Document:

helix_8k-ex1001.htm

 

    
      

    

    Exhibit 10.1

     

     

     

     

    EXTENSION
AMENDMENT

     

    WHEREAS,
Kenneth Morgan, Helix Wind, Inc., a Nevada corporation (“Helix Wind”), Ian
Gardner and Scott Weinbrandt entered into a Settlement Agreement and Mutual
Release ("Agreement") dated December 11, 2009;

     

    WHEREAS,
the last sentence of Paragraph 1.00 of the Agreement provides that “In the event
that Helix Wind fails to deliver payment of the Settlement Payment to the Law
Office of Sean Brew prior to January 15, 2010, then this Agreement shall be null
and void ab initio and
the Lock-Up Agreement attached hereto as Exhibit “1” shall be of no force or
effect”;

     

    WHEREAS,
the parties desire to amend the Agreement to extend the Settlement Payment date
to February 12, 2010;

     

    NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which the parties acknowledge, the parties agree that the Agreement shall be
amended to provide that the last sentence of Paragraph 1.00 of the Agreement
shall be deleted and replaced with the following sentence:  “In the
event that Helix Wind fails to deliver payment of the Settlement Payment to the
Law Office of Sean Brew prior to February 12, 2010, then this Agreement shall be
null and void ab initio
and the Lock-Up Agreement attached hereto as Exhibit “1” shall be of no force or
effect.”

    

    IN
WITNESS WHEREOF, this Extension Amendment has been executed by each of the
parties effective as of January 12, 2010.

     

    
       

      
        	 	
                /s/
      Kenneth
      Morgan                         
      

                Kenneth
      Morgan

                

                /s/
      Ian
      Gardner                                   
      

                Helix
      Wind, Inc.

                

                By:  Ian
      Gardner, CEO

                

                /s/
      Ian
      Gardner                                   
      

                Ian
      Gardner

                

                /s/
      Scott
      Weinbrandt                        
      

                Scott
      Weinbrandtdeepdown_8k-ex1001.htm

    Exhibit
10.1

    AMENDED
AND RESTATED

    EMPLOYMENT
AGREEMENT

     

    This
Employment Agreement (this "Agreement") is
entered into as of January 1, 2010 (the "Effective Date"), by
and among Deep Down, Inc., a Nevada corporation (the "Company") and Ronald
E. Smith (the "Executive”).

     

    WITNESSETH:

     

    WHEREAS,
the Company has determined that it is in its best interests and those of its
shareholders to retain the Executive;

     

    WHEREAS,
the Company desires to employ the Executive on the terms set forth below to
provide services to the Company and its affiliated companies, and the Executive
is willing to accept such employment and provide such services on the terms set
forth in this Agreement;

     

    WHEREAS,
the Company and the Executive previously entered into an Employment
Agreement  (the "Employment Agreement") dated and effective as of
August 6, 2007 pursuant to which certain services of the Executive have been
provided to the Company on the terms set forth therein;

     

    WHEREAS,
the Company and the Executive desire to amend and restate the Employment
Agreement and further desire to enter into this Agreement, which has been
drafted to comply with Section 409A of the Internal Revenue Code of 1986,
as amended; and

     

    NOW,
THEREFORE, in consideration of the foregoing and for other good and valuable
consideration, the parties hereto do hereby agree as follows:

     

    1.  Certain
Definitions.

     

    (a) "Affiliate" shall have
the meaning set forth in Rule 12b-2 promulgated under Section 12 of
the Exchange Act.

     

    (b) "Beneficial Owner"
shall have the meaning set forth in Rule 13d-3 under the Exchange
Act.

     

    (c) "Board" shall mean the
Board of Directors of the Company.

     

    (d) "Cause" shall
mean:

     

    (i) the
continued failure of the Executive to substantially perform the Executive's
duties with the Company (other than any such failure resulting from incapacity
due to physical or mental illness), which such failure continues or remains
uncorrected twenty (20) days after a written demand for substantial performance
is delivered to the Executive by the Board which specifically identifies the
manner in which the Executive has not substantially performed the Executive's
duties, or

     

    (ii) a
judicial determination that Executive has engaged in illegal conduct or gross
misconduct which is materially and demonstrably injurious to the
Company.

     

    Any act,
or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or upon the instructions of the Chief Executive Officer or
of a more senior officer of the Company or based upon the advice of counsel for
the Company (which may be counsel employed by the Company or its subsidiaries)
shall be conclusively presumed to not give rise to Cause.

     

     

    
      
        
        

      

      
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    (e) "Change of Control"
shall be deemed to have occurred if any event set forth in any one of the
following paragraphs shall have occurred:

     

    (i) any
Person is or becomes the Beneficial Owner, directly or indirectly, of more than thirty percent (30%)
or more of either (A) the then outstanding shares of common stock of the
Company (the "Outstanding Company Common
Shares") or (B) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting
Securities"), excluding any Person who becomes such a Beneficial Owner in
connection with the issuance of
equity securities directly by Company to such Person in a Board approved equity
financing or otherwise in connection with a transaction that complies
with clauses (A) and (B)  of paragraph (iii) below;

     

    (ii) individuals,
who, as of the date hereof, constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Company's shareholders, was approved by a vote of at least a
majority of the Incumbent Board (including in connection with an
equity financing by the Company or in connection with preparing for a listing of
Company equity securities on a national stock exchange) shall be
considered as though such individual was a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or any other actual or
threatened solicitation of proxies or consents by or on behalf of a Person other
than the Board; or

     

    (iii) the
consummation of a reorganization, merger, amalgamation, consolidation, scheme of
arrangement, exchange offer or similar transaction of the Company or any of its
subsidiaries or the sale, transfer or other disposition of all or substantially
all of the Company's Assets (each, a "Business
Combination"), unless, following such Business Transaction or series of
related Business Transactions, as the case may be, (A) individuals and
entities (which, for purposes of this Agreement, shall include, without
limitation, any corporation, partnership, association, joint-stock company,
limited liability company, trust, unincorporated organization or other business
entity) who were the beneficial owners, respectively, of more than fifty percent (50%) of,
respectively, the Outstanding Company Common Shares and Outstanding
Company Voting Securities immediately prior to such Business Transaction
beneficially own, directly or indirectly, more than fifty percent (50%) of,
respectively, the then outstanding common shares and the combined voting power
of the then outstanding voting securities entitled to vote generally in the
election of directors (or other governing body), as the case may be, of the
entity resulting from such Business Transaction (including, without limitation,
an entity which as a result of such transaction owns the Company or all or
substantially all of the Company's Assets either directly or through one
(1) or more subsidiaries or entities), as the case may be, (B) no
person (excluding any entity resulting from such Business Transaction or any
employee benefit plan (or related trust) of the Company or such entity resulting
from such Business Transaction) beneficially owns, directly or indirectly, twenty-five percent (25%) or
more of, respectively, then the outstanding shares of common stock of the entity
resulting from such Business Transaction or the combined voting power of the
then outstanding voting securities of such entity except to the extent that such
ownership existed prior to the Business Transaction, and (C) at least a majority the members of the
board of directors (or other governing body) of the entity resulting from such
Business Transaction were members of the Incumbent Board at the time of the
approval of such Business Transaction; or

     

     

    
      
        
        

      

      
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    (iv) approval
or adoption by the Board of Directors or the shareholders of the Company of a
plan or proposal which would result directly or indirectly in the liquidation,
transfer, sale or other disposal of all or substantially all of the Company's
Assets or the dissolution of the Company.

     

    (f) "Company" shall mean
Deep Down, Inc., a Nevada corporation, or any successor thereto, including (but
not limited to) any Entity into which Deep Down, Inc. is merged, consolidated or
amalgamated, or any Entity otherwise resulting from a Business
Transaction.

     

    (g) "Company's Assets"
shall mean the assets (of any kind) owned by the Company, including (but not
limited to) the securities of the Company's Subsidiaries and any of the assets
owned by the Company's Subsidiaries.

     

    (h) "Disability" shall
mean the absence of the Executive from performance of the Executive's duties
with the Company on a substantial basis for one hundred twenty
(120) calendar days within any 12-month period as a result of incapacity
due to mental or physical illness.

     

    (i) "Employment Period"
shall mean the period commencing on the Effective Date and ending on the third
anniversary of the Effective Date; provided, however, that commencing on
the third anniversary of the Effective Date, and on each annual anniversary of
such date (such date and each annual anniversary thereof shall be hereinafter
referred to as the "Renewal Date"),
unless previously terminated, the Employment Period shall be automatically
extended for an additional annual period(s) (until the next annual anniversary
of the Effective Date), unless, at least ninety (90) days prior to the
applicable Renewal Date, the Company shall give notice to the Executive that the
Employment Period shall not be so extended.

     

    (j) "Entity" shall mean
any corporation, partnership, association, joint-stock company,
limited-liability company, trust, unincorporated organization or other business
entity.

     

    (k) "Exchange Act" shall
mean the Securities Exchange Act of 1934, as amended.

     

    (l) "Good Reason" shall
mean the occurrence of any of the following:

     

    (i) except
as provided herein regarding a Change of Control, the assignment to the
Executive of any position, authority, duties or responsibilities that are not
materially consistent with the Executive's position (including status, offices
and titles), authority, duties or responsibilities as contemplated by Section 3(a) of this
Agreement, or any other action by the Company which results in a material
diminution in such position, authority, duties or responsibilities, excluding
for this purpose any action not taken in bad faith and which is remedied by the
Company after receipt of notice thereof given by the Executive;

     

    (ii) any
material failure by the Company to comply with any of the material provisions of
this Agreement (including, without limitation, its obligations under Section 3(a)) or
any other agreements between the Executive and the Company, other than any
failure not occurring in bad faith and which is remedied by the Company after
receipt of notice thereof given by the Executive;

     

     

    
      
        
        

      

      
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    (iii) any
material reduction to Executive's Annual Base Salary (as such term is defined in
Section 3(b)) or Executive's bonus, retirement, pension, savings, life
insurance, medical, health and accident, or disability plans;

     

    (iv) the
Company's requiring the Executive to be based at any office or location other
than as provided in Section 3(a)(i)
hereof;

     

    (v) any
failure by the Company to comply with and satisfy Section 9(b) of
this Agreement;

     

    (vi) the
failure of Executive and Company to mutually agree to the criteria, terms and
conditions for calculation of the Annual Bonus (as defined in
Section 3(b)(ii) within thirty (30) days after the date such criteria are
communicated to Executive.

     

    In the
event of a Change of Control or other Business Transaction, following the Change
of Control or the consummation of such other Business Transaction, "Good Reason"
shall be deemed to exist in the event Executive is assigned to any position,
authority, duties or responsibilities that are (A) not at or with the ultimate
parent company of the successor to the Company or the Entity surviving or
resulting from such Business Transaction, or (b) materially inconsistent with
the Executive's position (including status, offices, titles and excluding
Executive's reporting requirements), authority, duties or responsibilities as
contemplated by Section 3(a).

     

    (m) "IRS" shall mean the
Internal Revenue Service.

     

    (n) "Person" shall have
the meaning given in Section 3(a)(9) of the Exchange Act, as modified and
used in Sections 13(d) and 14(d) thereof, except that such term shall not
include (i) the Company or any of its Subsidiaries, (ii) a trustee or
other fiduciary holding securities under an employee benefit plan of the Company
or any of its Affiliates, (iii) an underwriter temporarily holding
securities pursuant to an offering by the Company of such securities, or
(iv) a corporation or other Entity owned, directly or indirectly, by the
shareholders of the Company in the same proportions as their ownership of
Outstanding Company Common Shares.

     

    (o) "Section 409A"
means Section 409A of the Internal Revenue Code of 1986, as
amended.

     

    (p) "Section 409A
Amounts" means those amounts that are deferred compensation subject to
Section 409A.

     

    (q) "Separation From
Service" shall have the meaning ascribed to such term in
Section 409A.

     

    (r) "Subsidiary" shall
mean any majority-owned subsidiary of the Company or any majority-owned
subsidiary thereof, or any other Entity in which the Company owns, directly or
indirectly, a majority of the economic interest therein.

     

    2.  Employment
Period. The Company and Executive hereby agree that unless this Agreement
is earlier terminated as provided for herein, the Company will continue to
employ throughout the Employment Period.

     

    3.  Terms of
Employment.

     

    (a) Position and
Duties.

     

    (i) During
the Employment Period, the Executive's position (including status, offices,
titles, authority, duties and responsibilities) shall be President of the
Company. The Executive’s services shall be performed at the location where the
Executive was employed immediately preceding the Effective Date or any office or
location less than thirty-five (35) miles from such location.

     

     

    
      
        
        

      

      
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    (ii) During
the Employment Period, and excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees to devote reasonable
attention and time during normal business hours for a similarly situated
executive to the reasonable business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities.  During the Employment Period
it shall not be a violation of this Agreement for the Executive to (A) serve on
corporate, civic or charitable boards or committees, (B) deliver lectures,
fulfill speaking engagements or teach at educational institutions and
(C) manage personal investments, so long as such activities in clause (A),
(B), and (C) together do not significantly interfere with the performance
of the Executive's responsibilities as an employee of the Company in accordance
with this Agreement.  It is expressly understood and agreed that to
the extent that such activities have been conducted by the Executive prior to
the date hereof, and are listed on Exhibit A, the continued
conduct of such activities (or the conduct of activities similar in nature and
scope thereto) subsequent to the date hereof shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company.

     

    (b) Compensation.

     

    (i) Base
Salary.  During the Employment Period, the Executive shall
receive an annualized base salary (the "Annual Base Salary"), which shall be
paid at a monthly rate, at least equal to twelve (12) times the highest monthly
base salary paid or payable, including any base salary which has been earned but
deferred, to the Executive by the Company and its affiliated companies in
respect of the twelve-month period immediately preceding the month in which the
Effective Date occurs.  During the Employment Period, the Annual Base
Salary shall be reviewed no more than twelve (12) months after the last salary
increase awarded to the Executive prior to the Effective Date and thereafter at
lease annually.  Any increase in the Annual Base Salary may not serve
to limit or reduce any other obligation to the Executive under this
Agreement.  The Annual Base Salary shall not be reduced after any such
increase and the Annual Base Salary as utilized in this Agreement shall refer to
the Annual Base Salary as so increased.

     

    (ii) Annual
Bonus.  In addition to the Annual Base Salary, the Executive
shall be awarded, for each fiscal year during the Employment Period, an annual
bonus (the "Annual Bonus") in cash.  Within the first three (3) months
of each fiscal year, the Board shall propose the criteria, terms and conditions
for meeting the targets (i) in the Company's Executive Officer Annual Incentive
Program, provided that the Executive’s target shall be at least equal to the
Executive’s target for the fiscal year prior to the Effective Date or equal to
an increase in the target given to any other peer executive after the Effective
Date, or if higher, (ii) under any annual incentive plan or discretionary award
by the Company to other peer executives which is enacted or approved after the
Effective Date.  The Annual Bonus will be paid no later than two and a
half months after the end of the fiscal year following the fiscal year for which
the Annual Bonus is awarded, unless the Executive shall elect to defer the
receipt of such Annual Bonus pursuant to an arrangement which meets the
requirements of Section 409A of the Internal Revenue Code of 1986, as
amended.

     

     

    
      
        
        

      

      
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    (iii) Incentive, Savings and
Retirement Plans.  During the Employment Period, the Executive
shall be eligible to participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other peer executives
of the Company, but in no event shall such plans, practices, policies and
programs provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to the extent, if
any, that such distinction is applicable), savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the whole, than the most
favorable of those provided by the Company for the Executive under such plans,
practices, policies and programs as in effect at any time during the 120-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company, subject to the terms and conditions of the
applicable plans, practices, policies and programs.

     

    (iv) Welfare Benefit
Plans.  During the Employment Period, the Executive and/or the
Executive's family, as the case may be, shall be eligible to participate in all
welfare benefit and retirement plans, practices, policies and programs provided
by the Company; including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and
travel accident insurance plans and programs (the “Plans”) from time to time to
the extent applicable generally to, and no less favorable than those provided to
other peer executives at any time during the 120-day period immediately
preceding the Effective Date or, if more favorable to the Executive, those
provided generally at any time after the Effective Date to other peer executives
of the Company. The Company shall pay 100% of all premiums with respect to such
Plans.

     

    (v) Fringe
Benefits.  During the Employment Period, the Executive shall be
entitled to such fringe benefits (including, without limitation, payment of
cellular telephone, vehicle allowance, payment of club dues, payment of
professional fees and taxes and related expenses, as appropriate) in accordance
with the plans, practices, programs and policies of the Company for other peer
executives at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive, those provided generally
at any time after the Effective Date to other peer executives of the
Company.  Notwithstanding the foregoing, no amounts shall be payable
under this Section 3(b)(v)
to the extent that such amounts are Section 409A Amounts.

     

    (vi) Expenses.  During
the Employment Period, the Executive shall be entitled to receive prompt
reimbursement for all reasonable business expenses incurred by the Executive
subject to the terms of the Company's applicable expense reimbursement policies
applicable to other peer executives at any time during the 120-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
those provided generally at any time after the Effective Date to other peer
executives of the Company.  Notwithstanding the foregoing, no amounts
shall be payable under this Section 3(b)(vi)
to the extent that such amounts are Section 409A Amounts.

     

    (vii) Vacation.  During
the Employment Period, the Executive shall be entitled to up to four
(4) weeks paid vacation per calendar year or such greater amount of paid
vacation as may be applicable generally to other peer executives at any time
during the 120-day period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company.  To the extent
not used in any fiscal year, Executive may carry over up to eight (8) weeks of
paid vacation to a subsequent calendar year.

     

     

    
      
        
        

      

      
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    (viii) Legal
Fees.  In the event of any dispute between Company and
Executive as to the validity or enforceability of, or liability under, any
provision of this Agreement or any guarantee of performance of this Agreement,
Executive shall be entitled to reimbursement of all legal fees and expenses
incurred by him, if Executive is the prevailing party in any such dispute, or
any litigation, arbitration or other proceedings arising out of such
dispute.

     

    (c) Certain Additional Payments
by the Company.

     

    (i) Anything
in this Agreement to the contrary notwithstanding, if it shall be determined
that any payment or distribution by the Company or any of its affiliated
companies to or for the benefit of the Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement, any other
plan, agreement or contract or otherwise, but determined without regard to any
additional payments required under this Section 3(c)) (a
“Payment”)
would be subject to any additional tax or excise tax imposed by sections 409A,
457A or 4999 of the Code (and any successor provisions or sections to sections
409A, 457A and 4999) or any interest or penalties are incurred by the Executive
with respect to such excise tax (such excise tax, together with any such
interest and penalties, are hereinafter collectively referred to as the “Excise Tax”), then
the Executive shall be entitled to promptly receive from the Company an
additional payment (a “Gross-Up Payment”) in
an amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without
limitation, any income taxes (and any interest and penalties imposed with
respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Executive
retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payments.  Any Gross Up Payment shall be made by the Company at
least 10 days prior to the date that the Executive is required to remit to
the relevant taxing authority any federal, state and local taxes imposed upon
the Executive, including the amount of additional taxes imposed upon the
Executive due to the Company’s payment of the initial taxes on such
amounts.  Notwithstanding any provision of this Agreement to the
contrary, any amounts to which the Executive would otherwise be entitled under
this Section
3(c)(i) during the first six months following the date of the Executive’s
Separation From Service shall be accumulated and paid to the Executive on the
date that is six months following the date of his Separation From
Service.  All reimbursements by the Company under this Section 3(c)(i) shall
be paid no later than the earlier of (i) the time periods described above
and (ii) the last day of the Executive’s taxable year next following the
taxable year in which the expense was incurred.

     

    (ii) Subject
to the provisions of Section 3(c)(iii),
all determinations required to be made under this Section 3(c),
including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such
determination shall be made by PricewaterhouseCoopers or, as provided below,
such other certified public accounting firm as may be designated by the
Executive (the “Accounting Firm”)
which shall provide detailed supporting calculations both to the Company and the
Executive within fifteen (15) business days after the receipt of notice
from the Executive that there has been a Payment, or such earlier time as is
requested by the Company.  In the event that the Accounting Firm is
serving as accountant or auditor for the individual, entity or group effecting a
Change of Control, the Executive shall appoint another nationally recognized
accounting firm to make the determinations required hereunder (which accounting
firm shall then be referred to as the Accounting Firm hereunder).  All
fees and expenses of the Accounting Firm shall be borne solely by the
Company.  Any Gross-Up Payment, as determined pursuant to this Section 3(c),
shall be paid by the Company to the Executive within five (5) days after
the receipt of the Accounting Firm’s determination.  Any determination
by the Accounting Firm, absent manifest error, shall be binding upon the Company
and the Executive, subject to the last sentence of Section 3(c)(i),
and in no event later than the payment deadline specified in Section 3(c)(i).  As
a result of the uncertainty in the application of section 4999 of the Code at
the time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made (“Underpayment”),
consistent with the calculations required to be made hereunder.  In
the event that the Company exhausts its remedies pursuant to Section 3(c)(iii) and
the Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive, subject to the last sentence of Section 3(c)(i),
and in no event later than the payment deadline specified in Section 3(c)(i).

     

     

    
      
        
        

      

      
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    (iii) The
Executive shall notify the Company in writing of any claim by the IRS that, if
successful, would require the payment by the Company of the Gross-Up Payment (or
an additional Gross-Up Payment) in the event the IRS seeks higher
payment.  Such notification shall be given as soon as practicable, but
no later than ten (10) business days after the Executive is informed in writing
of such claim, and shall apprise the Company of the nature of such claim and the
date on which such claim is requested to be paid.  The Executive shall
not pay such claim prior to the expiration of the thirty (30)-day period
following the date on which he gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due).  If the Company notifies the Executive in writing prior to
the expiration of such period that it desires to contest such claim, the
Executive shall:

     

    (A) give
the Company any information reasonably requested by the Company relating to such
claim,

     

    (B) take
such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company,

     

    (C) cooperate
with the Company in good faith in order to effectively contest such claim,
and

     

    
      
        
        

      

      
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    (D) permit
the Company to participate in any proceedings relating to such claims; provided, however, that the Company
shall bear and pay directly all costs and expenses (including additional
interest and penalties) incurred at any time during the period that ends ten
(10) years following the lifetime of the Executive in connection with such
proceedings and shall indemnify and hold the Executive harmless, on an after-tax
basis, for any Excise Tax or income tax (including interest and penalties with
respect thereto) imposed as a result of such representation and payment of costs
and expenses.  Without limitation on the foregoing provisions of this
Section 3(c)(iii),
the Company shall control all proceedings taken in connection with such contest
and, at its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing authority in
respect of such claim and may, at its sole option, either direct the Executive
to pay the tax claimed and sue for a refund or contest the claim in any
permissible manner, and the Executive agrees to prosecute such contest to
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as the Company shall
determine; provided,
however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided that any extension
of the statute of limitations relating to payment of taxes for the taxable year
of the Executive with respect to which such contested amount is claimed to be
due is limited solely to such contested amount.  The Company shall not
direct the Executive to pay such a claim and sue for a refund if, due to the
prohibitions of section 402 of the Sarbanes-Oxley Act of 2002, the Company may
not advance to the Executive the amount necessary to pay such
claim.  All such costs and expenses shall be made by the Company at
least ten (10) days prior to the date that the Executive is required to pay
or incur such costs and expenses.  The costs and expenses that are
subject to be paid by the Company pursuant to this Section 3(c)(iii)
shall not be limited as a result of when the costs or expenses are
incurred.  The amounts of costs or expenses that are eligible for
payment pursuant to this Section 3(c)(iii)(D)
during a given taxable year of the Executive shall not affect the amount of
costs or expenses eligible for payment in any other taxable year of the
Executive.  The right to payment of costs and expenses pursuant to
this Section 3(c)(iii)(D)
is not subject to liquidation or exchange for another
benefit.  Notwithstanding any provision of this Agreement to the
contrary, any amounts to which the Executive would otherwise be entitled under
this Section
3(c)(iii)(D) during the first six months following the date of the
Executive’s Separation From Service shall be accumulated and paid to the
Executive on the date that is six months following the date of his Separation
From Service.  All reimbursements by the Company under this Section 3(c)(iii)(D)
shall be paid no later than the earlier of (i) the time periods described
above and (ii) the last day of the Executive’s taxable year next following
the taxable year in which the expense was incurred.

     

    (iv) If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 3(c)(iii),
the Executive becomes entitled to receive any refund with respect to such claim,
the Executive shall (subject to the Company’s complying with the requirements of
Section 3(c)(iii))
promptly pay to the Company the amount of such refund (together with any
interest paid or credited thereon after taxes applicable
thereto).  If, after the receipt by the Executive of an amount
advanced by the Company pursuant to Section 3(c)(iii),
a determination is made that the Executive shall not be entitled to any refund
with respect to such claim and the Company does not notify the Executive in
writing of its intent to contest such denial of refund prior to the expiration
of thirty (30) days after such determination, then such advance shall not
be required to be repaid.

     

    (v) Any
provision in this Agreement or any other plan or agreement to the contrary
notwithstanding, if the Company is required to pay a Gross-Up Payment pursuant
to the provisions of this Agreement and pursuant to the provisions of another
plan or agreement, then the Company shall pay the total of the amounts
determined pursuant to this Agreement and the provisions of such other plan or
agreement.

     

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    4.  Termination
of Employment.

     

    (a) Death or Disability.
The Executive's employment shall terminate automatically upon the Executive's
death during the Employment Period.  If the Company determines in good
faith that the Disability of the Executive has occurred during the Employment
Period, it may provide the Executive with written notice in accordance with this
Agreement of its intention to terminate the Executive's
employment.  In such event, the Executive's employment with the
Company shall terminate effective thirty (30) days after receipt of such
notice by the Executive (the "Disability Effective
Date"), provided that within the thirty (30)-day period after such
receipt, the Executive shall not have returned to full-time performance of the
Executive's duties.  In addition, if a physician selected by the
Executive determines that the Disability of the Executive has occurred, the
Executive (or his representative) may provide the Company with written notice in
accordance with this Agreement of the Executive's intention to terminate his
employment.  In such event, the Disability Effective Date shall be
thirty (30) days after receipt of such notice by the Company.

     

    (b) Cause.  The
Company may terminate the Executive's employment during the Employment Period
for Cause.

     

    (c) Good
Reason.  The Executive's employment may be terminated by the
Executive at any time during the Employment Period for Good Reason.

     

    (d) By the Company without
Cause.  The Executive's employment may be terminated by the
Company at any time during the Employment Period without Cause and not pursuant
to the provisions of Section 4(a) above, at any time upon providing Executive a
Notice of Termination pursuant to Section 4(f) below.

     

    (e) By the Executive without
Good Reason.  The Executive's employment may be terminated by
the Executive at any time during the Employment Period without good Reason at
any time upon providing the Company a Notice of Termination pursuant to Section
4(f) below.

     

    (f) Notice of
Termination.  Any termination by one party during the
Employment Period for any reason other than Executive's death shall be
communicated by Notice of Termination to the other party hereto given in
accordance with Section 10(d) of this
Agreement.  For purposes of this Agreement, a "Notice of
Termination" means a written notice which (i) indicates the specific
termination provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated and (iii) if the Date of Termination (as defined
below) is other than the date of receipt of such notice, specifies the
termination date (which date, in the case of a notice by the Company for
termination pursuant to Section 4(d), or by the Executive for termination
pursuant to Section 4(e), shall be at least thirty (30) days after the
giving of such notice; provided, however that in the
event of a termination by Executive pursuant to Section 4(e), the Company may
accept Executive's resignation and terminate his employment prior to the
termination date set forth in the Notice of Termination).  The failure
by the Executive or the Company to set forth in the Notice of Termination any
fact or circumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of the Executive or the Company, respectively, from
asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.

     

    (g) Date of
Termination.  "Date of Termination"
shall mean:

     

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    (i) if
the Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be;

     

    (ii) if
the Executive's employment is terminated by the Company other than for Cause or
by the Executive without Good Reason, the Date of Termination shall be the
termination date specified in the Notice of Termination, unless an earlier date
is designated by the Company in the event of Executive's termination without
Good Reason; and

     

    (iii) if
the Executive's employment is terminated by reason of death or Disability, the
Date of Termination shall be the date of death of the Executive or the
Disability Effective Date, as the case may be.

     

    5.  Obligations
of the Company Upon Termination.

     

    (a) Benefit Obligation and
Accrued Obligation Defined.  For purposes of this Agreement,
"Benefit
Obligation" shall mean all benefits to which the Executive (or his
designated beneficiary or legal representative, as applicable) is entitled or
has become vested (or becomes entitled or vested as a result of termination)
under the terms of all employee benefit and compensation plans, agreements and
arrangements (collectively, "Benefit Plans") in
which the Executive is a participant as of the Date of
Termination.  "Accrued Obligation"
means the sum of (x) the Executive's Annual Base Salary through the Date of
Termination for periods through but not following his Separation From Service
and (y) any accrued vacation pay earned by the Executive subject to any
applicable Company policies on carryover of accrued vacation pay, and in each
case, to the extent not theretofore paid.

     

    (b) Death,
Disability.  If, during the Employment Period, the Executive's
employment is terminated by reason of the Executive's death or
Disability:

     

    (i) the
Company shall pay to the Executive (or Executive's heirs, beneficiaries or
representatives, as applicable) in a lump sum in cash, within thirty
(30) days after the Date of Termination, the Accrued Obligation;
and

     

    (ii) the
Company shall pay or cause the Executive (or Executive's heirs, beneficiaries or
representative, as applicable) to be paid the Benefit Obligation at the times
specified in and in accordance with the terms of the applicable Benefit
Plans.

     

    (c) Good Reason or Other Than
for Cause.  If, during the Employment Period, the Executive is
terminated by the Executive for Good Reason or by the Company for any reason
other than for Cause, then:

     

    (i) The
Company shall pay to the Executive, at the times specified in Section 5(c)(ii)
below, the following amounts:

     

    (A) the
Accrued Obligation,

     

    (B) the
Benefit Obligation,

     

    (C) a
lump sum in cash equal to one (1) times the Executive's Annual Base Salary (at
the rate in effect as of the Date of Termination); provided, however, that if such
termination occurs prior to the date that is twelve (12) months following a
Change of Control, then the amount of such lump sum cash payment shall be equal
to three (3) times the Executive's Annual Base Salary (at the rate in effect as
of the Date of Termination),

     

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    (D) a
lump sum in cash equal to the average annual bonus paid to the Executive for the
prior two (2) full fiscal years preceding the Date of Termination; provided, however, that if such
termination occurs prior to the date that is twelve (12) months following a
Change of Control, then the amount of such lump sum cash payment shall be equal
to two (2) times the average Annual Bonus paid to the Executive for the prior
two (2) full fiscal years preceding the Date of Termination,

     

    (E) a
lump sum in cash equal to a pro rata portion of the
Annual Bonus payable for the period in which the Date of Termination occurs
based on actual performance under the Company's annual incentive bonus
arrangement; provided, however, that such pro rata portion shall be
calculated based on Executive's Annual Bonus for the previous fiscal year;
provided, further that if no previous Annual Bonus has been paid to
ex-Executive, then the lump sum cash payment shall be no less than fifty (50)
percent of Executive’s Annual Base Salary, and

     

    (F) if
such termination occurs prior to the date that is twelve (12) months following a
Change of Control, then each and every share option, restricted share award and
other equity-based award that is outstanding and held by the Executive shall
immediately vest and become exercisable.

     

    (ii) The
Company shall pay the Executive the Benefit Obligation at the times specified in
and in accordance with the terms of the applicable Benefit Plans.  The
Company shall pay the Executive the amounts described under Section 5(c)(i)(A)
within thirty (30) days after the Date of Termination.  The Company
shall pay to the Executive the amounts or benefits described in Sections 5(c)(i)(C)
and 5(c)(i)(D)
within ninety (90) days following
the date of Executive's Separation From Service if he is not a Specified
Employee or on the date that is six (6) months following the date of his
Separation From Service if he is a Specified Employee.  The term
"Specified
Employee" means a person who is a "specified employee" within the meaning
of Section 409A.  Amounts payable pursuant to Section 5(c)(i)(E) will
be paid at time payment is made to employees generally pursuant to the terms of
the Company's annual incentive bonus arrangement or, if Executive is a Specified
Employee, on the date that is six (6) months following the date of his
Separation From Service, if later.

     

    (iii) Payments
to the Executive under this Section 5(c) (other
than the Accrued Obligation and the Benefit Obligation) are contingent upon the
Executive's execution (and non-revocation) of a release substantially in the
form of Exhibit
A hereto no later than sixty (60) days following Executive's Separation
From Service.

     

    (d) Cause.  If
the Executive's employment is terminated by the Company for Cause during the
Employment Period, this Agreement shall terminate without further obligations to
the Executive, other than the obligation to pay to the Executive (x) the
Accrued Obligation and (y) the Benefit Obligation in accordance with the
terms of the applicable Benefit Plans.  In such case, the Accrued
Obligation shall be paid to the Executive in a lump sum in cash within thirty
(30) days after the Date of Termination and the Benefit Obligation shall be
paid in accordance with the terms of the applicable Benefit Plans.

     

    (e) Termination by Executive
Other Than for Good Reason.  If the Executive voluntarily
terminates his employment during the Employment Period for any reason other than
for Good Reason, the Executive's employment shall terminate without further
obligations to the Executive, other than for payment of the Accrued Obligation
and the Benefit Obligation and the rights provided in Section
6.  In such case, the Accrued Obligation shall be paid to the
Executive in a lump sum in cash within thirty (30) days after the Date of
Termination and the Benefit Obligation shall be paid in accordance with the
terms of the applicable Benefit Plans.

     

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    (f) General.  Notwithstanding
anything herein to the contrary, if the Executive is a Specified Employee on the
date of his Separation From Service, any payments or benefits hereunder that are
deferred compensation subject to Section 409A, are payable upon his Separation
From Service, and are not otherwise exempt from Section 409A, shall not be paid
during the six-month period commencing on the date after the Executive's
Separation From Service (the "Waiting Period"), and
on the first business day following the expiration of the Waiting Period all
payment and benefits that were payable during the Waiting Period will be paid to
the Executive in a cash lump sum payment, without interest, and thereafter
payments and benefits will be paid as provided herein.

     

    6.  Other
Rights.  Except as provided herein, nothing in this Agreement
shall prevent or limit the Executive's continuing or future participation in any
plan, program, policy or practice provided by the Company and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under any contract or agreement with the
Company.  Except as otherwise provided herein, amounts which are
vested benefits, which vest according to the terms of this Agreement or which
the Executive is otherwise entitled to receive under any of the Benefit Plans or
any other plan, policy, practice or program of or any contract or agreement with
the Company or any of its affiliated companies at or subsequent to the Date of
Termination shall be payable in accordance with such plan, policy, practice or
program or contract or agreement.

     

    7.  Full
Settlement.

     

    (a) No Rights of
Offset.  The Company’s obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any set-off, counterclaim, recoupment, defense or other
claim, right or action which the Company may have against the Executive or
others.

     

    (b) No Mitigation
Required.  The Company agrees that, if the Executive’s
employment with the Company terminates, the Executive is not required to seek
other employment or to attempt in any way to reduce any amounts payable to the
Executive by the Company pursuant to this Agreement.  Further, the
amount of any payment or benefit provided for in this Agreement shall not be
reduced by any compensation earned by the Executive as the result of employment
by another employer, by retirement benefits, by offset against any amount
claimed to be owed by the Executive to the Company, or otherwise.

     

    8.  Confidential
Information; Non-Competition; Non-Solicitation.

     

    (a) Confidential
Information.  As a condition of Executive's employment
hereunder, the Company agrees to provide Executive with, and to give him access
to, Confidential Information.  The Executive shall hold in a fiduciary
capacity for the benefit of the Company all trade secrets, confidential
information, knowledge and data relating to the Company, its Subsidiaries and
their respective businesses, affiliates employees, partners, managers, agents
and representatives, which shall have been obtained by the Executive during the
Executive's employment by the Company and/or its Subsidiaries which shall not
have been or hereafter become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement)
(hereinafter being collectively referred to as "Confidential
Information").  After termination of the Executive's employment
with the Company, the Executive shall not, without the prior written consent of
the Company or as may otherwise be required by law or legal process,
communicate, use, disclose or divulge any such trade secrets, information,
knowledge or data to anyone other than the Company and those designated by the
Company.  Any termination of the Executive's employment or of this
Agreement shall have no effect on the continuing operation of this Section 8(a).  The
Executive agrees to return all Confidential Information, including all
photocopies, extracts and summaries thereof, and any such information stored
electronically on tapes, computer disks or in any other manner to the Company at
any time upon request by the Company and upon the termination of his employment
hereunder for any reason.  In no event shall an asserted violation of
the provision of this Section 8(a)
constitute a basis for deferring or withholding any amounts otherwise payable to
the Executive under this Agreement.

     

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    (b) Non-Competition.  [During
the Employment Period and for one (1) year immediately following (such period
following the Employment Period, the “Restricted Period”), the Executive shall
not engage in Competition, as defined below, with the Company; provided, that it
shall not be a violation of this Section 9(b) for the Executive to become the
registered or beneficial owner of up to five percent (5%) of any class of the
capital stock of a corporation registered under the Securities Exchange Act of
1934, as amended, provided that the Executive does not actively participate in
the business of such corporation until such time as this covenant
expires.

     

    For
purposes of this Agreement, “Competition” by the Executive means the Executive’s
engaging in, or otherwise directly or indirectly being employed by or acting as
a consultant or lender to, or being a director, officer, employee, principal,
agent, stockholder, member, owner or partner of, or permitting his name to be
used in connection with the activities of any other business or organization
which competes, directly or indirectly, with the business of the Company as the
same shall be constituted at any time during the Term.

     

    (c) Non-Solicitation;
Non-Interference.  During the Employment Period and the one
year immediately following the termination of the Executive's employment with
the Company for any reason (the "Restricted Period"),
the Executive agrees that he will not, directly or indirectly, for his benefit
or for the benefit of any other person, firm or Entity, do any of the
following:

     

    (i) solicit
from any customer doing business with the Company or any of its Subsidiaries, as
of the Date of Termination, business of the same or of a similar nature to the
business of the Company or any of its Subsidiaries with such
customer;

     

    (ii) solicit
from any potential customer (that is known to the Executive) of the Company or
any of its Subsidiaries business of the same or of a similar nature to that
which has been the subject of a known written or oral bid, offer or proposal by
the Company or any of its Subsidiaries, or of substantial preparation with a
view to making such a bid, proposal or offer, within six (6) months prior
to such Date of Termination;

     

    (iii) solicit
the employment or services of any person employed by or a consultant to the
Company upon the Date of Termination, or within six (6) months prior thereto
(provided, however, that the provisions
hereof shall be deemed not to prohibit the Executive, on the Executive's behalf
or on behalf of other persons, firms or Entities, from placing advertisements in
newspapers or other media of general circulation advertising employment
opportunities and offering employment to individuals responding to those
advertisements); or

     

    (iv) otherwise
knowingly interfere with the business or accounts of the Company or any of its
Subsidiaries.

     

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    (d) General.  The
Executive and the Company agree and acknowledge that the Company has a
substantial and legitimate interest in protecting the Company's and its
Subsidiaries' Confidential Information and goodwill.  The Executive
and the Company further agree and acknowledge that the provisions of this Section 8 are
necessary to protect the Company's legitimate business interests and are
designed to protect the Company's and its Subsidiaries' Confidential Information
and goodwill.  The Executive agrees that the scope of the restrictions
as to time, geographic area, and scope of activity in this Section 8 are
necessary for the protection of the Company's legitimate business interests and
are not oppressive or injurious to the public interest.  The Executive
agrees that in the event of a breach or threatened breach of any of the
provisions of this Section 8 the Company shall be entitled to injunctive
relief against the Executive's activities to the extent allowed by law, and the
Executive waives any requirement for the posting of any bond by the Company in
connection with such action.  The Executive further agrees that any
breach or threatened breach of any of the provisions of Section 8 would cause
injury to the Company for which monetary damages alone would not be a sufficient
remedy.  The Executive hereby agrees that the period during which the
agreements and covenants of the Executive made in Section 8(b) shall be
effective shall be computed by excluding from such computation any time during
which the Executive is in violation of any provision of Section
8(b).

     

    (e) Inventions.  The
Executive shall disclose promptly to the Company any and all significant
conceptions and ideas for inventions, improvements and valuable discoveries,
whether patentable or not, which are (i) conceived or made by the Executive,
solely or jointly with another, during the Employment Period, (ii) directly
related to the business or activities of the Company or its Subsidiaries, and
(iii) conceived by the Executive as a result of the Executive's employment by
the Company (hereafter “Invention”).  The Executive hereby assigns and
agrees to assign the Executive's interest in any such Invention, improvement or
valuable discovery to the Company or its nominee.  Whenever requested
to do so by the Company, the Executive shall execute any and all applications,
assignments or other instruments that the Company shall deem necessary
to  protect the Company's or any Subsidiary's interest in any such
Invention, improvement or valuable discovery.

     

    9.  Successors.  This
Agreement, and any rights and obligations hereunder, is personal to the
Executive and shall not be assignable by the Executive otherwise than by will or
the laws of descent and distribution.  This Agreement shall inure to
the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.

     

    10.  Miscellaneous.

     

    (a) Waivers and
Amendments.  This Agreement may be amended, superseded,
canceled, renewed or extended, and the terms and conditions hereof may be
waived, only by a written instrument signed by the Executive and the Company or,
in the case of a waiver, by the party waiving compliance.  No delay on
the party of any party in exercising any right, power or privilege hereunder
will operate as a waiver thereof, nor will any waiver on the part of any party
of any such right, power or privilege hereunder, not any single or partial
exercise of any right, power or privilege hereunder, preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder.  Notwithstanding anything herein to the contrary, the
Company may amend this Agreement in writing in any manner so that payments or
benefits hereunder comply with or continue to be exempt from Section 409A,
including, but not limited to, (i) adding a requirement that no payment or
benefits due on account of the Executive's Separation From Service shall be paid
during the six-month period commencing on the Executive's Date of Termination
and (ii) making payment of any amounts due to the Executive hereunder such that
any such payment is exempt from Section 409A (including making payment as soon
as administratively practicable, within the meaning of Section 409A, for such
purpose).

     

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    (b) Governing
Law.  THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS, WITHOUT REFERENCE TO PRINCIPLES
OF CONFLICT OF LAWS.

     

    (c) Headings.  The
captions of this Agreement are not part of the provisions hereof and shall have
no force or effect.

     

    (d) Notices.  All
notices and other communications hereunder shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, postage prepaid, addressed as follows:

     

    

    
      	 
      	 
      	
              If
      to the Executive:

            	
              Ronald
      E. Smith

              at
      the address set forth in his personnel file at Deep Down,
    Inc.

            
	 
      	 
      	 
      	 
      
	 
      	 
      	
              If
      to the Company:

            	
              Deep
      Down, Inc.

              8827
      W. Sam Houston Pkwy N., Suite 100

              
                Houston,
      Texas 77040

                
                  Attention:
      General Counsel

                

              

            

    

     

    or to
such other address as either party shall have furnished to the other in writing
in accordance herewith.  Notices and communications shall be effective
when actually received by the addressee.

     

    (e) Validity.  The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this
Agreement.

     

    (f) Withholding.  The
Company may withhold from any amounts payable under this Agreement such Federal,
state, local or foreign taxes as shall be required to be withheld pursuant to
any applicable law or regulation.

     

    (g) Entire
Agreement.  This Agreement constitutes the entire agreement and
understanding between the parties relating to the subject matter hereof and
supersedes all prior agreements between the parties relating to the subject
matter hereof.

     

    (h) Deferred Compensation and
Specified Employee.  The Executive acknowledges and understands
that none of the Company, its Affiliates, nor any of their officers, directors
or employees are responsible or liable for and none of them guarantee the tax
consequences of any payments or benefits under this Agreement, including, but
not limited to, any excise taxes or interest that may be incurred under Section
409A.

     

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    11.  Indemnity.

     

    (a) Legal Fees. To
the extent permitted by applicable law, and the By-Laws of the Company, the
Company agrees to defend, indemnify and hold harmless the Executive from any and
all claims, demands or causes of action, including reasonable attorneys' fees
and expenses, suffered or incurred by the Executive as a result of the assertion
or filing of any claim, demand, litigation or other proceedings based, in whole
or in part, upon statements, acts or omissions made by or on behalf of the
Executive pursuant to this Agreement and/or in the course and scope of the
Executive's employment by the Company.  Within ten (10) days after
notice from the Executive of the filing or assertion of any claim for which
indemnification is provided (or sooner if action is required sooner in order to
properly defend the Executive), the Company shall designate competent,
experienced counsel to represent the Executive, at the Company's expense, which
counsel shall be subject to the Executive's approval, which shall not be
unreasonably withheld.  Should the Company fail to so designate or
pay, or make arrangements for payment of, such counsel, then Executive shall
have the right to engage counsel of the Executive's choosing, and the Company
shall be obligated to pay or reimburse any and all fees and expenses incurred by
the Executive in defending himself in connection with any such
claim.

     

    (b) Insurance. During
the entire employment period, and for a period of not less than five (5) years
after termination of the Executive's employment, the Company shall maintain, and
pay all applicable premiums for, directors' and officers' liability insurance,
of which the Executive shall be an insured, which shall provide full coverage
for the defense and indemnification of the Executive, to the fullest extent
permitted by applicable law.

     

    
 

    [SIGNATURE
PAGE FOLLOWS]

     

     

    
      
        
        

      

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

    

    

    
      	 
      	
               EXECUTIVE

               

               

            	 
      
	 
      	
              /s/
      Ronald E. Smith

            	 
      
	 
      	
              Ronald
      E. Smith

            	 
      
	 
      	
               
      

               

               

            	 
      
	 
      	
              DEEP
      DOWN, INC.

               

               

            	 
      
	 
      	
              By:  

            	
              /s/
      Eugene L. Butler

            	 
      
	 
      	 
      	
              Name:  Eugene
      L. Butler

            	 
      
	 
      	 
      	
              Title:   
      Chairman and Chief Financial Officer

            	 
      
	 
      

    

    

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    

    EXHIBIT
A

    

    RELEASE

    

    The
Executive hereby irrevocably and unconditionally releases, acquits and forever
discharges the Company (as defined in the Executive's Employment Agreement) and
its affiliated companies and their directors, officers, employees and
representatives (collectively "Releasees"), from any
and all claims, liabilities, obligations, damages, causes of action, demands,
costs, losses and/or expenses (including attorneys' fees) of any nature
whatsoever, whether known or unknown, including, but not limited to, rights
arising out of alleged violations of any contracts, express or implied, any
covenant of good faith and fair dealing, express or implied, or any tort, or any
legal restrictions on the Company's right to terminate employees, or any
federal, state or other governmental statute, regulation, or ordinance,
including, without limitation, Title VII of the Civil Rights Act of 1964, as
amended, and the Age Discrimination in Employment Act of 1967, as amended, which
the Executive claims to have against any of the Releasees (in each case, except
as to indemnification provided by (a) the Executive's Employment Agreement
with the Company (as amended or superseded from time to time) and/or (b) by
the Company's bylaws and any indemnification agreement or arrangement permitted
by applicable law and by directors, officers and other liability insurance
coverages to the extent you would have enjoyed such coverages had you remained a
director or officer of the Company).  In addition, the Executive
waives all rights and benefits afforded by any state laws which provide in
substance that a general release does not extend to claims which a person does
not know or suspect to exist in his favor at the time of executing the release
which, if known by him, must have materially affected the Executive's settlement
with the other person.  The only exception to the foregoing are claims
and rights that may arise after the date of execution of this Release, claims
and rights arising under any employee benefit plan and claims and rights arising
under Section 5 of the Executive's Employment Agreement.

     

    The
Executive understands and agrees that:

     

    
      	
               
      

            	
              A.

            	
              He
      has a period of twenty-one (21) days within which to consider whether
      he desires to execute this Agreement, that no one hurried him into
      executing this Agreement during that twenty-one (21)-day period, and that
      no one coerced him into executing this
  Agreement..

            

    

     

    
      	
               
      

            	
              B.

            	
              He
      has carefully read and fully understands all of the provisions of this
      Release, and declares that this Release is written in a manner that he
      fully understands.

            

    

     

    
      	
               
      

            	
              C.

            	
              He
      is, through this Release, releasing the Releasees from any and all claims
      he may have against the Releasees, and that this Release constitutes a
      release and discharge of claims arising under the Age Discrimination in
      Employment Act of 1967, as amended, 29 U.S.C. §§ 621-634, including the
      Older Workers' Benefit Protection Act, 29 U.S.C. §
  626(f).

            

    

     

    
      	
               
      

            	
              D.

            	
              He
      declares that his agreement to all of the terms set forth in this Release
      is knowing and is voluntary.

            

    

     

    
      	
               
      

            	
              E.

            	
              He
      knowingly and voluntarily intends to be legally bound by the terms of this
      Release.

            

    

     

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              F.

            	
              He
      was advised and hereby is advised in writing to consult with an attorney
      of his choice concerning the legal effect of this Release prior to
      executing this Release.

            

    

     

    
      	
               
      

            	
              G.

            	
              He
      understands that rights or claims that may arise after the date this
      Release is executed are not waived.

            

    

     

    
      	
               
      

            	
              H.

            	
              He
      understands that, in connection with the release of any claim of age
      discrimination, he has a period of seven (7) days to revoke his acceptance
      of this Release, and that he may deliver notification of revocation by
      letter or facsimile addressed to the President of the Company, at 8827 W.
      Sam Houston Pkwy N., Suite 100, Houston, TX 77040.  Executive
      understands that this Release will not become effective and binding with
      respect to a claim of age discrimination until after the expiration of the
      revocation period.  The revocation period commences when
      Executive executes this Release and ends at 11:59 p.m. on the seventh
      calendar day after execution, not counting the date on which Executive
      executes this Release.  Executive understands that if he does
      not deliver a notice of revocation before the end of the seven-day period
      described above, that this Release will become a final, binding and
      enforceable release of any claim of age discrimination.  This
      right of revocation shall not affect the release of any claim other than a
      claim of age discrimination arising under federal
  law.

            

    

     

    
      	
               
      

            	
              I.

            	
              He
      understands that nothing in this Release shall be construed to prohibit
      Executive from filing a charge or complaint, including a challenge to the
      validity of this Release, with the Equal Employment Opportunity Commission
      or participating in any investigation or proceeding conducted by the Equal
      Employment Opportunity Commission.

            

    

     

    
      	
               
      

            	
              AGREED
      AND ACCEPTED, on this _____________ day of ___________________,
      _______.

            

    

    
    

     

    
      	 	 
	 	
               

              [Name of
      Executive]

            

    

     

     

     

     20

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