Edgar Filing: AQUACELL TECHNOLOGIES INC

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SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )

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[X] Definitive Proxy Statement Rule 14a-6(e)(2))

[_] Definitive Additional Materials

[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12

Aquacell Technologies
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(Name of Registrant as Specified In Its Charter)

N/A
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Notes:

AQUACELL TECHNOLOGIES, INC.

10410 TRADEMARK STREET
RANCHO CUCAMONGA, CA 91730

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NOTICE OF
ANNUAL MEETING OF STOCKHOLDERS

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December 5, 2001

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NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders ("Annual
Meeting") of AquaCell Technologies, Inc. ("Company") will be held at the Hilton
Hotel, 700 N. Haven Avenue, Ontario, CA 91764 on December 5, 2001, at 10:00
a.m., for the following purposes, all as more fully described in the attached
Proxy Statement:

1. To elect one director to serve for the ensuing three-year period and
until his successor is elected and qualified; and

2. To transact such other business as may properly come before the meeting
and any and all adjournments thereof.

The Board of Directors has fixed the close of business on October 7, 2001,
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the meeting or any adjournment thereof.

You are earnestly requested to date, sign and return the accompanying form
of proxy in the envelope enclosed for that purpose (to which no postage need be
affixed if mailed in the United States) whether or not you expect to attend the
meeting in person. The proxy is revocable by you at any time prior to its
exercise and will not affect your right to vote in person in the event you
attend the meeting or any adjournment thereof. The prompt return of the proxy
will be of assistance in preparing for the meeting and your cooperation in this
respect will be appreciated.

By Order of the Board of Directors

Karen B. Laustsen, Secretary

Rancho Cucamonga, California
October 29, 2001

AQUACELL TECHNOLOGIES, INC.

10410 TRADEMARK STREET
RANCHO CUCAMONGA, CA 91730

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PROXY STATEMENT

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ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 5, 2001

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This Proxy Statement and the accompanying form of proxy is furnished to
stockholders of AquaCell Technologies, Inc. ("Company") in connection with the
solicitation of proxies, in the accompanying form, by the Board of Directors of
the Company for use in voting at the Annual Meeting of Stockholders to be held
at the Hilton Hotel, 700 N. Haven Avenue, Ontario, CA 91764 on December 5,
2001, at 10:00 a.m., and at any and all adjournments thereof. Any proxy given
pursuant to this solicitation may be revoked by the person giving it by giving
notice to the Secretary of the Company in person, or by written notification
actually received by the Secretary, at any time prior to its being exercised.
Unless otherwise specified in the proxy, shares represented by proxies will be
voted FOR the election of the nominee listed herein.

The Company's executive offices are located at 10410 Trademark Street,
Rancho Cucamonga, CA 91730. On or about October 29, 2001, this Proxy Statement
and the accompanying form of proxy, together with a copy of the Annual Report
of the Company for the fiscal year ended June 30, 2001, are to be mailed to
each stockholder of record at the close of business on October 7, 2001.

VOTING SECURITIES

The Board of Directors has fixed the close of business on October 7, 2001,
as the record date for the determination of stockholders entitled to notice of,
and to vote at, the Annual Meeting. Only stockholders of record at the close of
business on that date will be entitled to vote at the Annual Meeting or any and
all adjournments thereof. As of October 7, 2001, the Company had issued and
outstanding 7,743,250 shares of Common Stock, the Company's only class of
voting securities outstanding. Each stockholder of the Company will be entitled
to one vote for each share of Common Stock registered in his name on the record
date. The presence, in person or by proxy, of a majority of all of the
outstanding shares of Common Stock constitutes a quorum at the Annual Meeting.
Proxies relating to "street name" shares that are returned to the Company but
marked by brokers as "not voted" will be treated as shares present for purposes
of determining the presence of a quorum on all matters but will not be treated
as shares entitled to vote on the matter as to which authority to vote is
withheld by the broker ("broker non-votes"). The election of directors requires
a plurality vote of those shares voted at the Annual Meeting with respect to
the election of directors. "Plurality" means that the individuals who receive
the largest number of votes cast "FOR" are elected as directors. Consequently,
any shares not voted "FOR" a particular nominee (whether as a result of a
direction to withhold authority or a broker non-vote) will not be counted in
such nominee's favor. All other matters to be voted on will be decided by the
affirmative vote of a majority of the shares present or represented at the
Annual Meeting and entitled to vote. On any such matter, an abstention will
have the same effect as a negative vote, but because shares held by brokers
will not be considered entitled to vote on matters as to which the brokers
withhold authority, a broker non-vote will have no effect on the vote.

The following table sets forth certain information as of October 7, 2001 (on
which date 7,743,250 shares of the Company's Common Stock were outstanding),
with respect to (i) those persons or groups known to the Company to
beneficially own more than 5% of the Company's Common Stock, (ii) each director
and nominee, (iii) each executive officer whose compensation exceeded $100,000
in fiscal 2000, and (iv) all directors and

executive officers as a group. The information is determined in accordance with
Rule 13d-3 promulgated under the Securities Exchange Act of 1934 based upon
information furnished by the persons listed or contained in filings made by
them with the Securities and Exchange Commission. Except as indicated below,
the stockholders listed possess sole voting and investment power with respect
to their shares.

Shares of Common Percentage of
Stock Beneficially Common Stock;
Name and Address Owned(2) Warrants and Options
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James C. Witham(1)............................................. 2,100,491 27.1%
10410 Trademark Street
Rancho Cucamonga, CA 91730

Karen B. Laustsen.............................................. 600,000 7.8%
10410 Trademark Street
Rancho Cucamonga, CA 91730

Gary S. Wolff.................................................. 508,500 6.6%
10410 Trademark Street
Rancho Cucamonga, CA 91730

Glenn A. Bergenfield........................................... 177,500(3) 2.3%
10410 Trademark Street
Rancho Cucamonga, CA 91730

Dr. William DiTuro............................................. 132,500(3) 1.7%
10410 Trademark Street
Rancho Cucamonga, CA 91730

Union Labor Life Insurance Co.................................. 650,000(4) 7.8%
111 Massachusetts Ave., NW
Washington, DC 20001

All officers and directors as a group (five persons)........... 3,518,991 45.1%

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(1) Includes an aggregate of 500,000 shares owned of record by Witham Group,
LLC and JW Acquisitions, LLC which are entities in which Mr. Witham
controls 100% of the outstanding equity.
(2) Includes exercise of private loan warrants in December, 2000.
(3) Includes 30,000 options exercisable within 60 days.
(4) Includes 550,000 warrants exercisable within 60 days.

PROPOSAL I: ELECTION OF DIRECTORS

Our Restated Certificate of Incorporation provides for three classes of
directors. Directors Witham and Bergenfield have been appointed to Class I and
will serve until the meeting of stockholders in 2003; directors Laustsen and
DiTuro have been appointed to Class II and will serve until the meeting of
stockholders in 2002; and director Wolff has been appointed to Class III and
will serve until the annual meeting of stockholders in 2001. After these
directors' terms expire, newly elected directors shall serve for three year
terms or until their successors are duly elected and qualified.

One person will be elected at the Annual Meeting to serve as a director for
a term of three years. The Board of Directors has nominated Gary S. Wolff as
the candidate for election. Unless authority is withheld, the proxies solicited
by the Board of Directors will be voted FOR the election of this nominee. In
case the nominee becomes unavailable for election to the Board of Directors, an
event which is not anticipated, the persons named as proxies, or their
substitutes, shall have full discretion and authority to vote or refrain from
voting for any other candidate in accordance with their judgment.

Name Age Position
---- --- --------

Gary S. Wolff................ 63 Chief Financial Officer, Treasurer, Director

Information About the Nominee

Mr. Gary S. Wolff is a founder of AquaCell and has served as its Treasurer,
Chief Financial Officer and as a Director since March, 1997. Prior to founding
AquaCell, Mr. Wolff served as Chief Financial Officer and a director of U.S.
Alcohol, a publicly held company from April, 1987 through July, 1996. Mr. Wolff
also served as Chief Financial Officer and as a director of U.S. Drug Testing,
Inc. and as Treasurer and a director of Good Ideas Enterprises, Inc. He is
licensed as a Certified Public Accountant in the States of New York and New
Jersey and during the period from July, 1996 through March, 1997 he was
self-employed as a sole practitioner of accounting.

Information About the Other Directors and Executive Officers

The Company's other directors and executive officers are as follows:

Name Age Position
---- --- --------

James C. Witham.............. 60 Chairman of the Board and Chief Executive Officer

Karen B. Laustsen............ 41 President, Chief Operating Officer, Secretary and
Director

Glenn A. Bergenfield......... 48 Director

Dr. William DiTuro........... 45 Director

Mr. James C. Witham founded AquaCell in March, 1997 and serves as its
Chairman and Chief Executive Officer. Prior to founding AquaCell, Mr. Witham
founded JW Acquisition Co. in May, 1996 and served as its Chief Executive
Officer until March, 1997. From April, 1987 through May, 1996, Mr. Witham
founded and served as Chairman, Chief Executive Officer and President of U.S.
Alcohol Testing of America, Inc., a publicly traded company. Mr. Witham also
served as Chairman and Chief Executive Officer of U.S. Alcohol's two publicly
held subsidiaries, U.S. Drug Testing, Inc. and Good Ideas Enterprises, Inc. Mr.
Witham is the husband of Karen B. Laustsen, President of AquaCell.

Ms. Karen B. Laustsen is a founder of AquaCell and has served as its
President, Chief Operating Officer, Secretary, and as a Director since March,
1997. Prior to founding AquaCell, Ms. Laustsen served as President of JW
Acquisition Co. from May, 1996 through March, 1997. From April, 1987 through
May, 1996, Ms. Laustsen served as Executive Vice President and a director of
U.S. Alcohol. Ms. Laustsen also served on the board of directors of U.S. Drug
Testing, Inc. and Good Ideas Enterprises, Inc. Ms. Laustsen is the wife of
James C. Witham, Chairman of AquaCell.

Mr. Glenn A. Bergenfield has been a director of AquaCell since July 1997.
For the past fifteen years, Mr. Bergenfield has been self-employed as a sole
practitioner of law in the State of New Jersey. Mr. Bergenfield served as a
director of U.S. Alcohol, and as a director of U.S. Drug Testing, Inc. and Good
Ideas Enterprises, Inc.

Dr. William DiTuro has been a director of AquaCell since July 1997. Dr.
DiTuro has been self-employed as a sole practitioner of general pediatrics
since 1986 and has served as a clinical instructor of pediatrics at the Robert
Wood Johnson Medical School. Dr. DiTuro served as a director of U.S. Alcohol,
U.S. Drug Testing, Inc. and Good Ideas Enterprises, Inc.

The executive officers of the Company are elected annually by the Board of
Directors and serve at the discretion of the Board.

During the fiscal year ended June 30, 2001, the Company's Board of Directors
held four meetings.

The Board of Directors maintains an Executive Committee currently consisting
of directors Witham, Laustsen and Wolff, which has all of the authority of the
Board of Directors except as limited by applicable law. In addition we have an
Audit Committee and a Compensation Committee which are required to consist of a

majority of outside directors. The Audit Committee, currently consisting of
directors Bergenfield and DiTuro, oversees actions taken by our independent
auditors and reviews our internal audit controls. The Compensation Committee,
currently consisting of directors Witham, Bergenfield and DiTuro, reviews the
compensation levels of our employees and makes recommendations to the Board
regarding compensation.

Audit Committee Information and Report

The Company's audit committee was established in June 2000 and is currently
comprised of Glenn Bergenfield and William DiTuro. The audit committee met
twice in the fiscal year ended June 30, 2001.

Audit Fees

For the fiscal year ended June 30, 2001, the aggregate fees billed for
professional services rendered for the audit of the Company's annual financial
statements and the reviews of its financial statements included in the
Company's quarterly reports totaled approximately $45,000.

Financial Information Systems Design and Implementation Fees

For the fiscal year ended June 30, 2001, there were no fees billed for
professional services by the Company's independent auditors rendered in
connection with, directly or indirectly, operating or supervising the operation
of its information system or managing its local area network.

All Other Fees

For the fiscal year ended June 30, 2001, the aggregate fees billed for all
other professional services rendered by its independent auditors totaled
approximately $117,000.

Audit Committee Report

Each member of the audit committee is an "independent director" and is
"financially literate" as defined under the recently adopted Amex listing
standards. The Amex listing standards define an "independent director"
generally as a person, other than an officer of the company, who does not have
a relationship with the company that would interfere with the director's
exercise of independent judgment. The Amex listing standards define
"financially literate" as being able to read and understand fundamental
financial statements (including a company's balance sheet, income statement and
cash flow statement).

Pursuant to the audit committee's written charter, which was adopted on June
1, 2000, the audit committee's responsibilities include, among other things:

. annually reviewing and reassessing the adequacy of the committee's formal
charter;

. reviewing the annual audited financial statements with the Company's
management and its independent auditors and the adequacy of its internal
accounting controls;

. reviewing analyses prepared by the Company's management and independent
auditors concerning significant financial reporting issues and judgments
made in connection with the preparation of its financial statements;

. making recommendations concerning the engagement of the independent
auditor;

. reviewing the independence of the independent auditors;

. reviewing the Company's auditing and accounting principles and practices
with the independent auditors and reviewing major changes to its auditing
and accounting principles and practices as suggested by the independent
auditor or its management; and

. reviewing all related party transactions on an ongoing basis for potential
conflict of interest situations.

A copy of the audit committee charter is attached as Appendix A.

The Company's audit committee has met and held discussions with management
and its independent auditors. Management represented to the committee that the
Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles, and the committee has reviewed and
discussed the consolidated financial statements with management and the
independent auditors. The committee discussed with the independent auditors the
matters required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees). The Company's independent auditors also
provided the audit committee with the written disclosures required by
Independence Standards Board Standard No. 1 (Independence Discussions with
Audit Committees) and the committee discussed with the independent auditors and
management the auditors' independence, including with regard to fees for
services rendered during the fiscal year and for all other professional
services rendered by the Company's independent auditors. Based upon the
committee's discussion with management and the independent auditors and the
committee's review of the representations of management and the report of the
independent auditors to the audit committee, the committee recommended that the
Board of Directors include the audited consolidated financial statements in its
annual report on Form 10-KSB for the fiscal year ended June 30, 2001.

Glenn Bergenfield
William DiTuro

Executive Compensation

The following table sets forth information concerning compensation for the
fiscal years indicated for services in all capacities awarded to, earned by or
paid to the Company's Chief Executive Officer and the only other executive
officer whose compensation was in excess of $100,000 during the fiscal year
ended June 30, 2001.

Long-Term
Annual Compensation Compensation
----------------------- --------------------
Options All Other
Name and Principal Position Year Salary($) Bonus($) Granted Compensation
--------------------------- ---- --------- -------- ------- ------------

James C. Witham................................... 2001 196,000 -- -- --
Chairman of the Board and Chief Executive Officer 2000 153,000 23,000 -- --
1999 76,000 -- -- --

Gary S. Wolff..................................... 2001 103,000 -- -- --
Treasurer, Chief Financial Officer and Director.. 2000 79,000 7,000 -- --
1999 40,000 -- -- --

No options were granted to the executive officers in the last fiscal year.
The executive officers do not hold any options.

Employment Agreements. On February 12, 2001, we entered into five-year
employment agreements with each of Mr. Witham and Ms. Laustsen, and a two-year
employment agreement with Mr. Wolff. These agreements provide for base salaries
of $265,000, $160,000, and $142,000, respectively, and also provide for bonuses
to be paid based upon established financial performance targets. Each of these
employment agreements contains standard noncompete, confidentiality and benefit
provisions, including provisions for severance compensation in the event of a
termination without cause or transactions that result in a change in control of
AquaCell. Each of these contracts provide that after the first year, the base
salary amounts will be subject to increase by 50% of the amount of any bonus,
with such bonus to be based on net sales and net income earned during the prior
year. The terms of the employment agreements, including bonus criteria were
reviewed and approved by the Compensation Committee.

Summary of Incentive Stock Plan

Our 1998 Incentive Stock Plan, covering 1,000,000 shares of our Common
Stock, will be administered by the Compensation Committee of our Board of
Directors. Among the Compensation Committee's powers will be the authority to:

. interpret the plan;

. establish rules and regulations for its operation;

. select officers, other key employees, consultants and advisors to receive
awards; and

. determine the form, amount and other terms and conditions of awards.

Directors, officers, key employees and independent contractors will be
eligible to participate in the plan. The selection of participants is within
the discretion of the Compensation Committee.

The plan provides for the grant of any or all of the following types of
awards:

. stock options, including nonqualified stock options and incentive stock
options;

. stock awards;

. stock appreciation rights;

. performance shares; and

. performance units.

Awards may be granted by themselves, in combination or in tandem with other
awards as determined by the Compensation Committee.

. Under the plan, the Compensation Committee may grant awards in the form of
nonqualified stock options or incentive stock options, shares of our
Common Stock, stock appreciation rights, performance shares or performance
units. The Compensation Committee, with regard to each stock option, will
determine the number of shares subject to the option, the manner and time
of the option's exercise and vesting, and the exercise price per share of
stock subject to the option. The following limitations are applicable
under the plan: no incentive stock options may be exercisable later than
ten years after the date they are granted and no nonqualified stock
options may be exercisable later than fifteen years after the date they
are granted;

. the aggregate fair market value at the time of grant of shares of Common
Stock with respect to which incentive stock options are exercisable for
the first time by a participant during any calendar year cannot be more
than $100,000;

. the exercise price of a stock option will not be less than 100% of the
fair market value of the shares of Common Stock on the date the option is
granted for incentive stock options or less than 85% of the market value
for non qualified stock options (or, in either case, not less than 110% of
fair market value if the optionee is an officer, director or a 10%
stockholder);

. the option price must be paid by a participant by check or, in the
discretion of the Compensation Committee, by delivery of our Common Stock;
and

. awards may be subject to such terms, conditions, restrictions or
limitations, as the Compensation Committee deems appropriate, including
restrictions on transferability and continued employment.

Under the plan, each stock appreciation right will entitle the holder to
elect to receive the appreciation in the fair market value of the shares
subject to the stock appreciation right up to the date the right is exercised.
Stock appreciation rights may be granted independent of, or in connection with,
stock options. In the case of stock appreciation rights issued independent of
stock options, the appreciation shall not be measured from a value less than
85% of the fair market value of the shares on the date of grant. If the stock
appreciation rights are issued in

connection with stock options, the appreciation shall be measured from not less
than the option price. No stock appreciation right may be exercised earlier
than six months after the date of grant or later than the earlier of the term
of the related option or fifteen years after the date it was granted.

Performance shares and units may be awarded either alone or in addition to
other awards and will consist of:

. in the case of performance shares, the right to receive shares of Common
Stock or cash of equal value at the end of a specified performance period;
or

. in the case of performance units, the right to receive a fixed dollar
amount, payable in cash or shares of Common Stock or a combination of both
at the end of a specified performance period.

The Compensation Committee may condition the performance shares or units on
the attainment of specified performance goals or such other facts or criteria
as the committee shall determine.

The plan provides that awards shall not be transferable otherwise than by
law or by will or the laws of descent and distribution. However, the
Compensation Committee may permit the transferability of an award to members of
the participant's immediate family or trusts or family partnerships for the
benefit of such family members.

The Board of Directors has the right to amend, suspend or terminate the plan
at any time, subject to the rights of participants under any outstanding
awards. However, no amendment to the plan may be made without the approval of
our stockholders if such approval is required by law or regulatory authority.

Compliance with Section 16(a) of the Exchange Act

Section 16(a) of the Securities Exchange Act of 1934 requires AquaCell's
directors and executive officers to file with the SEC initial reports of
ownership and changes in ownership of AquaCell's common stock during the fiscal
year ended June 30, 2001. AquaCell believes that its officers and directors
complied with all these filing requirements during the fiscal year. The Company
has relied upon the representations of its directors and executive officers.
The Company does not believe any other stockholders are subject to Section
16(a) filing requirements.

Stock Performance Graph

The graph depicted below shows a comparison of cumulative stockholder
returns for the Company, the American Stock Exchange Index and the Company's
peer group.

Comparison of Cumulative Return for
The Period February 12, 2001 to June 30, 2001

[CHART]

AQUACELL TECHNOLOGIES INC AMERICAN STOCK EXCHANGE IND PEER GROUP
12-Feb-01 100 100 100
1-Feb 107 96.8 95.22
1-Mar 101 93.53 89.6
1-Apr 80 101.5 102.12
1-May 99 100.21 119.65
1-Jun 90 97.88 120.15

ANNUAL RETURN PERCENTAGE

Years Ending
------------------------------
Company Name / Index Feb01 Mar01 Apr01 May01 Jun01
-------------------- ----- ----- ------ ----- -----

AQUACELL TECHNOLOGIES INC 7.00 -5.61 -20.79 23.75 -9.09
AMERICAN STOCK EXCHANGE IND -3.20 -3.38 8.52 -1.28 -2.32
PEER GROUP -4.78 -5.91 13.97 17.17 0.42

INDEXED RETURNS

Base Years Ending

Company Name / Index 12Feb01 Feb01 Mar01 Apr01 May01 Jun01
-------------------- ------- ------ ------ ------ ------ ------

AQUACELL TECHNOLOGIES INC 100 107.00 101.00 80.00 99.00 90.00
AMERICAN STOCK EXCHANGE IND 100 96.80 93.53 101.50 100.21 97.88
PEER GROUP 100 95.22 89.60 102.12 119.65 120.15

Peer Group Companies
--------------------

IONICS INC
OSMONICS INC
PENTAIR INC

INDEPENDENT ACCOUNTANTS

The Company anticipates that it will select the independent accounting firm
of Richard A. Eisner & Company, P.C. as the auditors of the Company for the
fiscal year ended June 30, 2002, although no formal recommendation has been
made to the Company's Board of Directors by its audit committee as of the date
of this proxy statement. A representative of Richard A. Eisner & Company, P.C.,
the auditors of the Company for the fiscal year ended June 30, 2001, is
expected to be present at the Annual Meeting. The representative will have the
opportunity to make a statement and will be available to respond to appropriate
questions from stockholders.

2002 STOCKHOLDER PROPOSALS

In order for stockholder proposals for the 2001 Annual Meeting of
Stockholders to be eligible for inclusion in the Company's Proxy Statement,
they must be received by the Company at its principal office in Rancho
Cucamonga, California not later than June 29, 2002. Stockholders are advised
that the Company's management shall be permitted to exercise discretionary
voting authority under proxies it solicits and obtains for the Company's 2002
Annual Meeting of Stockholders with respect to any proposal presented by a
stockholder at such meeting, without any discussion of the proposal in the
Company's proxy statement for such meeting, unless the Company receives notice
of such proposal at its principal office in Rancho Cucamonga, California, not
later than August 29, 2002.

SOLICITATION OF PROXIES

The solicitation of proxies in the enclosed form is made on behalf of the
company and the cost of this solicitation is being paid by the Company. In
addition to the use of the mails, proxies may be solicited personally or by
telephone or telephone using the services of directors, officers and regular
employees of the Company at nominal cost. Banks, brokerage firms and other
custodians, nominees and fiduciaries will be reimbursed by the Company for
expenses incurred in sending proxy material to beneficial owners of the
Company's stock.

OTHER MATTERS

The Board of Directors knows of no matter which will be presented for
consideration at the Annual Meeting other than the matters referred to in this
Proxy Statement. Should any other matter properly come before the Annual
Meeting, it is the intention of the persons named in the accompanying proxy to
vote such proxy in accordance with their best judgment.

Karen B. Laustsen, Secretary

Rancho Cucamonga, California
October 29, 2001

Appendix A

AUDIT COMMITTEE CHARTER
OF
AQUACELL TECHNOLOGIES, INC.

I. ORGANIZATION

There shall be a committee of the Board of Directors ("Board") for AQUACELL
TECHNOLOGIES, INC., a Delaware corporation ("Corporation"), to be known as the
Audit Committee ("Committee"). The Committee shall be composed of directors who
are independent of the management of the Corporation and are free of any
relationship that, in the opinion of the Board, would interfere with their
exercise of independent judgment as a Committee member.

The Committee shall be comprised of at least two (2) members who shall be
independent directors until such time as the Corporation is no longer
considered a "Small Business Filer" under Securities and Exchange Commission
Rules, at which time the Committee shall consist of at least three (3) members,
each of whom is able to read and understand fundamental financial statements,
or will become able to do so within a reasonable period of time after his or
her appointment. In addition, the Corporation will continue to have at least
one member of the Committee that has past employment history in finance or
accounting, requisite professional certification in accounting, or any other
comparable experience or background which results in the individual's financial
sophistication. Committee members may enhance their familiarity with finance
and accounting by participating in educational programs conducted by the
Corporation or an outside consultant.

The members of the Committee shall be elected by the Board at the annual
organizational meeting of the Board or until their successors shall be duly
elected and qualified. Unless a chair is elected by the full Board, the members
of the Committee may designate a chair by majority vote of the full Committee
membership.

II. PURPOSE

The Committee shall provide assistance to the directors in fulfilling their
responsibility to the shareholders, potential shareholders, and investment
community relating to corporate accounting, reporting practices of the
Corporation, and the quality and integrity of the financial reports of the
Corporation. It shall be the responsibility of the Committee to maintain free
and open means of communication between the directors, the independent
auditors, and the financial management of the Corporation. Consistent with this
function, the Committee should encourage continuous improvement of, and should
foster adherence to, the Corporation's policies, procedures and practices at
all levels.

While the Committee has the responsibilities and powers set forth in this
Charter, it is not the duty of the Committee to plan or conduct audits or to
determine that the Corporation's financial statements are complete and accurate
and are in accordance with generally accepted accounting principles. This is
the responsibility of management and the independent auditor. Nor is it the
duty of the Committee to conduct investigations, to resolve disagreements, if
any, between management and the independent auditor or to assure compliance
with laws and regulations and the Corporation's business conduct guidelines.

In carrying out its responsibilities, the Committee believes its policies
and procedures should remain flexible in order to best react to changing
conditions and to ensure to the directors and shareholders that the corporate
accounting and reporting practices of the Corporation are in accordance with
all requirements and are of the highest quality.

The Committee's primary duties and responsibilities are to:

. Serve as an independent and objective party to monitor the Corporation's
financial reporting process and internal control system.

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. Review and appraise the audit efforts of the Corporation's independent
accountants and financial management of the corporation.

. Provide an open avenue of communication among the independent accountants,
financial and senior management, and the Board.

The Committee will primarily fulfill these responsibilities by carrying out
the activities enumerated in Section IV of this Charter.

III. MEETINGS

The Committee shall meet at least four (4) times annually, or more
frequently as circumstances dictate. As part of its responsibility to foster
open communication, the Committee should meet at least annually with
management, and the independent accountants in separate executive sessions to
discuss any matters that the Committee or each of these groups believe should
be discussed privately. In addition, the Committee or its chair should meet
with the independent accountants and management annually to review the
Corporation's financials in accordance with Section IV (3) below.

IV. RESPONSIBILITIES AND DUTIES

To fulfill its responsibilities and duties the Committee shall:

Documents / Reports Review

1. Review and update this Charter periodically (at least annually) as
conditions dictate.

2. Review the Corporation's annual financial statements and any reports or
other financial information submitted to any governmental body, or the
public, including any certification, report, opinion, or review rendered
by the independent accountants.

3. Review with financial management and the independent accountants, the
Annual Report on Form 10-K prior to its filing or prior to the release
of earnings. The chairman of the Committee may represent the entire
Committee for purposes of this review.

4. Issue annually a report to be included in the Corporation's proxy
statement as required by the rules of the Securities and Exchange
Commission.

5. Discuss with management and/or the Corporation's general counsel any
legal matters (including the status of pending litigation) that may have
a material impact on the Corporation's financial statements, and any
material reports or inquires from regulatory or governmental agencies.

Independent Accountants

6. Recommend to the Board the selection of the independent accountants,
considering independence and effectiveness and approve the fees and
other compensation to be paid to the independent accountants. On an
annual basis, the Committee should review and discuss with the
accountants all significant relationships the accountants have with the
Corporation to determine the accountants' independence. The committee
shall be responsible for obtaining a formal written statement from the
independent accountants delineating all relationships between the
accountants and the Corporation consistent with Independence Standards
Board Standard 1.

7. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.

8. Periodically consult with the independent accountants out of the
presence of financial management about internal controls and the
fullness and accuracy of the Corporation's financial statements.

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Financial Reporting Processes

9. In consultation with the independent accountants and the financial
management, review the integrity of the Corporation's financial
reporting processes, both internal and external.

10. Consider the independent accountants judgments about the quality and
appropriateness of the Corporation's accounting principles as applied in
its financial reporting.

11. Consider and approve, if appropriate, major changes to the Corporation's
auditing and accounting principles and practices as suggested by the
independent accountants, or financial management.

Process Improvement

12. Establish regular and separate systems of reporting to the Committee by
each of financial management, and the independent accountants regarding
any significant judgments made in financial management's preparation of
the financial statements and the view of each as to appropriateness of
such judgments.

13. Following completion of the annual audit, review separately with each of
financial management, and the independent accountants, any significant
difficulties encountered during the course of the audit, including any
restrictions on the scope of work or access to required information.

14. Review any significant disagreement among financial management and the
independent accountants in connection with the preparation of the
financial statements.

15. Review with the independent accountants and financial management the
extent to which changes or improvements in financial or accounting
practices, as approved by the Committee, have been implemented; provided
such review shall be conducted at an appropriate time subsequent to
implementation of changes or improvements, as decided by the Committee.

Compliance

16. Review activities, organizational structure, and qualifications of
financial management of the corporation.

17. Perform any other activities consistent with this Charter, the
Corporation's by-laws and governing law, as the Committee or the Board
deem necessary or appropriate.

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AQUACELL TECHNOLOGIES, INC.

PROXY FOR ANNUAL MEETING OF STOCKHOLDERS TO BE HELD DECEMBER 5, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS

The undersigned Stockholder(s) of AQUACELL TECHNOLOGIES, INC., a
Delaware corporation (the "Company"), hereby appoints James C. Witham,
Proxy, with full power of substitution in the name, place and stead of the
undersigned, to vote the Annual Meeting of Stockholders of the Company to
be held on December 5, 2001 and at all adjournments thereof, according to
the number of votes that the undersigned would be entitled to vote if
personally present, upon the following matters.

1. Election of the following Director: Gary S. Wolff

[_] FOR the nominee listed [_] WITHHOLD AUTHORITY to vote for the nominee

2. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment
thereof.

(Continued and to be signed on reverse side)

THIS PROXY WILL BE VOTED IN ACCORDANCE WITH THE INSTRUCTIONS GIVEN ABOVE.
IF NO INSTRUCTIONS ARE GIVEN, THIS PROXY WILL BE VOTED FOR THE NOMINEE AND
PROPOSALS LISTED ABOVE.

Date __________, 2001

_____________________
Signature

_____________________
Signature if held
jointly

Please sign exactly
as name appears
above. When shares
are held by joint
tenants, both should
sign. When signing as
attorney, executor,
administrator,
trustee or guardian,
please give full
title as such. If a
corporation, please
sign in full
corporate name by
President or other
authorized officer.
If a partnership,
please sign in
partnership name by
authorized person.

Please mark, sign, date and return this proxy card promptly using the enclosed
envelope.