Exhibit 10.4
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of November 1,
2005, by and between Aquacell Water, Inc., a Delaware corporation ("Employer"),
and Xxxxx X. Xxxxxxxx ("Executive").
WITNESSETH:
WHEREAS, Executive has served Employer in various executive capacities and
Employer desires to obtain the benefit of continued service by Executive, and
Executive desires to render continued services to Employer;
WHEREAS, the Board of Directors of Employer (the "Board") has determined
that because of Executive's substantial experience and business relationships in
connection with the business of Employer, it is in the Employer's best interest
and that of its stockholders to secure services of Executive and to provide
Executive certain additional benefits; and
WHEREAS, Employer and Executive desire to set forth in this Agreement the
terms and conditions of Executive's employment with Employer.
NOW, THEREFORE, in consideration of the mutual promises and covenants
herein contained, the parties agree as follows:
AGREEMENT
SECTION 1. TERM. Employer hereby employs Executive and Executive hereby
accepts such employment, in accordance with the terms of this Agreement,
commencing on the date hereof and terminating on October 31, 2010 (the "Term"),
unless (a) terminated as provided herein in Section 5, or (b) renewed pursuant
to the terms of Section 9 hereof.
SECTION 2. SERVICES. So long as this Agreement shall continue in effect,
Executive shall use her commercially reasonable efforts and abilities to promote
Employer's business, affairs and interests, and shall perform the services
contemplated by this Agreement in accordance with policies established by
Employer.
SECTION 3. SPECIFIC POSITION; DUTIES AND RESPONSIBILITIES. Executive
shall serve as President and Chief Operating Officer with the powers and duties
consistent with such position. Executive agrees to observe and comply with the
rules and regulations of Employer as adopted by the Board respecting the
performance of Executive's duties and agrees to carry out and perform the
directions and policies of Employer and its Board as they may be, from time to
time, stated either orally or in writing. Employer agrees that the duties which
may be assigned to Executive shall be the usual and customary duties of the job
position as set forth in this Section 3, and shall not be inconsistent with the
provisions of the charter documents of Employer or applicable law. Executive
shall have such corporate power and authority as shall reasonably be required to
enable the discharge of duties in any office that may be held.
SECTION 4. COMPENSATION.
(a) Base Salary and Bonus.
(i) Base Salary. During the term of this Agreement, Employer agrees to
pay Executive a base salary of at least One Hundred-Thousand Dollars $100,000.00
per year in semi-monthly installments on the same dates the other senior
officers of Employer are paid ("Base Salary") The Board (or its Compensation
Committee) shall review the Base Salary annually and may in its discretion
increase the Base Salary each calendar year beginning November 1, 2006; provided
however, that the Base Salary shall be increased by an amount equal to 50% of
the amount of any bonus paid to Executive during the prior year..
(ii) Bonus. Executive will participate in the Executive Bonus Pool to
be determined on the basis of the three phase criteria set forth on Exhibit A
attached hereto.
(b) Expense Reimbursement. Employer shall reimburse Executive promptly for
reasonable and necessary business and entertainment expenses incurred in pursuit
and furtherance of Employer's business and goodwill. Employer shall reimburse
Executive for all such expenses upon presentation by the Executive, from time to
time, of an itemized written accounting of such expenditures.
(c) Benefits. Employer shall provide Executive with the following benefits
during the Term and any renewals thereof:
(i) Participation in Benefit Plans and Policies. Executive shall be
entitled to participate in all insurance and other benefit plans and policies
maintained for senior executives of Employer, including, but not limited to, all
group health, life disability and retirement plans (the "Plans").
(ii) Vacation. Executive shall be entitled to four (4) weeks paid
vacation time each year during the term of this Agreement. Vacation shall not
be taken more than one week at a time, and only when it will not interfere with
the operation of the company. Any vacation not taken will be accrued and paid,
and there shall be no limit on the accrual.
(iii) Automobile Expenses. Executive shall be entitled to an
automobile allowance of up to $500 per month, or as may be determined by the
Compensation Committee. The Employer will pay gas and maintenance for the
vehicle.
(iv) Disability Benefits. During the Term, Employer agrees to provide
Executive long-term disability insurance under a standard disability policy.
SECTION 5. TERMINATION. The compensation and other benefits provided to
Executive pursuant to this Agreement, and the employment of Executive by
Employer, shall be terminated prior to expiration of the term of this Agreement
only as provided in this Section 5:
(a) Disability. In the event that Executive shall fail, because of
illness, incapacity or injury which is determined to be total ("Disability") by
a physician selected by Employer or its insurers and acceptable to Executive or
Executive's legal representative (such agreement as to acceptability not to be
withheld unreasonably), to render, for three consecutive months or for shorter
periods aggregating ninety (90) or more business days in any twelve (12) month
period, the services contemplated by this Agreement, Executive's employment
hereunder may be terminated by sixty (60) days' prior written notice of
termination from Employer to Executive. Thereafter, Employer shall continue to
(i) pay the Base Salary to Executive for a period of twelve (12) months after
the date of termination, subject to adjustments referenced in the following
paragraph, and (ii) provide medical insurance as in effect prior to such
termination for a period of twelve (12) months following the date of
termination. Thereafter, no further salary shall be paid or medical insurance
be provided. Executive's rights under the Plans subsequent to termination of
employment pursuant to this paragraph shall be determined under the applicable
provisions of the respective Plans, unless otherwise expressly stated herein.
This Agreement in all other respects will terminate upon the termination of
employment pursuant to this paragraph.
The amount of compensation to be paid to Executive pursuant to the
preceding paragraph shall be adjusted in the event Executive becomes entitled to
and receives disability benefits under any disability payment plan, including
disability insurance. The amount of Executive's compensation otherwise payable
by Employer pursuant to the preceding paragraph shall be reduced on dollar-for-
dollar basis, but not to less than zero, by the amount of any such disability
benefits received by Executive, but only to the extent such benefits are
attributable to payments made by Employer.
(b) Death. In the event of Executive's death during the term of this
Agreement, Executive's Base Salary shall continue for a period of six (6) months
payable to the estate of the Executive and Employer shall pay to the estate of
Executive the Base Salary accrued to the date of Executive's death to the extent
not theretofore paid. If Executive's death occurs while receiving payments
under Section 5(a) above, such payments shall continue for a period of six (6)
months payable to the Estate of the Executive. Executive's rights under the
Plans subsequent to her death shall be determined under the applicable
provisions of the respective Plans; provided that, notwithstanding any
provisions to the contrary therein, Employer shall continue to provide medical
insurance to the dependents of Executive for a period of six (6) months
following the death of Executive. This Agreement in all other respects will
terminate upon the death of Executive.
(c) For Cause. The employment of Executive hereunder shall be terminable
by Employer in the event that Executive (i) is convicted of, or pleads nolo
contandere to a felony; (ii) has engaged in habitual misconduct in the
performance of her duties under this Agreement, (iii) has committed an act of
dishonesty, gross negligence or misconduct, which has a direct, substantial and
adverse effect on Employer, its business or reputation.
Notwithstanding the foregoing, no termination of Executive by Employer
pursuant to clauses (ii) (iii) or (iv) above shall be valid unless and until the
following procedures have been complied with by Employer: (a) no more than
thirty (30) days after the chairperson of the Board has obtained knowledge of
"cause" to terminate Executive pursuant to any of clauses (ii) or (iii) above,
he/she shall provide Executive with written notice of Employer's intent to
terminate this Agreement pursuant to this Section 5(c), including in reasonable
detail the reasons therefor (the "Termination Notice"); (b) at a mutually agreed
upon time and place, but in any event no more than ten (10) days following
receipt by Executive of the Termination Notice, the Board shall provide
Executive the opportunity to participate in a meeting of the Board regarding the
Termination Notice; (c) if the matter cannot be resolved by mutual agreement of
Employer and Executive at such meeting, Executive shall thereafter be given
thirty (30) days to cure such "cause" as detailed in the Termination Notice (the
"Cure Period"); and (d) if Executive does not cure such "cause" within the Cure
Period, Employer shall thereafter terminate Executive's employment hereunder in
writing within thirty (30) days of the end of the Cure Period. Any
determination of "cause" as used in this Section 5(c) shall be made only in good
faith by an affirmative majority vote of the Board (not counting Executive).
In the event of Executive's termination pursuant to this subsection 5(c),
Executive's rights to receive Base Salary shall immediately terminate and
Employer shall pay to Executive her Base Salary and vacation accrued to the date
of such termination to the extent not theretofore paid. Executive's rights
under the Plans subsequent to termination shall be determined under the
applicable provisions of the respective plans. This Agreement in all other
respects will terminate upon such termination.
(d) Without Cause. Notwithstanding any other provision of this Section 5,
the Board shall have the right to terminate Executive's employment with Employer
without cause at any time upon at least thirty (30) days' prior written notice
to Executive. The following conditions shall thereupon become applicable:
(i) Severance Pay. Employer shall continue to pay Executive the Base
Salary on a semi-monthly basis for the remainder of the Term or any extension
thereof.
(ii) Medical Insurance Continuation. Employer shall continue to
provide (under COBRA) medical insurance as in effect prior to such termination
for the greater of the remainder of the Term or twelve (12) months following
such termination, and Employer shall bear all costs for such insurance.
(iii) Bonus Payment. If Executive is terminated without cause,
Executive shall also be paid for any earned bonuses under this Agreement (the
"Bonus Severance"). The amount of any such Bonus Severance shall be equal to
the full amount of any unpaid target bonus payment(s) set forth on Exhibit A,
50% of which amount shall be added to the Base Salary to be paid during the
remainder of the Term, or any extensions thereof.
(e) Voluntary Termination. At any time during the term of this Agreement,
Executive shall have the right, upon thirty (30) days' prior written notice to
Employer, to terminate her employment with Employer. Upon termination of
Executive's employment pursuant to this subsection 5(e), (i) Executive's right
to receive Base Salary shall immediately terminate and Employer shall pay to
Executive her Base Salary accrued to the date of such termination to the extent
not theretofore paid, and (ii) Executive's rights under the Plans subsequent to
such termination shall be determined under the applicable provisions of the
respective Plans. This Agreement in all other respects with the exception of
Section 7 will terminate upon such termination.
(f) Termination by Executive for "Good Reason". Notwithstanding any other
provisions of this Agreement, Employer shall provide Executive with the payments
and benefits set forth in Section 5(d) in the event Executive terminates
employment for "Good Reason." For purposes of this Agreement, "Good Reason" for
Executive to terminate employment shall mean voluntary termination following a
Change of Control of Employer as defined in Exhibit B attached hereto as a
result of (1) the assignment of the Executive of duties inconsistent wit the
position as status of Executive as set forth in the Agreement without
Executive's prior written consent, (ii) a substantial alteration in the nature,
status or prestige or Executive's responsibilities as set forth in the Agreement
or a change in Executive's title or reporting level from that se forth in this
Agreement, (iii) the relocation of Employer's executive offices or principal
business location to a point more than twenty-five (25) miles from the location
of such offices or business at the time of the Change of Control, (iv) reduction
by Employer of Executive's Base Salary in effect on the date hereof or as the
same may be increased from time- to time, (v) any action by Employer (including
the elimination of benefit plans without providing substitutes therefore or the
reduction of Executive's benefits thereunder) that would substantially diminish
the aggregate value of Executive's incentive awards and other fringe benefits,
(vi) a failure by Employer to obtain from any successor, before the succession
takes place, an agreement to assume and perform this Agreement.
SECTION 6. JOINING EMPLOYER'S EMPLOYEES. During Executive's employment
hereunder, and for one (1) year following termination of employment, Executive
shall not, directly or indirectly, induce any employee of Employer or any
subsidiary or affiliate of Employer to leave such employment for employment with
Executive or any other entity outside of Employer. Executive shall not be in
breach of this covenant if, following her employment hereunder, he is contacted
on an unsolicited basis by an employee of Employer who desires to leave
Employer.
SECTION 7. CONFIDENTIALITY; NON COMPETITION
(a) Proprietary Information. For purposes of this Agreement, the term
"Proprietary Information" means and includes: all written, oral and visual
information about Employer's customers, clients, employees, consultants,
designs, products, inventions, business practices, programs, processes,
techniques, know-how, data, management programs, and methodologies, subject to
the final sentence of this subparagraph. Proprietary Information includes but
is not limited to all of the following insofar as it pertains to Employer:
financial information, trade secrets, designs, customer lists, pricing and fee
information, agreements and arrangements with affiliated companies, employee
files, personnel records, internal corporate records, correspondence, and
memoranda, contacts and relationships, opportunities, telephone logs and
messages, video or audio tapes and/or disks, photographs, film and slides,
computer disks and files, software, information stored on Employer's computers,
addresses and telephone numbers, contracts, releases, other writings of any
kind, and any and all other materials and information pertaining to Employer or
its business to which Executive is exposed or has access solely as a consequence
of her employment by Employer. For purposes hereof, the term "Proprietary
Information" shall not include any information (i) that was known by the public
or outside of this Agreement generally on or prior to the date hereof, (ii)
which becomes known by the public or outside of this Agreement generally after
the date hereof through no fault of Executive, (iii) that was developed by or
with the participation of Executive on or prior to the date hereof, or (iv) that
is independently developed by or with the participation of Executive following
Executive's employment with Employer.
(b) Rights to Proprietary Information. All Proprietary Information,
regardless of whether it is in intangible or tangible form, is and shall be the
sole property of Employer, its successors and assigns, and Employer, its
successors and assigns shall be the sole owner of all patents, trademarks,
service marks and copyrights, and other rights (collectively referred to herein
as "Rights") pertaining to the Proprietary Information. Executive hereby
assigns and/or agrees to assign to Employer any rights Executive may have or
acquire in Proprietary Information or Rights pertaining to the Proprietary
Information. Executive further agrees as to all Proprietary Information to
assist Employer or any person designated by it in every necessary or appropriate
manner to obtain, and from time to time enforce, Rights relating to said
Proprietary Information. Executive will execute all documents for use in
applying for, obtaining, and enforcing such Rights on such Proprietary
Information as Employer may desire, together with any assumptions thereof to
Employer or persons designated by it.
(c) Confidentiality of Proprietary Information. As a material condition of
employment, at all times both during and for five (5) years after the cessation
of her employment with Employer for any reason, Executive will keep in strictest
confidence all Proprietary Information, and Executive will not disclose, use, or
induce or assist in the use or disclosure of any such Proprietary Information or
Rights pertaining thereto, without the prior, express written consent of
Employer, except as may be necessary in the ordinary course of performing her
duties as an employee at Employer, or as may be required by law.
(d) Work for Hire/Assignment of Inventions. Executive agrees that all
designs, products, inventions, materials or other original works written,
created, developed, or acquired by Executive during the term of and in
connection with her employment hereunder (whether alone or in conjunction with
any other person), and all rights of any and every kind whatsoever in and to the
results and proceeds of Executive's services rendered hereunder, whether or not
such rights are now known, recognized or contemplated, and the complete,
unconditional and unencumbered ownership in and to such materials, results and
proceeds for all purposes whatsoever shall be "works for hire," as that term is
defined in the United States Copyright Act (17 U.S.C. Section 101), and shall be
the sole and absolute property of Employer, its successors and assigns, and
Executive agrees that he shall and does not have and will not claim to have,
either under this Agreement or otherwise, any right, title or interest of any
kind or nature whatsoever in or to said property. Executive hereby assigns
and/or agrees to assign to Employer any and all inventions, designs, programs,
or products that Executive may create during her employment with Employer;
provided, however, that Executive is hereby notified that the foregoing does not
apply to an invention that Executive creates entirely on her own time, without
the use of any equipment, supplies, facilities, Proprietary Information or
copyright of Employer, and that does not relate to Employer's business, research
or development or result from any work performed by Executive for Employer.
(e) Trade Secrets of Others. To the best of Executive's knowledge,
Executive's performance of her duties will not violate any agreements with or
trade secrets of any other person or entity.
SECTION 8. RENEWAL. If this Agreement has not terminated pursuant to the
provisions of Section 5, the Term shall be automatically renewed for successive
one-year periods commencing on each anniversary date of the original Term,
unless either party provides the other with written notice of its intent to
terminate the Agreement given not less than one hundred twenty (120) days prior
to the end of the Term, or any renewals thereof as provided for herein.
SECTION 9. MISCELLANEOUS.
(a) Succession; Survival. This Agreement shall inure to the benefit of and
shall be binding upon Employer, its successors and assigns. Absent the prior
written consent of Executive, this Agreement may not be assigned by Employer
other than in connection with a merger or sale of all or substantially all the
assets of Employer or a similar transaction in which the successor or assignee
assumes (whether by operation of law or express assumption) all obligations of
Employer hereunder. The obligations and duties of Executive hereunder are
personal and otherwise not assignable. Executive's obligations and
representations under this Agreement will survive the termination of Executive's
employment, regardless of the manner of such termination.
(b) Notices. Any notice or other communication provided for in this
Agreement shall be in writing and sent if to Employer to its office at:
AquaCell Water, Inc.
00000 Xxxxxxxxx Xxxxxx
Xxxxxx Xxxxxxxxx, Xxxxxxxxxx 00000
Attention: Board of Directors
or at such other address as Employer may from time to time in writing designate,
and if to Executive at such address as Executive may from time to time in
writing designate (or Executive's business address of record in the absence of
such designation). Each such notice or other communication shall be effective
(i) if given by telecommunication, when transmitted to the applicable number so
specified in (or pursuant to) this Section 7 and an appropriate answer back is
received, (ii) if given by mail, three days after such communication is
deposited in the mails with first class postage prepaid, addressed as aforesaid
or (iii) if given by any other means, when actually delivered at such address.
(c) Entire Agreement; Amendments. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and it supersedes
any prior agreements, undertakings, commitments and practices relating to
Executive's employment by Employer. No amendment or modification of the terms
of this Agreement shall be valid unless made in writing and signed by Executive
and, on behalf of Employer, by an officer expressly so authorized by the Board.
(d) Waiver. No failure on the part of any party to exercise or delay in
exercising any right hereunder shall be deemed a waiver thereof or of any other
right, nor shall any single or partial exercise preclude any further or other
exercise of such right or any other right.
(e) Choice of Law. This Agreement, the legal relations between the parties
and any action, whether contractual or non-contractual, instituted by any party
with respect to matters arising under or growing out of or in connection with or
in respect of this Agreement, the relationship of the parties or the subject
matter hereof shall be governed by and construed in accordance with the laws of
the State of California, applicable to contracts made and performed in such
State and without regard to conflicts of law doctrines, to the extent permitted
by law.
(f) Binding Arbitration. Any controversy involving a claim by either of
the parties against the other party arising out of or in connection with this
Agreement shall be finally settled by arbitration in San Bernardino County,
California, in accordance with the then-current rules for arbitration as
established by JAMS, LLC ("JAMS"), and judgment upon the award rendered by such
arbitration may be entered in any court having jurisdiction thereof. Such
arbitration shall be conducted by one (1) arbitrator mutually agreed to by
Employer and Executive from the JAMS panel of retired judges, or an arbitrator
appointed by JAMS in the event that no such mutual agreement is reached.
(g) Attorney's Fees. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to recover reasonable attorney's fees, costs and necessary
disbursements from the non-prevailing party in addition to any other relief to
which such party may be entitled.
(h) Confidentiality; Proprietary Information. Executive agrees to not make
use of, divulge or otherwise disclose, directly or indirectly, any trade secret
or other confidential or proprietary information concerning the business
(including but not limited to its products, employees, services, practices or
policies) of Employer or any of its affiliates of which Executive may learn or
be aware as a result of Executive's employment during the term of the Agreement
or prior thereto as stockholder, employee, officer or director of, or consultant
to, Employer, except to the extent such use or disclosure is (i) necessary to
the performance of this Agreement and in furtherance of Employer's best
interests, (ii) required by applicable law, (iii) lawfully obtainable from other
public sources, or (iv) authorized in writing by or pursuant to a written
agreement with Employer. The provisions of this subsection (g) shall survive
the expiration, suspension or termination, for any reason, of this Agreement.
(i) Severability. If any provision of this Agreement is held invalid or
unenforceable, the remainder of this Agreement shall nevertheless remain in full
force and effect, and if any provision is held invalid or unenforceable with
respect to particular circumstances, it shall nevertheless remain in full force
and effect in all other circumstances, to the fullest extent permitted by law.
(j) Withholding; Deductions. All compensation payable hereunder, including
salary and other benefits, shall be subject to applicable taxes, withholding and
other required, normal or elected employee deductions.
(k) Section Headings. Section and other headings contained in this
Agreement are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
(l) Counterparts. This Agreement and any amendment hereto may be executed
in one or more counterparts. All of such counterparts shall constitute one and
the same agreement and shall become effective when a copy signed by each party
has been delivered to the other party.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
"EMPLOYER"
Aquacell Water, Inc.
By: /s/ Xxxx X. Xxxxx
_____________________________________
Name: Xxxx X. Xxxxx
Title: Chief Financial Officer
"EXECUTIVE"
/s/ Xxxxx X. Xxxxxxxx
________________________________________
Xxxxx X. Xxxxxxxx
Exhibit A
Executive Bonus Plan Pool
Phase I - 2% of net sales increases over the prior year
Phase II - 2% of the net income after taxes and after deduction of the
Phase I Bonus
Phase III - 1% of the increase in market cap of the company over the
prior year
Exhibit B
Change of Control
A "Change of Control" as used in the Agreement of which this Exhibit is a
part shall mean any of the following:
(1) any "person," as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act")
(other than Employer or its Affiliate), is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of Employer (not including in the securities
beneficially owned by such person any securities acquired directly
from Employer or Executive) representing fifty percent (50%) or more
of the combined voting power of Employer's then outstanding
securities; or
(2) in the event that the individuals who at the beginning of the Term
constitute the Board of Directors, and any new director whose election
by the Board or nomination for election by Employer's stockholders was
approved by a vote of at least a majority of the Board then still in
office who either were members of the Board at the beginning of the
Term or whose election or nomination for election was previously so
approved, cease for any reason to constitute at least a majority
thereof; or
(3) the stockholders of Employer approve a merger or consolidation of
Employer with or the sale of Employer to any other entity and, in
connection with such merger, consolidation or sale; individuals who
constitute the Board immediately prior to the time any agreement to
effect such merger or consolidation is entered into fail for any
reason to constitute at least a majority of the board of directors of
the surviving corporation following the consummation of such merger or
consolidation; or
(4) the stockholders of Employer approve a plan of complete liquidation of
Employer or an agreement for the sale or disposition by Employer of
all or substantially all of Employer's assets to an entity not
controlled by Employer.
