Exhibit 10.6
|__| Employee's Copy
|__| Company's Copy
CAPITAL AUTOMOTIVE REIT
Employment Agreement
To Xxxxxx X. Xxxxxxxx:
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
Executive Vice President - Business Development on the
terms contained herein. In such position, you will
report directly to the Company's Chief Operating
Officer (the "COO"). You agree to perform whatever
duties the COO or the Company's Board of Trustees (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 COO 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 understand and agree that
you must travel from time to time for business reasons.
You understand your primary office will be a regional
office to be located in the San Xxxxxxxx / Corejo
Valley area of Southern California. 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
November 15, 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 26, 2001, if the Company has consummated
its IPO on or before June 30, 1998.
The period running from November 15, 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 November 15, 1997 at the rate of not
less than $200,000 in accordance with its payroll
practices. The Board or its Compensation Committee will
review your Salary annually and consider you for
increases.
Standard 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,
with a minimum bonus for 1998 (the "1998 Minimum
Bonus") of $100,000 if you remain employed by the
Company on December 31, 1998.
Incentive Bonus The Company will pay you an additional incentive bonus
of $200,000 in the first quarter of 1999 (the "1998
Special Incentive") if (i) proforma assets at the end
of 1998 exceed 150% of the greater of 1997 fiscal year
proforma assets or $770 million and (ii) you remain
employed by the Company on December 31, 1998.
Options The Company will grant options to you to acquire common
shares of beneficial ownership equal to 0.75% 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. 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.
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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.
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
Capital Automotive, L.P. (the "Operating
Partnership").) You may manage your personal
investments, as long as the management takes only
minimal amounts of time and is consistent with the
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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,
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the assignment to you of any duties inconsistent
with, or any substantial diminution in, your
employment status or responsibilities as in effect
on the date of this Agreement,
the Company's relocation of the regional office 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 after you have
exhausted your rights, if any, to retention and
reemployment under applicable federal or state laws.
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
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termination and any annual bonuses already determined
by such 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.
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;
use its reasonable best efforts to provide you
with continued benefits for 24 months under either
the Company's welfare benefit plans or other
comparable coverage and will, to the extent that
it is impractical to obtain or extend such
coverage or the expense to the Company would
exceed 200% of the premium expenses the Company
paid for you during your final year of employment,
the Company will pay you an amount equal to twice
the premiums it paid on your behalf for such
coverage in your last 12 months of employment,
with such amount paid to you net of any taxes that
might apply; provided, however, that any
obligations for continued benefits will cease if
you become covered under another employer's or
your own policies that provide the same category
of coverage; and
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will, at the time the Company would otherwise pay
your annual bonus, pay you your pro rata share of
the standard 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
standard bonus for the year of your termination
already paid; provided, however, that for 1998 the
foregoing obligation refers to the pro rata share
of (i) the greater of the 1998 Minimum Bonus and
your actual bonus for 1998 and (ii) if the Company
meets the proforma asset goals of the 1998 Special
Incentive Bonus, that bonus.
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
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Cause nor is it grounds for resignation with Good
Reason. 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 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
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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 the Company. This Agreement
supersedes all prior or contemporaneous negotiations,
commitments, agreements, and writings with respect to
the subject matter of this Agreement. 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: __________________________________
Xxxxxx X. Xxxxxx
Chief Executive Officer
I accept and agree to the terms of employment set forth in this Agreement:
______________________________ __________________
Xxxxxx X. Xxxxxxxx Date
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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.
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.
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Definitions
Competing Competing Business means any service or financial
Business product 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, and the
Company recognizes and agrees that you may engage in
any business whose primary focus in the auto industry
is other than real estate.
Market Area The Market Area consists of the United States.
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.
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Secrecy
Preserving Your employment with the Company under and, if applicable,
Company before this Agreement has given and will give you
Confidences 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.
Preserving You agree not to use in working for the Company Group and
Others' not to disclose to the Company Group any trade secrets or
Confidences 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 limitation,
Information 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
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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, or opportunities, 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.
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 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.
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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
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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