Document:

exv10w8w1

 

Exhibit 10.8.1

AMENDMENT TO EXECUTIVE EMPLOYEE AGREEMENT DATED

February 25,
2008

     This
AMENDMENT TO THE EXECUTIVE EMPLOYMENT AGREEMENT dated November 1, 2007) (“Amendment”) is
made as of July 1, 2008 (“Amendment Effective Date”) by and between Energy Recovery Inc., a Delaware
corporation, with its principal offices at 1908 Doolittle Drive, San Leandro, CA 94577 (the
“Company”) and Thomas Willardson , an individual (the “Executive”) (together, the “Parties”).

     Pursuant to Article 5.11 of the Executive Employment Agreement, the Parties hereby amend that
Agreement as follows:

Article 1.2. The Parties amend and replace Article 1.2 to read as follows:

Term. The term of Executive’s employment is hereby extended through
December 31, 2008. Thereafter, the Executive Employment Agreement, as amended,
shall automatically terminate and Executive’s employment with the Company will
become “at will.” “At will” employment means that either the Company or Executive
may terminate Executive’s employment at any time with or without cause and with
or without notice. Such at-will employment cannot be changed except by a writing
signed by the Executive and a duly authorized executive or Board member of the
Company.

Article 2.l(a). The Parties amend and replace Article 2.1(a) to read as follows:

     Base Salary. Effective as of January 1, 2008, Executive’s base salary
will be $20,833.33 per month ($250,000 per annum), less any deductions required
by law, which shall continue to be paid in accordance with the Company’s normal
and customary payroll practices, but no less frequently than monthly. The
Executive’s base salary shall be reviewed annually and may be reasonably adjusted
in the sole discretion of the Company.

Article 2.1(b). The Parties amend and replace Article 2.1 (b) to read as follows:

Annual Bonus.

(i) The Executive shall be eligible to participate in the Company’s annual
bonus program and shall be eligible to earn an annual bonus in an amount not to
exceed one (1) times Executive’s base salary. If the Executive is eligible to
earn an annual cash bonus, the exact amount of the Executive’s annual cash bonus,
if any, shall be determined by the Company pursuant to the attainment of
performance goals as set forth in the attached performance matrix prepared by the
Company.

(ii) Notwithstanding
Article 2.1(b)(i) to the contrary, the Executive’s receipt
of any annual bonus attributable to Executive’s performance

 

 

during the 2008 fiscal year is contingent upon the consummation of the
Company’s initial public offering of its common stock (“IPO”) by June 16,
2008. However, in the event that the IPO is not consummated by
June 16, 2008
through no fault of the Executive, as determined by the Board (with the
recusal by the Executive from such Board determination, as necessary) in good
faith, although the Executive shall not be eligible to receive any annual
cash bonus in 2008, all of the Executive’s stock options granted under
Executive’s 2006 Equity Compensation Grant pursuant to Article 2.1(c) of
Executive’s Executive Employment Agreement shall immediately and fully vest
effective as of December 31,2008.

Article 3.1(a)(iv). The Parties amend and replace Article 3.1(a)(iv) to
read as follows:

Executive’s violation of the Company’s Code of Conduct, if any, and as
amended from time to time, confidentiality obligations to the Company or
misappropriation of Company assets; or

Article 3.2(e)(i)(D).
The Parties amend and replace Article 3.2(e)(i)(D) to read as follows:

any material reduction, limitation or failure to pay or provide any of
the compensation provided to the Executive under Article 2.1 of this
Agreement or any other agreement or understanding between the Executive
and the Company, or pursuant to the Company’s policies and past
practices, as of the date immediately prior to the Change in Control; or

Article 3.2(e)(ii).
The Parties add Article 3.2(e)(ii)(E) as follows:

“Change
in Control,” as defined above, shall not in any instance be construed to include the Company’s IPO or any event occurring in connection with or as a result of the Company’s IPO.

All other terms contained in the Executive Employment Agreement shall continue in full force
and effect.

WITNESS, the execution of this Amendment as of the date first above written.

	 	 	 	 	 	 	 	 
	“Executive”

	 	 	“Company”	 
	 
	 	 	 	 	 	 
	 	 	 	 	Energy Recovery Inc.
	 
	 	 	 	 	 	 
	By:

	   /s/ Tom Willardson	 	By:	 	 
	 

	 
	 	 	 
	 

	 	Thomas Willardson
	 	Title:
	President and CEO

 

 

MEMORANDUM

	 	 	 
	TO:

	 	Tom Willardson
	FROM:

	 	GG Pique
	DATE:

	 	October 10, 2007
	SUBJECT:

	 	Proposed ERI Financial Incentive Compensation Plan
	 

Your financial compensation plan includes a base salary as well as a financial goal bonus. This
bonus is a percentage of the base salary, and can increase or decrease applying a matrix that
tracks financial goals as a function of actual EBITDA results.

	a)	 	Amount of Financial Goals Bonus

The Financial goals bonus will be 30% of annual salary payable for achieving profitability
targets. A partial bonus will be paid if we reach 80% of financial goal. Additional bonus is
payable if targets are exceeded. No bonus will be paid for performance results less than 80%
of target. The financial bonus award calculation will be based upon the following matrix:

Financial Bonus earned as a percentage of base salary

Based on achieving EBITDA target to be set by mutual agreement

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	% of EBITDA achieved
	 	 	80	%	 	 	90	%	 	 	95	%	 	 	100	%	 	 	140	%	 	 	160	%	 	 	180	%	 	 	200	%	 	 	300	%
	Financial Goals
Bonus payable
	 	 	10	%	 	 	20	%	 	 	25	%	 	 	30	%	 	 	40	%	 	 	50	%	 	 	60	%	 	 	80	%	 	 	140	%

	b)	 	Bonus Payments

20% of target bonus at end of 1st Quarter, if at or above plan 

20% of target bonus at end of 2nd Quarter, if at or above plan 

20% of target bonus at end of 3rd Quarter, if at or above plan 

40% of target bonus, plus / minus any adjustments at end of fiscal year.

Note 1: Financial Bonuses will be calculated using audited revenue and financial results. In
the event of doubtful receivables a proportional portion of the bonus may be held in escrow

Note 2: Bonuses will be calculated on performance during a specific year, and should be
accrued in the fiscal year they are earned, not paid.

	 	 	 	 	 	 	 	 	 
	/s/ G.G. Pique

	 	10/[Illegible]/07
	 	 	 	/s/ Tom Willardson
	 	10/12/07
	 	 	 	 	 
	G.G. Pique

	 	Date
	 	 	 	Thomas D. Willardson
	 	Dateexv10w9

 

Exhibit
10.9

EXECUTIVE EMPLOYEE AGREEMENT

     This EXECUTIVE EMPLOYEE AGREEMENT (the “Agreement”) is made and entered into as of July 1,
2006, by and between Energy Recovery Inc., a Delaware corporation, with its principal offices at
1908 Doolittle Drive, San Leandro, CA 94577 (the “Company”), and Richard Stover, an individual (the
“Executive”).

RECITALS

     A. WHEREAS, the Company is in the business of designing and manufacturing
energy recovery devices.

     B. WHEREAS, Executive has been serving as Chief Technology Officer (CTO) of
the Company, and the Company desires to continue its relationship with Executive as its CTO,
and Executive desires to provide his services to the Company on all of the terms and
conditions herein set forth.

     C. WHEREAS, The Company desires to provide Executive with a compensation
plan in recognition of Executive’s valuable skills and services.

     NOW, THEREFORE, in consideration of the mutual covenants and conditions herein contained, the
parties hereto agree as follows:

ARTICLE I. EMPLOYMENT

     1.1 Employment. The Company hereby employs Executive as its CTO, and Executive
hereby accepts such engagements with the Company, in accordance with and subject to all of the
terms, conditions, and covenants set forth in this Agreement.

     1.2 Term. The terms of this Agreement shall commence on the date that this
Agreement is fully executed (the “Effective Date”) and, unless terminated earlier in accordance
with the terms of Article IV hereof, shall continue for a period of two years from the Effective
Date (the “Term of Agreement). The Agreement, thereafter, shall automatically terminate and
Executive’s employment with the Company will become “at will” “At will” employment means that the
either the Company or Executive may terminate Executive’s employment with or without cause and with
or without notice.

     1.3 Scope of Executive’s Duties. Executive shall be the CTO of the Company,
reporting to the President and CEO of the Company (CEO). Executive shall have such duties,
responsibilities and authority as shall be consistent with that position and will operate within
such established guidelines, plans, or policies as may be established or approved by the CEO and
the company Board of Directors from time to time.

 

 

ARTICLE II. COMPENSATION AND BENEFITS

     2.1 Compensation.

          (a)
Base Salary. Executive shall be paid a base salary of $17,500 per month ($210,000
per annum), less any deductions required by law, which shall be paid in accordance with the
Company’s normal and customary payroll practices, but no less frequently than monthly. The
Executive’s base salary shall be reviewed annually and may be reasonably adjusted in the sole
discretion of the Company.

          (b) Annual Bonus. The Executive shall be eligible to participate in the Company’s
annual bonus program and shall be eligible to earn an annual bonus in an amount not to exceed (1)
times his base salary. The exact amount of the Executive’s annual bonus, if any, shall be
determined by the Company pursuant to the attainment of performance goals as set forth in the
matrix.

          (c) Equity Compensation. Contingent on the Executive’s continued employment on the
date of grant, Company intends to grant the Executive stock options to purchase an additional
thirty thousand (30,000) shares of the Company’s Common Stock, to be arranged under, and subject to
the terms of, Company’s 2006 Equity Compensation Plan or, at the discretion of the Company, any
such subsequent equity compensation plan that may be adopted, as well as the terms and conditions
of the stock option agreement (which will be provided to the Executive as soon as practicable after
the grant date). Any additional terms governing the options (i.e., vesting, conditions to exercise,
etc.) shall be set forth in the applicable option agreement. The foregoing is not intended to
preclude the Company, in its discretion, from making any additional awards of stock options or
other types of equity compensation to the Executive.

     2.2 Reimbursable Expenses. Upon submission of expense reports to the extent necessary
to substantiate the Company’s federal income tax deductions for such expenses under the Internal
Revenue Code of 1986 (as amended) and the Regulations thereunder (the “Code”) and subject to such
expense report approval procedures as may be established by the Board, the Company shall reimburse
Executive for all reasonable business expenses incurred and submitted in the performance of his
duties hereunder on behalf of the Company.

     2.3 Fringe Benefits.

          (a) Executive and Executive’s dependents shall be permitted to participate in all group
health, medical, hospital, dental, prescription, vision, long-term disability and other insurance
plans which the Company may establish for its executive employees and such other employee benefits
or plans as the Company may establish for its employees generally, and which may be modified from
time to time. When such program is implemented, the Executive shall receive, if insurable under
usual underwriting standards, term life insurance coverage on the Executive’s life, payable to
whomever the Executive directs, in an amount equal to one (1) time the Executive’s base salary,
subject to any cap imposed by the insurer, provided that Executive completes the required statement
and application and that Executive’s physical condition does not prevent Executive from qualifying
for such insurance under reasonable terms and conditions.

 

 

Until such time as a term life insurance program is implemented, the Company shall reimburse
Executive the premium for individual term life insurance equal to one (1) times the Executive’s
base salary. Executive shall be eligible to participate in any tax-qualified retirement plan
sponsored by the Company, equity compensation plan, or deferred
compensation plan, if any, pursuant
to the terms of such plans, as the same may be modified from time to time, to the extent such plans
are offered to other officers of employees of the Company.

     2.4 Vacations. Executive shall earn annual vacations in accordance v\with the
Company’s standard policy for similarly situated employees. Once Executive has accrued the maximum
of two (2) times the accrual rate cap applicable to the Executive as set forth in the standard
policy, Executive shall be ineligible to earn further vacation until Executive has used vacation,
at which time Executive may begin to accrue vacation again.

     2.5 Taxes. The Executive acknowledges that he is responsible for all taxes relating to
his Compensation and except for those taxes for which the Company is obligated to pay under
applicable law or regulation, Executive agrees that the Company may withhold from Executive’s cash
compensations any amounts that the Company is required to withhold by law or regulation.

ARTICLE III. TERMINATION AND COMPENSATION UPON TERMINATION

     3.1 Termination will be deemed to occur as follows:

          (a) Termination for Good Cause by the Company. The Company may
terminate this Agreement immediately for “Good Cause” upon written notice to Executive, the
date of which shall specify the effective date of the termination. For purposes of this
Agreement, “Good Cause” shall mean:

               (i) Executive’s performance of any act for which, if Executive were prosecuted, would
constitute a felony or misdemeanor;

               (ii) Executive’s failure to carry out Executive’s material duties;

               (iii) Executive’s dishonesty towards or fraud upon the Company which is injurious to the
Company;

               (iv) Executive’s violation of confidentiality obligations to the Company or
misappropriation of Company assets; or

               (v) Executive’s death or inability to carry out Executive’s duties with reasonable
accommodation, if any, unless prohibited by law.

          (b) Voluntary Termination by the Executive. The Executive may terminate
this Agreement at any time by providing the Company with thirty (30) days written notice. The
effective date of the termination shall be the date specified in the notice. In the event of
such a termination, the parties agree to act in good faith towards one another during any notice
period.

 

 

          (c) Notice of Termination. Any termination by the Company for Good Cause or by
Executive shall be communicated by Notice of Termination to the other party hereto. For purposes of
this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the
specific termination provision in this Agreement relied upon, and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis of termination of Executive’s
employment under the provision so indicated.

     3.2 Compensation Upon Termination. Upon termination of this Agreement by either
party, Executive shall be entitled to receive the following payments:

          (a) Termination By the Company for Good Cause. Upon termination of this Agreement for
“Good Cause” as defined under the provisions of Section 3.1(a) above, Executive shall be paid, in a
lump sum, any and all base salary due and owing through the date of termination, plus an amount
equal to earned but unused vacation through the date of termination and reimbursement of all
reasonable expenses, plus any earned but unpaid and undeferred bonus attributable to the year that
ends immediately before the year in which the Executive’s termination occurs. No pay continuance or
other benefits will be provided.

          (b) Termination By the Company Without Good Cause. Upon termination of this Agreement
by the Company without “Good Cause” as defined under the provisions of Section 3.1(a) above,
Executive shall be entitled to the following severance benefits:

               (i) payment, in a lump sum, of any and all base salary due and owing to him through the
date of termination, plus an amount equal to his earned but unused vacation through the date of
termination, reimbursement for all reasonable expenses and any earned but unpaid and undeferred
bonus attributable to the year that ends immediately before the year in which the Executive’s
termination occurs; and

               (ii) subject to the provisions of Section 5.1 below, payment, in a lump sum of an amount
equal to fifty percent (50%) of Executive’s current annual base salary, less deductions required by
law.

               (iii) immediate vesting of all unvested equity compensation held by the Executive as of
the date of termination.

               (iv) if the Executive (including, if applicable, the Executive’s spouse and dependents)
timely elects to continue Executive’s medical, dental, and vision benefits under COBRA than,
contingent upon the Executive paying his portion of the monthly COBRA premium, the Company shall
pay its share of the monthly premium (if any) under COBRA to the same extent it pays for coverage for an active employee until the earliest of (a) the end of the
twelve (12) month period that commences with the Executive’s termination of employment or (b) the
Executive becomes eligible for group medical, dental, and vision coverage through another employer.
As a condition of the Company paying a pro rata portion of the monthly premium for a portion of the
Executive’s continuation coverage period the Executive will be required to notify the Company upon
becoming eligible for group medical, dental and vision benefits from another employer during such
twelve (12) month period. At the end of any

 

 

Company-paid period of COBRA coverage, the Executive may, at his own expense, continue COBRA
coverage for the remainder of the period for which the Executive is eligible.

     The
payments provided for in Section 3.2(a) or 3.2(b)(i) and
(ii) or 3.2(d), as applicable,
shall be paid on the date immediately following the Executive’s termination. All such payments will
be subject to applicable payroll or other taxes required to be withheld by the Company. However, in
the event it is determined that the Executive is a “Specified Employee’’ as defined in Section
409A(a)(2)(B)(i) of the Code any payment to be made under this Agreement that is “nonqualified
deferred compensation” subject to Section 409A of the Code shall be delayed for six months
following the Executive’s termination of employment.

          (c) Payments to Executive hereunder shall be considered severance pay in consideration of past
service and continued service after the date of this Agreement and Executive shall not be required
to mitigate the amount of any payment provided for in this Section 3.2 by seeking alternative
employment or otherwise, and, with the exception of COBRA payments, the amount of any payment
provided for in this Section 3.2 shall not be reduced by any compensation earned by Executive as
the result of employment by another employer after the date of termination, or otherwise.

          (d) Voluntary Termination by Executive. If Executive voluntarily resigns or terminates
this Agreement, Executive shall be paid, in a lump sum, any and all base salary due and owing to
him through the date of termination and an amount equal to his earned but unused vacation through
the date of termination, plus any earned but unpaid and undeferred bonus attributable to the year
that ends immediately before the year in which the Executive’s termination occurs. Executive, his
family, or his estate shall be entitled to other benefits to the extent permitted by law, contract,
or the terms of any benefit plan or program.

          (e) Termination Pursuant to a Change of Control. If upon or at any time during
the Term of Agreement there is a “Termination Event”, as defined below, that occurs within one (1)
year following a “Change in Control”, as defined below, Executive shall be treated as if Executive
had been terminated by the Company Without Good Cause pursuant to Section 3.2(b) and in addition to
the severance benefits described therein shall be entitled to receive an additional Change in
Control amount equal to fifty percent (50%) of the Executive’s current annual base salary. The
Change in Control amount shall be paid at the same time and in the same manner as the Executive’s
severance payments pursuant to Section 3.2(b)(ii).

               (i) A Termination Event shall mean the occurrence of any one or more of the
following, but shall not include the Executive’s termination due to death or disability:

                    A. the termination or material breach of this Agreement by the
Company;

                    B. the failure by the Company to obtain the assumption of this
Agreement by any successor to the Company or any assignee of all or substantially all of the
Company’s assets;

 

 

                    C. any material diminishment in the title, position, duties,
responsibility or status that the Executive had with the Company immediately prior to the
Change in Control;

                    D. any reduction, limitation or failure to pay or provide any of
the compensation provided to the Executive under Section 2.1 of this Agreement or any other
agreement or understanding between the Executive and the Company, or pursuant to the
Company’s policies and past practices, as of the date immediately prior to the Change in
Control; or

                    E. any requirement that the Executive relocate more than 30
miles from his place of employment as of the date immediately prior to the Change in Control.

               (ii) Change in Control shall mean any of the following, occurring during the term of the
Executive’s employment or employment relationship with the Company:

                    A. an acquisition by an individual, an entity or a group
(excluding the Company, an employee benefit plan of the Company, or a corporation controlled
by the Company’s shareholders) of fifty percent (50%) or more of the Company’s then-
outstanding common stock or voting securities;

                    B. a change in composition of the Board occurring within a
roiling twelve-month period, as a result of which fewer than a majority of the directors are
Incumbent Directors (“Incumbent Directors” shall mean directors who either (x) are members of
the Board as of the Executive Date or (y) are elected, or nominated for election, to the Board
with the affirmative votes of at least a majority of the Incumbent Directors at the time of
such election or nomination, but shall not include an individual not otherwise an Incumbent
Director whose election or nomination is in connection with an actual or threatened proxy contest
(relating to the election of directors to the Board));

                    C. consummation of a complete liquidation or dissolution of
the Company, or a merger, consolidation or sale of all or substantially all of the Company’s
then- existing assets (collectively, a “Business Combination”), other than a Business Combination
(x) in which the stockholders of the Company immediately prior to the Business Combination
receive fifty percent (50%) or more of the voting stock resulting from the Business
Combination, (y) at least a majority of the board of directors of the corporation resulting from the
Business Combination were Incumbent Directors and (z) after which no individual, entity or group

(excluding any corporation resulting from the Business Combination or any employee benefit
plan of such corporation or if the Company owns fifty percent (50%) or more of the stock of
the corporation resulting from the Business Combination who did not own such stock immediately

before the Business Combination; or

                    D. change in the ownership of a substantial portion of a
Company’s assets. A change in the ownership of a substantial portion of the Company’s assets
occurs on the date that any individual or group of individuals acquires (or has acquired
during the 12-month period ending on the date of the most recent acquisition by such individual or
group of individuals) assets from the Company that have a total gross fair market value equal
to

 

 

or more than forty percent (40%) of the total gross fair market value of all of the assets of the
Company immediately prior to such acquisition or acquisitions. For this purpose, gross fair market
value means the value of the assets of the Company, or the value of the assets being disposed of,
determined without regard to any liabilities associated with such assets.

               (iii) To the extent that any or all of the payments and benefits provided for in this
Agreement, either alone or in conjunction with other compensatory payments, would give rise to a
“parachute payment” under Sections 280G and 4999 of the Code (collectively, the “Parachute Rules”):

                    A. If the Company so requests at a time when the Company’s
securities are not “readily tradable” (as defined in the Parachute Rules), the Company shall
be permitted to solicit a shareholder vote or written consent to approve the parachute payment in order to avoid characterization as a parachute payment under the Parachute Rules. In that
event, the Executive agrees, to the extent required by the Parachute Rules then in effect and without further consent or documentation, to waive and cancel all rights or parachute payments in
connection with the Change of Control to the extent that shareholder approval is not obtained
in accordance with the Parachute Rules.

                    B. Unless shareholder approval has avoided application of the
Parachute Rules, the Company shall reduce and cancel, and the Executive hereby waives, the
parachute payment to the minimum extent necessary to equal one dollar less than the amount
which would result in any compensatory payments being subject to the excise tax imposed by
Section 4999 of the Code and such that the Executive receives only the amount of such payment
which would not constitute an “excess parachute payment” under the Parachute Rules.

                    C. Notwithstanding clauses A and B above, the Executive may
elect not to subject a payment or benefit to stockholder approval and to instead receive
either (i) the full amount of any parachute payment or (ii) 2.99 times the Executive’s “base amount” (as
such term is defined under the Parachute Rules), whichever of the foregoing amounts (after
taking into account any applicable federal, state and local income taxes and the excise tax
imposed by Section 4999 of the Code) results in the receipt by the Executive, on an after-tax
basis, of the greater payment provided that (a) the acquiring person in the Change of Control,
in its sole discretion, does not object thereto and docs not impose on the Company or its
shareholder any added cost, price reduction, or other detriment therefrom (economic or
otherwise as determined in the Company’s sole discretion), and (b) the Executive deposits at least three
(3) business days prior to consummation of the Change of Control with a party designated by the
Company a cash sum sufficient in the discretion of the Company to fund all withholding
payments that may arise in connection with the Executive’s parachute payments from any
source.

                    D. In no event shall the Company be required to gross up any
payment or benefit to the Executive to avoid the effects of the Parachute Rules or to pay any
regular or excise taxes arising therefrom. Unless the Company and the Executive otherwise agree in
writing, any parachute payment calculation shall be made in writing by independent pubic accounts
agreed to by the Company and the Executive, whose calculations shall be conclusive and binding upon
the Company and the Executive for all purposes. The Company

 

 

and the Executive shall furnish to the accountants such information and documents as the
accountants may reasonably request in order to make a parachute payment determination.

ARTICLE IV. NONCOMPETITION AND NONSOLICITATION

     4.1 Noncompetition During Employment. Executive agrees that, during the term hereof,
Executive will devote his full productive time and best efforts to the performance of his duties
hereunder pursuant to the supervision and direction of the Company’s Board of Directors or its
designee. Executive further agrees, as a condition to the performance by the Company of each and
all of its obligations hereunder, that so long as Executive is employed by the Company, Executive
will not directly or indirectly render services of any nature to otherwise become employed by or
otherwise participate or engage in any other business without the Company’s prior written consent.
Nothing herein contained shall be deemed to preclude Executive from having outside personal
investments and involvement with appropriate community and charitable activities, or from devoting
a reasonable amount of time to such matters, provided that this shall in no manner interfere with
or derogate from Executive’s work for the Company.

     4.2 Non-solicitation.

          (a) Executive agrees that during Executive’s employment and for a period of
two (2) years after the termination of this Agreement for any reason, in the United States or
any-other equivalent geographical subdivision in foreign jurisdictions in which the Company does
business, Executive shall not, in competition with the Company or any subsidiary or
affiliates:

               (i) directly call upon or solicit any of the customers of the Company or any subsidiary
that were or became customers during the term of Executive’s employment (as used herein “customer”
shall mean any person or company as listed as such on the books of the Company or any affiliates);
or

               (ii) induce or attempt to induce any employee, agent, or consultant of the Company or
any subsidiary or affiliates to terminate his or her association with the Company or any subsidiary
or affiliates.

          (b) The Company and Executive agree that the provisions of this Section 4.2
contain restrictions that are not greater than necessary to protect the interests of the
Company. In the event of the breach or threatened breach by Executive of this Section 4.2, the Company, in
addition to all other remedies available to it at law or in equity, will be entitled to seek
injunctive relief and/or specific performance to enforce this Section 4.2.

ARTICLE V. MISCELLANEOUS PROVISIONS

     5.1 General Release. Any other provision of this Agreement notwithstanding, Section
3.2(b)(ii)-(iv) above shall not apply unless Executive has executed a general release of all known
and unknown claims that Executive may then have against the Company or persons affiliated

 

 

with the Company and has expressly agreed in writing not to prosecute any legal action or other
proceeding based on any of such claims.

     5.2 Confidential Proprietary Information and Inventions Assignment Agreement.
Concurrent with execution of this Agreement, Executive acknowledges receipt of an executed copy of
the Company’s standard Confidential Information and Inventions Assignment Agreement, signed by
Executive on April 19, 2005, which shall be incorporated herein.

     5.3 Fees and Expenses. The Company shall pay all legal fees and related expenses
for counsel incurred by Executive as a result of preparation of and negotiation of the terms of
Executive’s employment.

     5.4 Irrevocable Arbitration of Disputes.

          (a) You and the Company agree that any dispute, controversy or claim arising hereunder or in
any way related to your employment or termination of employment with the Company or this Agreement,
its interpretation, enforceability, or applicability, that cannot be resolved by mutual agreement
of the parties (the “arbitrable claims”) shall be submitted to binding arbitration. The parties
agree that arbitration is the parties” only recourse for such claims and hereby waive the right to
pursue such claims in any other forum, unless otherwise provided by law. Any court action involving
a dispute which is not subject to arbitration shall be stayed pending arbitration of arbitrable
disputes.

          (b) You and the Company agree that the arbitrator shall have the authority to issue
provisional relief. You and the Company further agree that each has the right, pursuant to
California Code of Civil Procedure section 1281.8, to apply to a court for a provisional remedy in
connection with an arbitrable dispute so as to prevent the arbitration from being rendered
ineffective.

          (c) Any demand for arbitration shall be in writing and must be communicated to the other party
prior to the expiration of the applicable statute of limitations.

          (d) The arbitration shall be administered by JAMS pursuant to its Employment Arbitration Rules
and Procedures. The arbitration shall be conducted in San Diego by a former or retired judge or
attorney with at least 10 years experience in employment-related disputes, or a non-attorney with
like experience in the area of dispute, who shall have the power to hear motions, control
discovery, conduct hearings and otherwise do all that is necessary to resolve the matter. The
parties must mutually agree on the arbitrator. If the parties cannot agree on the arbitrator after
their best efforts, an arbitrator will be selected from JAMS pursuant to its Employment Arbitration
Rules and Procedures. The Company shall pay the costs of the arbitrator’s fees.

          (e) The arbitration will be decided upon a written decision of the arbitrator stating the
essential findings and conclusions upon which the award is based. The arbitrator shall have the
authority to award damages, if any, to the extent that they are available under applicable

 

 

law(s). The arbitration award shall be final and binding, and may be entered as a judgment in
any court having competent jurisdiction. Either party may seek review pursuant to California
Code of Civil Procedure section 1286, et seq.

          (f) It is expressly understood that the parties have chosen arbitration to avoid the burdens,
costs and publicity of a court proceeding, and the arbitrator is expected to handle all aspects of
the matter, including discovery and any hearings, in such a way as to minimize the expense, time,
burden and publicity of the process, while assuring a fair and just result. In particular, the
parties expect that the arbitrator will limit discovery by controlling the amount of discovery that
may be taken (e.g., the number of depositions or interrogatories) and by restricting the scope of
discovery only to those matters clearly relevant to the dispute. However, at a minimum, each party
will be entitled to at least one (1) deposition and shall have access to essential documents and
witnesses as determined by the arbitrator.

          (g) The provisions of this Section shall survive the expiration or termination of the
Agreement, and shall be binding upon the parties.

THE PARTIES HAVE READ SECTION 5.4 AND IRREVOCABLY AGREE TO ARBITRATE ANY DISPUTE IDENTIFIED ABOVE.

	 	 	 	 	 	 	 	 	 
	

	 	(Executive)
	 	 	 	GGP
	 	(Company)
	 

	 	 	 	 
	 	 

	 	 

     5.5 Settlement of Claims. The Company’s obligation to make the payments provided for
in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any
circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or
other right which the Company may have against the Executive or others.

     5.6 Legal Representatives. Upon the death or disability of Executive, any payments due
under this Agreement shall be paid to Executive’s legal representatives.

     5.7 Notices. Any notice or other communication given hereunder or in connection
herewith shall be sufficiently given if in writing and (a) sent by certified mail or overnight
courier, postage or delivery costs prepaid and return receipt requested, (b) sent by facsimile
transmission, or (c) delivered personally, to the parties hereto at the following addresses or to
such addresses as the parties may from time to time provide in accordance herewith:

	 	 	 	 	 	 	 	 	 
	 

	 	If to the Company:
	 	 	 	Energy Recovery Inc.	 	 
	 

	 	 	 	 	 	1908 Doolittle Drive San	 	 
	 

	 	 	 	 	 	Leandro, CA 94577 Fax:	 	 
	 

	 	 	 	 	 	(510)483-7371 Attention:	 	 
	 

	 	 	 	 	 	MariaElena Ross	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	If to Executive:
	 	 	 	Richard Stover	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 

	 	 	 	 	 	Fax:	 	 
	 

	 	 	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 

 

 

Such notice shall be deemed given on the date on which personally served or, if by mail, on the
fifth (5th) day after being posted or on the date of actual receipt, whichever is earlier, or if by
facsimile transaction with confirmation of receipt, one (1) business day after the time sent or the
time of actual receipt, whichever is earlier.

     5.8 Compliance with Section 409A of the Code. It is the intent of this Agreement
that no payment to the Executive shall result in nonqualified deferred compensation within the
meaning of Section 409 A of the Code. However, in the event that all, or a portion, of the payments
set forth in this Agreement meet the definition of nonqualified deferred compensation, the Company
intends that such payments be made in a manner that complies with Section 409A of the Code. The
Company reserves the right, to the extent the Company deems necessary or advisable in its sole
discretion, to unilaterally amend or modify this Agreement as may be necessary to ensure all
benefits provided under this Agreement are made in a manner that qualifies for exemption from or
complies with Section 409A of the Code, provided, however. that the Company makes no
representations that the benefits provided under this Agreement will be exempt from Section 409A of
the Code and makes no undertakings to preclude Section 409A of the Code from applying to the
benefits provided under this Agreement.

     5.9 Severability. If any term, provision, covenant, or condition of this Agreement is
held to be invalid, void, or unenforceable, the remainder of the provisions of this Agreement shall
remain in full force and effect and shall in no way be affected, impaired or invalidated thereby.

     5.10 Survival. Sections 4.2, 5.2. and 5.4 shall survive the termination of
this Agreement.

     5.11 Entire Agreement; Employment Amendments; Waiver. This Agreement, together with
all stock option agreements and/or stock repurchase agreements and any other equity grants, and the
Confidential Proprietary Information and Inventions Assignment_Agreement is the entire agreement
between the parties hereto concerning the subject matter hereof and supersedes and replaces all
prior or contemporaneous agreements or understandings between the parties. This Agreement may not
be amended or modified in any manner, except by an instrument in writing signed by the Executive
and the Company or as otherwise provided in Section 5.8. Failure of either party to enforce any of
the provisions of this Agreement or any rights with respect thereto or failure to exercise any
election provided for herein shall in no way be considered to be a waiver of such provisions,
rights, or elections or in any way effect the validity of this Agreement. The failure of either
party to exercise any of said provisions, rights, or elections shall not preclude or prejudice such
party from later enforcing or exercising the same or other provisions, rights, or elections which
it may have under this Agreement.

     5.12 Governing Law. This Agreement shall be governed by and construed in all
respects in accordance with the laws of the State of California. With the exception of “arbitrable
claims” as defined in Section 5.4, the federal courts and/or state courts of the State of
California, County of Alameda shall have exclusive jurisdiction to adjudicate any dispute arising
out of this Agreement and/or employment relationship or termination thereof and Executive consents
to such jurisdiction and venue.

 

 

     5.13 Attorneys’ Fees. In the event of any action for the breach of this Agreement,
the prevailing party shall be entitled to reasonable attorneys’ fees, costs, and expenses incurred
in connection with such action.

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

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	“Executive”	 	 	 	“Company”	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	By:	 	/s/ Richard S. Stover	 	 	 	By:	 	/s/ G.G. Pique	 	 
	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Title:
	 	VP/CTO
	 	 	 	 	 	Title:
	 	President

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