in several counterparts, each of which shall be deemed
to be an original and all of which together shall constitute one and the same
instrument.

     

    9.07           Section Headings. The
section headings contained in this Agreement are inserted for reference purposes
only and shall not affect the meaning or interpretation of this
Agreement.

     

    


     

    


     

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    IN WITNESS WHEREOF, the
parties have executed this Agreement as of the date first written
above.

     

    


    COMPANY:

    


    Flotation
Technologies, Inc.

    


    


    


    By:____________________________________

     

    Name:__________________________________

     

    Title:___________________________________

     

    


    


    EXECUTIVE:

    


    


    


    /s/ David A.
Capotosto

    David A.
Capotosto

    


    


    


    FOR
ACKNOWLEDGMENT PURPOSES ONLY:

    


    Deep
Down, Inc.

    


    


    By:  /s/ Ronald E.
Smith

           Ronald
E. Smith

           Chief
Executive Officer

    


    


    


    


    


    


    


    


    [Signature Page to Employment
Agreement between Flotation Technologies, Inc. and David A.
Capotosto]

     

     

     

    11