Exhibit 10.4
|__| Employee's Copy
|__| Company's Copy
CAPITAL AUTOMOTIVE REIT
Employment Agreement
To Xxxxxx X. Xxxxxx:
This Agreement establishes the terms of your employment with Capital
Automotive REIT, a Maryland real estate investment trust (the "Company").
Employment and Duties You and the Company agree to your employment as
President and Chief Executive Officer on the terms
contained herein. In such position, you will report
directly to the Company's Board of Trustees (the
"Board"). You agree to perform whatever duties the
Board may assign you from time to time, consistent with
your position as a senior executive. During your
employment, you agree to devote your full business
time, attention, and energies to performing those
duties (except as the Board otherwise agrees from time
to time). You agree to faithfully serve the Company, to
conform to and comply with the lawful and good faith
directions and instructions given you by the Company,
and to use your best efforts to promote and serve the
interests of the Company. You agree to comply with the
noncompetition, secrecy, and other provisions of
Exhibit A to this Agreement.
Term of Employment Your employment under this Agreement begins as of
October 27, 1997 (the "Effective Date"). Unless sooner
terminated under this Agreement, your employment ends
at 6:00 p.m. Eastern Time on
June 30, 1998, if the Company has not consummated
its initial public offering ("IPO") by that date,
or
October 19, 2001, if the Company has consummated
its IPO on or before June 30, 1998.
The period running from October 27, 1997 to the
applicable date in the preceding sentence is the
"Term."
Termination or expiration of this Agreement ends your
employment but does not end your obligation to comply
with Exhibit A.
Compensation
Salary The Company will pay you an annual salary (the
"Salary") from October 27, 1997 at the rate of not less
than $350,000 in accordance with its payroll practices.
The Board or its Compensation Committee will review
your Salary annually and consider you for increases.
Bonus The Board or its Compensation Committee will establish
annual bonus targets under which you will be eligible
for an annual bonus equal to up to 100% of your Salary.
Options The Company will grant options to you to acquire common
shares of beneficial ownership equal to 3% of the
Company's outstanding shares as of and contingent on
the consummation of the Company's IPO (based on the
number of shares outstanding immediately after the
IPO's completion), exercisable at the IPO price, or
comparable options from the Capital Automotive, L.P.
(the "Operating Partnership"). Such options will become
exercisable ratably over four years, beginning with the
first anniversary of their date of grant, and will
provide that they become fully exercisable on (i) a
Change of Control, (ii) the Company's termination of
your employment other than for Cause, or (iii) your
resignation for Good Reason and remain exercisable
throughout their ten-year term.
Employee Benefits While you are employed under this Agreement, the
Company will provide you with the same benefits,
including medical insurance coverage, as the Company
makes generally available from time to time to the
Company's employees, as those benefits are amended or
terminated from time to time, and such other benefits
as are commensurate with your position as a senior
executive of a public company, including either a
company automobile or an allowance for an automobile.
Your participation in the Company's benefit plans will
be subject to the terms of the applicable plan
documents and the Company's generally applied policies,
and the Company in its sole discretion may from time to
time adopt, modify, interpret, or discontinue such
plans or policies.
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Place of Employment Your principal place of employment will be at the
Company's corporate headquarters in the Washington
metropolitan area (or such other offices as the Company
may establish from time to time and to which it assigns
you in its sole discretion). You understand and agree
that you must travel from time to time for business
reasons.
Indemnification The Company will indemnify you to the fullest extent
authorized by law if you are made a party to any
action, suit, or proceeding, whether criminal, civil,
administrative, or investigative, because you are or
were a director, officer, or employee of the Company or
serve or served any other entity as a director,
officer, or employee at the Company's request;
provided, however, that you must repay the Company for
any indemnification if the final determination of an
arbitrator or a court of competent jurisdiction
declares, after the expiration of the time within which
judicial review (if permitted) of such determination
may be perfected, that indemnification by the Company
is not permissible under applicable law.
Expenses The Company will reimburse you for reasonable and
necessary travel and other business-related expenses
you incur for the Company in performing your duties
under this Agreement. You must itemize and substantiate
all requests for reimbursements. You must submit
requests for reimbursement in accordance with the
policies and practices of the Company and within 60
days after incurring the expense.
No Other Employment For so long as you are employed by the Company, you
agree that you will not, directly or indirectly,
provide services to any person or organization for
which you receive compensation or otherwise engage in
activities that would conflict or interfere
significantly with the faithful performance of your
duties to the Company without the Board's prior written
consent. (This prohibition excludes any work performed
at the Company's direction including any work for the
Operating Partnership.) The Company acknowledges that,
as of the Effective Date, you serve as a director of
The Munder Funds (a family of mutual funds) and The
Celotex Corp. and agrees that such directorships do not
violate the prohibition on other employment. You may
manage your personal investments, as long as the
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management takes only minimal amounts of time and is
consistent with the provisions of the No Competition
Section in Exhibit A and is otherwise consistent with
the policies and practices of the Company.
You represent to the Company that you are not subject
to any agreement, commitment, or policy of any third
party that would prevent you from entering into or
performing your duties under this Agreement, and you
agree that you will not enter into any agreement or
commitment or agree to any policy that would prevent
or hinder your performance of duties and obligations
under this Agreement, including Exhibit A.
No Conflicts of Interest You confirm that you have fully disclosed to the
Company and the Operating Partnership, to the best of
your knowledge, all circumstances under which you,
your spouse, and your relatives (including their
spouses, children, and relatives) have or may have a
conflict of interest with the Company or the
Operating Partnership. You further agree to fully
disclose to the Company any such circumstances that
might arise during the Term. You agree to fully
comply with the Company's policy and practices
relating to conflicts of interest.
No Payments to You will neither pay nor permit payment of any
Governmental Officials remuneration to or on behalf of any governmental
official other than payments required or permitted by
applicable law.
Termination Subject to the provisions of this section, the
Company may terminate your employment, or you may
resign, except that, if you voluntarily resign, you
must provide the Company with 90 days' prior written
notice (unless the Board has previously waived such
notice in writing or authorized a shorter notice
period).
For Cause The Company may terminate your employment for "Cause"
if you:
(i) engage in dishonesty that relates materially
to the performance of services or any
obligations under this Agreement, including
Exhibit A;
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(ii) are convicted of any misdemeanor (other than
for minor infractions) involving fraud, breach of
trust, misappropriation, or other similar activity
or any felony;
(iii) perform your duties under this Agreement in
a grossly negligent manner; or
(iv) willfully breach this Agreement, including
Exhibit A, in a manner materially injurious to the
Company. An act or omission is only "willful" if
you acted in bad faith or without any reasonable
belief that the action or omission was in the
interests of the Company and consistent with your
duties and obligations under this Agreement.
Your termination for Cause under (i) and (ii) will be
effective immediately upon the Company's mailing or
transmission of such notice. Before terminating your
employment for Cause under (iii) or (iv), the Company
will specify in writing to you the nature of the act,
omission, refusal, or failure that it deems to
constitute Cause. The Board will give you the
opportunity to correct the situation (and thus avoid
termination for Cause under (iii) or (iv)). You must
complete the correction within a reasonable period of
time after the written notice to you, and the Company
agrees to provide you no less than 15 days for such
correction.
Without Cause Subject to the provisions below under Payments on
Termination, the Company may terminate your employment
under this Agreement before the end of the Term without
Cause.
Good Reason You may resign for Good Reason with 45 days' advance
written notice as provided below. "Good Reason" means
the occurrence, without your written consent, of any of
the following circumstances:
the Company's failure to perform or observe any of
the material terms or provisions of this
Agreement,
the assignment to you of any duties inconsistent
with, or any substantial diminution in, your
employment status or
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responsibilities as in effect on the date of this
Agreement or your departure from the Board (other
than by your voluntary resignation or your choice
not to stand for re-election),
the Company's relocation of its corporate
headquarters to a location that would increase
your commuting distance by more than 50 miles,
based on your residence when this Agreement is
executed, or
a Change of Control after consummation of an IPO,
consisting of any one or more of the following
events:
a person, entity, or group (other than the
Company, the Operating Partnership, any
subsidiary of either, any Company Group
benefit plan, or any underwriter temporarily
holding securities for an offering of such
securities) acquires ownership of more than
40% of the undiluted total voting power of
the Company's then-outstanding securities
eligible to vote to elect members of the
Board ("Company Voting Securities");
consummation of a merger or consolidation of
the Company into any other entity -- unless
the holders of the Company Voting Securities
outstanding immediately before such
consummation, together with any trustee or
other fiduciary holding securities under a
Company Group benefit plan, hold securities
that represent immediately after such merger
or consolidation more than 60% of the
combined voting power of the then outstanding
voting securities of either the Company or
the other surviving entity or its parent; or
the stockholders of the Company approve (i) a
plan of complete liquidation or dissolution
of the Company or (ii) an agreement for the
Company's sale or disposition of all or
substantially all the
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Company's assets, and such liquidation,
dissolution, sale, or disposition is
consummated.
Even if other tests are met, a Change of Control has
not occurred under any circumstance in which the
Company files for bankruptcy protection or is
reorganized following a bankruptcy filing.
You must give notice to the Company of your intention
to resign for Good Reason within 30 days after the
occurrence of the event that you assert entitles you to
resign for Good Reason. In that notice, you must
specify the condition that you consider provides you
with Good Reason and must give the Company an
opportunity to cure the condition within 30 days after
your notice. If the Company fails to cure the
condition, your resignation will be effective on the
45th day after your notice (unless the Board has
previously waived such notice period in writing or
agreed to a shorter notice period).
You will not be treated as resigning for Good Reason if
the Company had Cause to terminate your employment as
of the date of your notice of resignation.
Disability If you become "disabled" (as defined below), the
Company may terminate your employment. You are
"disabled" if you are unable, despite whatever
reasonable accommodations the law requires, to render
services to the Company for more than 90 consecutive
days because of physical or mental disability,
incapacity, or illness. You are also disabled if you
are deemed to be disabled within the meaning of the
Company's long-term disability policy as then in
effect.
Death If you die during the Term, the Term will end as of
the date of your death.
Payments on If the Company terminates your employment for or
Termination without Cause or because of disability or death or
because the Company does not consummate its IPO or you
resign, the Company will pay you any unpaid portion of
your Salary pro-rated through the date of actual
termination and any annual bonuses already determined
by such
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date but not yet paid, reimburse any substantiated but
unreimbursed business expenses, pay any accrued and
unused vacation time (to the extent consistent with the
Company's policies), and provide such other benefits as
applicable laws or the terms of the benefits require.
Except to the extent the law requires otherwise or as
provided in the Severance paragraph, neither you nor
your beneficiary or estate will have any rights or
claims under this Agreement or otherwise to receive
severance or any other compensation, or to participate
in any other plan, arrangement, or benefit, after such
termination. If your employment is terminated because
the Company does not consummate its IPO by June 30,
1998, you agree to waive any rights to severance set
forth below in exchange for the benefits provided under
your agreement with Friedman, Billings, Xxxxxx & Co.,
Inc. dated as of October 27, 1997.
Severance In addition to the foregoing payments, if the
Company terminates your employment without Cause
or you resign for Good Reason before the end of
the Term, the Company will
pay you severance equal to your Salary, as
then in effect, for 24 months in a single
lump sum as soon as practicable but in any
event no more than 90 days after termination;
pay the premium cost for you to receive any
group health coverage the Company must offer
you under Section 4980B of the Internal
Revenue Code of 1986 ("COBRA Coverage") for
the period of such coverage; and
pay you, at the time the Company would
otherwise pay your annual bonus, your pro
rata share of the bonus for the year of your
termination, where the pro rata factor is
based on days elapsed in your year of
termination till date of termination over
365, less any portion of the bonus for the
year of your termination already paid.
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You are not required to mitigate amounts payable
under the Severance paragraph by seeking other
employment or otherwise; however, you agree to
return any payments under this Severance paragraph
if you fail to comply with Exhibit A. Expiration
of this Agreement, whether because of notice of
non-renewal or otherwise, does not constitute
termination without Cause nor is it grounds for
resignation with Good Reason.
Assignment The Company may assign or otherwise transfer this
Agreement and any and all of its rights, duties,
obligations, or interests under it to
the Operating Partnership or any of the affiliates
or subsidiaries of the Company or the Operating
Partnership or
to any business entity that at any time by merger,
consolidation, or otherwise acquires all or
substantially all of the Company's stock or assets
or the partnership units or assets of the
Operating Partnership or to which the Company or
the Operating Partnership transfers all or
substantially all of its assets.
Upon such assignment or transfer, any such business
entity will be deemed to be substituted for the Company
for all purposes. Assignment or transfer does not
constitute termination without Cause nor is it grounds
for resignation with Good Reason absent the occurrence
of a Change of Control. This Agreement binds the
Company, its successors or assigns, and your heirs and
the personal representatives of your estate. Without
the Board's prior written consent, you may not assign
or delegate this Agreement or any or all rights,
duties, obligations, or interests under it.
Severability If the final determination of an arbitrator or a court
of competent jurisdiction declares, after the
expiration of the time within which judicial review (if
permitted) of such determination may be perfected, that
any term or provision of this Agreement, including any
provision of Exhibit A, is invalid or unenforceable,
the remaining terms and provisions will be unimpaired,
and the invalid or unenforceable term or provision will
be deemed replaced by a
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term or provision that is valid and enforceable and
that comes closest to expressing the intention of the
invalid or unenforceable term or provision.
Amendment; Waiver Neither you nor the Company may modify, amend, or
waive the terms of this Agreement other than by a
written instrument signed by you and an executive
officer of the Company duly authorized by the Board.
Either party's waiver of the other party's compliance
with any provision of this Agreement is not a waiver of
any other provision of this Agreement or of any
subsequent breach by such party of a provision of this
Agreement.
Withholding The Company will reduce its compensatory payments to
you for withholding and FICA taxes and any other
withholdings and contributions required by law.
Third Party Beneficiary You understand and agree that the Operating Partnership
is a third party beneficiary of this Agreement.
Governing Law The laws of the Commonwealth of Virginia (other than
its conflict of laws provisions) govern this Agreement.
Notices Notices must be given in writing by personal delivery,
by certified mail, return receipt requested, by
telecopy, or by overnight delivery. You should send or
deliver your notices to the Company's corporate
headquarters. The Company will send or deliver any
notice given to you at your address as reflected on the
Company's personnel records. You and the Company may
change the address for notice by like notice to the
others. You and the Company agree that notice is
received on the date it is personally delivered, the
date it is received by certified mail, the date of
guaranteed delivery by the overnight service, or the
date the fax machine confirms receipt.
Legal Fees If a claim is asserted for breach of any provision of
this Agreement, you will be entitled to recover your
reasonable attorney's fees and expenses if you prevail.
Superseding Effect This Agreement supersedes any prior oral or written
employment, severance, option, or fringe benefit
agreements between you and
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the Company. This Agreement supersedes all prior or
contemporaneous negotiations, commitments, agreements, and
writings with respect to the subject matter of this
Agreement (other than your agreement with Friedman,
Billings, Xxxxxx & Co. dated as of October 27, 1997). All
such other negotiations, commitments, agreements, and
writings will have no further force or effect; and the
parties to any such other negotiation, commitment,
agreement, or writing will have no further rights or
obligations thereunder.
If you accept the terms of this Agreement, please sign in the space indicated
below. We encourage you to consult with any advisors of your choosing.
CAPITAL AUTOMOTIVE REIT
By: __________________________________
Xxxxxxx X. Xxxxxxx
Trustee
I accept and agree to the terms of employment set
forth in this Agreement:
___________________________
Xxxxxx X. Xxxxxx
Dated:_____________________
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Exhibit A
---------
No Competition In consideration of your employment by the Company and
salary and benefits under this Agreement, during the term of
your employment, and except as set forth below, until the
date one year after your employment with the Company, the
Operating Partnership, or their successors, assigns,
affiliates, or subsidiaries (collectively, the "Company
Group") ends for any reason (the "Restricted Period"), you
agree as follows:
The Company is a real estate investment trust formed to
acquire real properties owned by automobile dealerships and
other automotive-related businesses and lease the properties
to such businesses. You will not, directly or indirectly,
promote, be employed by, lend money to, invest in, or engage
in any Competing Business within the Market Area. That
prohibition includes, but is not limited to, acting, either
singly or jointly or as agent for, or as an employee of or
consultant to, any one or more persons, firms, entities, or
corporations directly or indirectly (as a director,
independent contractor, representative, consultant, member,
or otherwise) that constitutes such a Competing Business.
You may own up to 3% of the outstanding capital stock of any
corporation that is actively publicly traded without
violating this No Competition covenant. This covenant does
not preclude you from being employed by any automobile
dealership or dealership group or other automotive-related
business that is a lessee or prospective lessee of
properties the Company or the Operating Partnership holds or
is actively considering acquiring.
If, during the Restricted Period, you are offered and want
to accept employment with a business that engages in
activities similar to the Company's, you will inform the
Board in writing of the identity of the business, your
proposed duties with that business, and the proposed
starting date of that employment. You will also inform that
business of the terms of this Exhibit A. The Board will
analyze the proposed employment and make a good faith
determination as to whether it would threaten the Company's
legitimate competitive
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interests. If the Company determines that the proposed
employment would not pose an unacceptable threat to its
interests, the Company will notify you that it does not
object to the employment.
You acknowledge that, during the portion of the Restricted
Period that follows your employment, you may engage in any
business activity or gainful employment of any type and in
any place except as described above. You acknowledge that
you will be reasonably able to earn a livelihood without
violating the terms of this Agreement.
You understand and agree that the rights and obligations set
forth in this No Competition Section will continue for one
year from the date of termination of this Agreement and your
employment with the Company or the Company Group, unless the
Company does not consummate its IPO by June 30, 1998, in
which event your obligations under this No Competition
Section end when your employment ends.
Definitions
Competing Competing Business means any service or financial product
Business of any person or organization other than the Company Group,
in existence or then under development, that competes or
could potentially compete, directly or indirectly, with any
service or financial product of the Company Group upon which
or with which you have worked for the Company or the Company
Group or about which you acquire knowledge while working for
the Company or the Company Group. Competing Business
includes any enterprise engaged in the formation or
operation of real estate investment trusts or other entities
that invest primarily in automobile dealership or
automotive-related properties or provide real estate
financing to automobile dealerships or automotive-related
businesses. Competing Business excludes real estate
investment trusts and similar entities that do not engage in
activities related to automotive dealerships or automotive-
related businesses.
Market Area The Market Area consists of the United States.
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No Interference; During the Restricted Period, you agree that you will
No Solicitation not, directly or indirectly, whether for yourself or
for any other individual or entity (other than the
Company or its affiliates or subsidiaries),
intentionally solicit or endeavor to entice away from
the Company Group:
any person whom the Company Group employs (other
than as your personal secretary) or otherwise
engages to perform services as a consultant or
sales representatives; or
any person or entity who is, or was, within the
Restricted Period, a contractor or subcontractor
of the Company Group known to you or a lessee or
prospective lessee of properties the Company Group
holds or is actively considering acquiring.
Secrecy
Preserving Your employment with the Company under and, if
Company applicable, before this Agreement has given and will
Confidences give you Confidential Information (as defined below).
You acknowledge and agree that using, disclosing, or
publishing any Confidential Information in an
unauthorized or improper manner could cause the Company
or Company Group substantial loss and damages that
could not be readily calculated and for which no remedy
at law would be adequate. Accordingly, you agree with
the Company that you will not at any time, except in
performing your employment duties to the Company or the
Company Group under this Agreement (or with the Board's
prior written consent), directly or indirectly, use,
disclose, or publish, or permit others not so
authorized to use, disclose, or publish any
Confidential Information that you may learn or become
aware of, or may have learned or become aware of,
because of your prior or continuing employment,
ownership, or association with the Company or the
Company Group or any of their predecessors, or use any
such information in a manner detrimental to the
interests of the Company or the Company Group.
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Preserving You agree not to use in working for the Company Group
Others' and not to disclose to the Company Group any trade
Confidences secrets or other information you do not have the right
to use or disclose and that the Company Group is not
free to use without liability of any kind. You agree to
promptly inform the Company in writing of any patents,
copyrights, trademarks, or other proprietary rights
known to you that the Company or the Company Group
might violate because of information you provide.
Confidential "Confidential Information" includes, without
Information limitation, information the Company or the Company
Group has not previously disclosed to the public or to
the trade with respect to the Company's or the Company
Group's present or future business, operations,
services, products, research, inventions, discoveries,
drawings, designs, plans, processes, models, technical
information, facilities, methods, trade secrets,
copyrights, software, source code, systems, patents,
procedures, manuals, specifications, any other
intellectual property, confidential reports, price
lists, pricing formulas, customer lists, financial
information (including the revenues, costs, or profits
associated with any of the Company's or the Company
Group's products or services), business plans, lease
structure, projections, prospects, opportunities or
strategies, acquisitions or mergers, advertising or
promotions, personnel matters, legal matters, any other
confidential and proprietary information, and any other
information not generally known outside the Company or
the Company Group that may be of value to the Company
or the Company Group but excludes any information
already properly in the public domain. "Confidential
Information" also includes confidential and proprietary
information and trade secrets that third parties
entrust to the Company or the Company Group in
confidence.
You understand and agree that the rights and
obligations set forth in this Secrecy Section will
continue indefinitely and will survive termination of
this Agreement and your employment with the Company or
the Company Group.
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Exclusive Property You confirm that all Confidential Information is and
must remain the exclusive property of the Company or
the relevant member of the Company Group. All business
records, business papers, and business documents you
keep or make in the course of your employment by the
Company relating to the Company or any member of the
Company Group must be and remain the property of the
Company or the relevant member of the Company Group.
Upon the termination of this Agreement with the Company
or upon the Company's request at any time, you must
promptly deliver to the Company or to the relevant
member of the Company Group any Confidential
Information or other materials (written or otherwise)
not available to the public or made available to the
public in a manner you know or reasonably should
recognize the Company did not authorize, and any
copies, excerpts, summaries, compilations, records and
documents you made or that came into your possession
during your employment. You agree that you will not,
without the Company's consent, retain copies, excerpts,
summaries or compilations of the foregoing information
and materials. You understand and agree that the rights
and obligations set forth in this Exclusive Property
Section will continue indefinitely and will survive
termination of this Agreement and your employment with
the Company Group.
Maximum Limits If any of the provisions of Exhibit A are ever deemed
to exceed the time, geographic area, or activity
limitations the law permits, you and the Company agree
to reduce the limitations to the maximum permissible
limitation, and you and the Company authorize a court
or arbitrator having jurisdiction to reform the
provisions to the maximum time, geographic area, and
activity limitations the law permits.
Injunctive Relief Without limiting the remedies available to the Company,
you acknowledge
that a breach of any of the covenants in this
Exhibit A may result in material irreparable
injury to the Company and Company Group for which
there is no adequate remedy at law, and
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that it will not be possible to measure damages for
such injuries precisely.
You agree that, if there is a breach or threatened breach,
the Company or any member of the Company Group will be
entitled to obtain a temporary restraining order and/or a
preliminary or permanent injunction restraining you from
engaging in activities prohibited by any provisions of this
Exhibit A or such other relief as may be required to
specifically enforce any of the covenants in this Exhibit A.
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