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EMPLOYMENT AGREEMENT
This
Employment Agreement (the "Agreement") is entered into by and
between THE WAAT CORPORATION., a corporation organized under
the laws of California with
its principal offices located at 14242 Ventura Boulevard,
Sherman Oaks, California 91423
(the "Company, which shall include any parent or holding
company") and David Mandell
("Employee"), as of June 5, 2006 ("Effective
Date").
I.
EMPLOYMENT.
The
Company hereby employs Employee and Employee hereby accepts
such employment, upon the terms and conditions hereinafter set
forth, from
June 5, 2006 ("Employment
Date"), to and including June 30, 2009 (the "Term").
This
Agreement is subject
to renewal only as set forth in Section VI below. In the event
the Agreement is renewed
pursuant to Section VI below, reference to the Term in this
Agreement shall also refer
to such renewal term.
II.
DUTIES.
A.
Employee
shall serve during the course of his employment as
Executive Vice
President, General Counsel and Corporate Secretary of the
Company and shall have such
other duties and responsibilities as are consistent with those
generally performed by
the
Executive Vice President, General Counsel and Corporate
Secretary of
a similarly situated
company as the Chief Executive Officer of the Company shall
determine from time to time, including the authority to hire
and fire appropriate legal and administrative
staff
personnel. The Company shall provide Employee with all
reasonable and necessary business
equipment to allow Employee to perform such duties and
responsibilities. The
Company
retains absolute discretion to reorganize the Company from
time to time and that
nothing in this Agreement shall in any way affect or limit
such discretion; provided that,
such reorganization shall not serve to diminish
or otherwise materially alter Employee's
position as Executive Vice President, General
Counsel and Corporate Secretary
after any such reorganization.
B.
Employee
agrees to devote substantially all of his time, energy
and
ability
to
the business of the Company. Nothing herein shall prevent
Employee, upon approval of the Board of Directors of the
Company, from serving as a director or trustee of other
corporations
or businesses which are not in direct competition with the
business of
the Company or in direct competition with any
present
or future affiliate
of
the
Company; provided,
however, that no approval of the Board of Directors of the
Company shall be required
for Employee to continue to serve as a director of any company
of which he was a
director as of the Effective Date so long as
such
company is not in direct competition with
the Company. Nothing herein shall prevent Employee from
(i) investing
in real estate
for his own account, (ii) becoming a partner or a stockholder
in any corporation, partnership
or other venture not in direct competition with the business
of the Company or in direct competition with any present
affiliate of the Company, or (iii) becoming up to
a 5% stockholder in any publicly held corporation whether or
not in competition with the
business of the Company or in competition with any present or
future affiliate of the Company.
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C.
For the Term of this Agreement, Employee shall report to the
Chief Executive Officer of the Company and serve as a member
of the Company's core executive team, regardless of any
reorganization of the Company.
III.
COMPENSATION.
A.
The
Company will pay to Employee a base salary at the annual rate
of $300,000
from June 5, 2006 through June 4, 2007, $315,000 from June 5,
2007 through June
4, 2008 and $330,750 from June 5, 2008 through June 30,
2009. Such
salary shall be
earned monthly and shall be payable in periodic installments
no less frequently than monthly
in accordance with the Company's customary practices.
Amounts
payable shall be
reduced by standard withholding and other authorized
deductions. The Company may in
its discretion increase Employee's salary beyond these set
amounts but
it may not reduce it during the Term or any extension
thereof.
B.
Annual Bonus.
Employee
shall be paid an annual bonus (the " Bonus ") at
the
Company's sole discretion based upon Employee's performance and the
performance of
the Company with a target Bonus of thirty-five percent (35%) of the
then-current base salary,
such Bonus to be determined and paid on the Company's fiscal year
basis to the extent
and in such manner as determined with such other comparable senior
executives of the
Company.
C.
Welfare Benefit Plans.
Employee
and/or his family, as the case may be, shall be eligible for
participation in and shall receive all benefits under
welfare benefit
plans,
practices, policies and programs provided by the Company
(including, without
limitation,
medical, prescription, dental, vision, disability, salary
continuance, employee
life,
group life, accidental death, travel accident insurance plans and
programs and 401K Plan)
to the extent applicable generally to other comparable senior
executives of the Company.
D.
Expenses. Employee
shall be entitled to receive prompt reimbursement
for
all reasonable employment expenses incurred by him in accordance
with the policies, practices
and procedures as in effect generally with respect to other
comparable senior
executives of the Company.
E.
Fringe Benefits. Employee
shall be entitled to fringe benefits
in accordance
with the plans, practices, programs and policies as in effect
generally with
respect
to other comparable senior executives of the Company.
F.
Vacation. Employee
shall be entitled to four (4) weeks paid vacation each
year
which shall be taken in accordance with the policies and
practices as
in effect generally
with respect to other comparable senior executives of the
Company.
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G.
Stock Options.
The
Company shall
grant
to Employee on June 5, 2006 ("First Issue Date"), subject to
Compensation Committee approval
and the vesting provisions
described in this Agreement, nonqualified stock options (the
"Options") under
the
Company's 2006 Stock Incentive Plan, as amended (the "Plan"), to
acquire seventy five
thousand (75,000) shares of the Company's Common Stock ("Common
Shares") at the
exercise price per Common Share under each such Option of
Thirty Five
Cents ($0.35).
The Company shall grant to Employee on June 5, 2007 ("Second Issue
Date") an
additional seventy five thousand (75,000) shares of the Company's
Common Shares at the
exercise price per Common Share under each such Option determined
at the time of grant
and no greater than the Series B financing purchase price.
Each
Option shall represent
the right to acquire one (1) Common Share. Subject to earlier
termination of the Options
as described below, the Options shall vest in full and become
immediately exercisable
as follows: (a) twenty five percent (25%) on the first anniversary
of the First Issue
Date and the remaining seventy five percent (75%) in equal
quarterly installments over the three (3) year period following the
first anniversary of the First Issue Date
and (b)
twenty five percent (25%) on the first anniversary of the Second
Issue Date and the
remaining
seventy five percent (75%) in equal quarterly installments over
the three
(3) year
period following the first anniversary of the Second Issue
Date. The
Options shall expire
on the first to occur of (i) the close of business on the last
business day of
the Company
coinciding with or immediately preceding the day before the tenth
anniversary of
the Effective Date, (ii) the termination of the Options pursuant to
the Plan, or (iii) the
termination
of the Options in connection with a termination of Employee's
employment with
the Company as contemplated by the Option Agreement.
The
Options shall be evidenced
by a written option agreement in the form attached hereto
as
Exhibit
A (the "Option
Agreement"). In
addition to any provision contained in the Plan and/or the
Option
Agreement, all Options are subject to full accelerated
vesting upon
an underwritten
initial public offering of the securities of the Company and/or a
Change of
Control
of the Company. At
the Company's sole discretion, to the extent other
comparable
executives of the Company are granted additional Options,
Employee shall
be
granted additional Options.
H.
The
Company reserves the right to modify, suspend or discontinue
any and
all of the plans, practices, policies and programs described
in Sections III-C, III-D,
and
III-E above at any time without recourse by Employee so long
as such action is taken generally
with respect to other comparable senior executives, is not
applied retroactively, and does not single out Employee.
Notwithstanding such right, in the event the Company ceases to
provide medical insurance, the Company shall
reimburse Employee for premiums
paid for COBRA continuation of medical insurance during the
Term and any renewal.
IV.
TERMINATION.
A.
Death
or
Disability.
Employee's
employment
shall
terminate
automatically
upon Employee's death. If
a Disability of Employee has occurred (pursuant to the definition
of Disability set forth below), the Company
may give to Employee
written notice of its intention to terminate Employee's
employment. In
such event,
Employee's employment with the Company shall terminate effective on
the 120th
day
after receipt of such notice by Employee, provided that, within
the 120
days after such
receipt, Employee shall not have returned to full-time
performance of
his duties. For
purposes of this Agreement, "Disability" shall mean either a
physical or
mental impairment which substantially limits a major life
activity of
Employee and which renders Employee unable to perform the essential
functions of his position, even with reasonable accommodation which
does not impose an undue hardship on the Company
for an aggregate of 120 days in any twelve-month period. The
determination of Disability
under the preceding sentence, shall be based upon information
supplied by
Employee
and/or his medical personnel, as
well
as information from medical personnel (or
others) selected by the Company. In
the event Employee's health care provider and the Company do not
agree as
to whether Employee has a Disability, Employee and the Company
shall appoint a third-party qualified physician who shall
evaluate Employee
and
provide a determination of whether Employee has a
Disability.
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B.
Cause.
The
Company may terminate Employee's employment
for "Cause" in the event the Employee has engaged in or committed:
willful misconduct;
gross
negligence; theft, or fraud; any
willful act that is reasonably likely to and which
does
in fact have the effect of materially injuring the reputation,
business or a business relationship
of the Company; and material breach of any material term of
this Agreement.
In the event the Company determines that Cause for termination
exists based upon
willful misconduct or gross negligence, the Company shall give
Employee fourteen (14)
days prior written notice of such termination which notice shall
include reasonable detail
as to the ground for such termination. If such ground is curable,
Employee shall be given
thirty (30) days from the date of such notice to cure such ground
for termination for Cause.
After the expiration of any such cure period, the
Company shall make a good faith
determination as to
whether Employee has cured such ground for termination for
Cause
and shall give written notice thereof to the Employee which,
in
the case of a determination
that Employee has failed to cure, shall include reasonable
detail as
to
why Employee's
efforts to cure were not adequate. Notwithstanding
anything to the contrary set
forth in this Section IV-B, the Company shall not have the right to
terminate the
Employee
for "Cause" after the expiration of six (6) months from
discovery
by the Company
of the conduct or circumstances that are the basis for such
termination.
C.
Good Reason. Employee
may terminate employment for Good Reason. For purposes of this
Agreement, "Good Reason" shall mean any of the following:
(i)
the Company
requires Employee to relocate his principal office more than 25
miles from the Company's
current principal place of business without Employee's
consent;
(ii) the Company
assigns Employee to a position other than Executive Vice
President, General
Counsel
and Corporate Secretary of the Company without Employee's consent;
(iii) the Company
requires Employee to report directly to any officer other than Ian
Aaron, Chief Executive
Officer, without Employee's consent; (iv) Ian Aaron is no longer
the Chief
Executive
Officer of the Company (v) the Company substantially diminishes
Employee's duties or responsibilities; and/or (vi) the Company
fails to pay any amounts owed to Employee
when due or otherwise materially breaches any material term of
this Agreement.
Before terminating his employment with Good Reason under
subsections (i) -
(vi), Employee
shall give the Company written notice of his intent to
terminate for
Good
Reason and the basis therefore, and the Company shall have thirty
(30) days to cure (the "Cure Period") the Good Reason. At the end
the Cure Period, Employee shall determine
in good faith determination as to whether the Company has cured
such Good Reason.
If Employee determines that the Company has failed to
cure
the Good Reason within the Cure Period, Employee may terminate his
employment and this Agreement upon an additional ten (10) days'
written notice which notice shall include reasonable
detail
as to why the Company's efforts
to
cure such Good Reason were inadequate. For
all
purposes under this Agreement, any termination by Employee with
Good Reason shall be treated as a termination without Cause and
Employee shall be entitled to the payments and benefits set forth
in Section IV-E-3 pursuant to its terms.
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D.
Other than Cause or Death or Disability .
The
Company may terminate Employee's
employment at any time, with or without cause, upon ninety
(90)
days' written
notice.
E.
Obligations of the Company Upon Termination.
1.
Death or Disability.
If
Employee's employment is terminated by reason
of Employee's Death or Disability, this Agreement shall
terminate without
further obligations to Employee or his legal representatives
under this
Agreement (except as provided in this Section IV-E-1), other than
for (a)
payment of the sum of (i) Employee's annual base salary through
the date
of termination to the extent not theretofore paid, (ii) Employee's
pro rata
portion of the Bonus (based on the number of days elapsed prior
to termination)
for the calendar year during which the Emplo
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