EXHIBIT 10.5
HOST AMERICA CORPORATION
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), dated as of this 19th day of
February 1998 is by and between Host America Corporation, a Delaware
corporation with its principal places of business in the State of
Connecticut (hereinafter called the "Employer") and Xxxxxxxx X. Xxxxxx, an
individual residing at 00 Xxxxxxx Xxx., Xxxxxx, Xxxxxxxxxxx 00000-0000
(hereinafter called the "Employee").
WHEREAS, the Employer is a regional contract food service management
company; and
WHEREAS, the Employer wishes to provide assurance to the Employee that his
duties, responsibilities and authority are considered by the Employer to be
essential to the Employer's business success; and
WHEREAS, the Employer wishes to employ the Employee on terms that are
competitive in the marketplace and that reflect the Employee's experience
and expertise related to the business activities of the Employer; and
WHEREAS, the Employer desires to employ the Employee, and the Employee
desires to accept such employment, all upon the terms and conditions set
forth below.
NOW, THEREFORE, in consideration of the premises and mutual promises
hereinafter set forth, the parties hereto hereby mutually agree as follows:
1. EMPLOYMENT. The Employer hereby employs the Employee, and the
Employee hereby accepts such employment, upon and subject to the
terms and conditions set forth herein.
2. EFFECTIVE DATE AND TERM. This Agreement shall take effect as of the
date hereof (the "Effective Date") and shall continue thereafter in
full force and effect for five years, until the day and month in the
year 2003 (the "Expiration Date") that corresponds to the day and
month that this Agreement shall take effect.
3. TITLE AND DUTIES; EXTENT OF SERVICES. The Employee shall promote the
business and affairs of the Employer as President and Treasurer. The
Employee shall report and be responsible to the Board of Directors
of the Employer, and shall devote his full efforts, time, attention
and energies to the business and affairs of the Employer; provided,
however, that nothing in this Agreement or in the Employee's
employment relationship with the Employer shall prevent the Employee
from having an ownership interest in, and from rendering services to,
other companies or entities so long as any such ownership interest
of the Employee or any such services rendered by the Employee to any
such other companies or entities do not interfere with the reasonable
performance of the Employee's duties and responsibilities hereunder.
4. TRAVEL. During the term of this Agreement, the Employee shall engage
in reasonable business travel on behalf of the Employer.
5. COMPENSATION AND BENEFITS.
5.1. SALARY. The Employer shall pay the Employee a salary at an
annual rate of $85,000.00 (eighty five thousand dollars).
The Employee's salary, which may be increased from time to
time by the Compensation Committee (in the absence thereof,
by the Board of Directors) of the Employee (hereinafter, the
"Salary"), shall not be decreased without the consent of the
Employee. The Employee's salary shall be paid in accordance
with the Employer's payroll practices as in effect from time
to time.
5.2. FRINGE BENEFITS. In addition to the Salary provided for in
Section 5.1 above, in connection with the Employee's
employment by the Company, the Employee shall be entitled to
receive all fringe benefits customarily offered by the
Company to its officers, including without limitation, an
expense account, an automobile expense account, and
reimbursement of reasonable country club membership dues and
related business expenses.
5.3. HEALTH AND DENTAL INSURANCE. The Employee shall be
entitled, on a family coverage basis and at the Employer's
sole cost and expense, to participate in the health
insurance plan (the "Employer's Health Plan") and the dental
insurance plan (the "Employer's Dental Plan") generally made
available to the Employer's officers.
5.4. DISABILITY INSURANCE. The Employee shall be entitled to
participate, at the Employer's sole cost and expense, in the
long-term disability insurance plan generally made available
to other officers of the Employer (the "Long Term Disability
Plan").
5.5. LIFE INSURANCE. The Employee shall be entitled to
participate, at the Employer's sole cost and expense, in the
life insurance plan of the Employer (the "Life Insurance
Plan") generally made available to other officers of the
Employer.
5.6. D&O LIABILITY INSURANCE. The Employer shall maintain at all
times a directors and officers liability insurance policy
(the "D&O Policy") and the Employee shall be covered in his
capacity as an officer of the Employer under the D&O Policy.
The cost of such coverage shall be borne by the Employer.
In addition, the Employee shall be entitled to
indemnification from the Employer for any claim, loss,
damage or expense made against or suffered by the Employee
in his capacity as an officer of the Employer.
5.7. 401(k) PLAN. The Employee shall be entitled to participate
in the Employer's 401(k) Plan and profit-sharing plans on
the same basis as other officers of the Employer. The
Employee shall be eligible to participate in the Employer's
401(k) Plan and profit-sharing plans commencing on the
Effective Date.
5.8. VACATION. The Employee shall be entitled to at least four
weeks of vacation per fiscal year during which time his
compensation shall be paid in full, and any
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unused vacation time shall accrue from year to year in
accordance with the Employer's policy therefor.
5.9. EXPENSE REIMBURSEMENT. The Employee may incur reasonable
expenses in connection with the promotion of the Employer's
business, all upon presentation by the Employee of
documentation, expense statements, vouchers and/or such
other supporting documentation as the Employer may
reasonably request. The Employer shall directly pay, or
shall reimburse the Employee for all of such reasonable
expenses.
5.10. OTHER BENEFITS. The Employee shall be entitled to receive
such other fringe benefits as are customarily provided by
the Employer to other officers.
6. ADDITIONAL COMPENSATION.
6.1 STOCK OPTIONS. The Employee shall be entitled to
participate in the Employer's stock option plans on a basis
consistent with other officers of the Employer.
6.2 CONVERTIBLE PREFERRED SHARES. The Employee shall receive
225,000 shares of the Preferred Stock. Each share of
Preferred Stock is convertible into one (1) share of the
Company's Common Stock at a conversion value of $5.00 per
share, provided, however, the shares may only be converted
after five (5) years or sooner in the event the Company
attains the following revenues and pre-tax earnings during
the following time period or fiscal year after the
completion of the proposed public offering, each share of
Preferred Stock shall be convertible into the following
number shares of Common Stock at the following conversion
value per share at no cost to the employees:
Number of
Pre-Tax Conversion Common
Incentive Period Revenues Earnings Value Shares
---------------- -------- -------- ---------- --------
15 Months After
Public Offering $20,000,000 $1,000,000 $2.50 2.0 shares
Two Years After
Public Offering $40,000,000 $2,000,000 $2.00 2.5 shares
Three Years After
Public Offering $75,000,000 $3,750,000 $1.50 3.3 shares
Of the 700,000,000 shares of Preferred Stock to be issued to the
Company's Officers and Directors, up to 233,333 shares of Preferred Stock
are convertible upon achieving the performance goals in accordance with the
aforesaid formula at the end of each Incentive Period. In the event the
Company does not attain any of the aforesaid goals, each share of Preferred
Stock then outstanding shall automatically convert, at no cost to the
holder, into one (1) share of Common Stock five (5) years from the
effective date of the registration statement relative to the proposed
public offering. Each share of Preferred Stock will have the same voting
rights as a share of Common Stock.
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7. TERMINATION.
7.1. TERMINATION RIGHTS OF THE PARTIES.
(a) The Employee may terminate his employment hereunder at any
time for Good Reason (as defined below) by giving the Employer
thirty (30) days' prior notice thereof, whereupon such employment
shall terminate on the earlier of (i) the 30th day following the
date on which such notice is given to the Employer by written
notice to the Employer or (ii) any date prior to such 30th day
that is specified by the Employer by written notice to the
Employee. For purposes of this Agreement, the term "Good Reason"
shall mean (i) material breach by the Employer of any of the
terms or provisions of this Agreement, (ii) any event of
bankruptcy or insolvency in respect of the Employer, (iii) any
diminution on a cumulative basis, of the Employee's, duties,
responsibilities or authority of the Employee as an officer of
the Employer, (iv) the principal place of business at which the
Employee performs his duties is changed to a location outside the
State of Connecticut, or (v) the occurrence of a Change of
Control (as defined in Section 7.3 hereof).
(b) The Employee may terminate his employment hereunder for any
reason whatsoever at any time by giving ninety (90) days' prior
written notice of such termination, whereupon such employment
shall terminate on the earlier of (i) the 90th day following the
date on which such notice is given or (ii) any date prior to the
90th day that is specified by the Employer by written notice to
the Employee.
(c) The Employer may terminate the Employee's employment
hereunder at any time for Cause (as defined below) by giving the
Employee written notice of such termination whereupon such
employment shall terminate on the date such written notice is
given to the Employee. For purposes of this document, the term
"Cause" shall mean (i) any willful misconduct by the Employee
which materially injures the Employer, (ii) any act of dishonesty
in the Employee's relations with the Employer or any of its
directors, employees or vendors which materially injures the
Employer, (iii) any act of larceny, embezzlement, conversion or
any other similar act involving the misappropriation of Employer
funds in the course of the Employee's employment, (iv) any
material breach of this Agreement by the Employee which is not
cured by the Employee within ten (10) days after receiving
written notice thereof from the Employer, or (v) the conviction
of the Employee of any felony which involves moral turpitude.
(d) The Employee's employment hereunder shall terminate
automatically (i) upon the Employee's death or (ii) on the
thirtieth (30th) day following any determination of Disability
(as defined below) in accordance with the procedures specified in
this Section 7.1(e). For purposes of this Agreement, the term
"Disability" shall mean an inability to perform the material
services contemplated under this Agreement for a period of six
consecutive months. A determination of Disability shall be made
by a physician satisfactory to both the Employee and the
Employer, provided that, if the Employee and the Employer do not
agree on
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a physician, the Employee and the Employer shall each select a
physician and these two together shall select a third physician,
whose determination as to Disability shall be binding on all
parties.
(e) The effective date of any termination of the Employee's
employment hereunder is hereinafter referred to as the
"Termination Date."
7.2. EMPLOYEE'S RIGHT TO COMPENSATION FOLLOWING TERMINATION;
SEVERANCE BENEFITS.
(a) Upon any termination of the Employee's employment hereunder
by the Employer or the Employee for any reason whatsoever, or
upon any termination of the Employee's employment hereunder on
account of his death or Disability, the Employer shall (1) pay to
the Employee all Salary accrued by the Employee through the
Termination Date, (2) pay to the Employee any accrued but
previously unpaid bonuses and (3) pay and make available to the
Employee all other benefits accrued by the Employee through the
Termination Date pursuant to Section 5 hereof, all in the manner
and at the time provided in said Section 5. Any payments due or
benefits owed to the Employee by the Employer under this Section
7.2(a) shall be paid or made available by the Employer to the
Employee's legal representative or heirs, as the case may be,
upon the Employee's death or Disability.
(b) Upon the termination of the Employee's employment hereunder
by the Employee for Good Reason pursuant to Section 7.1(a)
hereof, the Employer shall provide severance to the Employee by
(1) continuing to pay to the Employee the Salary through (i) the
second anniversary of the Termination Date, or (ii) the
Expiration Date, whichever period is longer, in the manner and at
the time provided in Section 5.1 hereof, and (2) paying and
making available to the Employee through (i) the second
anniversary of the Termination Date, or (ii) the Expiration Date,
whichever period is longer, all fringe benefits set forth in
Section 5.3 through 5.10 hereof. Except as provided under
Section 7.3(c) below, the provisions of this Section 7.2(b) shall
be applicable with respect to any termination of the Employee's
employment hereunder to the extent that the Employee shall be
entitled to severance therefor pursuant to Section 7.3 hereof.
7.3. SPECIAL SEVERANCE UPON A CHANGE OF CONTROL.
(a) Notwithstanding anything in this Agreement (including,
without limitation, Section 7.2 hereof) to the contrary, in the
event that the Employee's employment under this Agreement is
terminated by the Employer for any reason whatsoever, or by the
Employee with Good Reason (which for purposes of this Section
7.3(a) shall mean the occurrence of any of the events described
in clauses (i), (ii), (iii) or (iv) of the definition of the term
Good Reason as set forth in Section 7.1(a) hereof), at any time
within the two year period after a Change of Control, the
Employer shall, in addition to performing its obligations under
7.2(a) hereof, provide severance to the Employee by (i)
continuing to pay to the Employee the
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Salary through the last business day of the Special Severance
Period (as defined in Section 7.3(c) below) in the manner and at
the time provided in Section 5.1 hereof, and (ii) paying and
making available to the Employee through the last business day of
the Special Severance Period all fringe benefits set forth in
Section 5.3 through 5.10 hereof.
(b) For purposes of this Agreement, a "Change of Control" shall
be deemed to have occurred upon any of the following events:
(i) when, pursuant to any transaction or series of
transactions, any "person" (as such term is used in Section
13(d) and 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "1934 Act")) becomes a "beneficial owner"
(as such term is defined in Rule 13d-3 promulgated under the
1934 Act), directly or indirectly, of securities of the
Employer representing thirty-five percent (35%) or more of
the total number of votes that may be cast for election of
directors of the Employer;
(ii) any contested election of directors, the result of
which is that the individuals who were directors of the
Employer immediately before such election shall cease to
constitute a majority of directors serving on the Board of
Directors of the Employer or any successor thereof;
(iii) any merger of consolidation of the Employer with or
into another corporation or entity where the Employer is not
a survivor;
(iv) a sale or disposal by the Employer of substantially
all of its assets to another corporation, entity or person;
or
(v) any tender of exchange offer, or other business
combination, the result of which is the persons who were
directors of the Employer before such transaction shall
cease to constitute a majority of the directors serving on
the Board of Directors of the Employer or any successor
thereof.
(c) For purposes of Section 7.3(a) above, the term "Special
Severance Period" shall mean a period of time, commencing on the
Termination Date, equal to two months for each calendar year
through which the Employee shall have been employed hereunder;
provided however, that in no event shall such period have a total
duration of less than one year from the Termination Date or more
than two years from the Termination Date; and provided, further,
that in no event shall such period have a total duration of less
than the severance period applicable under Section 7.2(b) above.
7.4. MITIGATION. The Employee shall be under no obligation to
mitigate the amount of any severance payments provided for
in Sections 7.2 and 7.3 hereof or to seek other employment
following any termination of employment hereunder, and any
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amounts he may earn in any other employment shall not reduce or
offset the severance payments or other amounts due hereunder.
7.5. NO OFFSET. The Employer shall not be entitled to setoff,
offset, reduce or otherwise withhold any compensation due by
the Employer to the Employee hereunder. In the event that
the Employer shall have any claim against the Employee
hereunder, the Employer's only remedy shall be to commence
an action at law or in equity against the Employee seeking
damages or injunctive relief.
8. GENERAL PROVISIONS.
8.1. ACCELERATION. In the event of any failure by the Employer
to pay any of the amounts due and payable by the Employee
under Section 7.2 or 7.3 hereof, or in the event of the
filing of any bankruptcy petition by or against the Employer
or the appointment of a receiver to wind up and liquidate
the Employer, at any time after the Termination Date, the
Employee shall be entitled to accelerate any and all amounts
due and payable by the Employer to the Employee under this
Agreement. Any such right of acceleration shall not be in
lieu of, or otherwise limit, any remedies available to the
Employee at law or in equity.
8.2. ENTIRE AGREEMENT. This Agreement represents the entire
agreement of the parties and supersedes any prior
understandings, agreements or representations by and between
the Employer and the Employee with respect to the
arrangements contemplated hereby. No prior agreement,
whether written or oral, shall be construed to change,
amend, alter, repeal or invalidate this Agreement. This
Agreement may be amended only by a written instrument
executed in one of more counterparts by the parties.
8.3. WAIVER. No consent to or waiver of any breach or default in
the performance of any obligations hereunder shall be deemed
or construed to be a consent to or waiver of any other
breach or default in the performance of any of the same or
any other obligations hereunder. Failure on the part of
either party to complain of any act or failure to act of the
other party or to declare the other party in default,
irrespective of the duration of such failure, shall not
constitute a waiver of rights hereunder and no waiver
hereunder shall be effective unless it is in writing,
executed by the party waiving the breach or default
hereunder.
8.4. ASSIGNMENT. This Agreement shall be binding upon and inure
to the benefit of the parties hereto, their respective
successors and assigns and, in the case of the Employee, his
heirs. Neither the Employee nor the Employer may assign or
transfer any or all of their respective rights or
obligations under this Agreement.
8.5. VENUE. In the case of any dispute hereunder, the parties
submit to the exclusive jurisdiction and venue of any court
of competent jurisdiction sitting in the State of
Connecticut, and will comply with all requirements necessary
to give such court jurisdiction over the parties and the
controversy.
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8.6. SEVERABILITY. All headings and subdivisions of this
Agreement are for reference only and shall not affect its
interpretation. In the event that any provision of this
Agreement should be held unenforceable by a court of
competent jurisdiction, such court is hereby authorized to
amend such provision so as to be enforceable to the fullest
extent permitted by law, and all remaining provisions shall
continue in full force without being impaired or invalidated
in any way.
8.7. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of
Connecticut, without regard to its conflict of laws
principles.
8.8. SURVIVAL. The provisions of Sections 5, 6, 7, and 8 shall
survive any termination of this Agreement or of the
employment relationship of the Employee and the Employer,
including any termination of such employment relationship at
any time on or after the expiration of the term of this
Agreement as set forth in Section 2 hereof. Without in any
way or to any extent limiting the generality of the
foregoing, the parties hereby expressly agree that the
provisions of Section 7 hereof under which prior written
notice of termination shall be thirty (30) days) shall
survive the expiration of the term of this Agreement as set
forth in Section 2 hereof, it being the intention of the
parties hereto that the Employee shall be entitled to
compensation and severance as set forth in Section 7 hereof,
upon any termination of the employment relationship of the
Employee and the Employer at any time after the expiration
of the term of this Agreement, all to the same extent as if
the Employee were employed under the terms of this Agreement
at the time of such termination.
8.9. NOTICES. All notices required or permitted under this
Agreement shall be in writing and shall be deemed effective
upon personal delivery or three days after deposit in the
United States Post Office, by registered or certified mail,
postage prepaid, return receipt requested, addressed to the
other party at the address shown above, or at such other
address or addresses of which either party shall notify the
other in accordance with this Section 8.9.
8.10. COUNTERPARTS. This Agreement may be executed in
counterparts, all of which together shall for all purposes
constitute one Agreement, binding on each of the parties
hereto notwithstanding that each such party shall not have
signed the same counterpart.
8.11. ATTORNEYS' FEES. Each party agrees that the losing party in
any suit or action shall reimburse the prevailing party for
its reasonable costs, expenses and attorneys' fees incurred
in any action or suit brought to determine the rights of the
parties hereunder.
8.12. ARBITRATION. Any disputes arising out of this Agreement
between the Employee and the Employer shall be settled by
the binding arbitration to held in the State of Connecticut,
in accordance with the rules of the American Arbitration
Association. Judgment upon any award rendered by any
arbitrator may be
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entered in any court having jurisdiction. The statute of
limitations, estoppel, waiver, laches, and similar doctrines
which would otherwise be applicable in any action brought by
a party shall be applicable in any arbitration proceeding,
and the commencement of an arbitration proceeding shall be
deemed the commencement of any action for these purposes.
8.13. INDEMNIFICATION. Employer shall indemnify, defend and hold
harmless Employee from and against any and all actions,
claims, liabilities, demands and proceedings asserted
against the Employee by reason of the fact that Employee is
or was an employee or officer of the Employer on or after
the date hereof to the fullest extent permitted under the
laws of the State of Delaware.
IN WITNESS WHEREOF, the parties have signed this agreement as of the date
written above as a sealed instrument.
EMPLOYEE EMPLOYER
HOST AMERICA CORPORATION
/s/ XXXXXXXX X. XXXXXX By: /s/ XXXXXX X. XXXXX, XX.
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Xxxxxxxx X. Xxxxxx Name: Xxxxxx X. Xxxxx, Xx.
President Title: Director
