Document:

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                                                                    Exhibit 10.2

                             EMPLOYMENT AGREEMENT
                             --------------------

     THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of ___________,
2000, by and between AquaCell Technologies, Inc., a Delaware corporation
("Employer"), and Karen B. Laustsen ("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 October 1, 2000, and terminating on September 30, 2005 (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 reasonably 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 devote her full business
time to rendering the services as President and Chief Operating Officer.
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

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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 Target Bonus.
          ----------------------------

          (i)   Base Salary. During the term of this Agreement, Employer agrees
                -----------
to pay Executive a base salary of at least One Hundred Sixty Thousand Dollars
($160,000) 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 October 1,
2001; 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 and retirement plans (the "Plans").  Employer acknowledges
that Executive has retained a $1 million key man life insurance policy as
required in accordance with the Employer's initial public offering.  Employer
agrees that ownership of this policy automatically transfers to the Executive if
employment of the Executive is terminated for any reason, or three years from
the completion of the Employer's initial public offering.  Employer agrees to
pay the premium for such policy for as long as the Executive is employed by the
Employer.

          (ii)  Vacation. Executive shall be entitled to four (4) weeks paid
                --------
vacation time each year. Executive's vacation shall be under Employer's usual
policies applicable to senior executives. 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 Allowance.  The Employer agrees to provide a leased
                --------------------
automobile with all expenses, to be determined by the Compensation Committee.

          (iv)  Disability Benefits. During the Term, Employer agrees to provide
                -------------------
Executive long-term disability insurance under a standard disability policy.

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          (v)   Country Club Membership.  Employer will provide Executive with a
                -----------------------
country club membership, and pay all monthly fees and expenses during the term
of employment.

     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 a 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

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or, (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) or (iii) 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 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 potential 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

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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 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 (i) the assignment to Executive of duties inconsistent with the
position and status of Executive as set forth in this Agreement without
Executive's prior written consent, (ii) a substantial alteration in the nature,
status or prestige of Executive's responsibilities as set forth in this
Agreement or a change in Executive's title or reporting level from that set
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
therefor 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.
                    ---------------

     (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,

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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 known to or in the possession of Executive on or prior
to the date hereof, (iv) that was developed by or with the participation of
Executive on or prior to the date hereof, or (v) 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 two (2) 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 know, 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

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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.     SURRENDER OF PROPRIETARY INFORMATION AND OTHER COMPANY
                    ------------------------------------------------------
PROPERTY.  In the event of the termination of her employment for any reason,
--------
Executive immediately will deliver to Employer upon request all devices,
records, designs, sketches, reports, proposals, information, lists,
correspondence, equipment, software, computer disks, documents, photographs,
photostats, negatives, undeveloped film, notes, drawings, specifications, tape
recordings or other electronic recordings, programs, data, Proprietary
Information, and other materials or property of any nature belonging to
Employer, and Executive will not take with Executive, any of the foregoing or
any reproduction of any of the foregoing.

     SECTION 9.     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 10.    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 Technologies, Inc.
          10410 Trademark Street
          Rancho Cucamonga, California  91730
          Attention: Chief Executive Officer

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

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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, L.L.C. ("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.

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     (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 Technologies, Inc.

                                  By_______________________________________
                                    Name:__________________________________
                                    Title:_________________________________

                                  "EXECUTIVE"

                                  _________________________________________
                                  Karen B. Laustsen

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                                   Exhibit A
                                   ---------

                           Executive Bonus Plan Pool
                           -------------------------

Phase I   -   2% of net sales increase 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

                                      A-1

<PAGE>

                                   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 1 3d-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.

                                      B-1

<PAGE>

                             EMPLOYMENT AGREEMENT
                             --------------------

     THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of ____________,
2000, by and between AquaCell Technologies, Inc., a Delaware corporation
("Employer"), and James C. Witham ("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 October 1, 2000, and terminating on September 30, 2005 (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 his commercially reasonably 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 Chairman and Chief Executive Officer, with the powers and duties
consistent with such position. Executive agrees to devote his full business time
to rendering the services as Chairman and Chief Executive Officer. 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

                                      -1-
<PAGE>

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 Target Bonus.
          ----------------------------

          (i)    Base Salary. During the term of this Agreement, Employer agrees
                 -----------
to pay Executive a base salary of at least Two Hundred Sixty-Five Thousand
Dollars ($265,000) 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 October 1,
2001; 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 and retirement plans (the "Plans"). Employer acknowledges
that Executive has retained a One Million Dollar ($1,000,000) key man life
insurance policy as required in accordance with the Employer's initial public
offering. Employer agrees that ownership of this policy automatically transfers
to the Executive if employment of the Executive is terminated for any reason, or
three years from the completion of the Employer's initial public offering.
Employer agrees to pay the premium for such policy for as long as the Executive
is employed by the Employer.

          (ii)   Vacation. Executive shall be entitled to four (4) weeks paid
                 --------
vacation time each year. Executive's vacation shall be under Employer's usual
policies applicable to senior executives. 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 Allowance. The Employer agrees to provide a leased
                 --------------------
automobile with all expenses, to be determined by the Compensation Committee of
the Board of Directors.

                                      -2-
<PAGE>

          (iv)   Disability Benefits. During the Term, Employer agrees to
                 -------------------
provide Executive long-term disability insurance under a standard disability
policy.

          (v)    Country Club Membership. Employer will provide Executive with a
                 -----------------------
country club membership at Bighorn Golf Club, and pay all monthly fees and
expenses during the term of employment.

     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 a 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 his 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.

                                      -3-
<PAGE>

     (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 his duties under this Agreement or, (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) or (iii) 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 his 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 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 potential 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.

                                      -4-
<PAGE>

     (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 his 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 his 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 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 (i) the assignment to Executive of duties inconsistent with the
position and status of Executive as set forth in this Agreement without
Executive's prior written consent, (ii) a substantial alteration in the nature,
status or prestige of Executive's responsibilities as set forth in this
Agreement or a change in Executive's title or reporting level from that set
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
therefor 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 his employment hereunder, he is contacted
on an unsolicited basis by an employee of Employer who desires to leave
Employer.

     SECTION 7.  CONFIDENTIALITY.
                 ---------------

     (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

                                      -5-
<PAGE>

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 his 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 known to or in the
possession of Executive on or prior to the date hereof, (iv) that was developed
by or with the participation of Executive on or prior to the date hereof, or (v)
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 two (2) years after the cessation
of his 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 his
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 his 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 know, 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 his

                                      -6-
<PAGE>

employment with Employer; provided, however, that Executive is hereby notified
that the foregoing does not apply to an invention that Executive creates
entirely on his 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 his duties will not violate any agreements with or
trade secrets of any other person or entity.

     SECTION 8.  SURRENDER OF PROPRIETARY INFORMATION AND OTHER COMPANY
                 ------------------------------------------------------
PROPERTY.  In the event of the termination of his employment for any reason,
--------
Executive immediately will deliver to Employer upon request all devices,
records, designs, sketches, reports, proposals, information, lists,
correspondence, equipment, software, computer disks, documents, photographs,
photostats, negatives, undeveloped film, notes, drawings, specifications, tape
recordings or other electronic recordings, programs, data, Proprietary
Information, and other materials or property of any nature belonging to
Employer, and Executive will not take with Executive, any of the foregoing or
any reproduction of any of the foregoing.

     SECTION 9.  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 10. 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 Technologies, Inc.
          10410 Trademark Street
          Rancho Cucamonga, California  91730
          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

                                      -7-
<PAGE>

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, L.L.C. ("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

                                      -8-
<PAGE>

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 Technologies, Inc.

                                   By _______________________________
                                      Name:__________________________
                                      Title:_________________________

                                   "EXECUTIVE"

                                   _________________________________
                                   James C. Witham

                                      -9-
<PAGE>

                                   Exhibit A
                                   ---------

                           Executive Bonus Plan Pool
                           -------------------------
<TABLE>
<S>        <C>
Phase I    -  2% of net sales increase 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
</TABLE>

                                      A-1
<PAGE>

                                   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 1 3d-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.

                                      B-1
<PAGE>

                             EMPLOYMENT AGREEMENT
                             --------------------

     THIS EMPLOYMENT AGREEMENT ("Agreement") is entered into as of ____________,
2000, by and between AquaCell Technologies, Inc., a Delaware corporation
("Employer"), and Gary S. Wolff ("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 October 1, 2000, and terminating on September 30, 2002 (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 his commercially reasonably 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 Chief Financial Officer, with the powers and duties consistent
with such position.  Executive agrees to devote his full business time to
rendering the services as Chief Financial Officer.  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 agrees to travel to the Employer's West Coast office
whenever it is

                                      -1-
<PAGE>

necessary, up to two weeks per month. 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 Target Bonus.
          ----------------------------

          (i)    Base Salary.  During the term of this Agreement, Employer
                 -----------
agrees to pay Executive a base salary of at least One Hundred Forty-Two Thousand
Dollars ($142,000) 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 October 1,
2001; 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 and retirement plans (the "Plans").  Employer acknowledges
that Executive has retained a $1 million key man life insurance policy as
required in accordance with the Employer's initial public offering.  Employer
agrees that ownership of this policy automatically transfers to the Executive if
employment of the Executive is terminated for any reason, or three years from
the completion of the Employer's initial public offering.  Employer agrees to
pay the premium for such policy for as long as the Executive is employed by the
Employer.

          (ii)   Vacation.  Executive shall be entitled to four (4) weeks paid
                 --------
vacation time each year. Executive's vacation shall be under Employer's usual
policies applicable to senior executives. 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 Allowance.  Executive shall be entitled to an
                 --------------------
automobile allowance of $750.00 per month.

          (iv)   Disability Benefits.  During the Term, Employer agrees to pay
                 -------------------
the premium for long-term disability insurance under Executive's present
disability policy.

                                      -2-
<PAGE>

     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 a 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 his 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 his duties under this Agreement or, (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.

                                      -3-
<PAGE>

     Notwithstanding the foregoing, no termination of Executive by Employer
pursuant to clauses (ii) or (iii) 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 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 his 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 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 potential 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 his 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 his Base Salary accrued to the date of such

                                      -4-
<PAGE>

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 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 (i) the assignment to Executive of duties inconsistent with the
position and status of Executive as set forth in this Agreement without
Executive's prior written consent, (ii) a substantial alteration in the nature,
status or prestige of Executive's responsibilities as set forth in this
Agreement or a change in Executive's title or reporting level from that set
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
therefor 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 his employment hereunder, he is contacted
on an unsolicited basis by an employee of Employer who desires to leave
Employer.

     SECTION 7.     CONFIDENTIALITY.
                    ---------------

     (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 his employment by Employer.  For purposes hereof, the term "Proprietary

                                      -5-
<PAGE>

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 known to or in the
possession of Executive on or prior to the date hereof, (iv) that was developed
by or with the participation of Executive on or prior to the date hereof, or (v)
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 two (2) years after the cessation
of his 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 his
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 his 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 know, 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 his employment with Employer;
provided, however, that Executive is hereby notified that the foregoing does not
apply to an invention that Executive creates entirely on his 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.

                                      -6-
<PAGE>

     (e) Trade Secrets of Others.  To the best of Executive's knowledge,
         -----------------------
Executive's performance of his duties will not violate any agreements with or
trade secrets of any other person or entity.

     SECTION 8.     SURRENDER OF PROPRIETARY INFORMATION AND OTHER COMPANY
                    ------------------------------------------------------
PROPERTY.  In the event of the termination of his employment for any reason,
--------
Executive immediately will deliver to Employer upon request all devices,
records, designs, sketches, reports, proposals, information, lists,
correspondence, equipment, software, computer disks, documents, photographs,
photostats, negatives, undeveloped film, notes, drawings, specifications, tape
recordings or other electronic recordings, programs, data, Proprietary
Information, and other materials or property of any nature belonging to
Employer, and Executive will not take with Executive, any of the foregoing or
any reproduction of any of the foregoing.

     SECTION 9.     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 10.    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 Technologies, Inc.

         10410 Trademark Street
         Rancho Cucamonga, California 91730
         Attention: President

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.

                                      -7-
<PAGE>

     (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, L.L.C. ("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

                                      -8-
<PAGE>

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 Technologies, Inc.

                                   By ________________________________________
                                      Name:___________________________________
                                      Title:__________________________________

                                   "EXECUTIVE"

                                   ___________________________________________
                                   Gary S. Wolff

                                      -9-
<PAGE>

                                   Exhibit A
                                   ---------

                           Executive Bonus Plan Pool
                           -------------------------

Phase I    -  2% of net sales increase 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

                                      A-1
<PAGE>

                                   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.

                                      B-1INVESTMENT AGREEMENT

          THIS AGREEMENT is being entered into as of the 17 day of August, 2000
by and between Nurescell, Inc., a Nevada corporation, with its principal place
of business in Newport Beach, California ("USA") and AG, an entity formed under
the laws of the Federal Republic of Germany ("AG").

          WHEREAS, AG has concurrently entered into an exclusive Licensing
Agreement for technology developed by USA (hereinafter, "Technology") for the
purpose of commercialization and marketing of said Technology in Europe, the
British Isles and countries of the former Soviet Union; and

          WHEREAS, as additional consideration for entering into the License
Agreement, AG, with the assistance of Advanced Technology Industries, Inc., a
Delaware corporation (ATI), shall exercise its best efforts in good faith to
raise as investment capital the sum of Twenty Million Deutsche Marks
(DM20,000,000), a portion of which shall be subject to the terms and conditions
of this Agreement; and

          WHEREAS, USA shall initially own fifty-one percent (51%) of AG and ATI
shall own forty-nine percent (49%) of AG.

          For the mutual promises and covenants contained herein and for
valuable consideration, the parties herewith agree as follows:

          1. AG, with the assistance of ATI, shall exercise its best efforts in
good faith to cause to be raised the sum of Twenty Million Deutsche Marks
(DM20,000,000) as investment capital for the operations of AG, a portion of
which shall be subject to a "put option" by USA.

          2. AG shall have the option to purchase from USA up to Four Million
Dollars ($4,000,000.00) worth of USA stock ("Call"), The Call(s) shall be in the
form attached hereto as Exhibit A. The right to exercise said Call shall be
effective upon signing of this Investment Agreement and shall continue for a
period of five (5) years thereafter. It is acknowledged by the parties that said
transfer of stock pursuant to the Call may be subject to various restrictions on
resale pursuant to the rules and regulations of the Securities and Exchange
Commission of the United States of America and other applicable securities laws.
AG acknowledges and warrants that the Call shares will be purchased for its own
account and not for the beneficial interest of any other person or for resale in
connection with any other distribution of those shares; provided, however, that
AG shall be entitled to the benefit of that certain Registration Right
Agreement, attached hereto as Exhibit "B".

         3. All shares of USA delivered pursuant to the Call Option shall be
deemed restricted shares, subject to the attached Registration Rights Agreement
attached as

                                        1
<PAGE>

Exhibit "B," and may not be sold, transferred, assigned or hypothecated without
compliance with all rules and regulations of the U.S. Securities Act of 1933.
All such shares shall contain a restrictive legend as follows:

                  THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UNITED
                  STATES SECURITIES ACT OF 1933 (THE "ACT") OR QUALIFIED UNDER
                  THE LAWS OF ANY OTHER JURISDICTION. THEY MAY NOT BE OFFERED OR
                  SOLD IN THE UNITED STATES OR TO U.S. PERSONS IN THE ABSENCE OF
                  AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT AND ALL
                  OTHER REQUIRED QUALIFICATIONS OR AN OPINION OF COUNSEL
                  SATISFACTORY TO NURESCELL TO THE EFFECT THAT SUCH REGISTRATION
                  AND QUALIFICATIONS ARE NOT REQUIRED. HEDGING TRANSACTIONS
                  INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN
                  COMPLIANCE WITH THE ACT.

          4. The Board of Directors of AG shall include sufficient directors
appointed by USA to equal its percentage of ownership of AG. Said appointments
to be in accordance with the laws of the Federal Republic of Germany.

         5. It is understood and agreed that the raising of said Investment
Capital by AG from third party investors, shall be in exchange for shares of
stock of AG not to exceed thirty-four percent (34%) of the outstanding shares of
AG. It is agreed that any such dilution shall apply equally to the holdings of
AG by ATI and USA, respectively.

         6. The share of certificates of AG shall be delivered to USA not later
than ten (30) days after the execution of the License Agreement. Should said
shares not be delivered to USA within the said time, then in that event,
Nurescell may forthwith terminate said License Agreement.

         7. CORPORATE GOVERNANCE

                  a. As further consideration for AG to enter into this
Agreement, USA shall cause to be named to the Board of Directors of USA, one
director as specified by Mr. Jim Samuelson who shall also be named President of
USA. Mr. William A. Wilson shall forthwith resign as President while retaining
his position as Chairman of the Board. Said resignation shall be signed upon
execution of this Agreement. William A. Wilson, Shelby Brewer and John
Longenecker shall each, within five (5) days of execution of this Agreement,
execute and deliver their resignations as members of the Board to the corporate
secretary of USA pending the receipt by USA of the $1 million due under the
License Agreement. Except as specified in this paragraph and provided that AG is
not in default under the License Agreement, without prior written approval of
both Boards of Directors, neither USA nor AG shall make any changes in their
respective corporate management, including members of the Board, until such time
that the full One Million Dollars ($1,000,000) due under the License Agreement
has been paid.

                                       2
<PAGE>

         8. MISCELLANEOUS

                  a. GOVERNING LAWS: WAIVER JURY. This Agreement and the
obligations of the parties hereunder shall be interpreted, construed and
enforced in accordance with the internal laws of the State of California. In the
event of legal proceedings, the parties hereby knowingly, voluntarily and
intentionally WAIVE THE RIGHT EITHER OF THEM OR THEIR HEIRS, REPRESENTATIVES,
SUCCESSORS OR ASSIGNS MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY AGREEMENT
CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT,
DEALING, STATEMENTS OR ACTIONS OF EITHER PARTY. EACH OF THE PARTIES CONSENT TO
THE JURISDICTION AND VENUE OF THE UNITED STATES DISTRICT COURT FOR THE CENTRAL
DISTRICT OF CALIFORNIA.

                  b. ENTIRE AGREEMENT. This Agreement and the License Agreement
referred to herein contain the entire agreement between the parties hereto with
respect to the subject matter hereof. No variations from, modifications of,
amendments to or changes in this Agreement shall be binding upon any party
hereto unless set forth in a document duly executed by or on behalf of such
party.

                  c. SEVERABILITY. If any provision of this Agreement or the
application thereof to any Person or circumstance shall be invalid or
unenforceable to any extent the remainder of this Agreement and the application
of such provisions to other Persons or circumstances shall not be affected
thereby and shall be enforced to the greatest extent permitted by law.

                  d. ATTORNEY FEES. If any litigation arises between the parties
concerning this Agreement or its enforcement the prevailing party in such
litigation shall be entitled to collect in such action from the non-prevailing
party all costs of such litigation, including reasonable attorney fees at all
levels of proceedings.

                  e. NO THIRD PARTY BENEFICIARIES. This Agreement is intended
for the benefit of the parties hereto and their respective permitted successors
and assigns, and is not for the benefit at nor may any provision hereof be
enforced by, any other person.

                  f. PUBLICITY. Each of the party shall have the right to review
before issuance the others press releases, or any other public statements, with
respect to the transactions contemplated hereby; provided, however, each of the
companies shall be entitled, without prior consultation with or approval of the
other, to make any press release or other public disclosure with respect to
transactions as is required by applicable laws and regulations of the
jurisdictions of the United Stales of America and/or the Federal Republic of
Germany.

               g. FURTHER ASSURANCE. Each party shall do and perform, or cause
to be done and performed, all such further acts and things, and shall execute
and deliver all such other agreements, certificates, instruments and documents,
as the other party may reasonably request in order to carry out the intent and
to accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.

                  h. REMEDIES. No provision of this Agreement providing for any
specific remedy to a party shall be construed to limit such party to the
specific remedy described and any other remedy that would otherwise be available
to such party at law or in equity shall also be available.

                  i. COUNTERPARTS: EXECUTION BY FACSIMILE. This Agreement and/or
any amendments to this Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. Any signature transmitted via facsimile
shall be deemed an original signature for all purposes.

        IN WITNESS WHEREOF, the parties hereto have executed this Investment
Agreement effective as of the day end year first written above.

NURESCELL, INC.                        NURESCELL AG
a Nevada corporation                   An entity formed under the laws of the
                                       Federal Republic of Germany

By: /S/ William Wilson                 By: /S/ Hans Joachim Skrobanek
   -----------------------                ------------------------------
Its: Chairman                          Its: President

                                       4
<PAGE>

                                    EXHIBIT A

                          FORM OF NOTICE OF CALL OPTION

         Pursuant to the Investment Agreement executed the ___ day of _______,
_____, AG herewith exercises its Call Option rights pursuant to said agreement
by requesting USA to deliver to AG ____ shares of stock of USA at a price in
accordance with said agreement of ___ which is based upon eighty percent (80%)
of the average five (5) day bid price trading range of said USA stock for the
period.

         Executed this __day of _______, 2000.

NURESCELL AG
An entity formed under the laws of the
Federal Republic of Germany

By:
    -----------------------------

Its:
     ----------------------------

                                       5
<PAGE>

                                    EXHIBIT B

                          REGISTRATION RIGHTS AGREEMENT

         This Registration Rights Agreement (the "Agreement") is entered into as
of August 15, 2000, by and between Nurescell Inc., a Nevada corporation (the
"Company"), and Nurescell AG, an entity formed under the laws of the Republic of
Germany ("Nurescell AG"), with reference to the following facts and
circumstances:

         A. Capitalized terms used and not otherwise defined herein shall have
the same meaning as set forth in the License and Investment Agreement entered
into concurrently herewith by and between the Company and Nurescell AG (the
"Investment Agreement").

         B. Pursuant to the Call, the Company may in the future issue to
Nurescell AG certain shares of the $.0001 par value common stock of the Company
(the "Common Stock").

         C. In connection with the Investment Agreement, the Company desires to
grant certain registration rights with respect to the shares of Common Stock
obtainable upon the exercise of the Call.

         NOW, THEREFORE, for good and valuable consideration, the receipt and
adequacy of which is hereby acknowledged, the parties agree as follows.

                                    SECTION 1

                                  DEFINITIONS
                                  -----------

         Capitalized terms used in this Agreement and not defined elsewhere
herein shall have the meanings set forth below:

         "COMMISSION" means the Securities and Exchange Commission, or any other
federal agency then administrating the Securities Act.

         "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect from time to time.

         "LOSSES" means all losses, claims, damages or liabilities and
reasonable expenses related thereto.

         "CALL SHARES" means any shares of Common Stock obtainable upon the
exercise of the Call. As used herein, "Call Shares" also includes any shares of
equity securities of the Company or of a successor company that are issued with
respect to or on account of the Call Shares, including without limitation shares
distributed as stock dividends, shares issued under stock splits or other
recapitalizations, and shares issued under mergers or other reorganizations.

<PAGE>

         "SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in affect from time to time.

                                    SECTION 2

                              DEMAND REGISTRATION
                              -------------------

         2.1 At any time within 30 days (5) years following the first exercise
of the Call, upon the written demand of Nurescell AG, the Company shall prepare
and file a registration statement under the Securities Act covering an offering
of such number of Call Shares as shall have been requested to be registered by
Nurescell AG in such demand; provided, however, that (i) the Company shall be
obligated to effect a registration pursuant to this Section 2.1 no more than 4
times (4) times, and (ii) no demand shall be made within six (6) months
following the date of the exercise of the Call.

         2.2 The Company shall proceed as expeditiously as possible after
receipt of a demand pursuant to Section 2.1 hereof to file a registration
statement and use its best efforts to cause such registration statement to
become effective within one hundred twenty (120) days after the receipt of such
written demand or, in the case of a demand made with sixty (60) days prior to
the end of the Company's then fiscal year, within two hundred ten (210) days
after the receipt of such written demand. The Company shall select any
underwriter(s) to be engaged in connection with any such registration.

                                    SECTION 3

                             PIGGYBACK REGISTRATION
                             ----------------------

         3.1 If at any time with 5 years (5) years following the first exercise
of the Call, the Company proposes to register any offering of shares of its
capital stock under the Securities Act, and if such registration is to be on a
form of the Commission that may include, or is at any time amended or changed to
such a form that may include the Call Shares, the Company will provide written
notice to Nurescell AG of the Company's intention to register the offering at
least thirty (30) days prior to the filing of said registration statement.

         3.2 Unless objected to by any underwriter(s) participating in the sale
and distribution of the Company's securities covered by the registration
statement referred to in Section 3.1 hereof, the Company's notice shall give
Nurescell AG the opportunity to elect to include in the registration some or all
of the Call Shares. Nurescell AG shall have thirty (30) days after receipt of
the Company's notice to notify the Company in writing of the number of Call
Shares (the "Elected Shares") which Nurescell AG elects to include in the
offering. If the number of Elected Shares that Nurescell AG requests to include
in each registration exceeds the number of Call Shares permitted by any
underwriter, then Nurescell AG, and each other selling shareholder who also has
piggyback registration rights and has elected to include shares of Common Stock
in the registration, shall be entitled to include that number of shares of
Common Stock that bears the same ratio to the number of shares permitted by the
underwriter as the number of Elected Shares which Nurescell AG requests to
include bears to the aggregate number of shares that Nurescell AG and any other
selling shareholders request to include. The piggyback registration rights
provided by this Section 3.2 with respect to the Call Shares shall not apply to
offerings that are registered on Form S-4, Form S-8, or successor forms thereto
for registering stock issued under business combinations or employee plans.

                                      -2-
<PAGE>

         3.3 The inclusion of Call Shares in registered offerings pursuant to
this Section 3 shall be upon the condition that Nurescell AG sells its Elected
Shares to any underwriter at the same price and on substantially the same terms
and conditions as the Company.

         3.4 The Company shall give Nurescell AG the right to participate in
each registration pursuant to this Section 3 without limitation as to the number
of registrations.

         3.5 In the case of any public offering of securities of the Company
pursuant to which Nurescell AG exercises registration rights under this Section
3, the Company shall designate any underwriters in connection therewith.

                                    SECTION 4

                           CONDITIONS TO PARTICIPATION
                           ---------------------------

         To include any Call Shares in a registration under Section 2 or Section
3 hereof, Nurescell AG shall:

         (a) cooperate with the Company in preparing the registration statement
and execute such agreements in connection therewith as the Company or any
underwriter may deem reasonably necessary;

         (b) promptly supply the Company with such information, documents,
representations and warranties as the Company or any underwriter may deem
reasonably necessary in connection with such registration; and

         (c) as requested by the Company or any underwriter, agree in writing
not to sell or transfer any Common Stock not included in such registration for a
period of fifteen (15) days prior to and one hundred eighty (180) days after the
effective date of the registration without the underwriter's consent, but
Nurescell AG shall not be required to make such agreement unless the other
holders of Common Stock included in the offering covered by such registration
shall similarly agree.

                                    SECTION 5

                               OPINION OF COUNSEL
                               ------------------

         The Company shall have no obligation under Section 2 or Section 3
hereof to register any Call Shares if the Company delivers to Nurescell AG an
opinion of counsel reasonably satisfactory to Nurescell AG to the effect that
the proposed sale or disposition of the Call Shares for which registration was
requested does not require registration under the Securities Act for a sale or
disposition in a single public transaction. The Company hereby agrees to
indemnify Nurescell AG against, and to hold it harmless from, all Losses,
including liability for rescission, that it may incur under the Securities Act
or otherwise by reason of it proceeding in accordance with such opinion of
counsel.

                                      -3-
<PAGE>

                                    SECTION 6

                             REGISTRATION PROCEDURES
                             -----------------------

         If and whenever the Company is obligated by the provisions of this
Agreement to effect the registration of any offering of Call Shares under the
Securities Act, as expeditiously as possible the Company will, or will use its
best efforts to, as the case may be:

         (a) Prepare and file with the Commission a registration statement with
respect to such Call Shares and cause such registration statement to become
effective; provided, however; that before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company shall furnish
to Nurescell AG and its counsel selected pursuant to Section 7.2 hereof copies
of all such documents proposed to be filed, which documents will be subject to
the review of Nurescell AG and its counsel and, in the event of a demand
registration which is not accompanied by a registration of Common Stock for sale
by the Company, the Company shall not file any registration statement or
Prospectus or any amendments or supplements thereto to which Nurescell AG or its
counsel shall reasonably object on a timely basis.

         (b) Prepare and file with the Commission such amendments and
supplements to the registration statement and the prospectus used in connection
therewith as may be necessary to keep the registration statement effective until
the earlier of the sale of all Call Shares covered thereby or the expiration of
a period of two hundred seventy (270) days after its effective date, and comply
with the provisions of the Securities Act with respect to the disposition of all
shares of Common Stock covered by the registration statement provided, however,
that if maintaining the effectiveness of the registration statement would
require the filing of a post-effective amendment including new financial
statements (other than financial statements which the Company would be required
to include in a current report on Form 10-Q or Form 10-QSB), the Company shall
be obligated to use its best efforts to maintain the effectiveness of such
registration statement for only six (6) month, in the case of the first
registration filed hereunder, and ninety (90) days in the case of any other
registration filed hereunder. In the event that any Call Shares included in a
registration statement subject to this Agreement remain unsold at the end of the
period during which the Company is obligated to use its best efforts to maintain
the effectiveness of the registration statement, the Company, if and when a
further amendment or supplement would be required to comply with Section 10 of
the Securities Act, may file a post-effective amendment to the registration
statement for the purpose of removing such Call Share from registered status.

         (c) Furnish to Nurescell AG as many copies of prospectuses, including
the preliminary prospectus, in conformity with the requirements of the
Securities Act and other related documents, as Nurescell AG may reasonably
request.

                                      -4-
<PAGE>

         (d) Register or qualify the Call Shares covered by the registration
statement under the securities or blue sky laws of such jurisdictions as
Nurescell AG shall reasonably request, and do any acts that may be reasonably
necessary or advisable to enable Nurescell AG to consummate the disposition in
such jurisdictions of the Call Shares; provided, however, that the Company shall
not be obligated, by reason thereof, to qualify as a foreign corporation or file
any general consent to service of process under the laws at any such
jurisdiction or subject itself to taxation as doing business in any such
jurisdiction.

         (e) Furnish to Nurescell AG an opinion of counsel for the Company,
which opinion shall be reasonably acceptable to Nurescell AG and its counsel
selected pursuant to Section 7.2 hereof, to this effect that (i) a registration
statement covering the offering of the Call Shares has been filed with the
Commission under the Securities Act and has been made effective by order oft,
Commission, (ii) a prospectus complying as to form with the requirements of the
Securities Act is available for delivery. (iii) no stop order has been issued by
the Commission suspending the effectiveness of such registration statement and
that to the best of such counsels knowledge, no proceedings for the issuance of
such a stop order are threatened or contemplated and (iv) the securities
included in the offering covered by such registration statement have been
registered or qualified, or exempted from such registration or qualification,
under the securities or blue sky laws of each state in which the Company has
been required to register or qualify such shares under Section 6(d) hereof. In
giving such opinion, counsel for the Company shall be entitled to rely upon the
opinion of counsel for any underwriter.

         (f) Notify Nurescell AG promptly after the Company shall receive notice
that (i) any registration statement, supplement or amendment has become
effective, (ii) any registration statement is required to be amended or
supplemented or (iii) any stop order with respect thereto has been issued.

         (g) Enter into such agreements, including an underwriting agreement in
form, scope and substance as is customary in underwritten offerings, and take
all other actions in connection therewith, including actions reasonably
requested by any underwriter or Nurescell AG, in order to expedite or facilitate
the disposition of the Call Shares. The Company's obligations pursuant to the
preceding sentence can include without limitation, the Company; (i) making
representations and warranties to the underwriters with respect to the business
of the Company, the registration statement, the prospectus and the documents, if
any, incorporated or deemed to be incorporated by reference in the registration
statement in each case in form, substance and scope as are customarily made by
issuers to underwriters in underwritten secondary offerings and confirm such
matters if and when requested; (ii) obtaining opinions of counsel to the Company
and updates thereof, which counsel and opinions, in form, scope and substance
shall be reasonably satisfactory to the underwriters covering the matters
customarily covered in opinions requested in underwritten offerings, (iii)
obtaining "cold comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary, any other
independent certified public accountants of any subsidiary of the Company or of
any business acquired by the Company for which financial statements and
financial data are or are required to be included in the registration statement)
addressed to the underwriters, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters to
underwriters in connection with underwritten offerings; (iv) agreeing in any
underwriting agreement to the indemnification and contribution provisions and
procedures of Sections 9 through 12 hereof (or such other less favorable
provisions and procedures for the underwriters that is acceptable to the
underwriters) with respect to all parties to be indemnified pursuant to said
Sections; and (v) delivering such documents and certificates as may be requested
by any underwriter to evidence the continued validity of the representations and
warranties made pursuant to clause (i) of this Section 6(g), and to evidence
compliance with any customary conditions contained in the underwriting agreement
or other agreement entered into by the Company.

                                      -5-
<PAGE>

         (h) Make available for inspection, by any underwriter and any counsel
or accountant retained by the underwriter, financial and other records,
pertinent corporate documents and properties of the Company; and cause the
officers, directors and employees of the Company to supply information
reasonably requested by any underwriter, counsel or accountant in connection
with such registration statement; provided, however, that any records,
information or documents that we designated by the Company in writing as
confidential shall be kept confidential by such persons unless (i) disclosure of
such records, information or documents is required by court or administrative
order, (ii) disclosure of such records, information or documents, in the opinion
of counsel to such person, is required by law, including without limitation
pursuant to the requirements of the Securities Act or (iii) such records,
information or documents are in the public domain or otherwise publicly
available.

                                    SECTION 7

                 REGISTRATION EXPENSES; COUNSEL FOR NURESCELL AG
                 -----------------------------------------------

         7.1 The costs and expenses in connection with registrations and
qualifications of Call Shares under Section 2 hereof shall be paid by Nurescell
AG. The costs and expenses (other than underwriting discounts or commissions and
such fees for counsel, printing, registration and other fees as state securities
officials may require that Nurescell AG and other selling shareholders pay) of
all registrations and qualifications of Call Shares under Section 3 hereof shall
be paid by the Company, including without limitation all registration and filing
fees, printing expenses, costs of special audits incident to or required by any
registration, fees and disbursements of counsel for the Company and the fees and
disbursement of one special counsel acting for Nurescell AG and selected
pursuant to Section 7.2 hereof except that all such expenses in connection with
any amendment or supplement to the registration statement or the prospectus used
in connection therewith required to be filed more than two hundred seventy (270)
days after the date on which such registration statement becomes effective under
the Securities Act because Nurescell AG has not effected the disposition of all
Call Shares covered by such registration statement shall be borne pro rata by
Nurescell AG and any other selling shareholders benefitted thereby.

         7.2 Nurescell AG may select the counsel to act on its behalf in
connection with a registration under this Agreement, provided that such counsel
is reasonably acceptable to the Company.

                                      -6-
<PAGE>

                                    SECTION 8

                                    RULE 144
                                    --------

         The Company shall file the reports required under the Securities Act
and the Exchange Act and the rules and regulations adopted by the Commission
thereunder, and shall take such further action as Nurescell AG may reasonably
request, as required from time to time, to enable Nurescell AG to sell the Call
Shares without registration under the Securities Act within the limitation of
the exemptions provided by Rule 144 under the Securities Act, as such Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission.

                                    SECTION 9

                         INDEMNIFICATION BY THE COMPANY
                         ------------------------------

         In the event of any registration under the Securities Act of any
offering of Call Shares, the Company hereby agrees to indemnify and bold
harmless Nurescell AG, its officers and directors, and each other person, if
any, who controls Nurescell AG (within the meaning of the Securities Act) and
each other person (including each underwriter, and each other person, if any,
who controls such underwriting) who participates in the offering of such Call
Shares against any Losses, joint or several, to which Nurescell AG or such
controlling person or participating person may became subject under the
Securities Act or otherwise, insofar as such Losses (or proceedings in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained, on the effective date thereof, in any
registration statement under which Call Shares were registered under the
Securities Act in any preliminary prospectus or final prospectus contained
therein or in any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse Nurescell AG and each such controlling person or
participating person for any legal or other expenses reasonably incurred by
Nurescell AG or such controlling person or participating person in connection
with investigating or defending any such Loss; provided, however, that, the
Company will not be liable in any such case to the extent that any such Loss
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in such registration statement, said
preliminary or final prospectus or said amendment or supplement in reliance upon
and in conformity with written information furnished by Nurescell AG or such
controlling or participating person, as the case may be, specifically for use in
the preparation thereof. The Company shall also indemnify underwriters, selling
brokers, dealer managers and similar securities industry professionals
participating in the distribution, their officers, directors, agents and
employees and each person who controls such persons (within the meaning of the
Securities Act or the Exchange Act) to the same extent as provided above with
respect to the indemnification of Nurescell AG.

                                       -7-

<PAGE>

                                   SECTION 10

                         INDEMNIFICATION BY NURESCELL AG
                         -------------------------------

         In the event of any registration under the Securities Act of any
offering of Call Shares, Nurescell AG hereby agrees to indemnify and hold
harmless the Company and each person who controls the Company within the meaning
of the Securities Act and each other person (including each underwriter, and
each other person, if any, who controls such underwriter, and each other selling
shareholder, and each other person, if any, who controls such selling
shareholder) who participates in the offering of such Call Shares, against any
Losses, joint or several, to which the Company, other selling shareholder, or
controlling person or participating person may become subject under to
Securities Act or otherwise, insofar as such Losses (or proceedings in respect
thereof) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained, on the effective date thereof in any
registration statement under which an offering of such Call Shares was
registered under the Securities Act, in any preliminary prospectus or final
prospectus contained therein, or in any amendment or supplement thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, other selling
shareholders, and each such controlling person or participating person for any
legal or other expenses reasonably incurred by the Company, other selling
shareholders, or such controlling person or participating person in connection
with investigating or defending any such Loss or proceeding; provided, however,
that Nurescell AG will be liable in any such case to the extent, and only to the
extent, that any such Loss arise out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in such
registration statement, said preliminary or final prospectus or said amendment
or supplement in reliance upon and in conformity with written information
furnished by Nurescell AG specifically for use in the preparation thereof.
Notwithstanding the foregoing, the liability of Nurescell AG under this Section
10 shall be limited to an amount equal to the price of the Call Shares sold by
Nurescell AG in connection with such registration unless such liability arises
out of acts based on willful conduct of Nurescell AG.

                                   SECTION 11

                     CONDUCT OF INDEMNIFICATION PROCEEDINGS
                     --------------------------------------

         If any action or proceeding (including any governmental investigation
or inquiry) shall be brought or any claim shall be asserted against any person
entitled to indemnity hereunder (an "indemnified party"), such indemnified party
shall promptly notify the party from which such indemnity is sought (the
"indemnifying party") in writing, and the indemnifying party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
the indemnified party and the payment of all fees and expenses incurred in
connection with the defense thereof. Any such indemnified party shall have the
right to employ separate counsel in any such action, claim or proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be the expenses of such indemnified party unless (i) the indemnifying
party has agreed to pay such fees and expenses or (ii) the indemnifying party
shall have failed to promptly assume the defense of such action, claim or
proceeding

                                       -8-
<PAGE>

or (iii) the named parties to any such action, claim or proceeding (including
any impleaded parties) include both such indemnified party and the indemnifying
party, and such indemnified party shall have been advised by counsel that there
may be one or more legal defenses available to it which are different from or in
addition to those available to the indemnifying party and that the assertion of
such defenses would create a conflict of interest such that counsel employed by
the indemnifying party could not faithfully represent the indemnified party (in
which case, if such indemnified party notifies the indemnifying party in writing
that it elects to employ separate counsel at the expense of the indemnifying
party, the indemnifying party shall not have the right to assume the defense of
such action, claim or proceeding on behalf of such indemnified party, it being
understood, however, that the indemnifying party shall not, in connection with
any one such action, claim or proceeding or separate but substantially similar
or related actions, claims or proceedings in the same jurisdiction arising out
of the same general allegations or circumstances, be liable for the reasonable
fees and expenses of more than one separate firm of attorneys (together with
appropriate local counsel) at any time for all such indemnified parties, unless
in the reasonable judgement of such indemnified party a conflict of interest may
exist between such indemnified party and any other of such indemnified parties
with respect to such action, claim or proceeding, in which event the
indemnifying party shall be obligated to pay the fees and expenses of such
additional counsel or counsels). The indemnifying party shall not be liable for
any settlement of any such action or proceeding effected without its written
consent.

                                   SECTION 12

                                  CONTRIBUTION
                                  ------------

         If the indemnification provided for in this Agreement is unavailable to
an indemnified party under Section 9 or Section 10 hereof (other than by reason
of exceptions provided in such Sections) in respect of any Losses, then each
applicable indemnifying party in lieu of indemnifying such indemnified party
shall contribute to the amount paid or payable by such indemnified party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties in connection
with the actions, statements or omissions which resulted in such Losses, as well
as any other relevant equitable considerations. The relative fault of such
indemnifying party and the indemnified parties shall be determined by reference
to, among other things, whether any action in, question, including any untrue
statement or alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or relates to
information supplied by such indemnifying party or indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set worth in Section 11 hereof, any legal or other fees or
expenses reasonably incurred by such party in connection with any action, suit,
claim, investigation or proceeding.

         The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 12 were determined by pro rata allocation
or by any other method of allocation which does not take into account the
equitable considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 12, Nurescell AG shall not be
required to contribute any amount in excess of the amount by which the total
price at which the Call Shares said by it exceeds the amount of any damages
which such indemnifying party has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.

                                      -9-
<PAGE>

                                   SECTION 13

                                EQUITABLE RELIEF
                                ----------------

         The parties agree and declare that legal remedies may be inadequate to
enforce the provisions of this Agreement and that equitable relief, including
specific performance and injunctive relief, may be used to enforce such
provisions.

                                   SECTION 14

                                  M1SCELLANEOUS
                                  -------------

         14.1 NOTICES. Any notices or other communication provided for herein
shall be given in writing, and delivered personally, by courier, by facsimile,
or by registered or certified mail postage prepaid, addressed, if to the
Company, to Nurescell Inc., 1400 Bristol Street North, Suite 250, Newport Beach,
California 92660; facsimile (949) 752-0091, and if to Nurescell AG, at the
address or facsimile number indicated on the records of the Company, or to such
other address or facsimile number as may be designated in writing by the Company
or Nurescell AG. Except as otherwise provided in this Agreement, each such
notice shall be deemed given when received by the person to whom the notice is
addressed.

         14.2 TERMINATION OF REGISTRATION RIGHTS. The obligations of the Company
to register Call Shares pursuant to Section 2 or Section 3 hereof; and the
rights of Nurescell AG to include its Call Shares in registration statements
pursuant to such Sections, shall terminate five (5) years following the date of
the first exercise of the Call.

         14.3 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that Nurescell AG's rights under this Agreement
shall not be assigned other than pursuant to a merger or similar business
succession.

         14.4 WAIVER. No failure or delay on the part of the parties in
exercising any right, power or privilege hereunder, nor any course of dealing
among the parties shall operate as a waiver of any such right, power or
privilege nor shall any single or partial exercise of any such right, power or
privilege preclude the simultaneous or later exercise of any other right, power
or privilege. The rights and remedies

                                      -10-
<PAGE>

provided herein are cumulative and are not exclusive of any rights or remedies
which any of the parties would otherwise have.

         14.5 FURTHER ASSURANCES. Each party agrees to execute and deliver such
additional documents and take such other actions as the other party may
reasonably request for purposes of carrying out the transactions contemplated by
this Agreement.

         14.6 ATTORNEYS' FEES. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable attorneys' fees (including any fees incurred in any appeal) in
addition to its costs and expenses and any other available remedy.

         14.7 GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, USA, without reference
to principles of conflict of laws.

         14.8 ENTIRE AGREEMENT; MODIFICATION. This Agreement expresses the
entire understanding of the parties as to its subject matter and supersedes any
prior discussions, negotiations and agreements with respect to such subject
matter. The terms of this Agreement may be amended or waived only in writing
that is approved by the Company and Nurescell AG.

         14.9 SEVERABILITY. Any provision of this Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction be
ineffective only to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof or affecting the validity or
enforceability of such provision in any other jurisdiction.

         14.10 CAUTION HEADINGS; SINGULAR AND PLURAL; PERSONS. Caption headings
are provided for convenience only and shall not affect the interpretation of
this Agreement. As used herein references to the singular include the plural and
the plural include the singular, except where the context requires otherwise. As
used herein references to person includes individuals and entities.

         14.11 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.

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

                                       NURESCELL INC.

                                       By:
                                           -----------------------------
                                       Its:
                                            ----------------------------

                       [SIGNATURES CONTINUED ON NEXT PAGE]

                                      -11-
<PAGE>

                                       NURESCELL AG

                                       By: /S/ Hans Joachim Skrobanek
                                          ------------------------------
                                       Its: President
                                           -----------------------------

                                      -12-

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