EXHIBIT 10.5
|__| Employee's Copy
|__| Company's Copy
CAPITAL AUTOMOTIVE REIT
Employment Agreement
To Xxxxx X. Xxxxx:
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 - Acquisitions on the terms
contained herein. In such position, you will report
directly to the Company's Chief Executive Officer (the
"CEO"). You agree to perform whatever duties the CEO 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
CEO 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 $225,000 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 1.625% 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
Employment Agreement with Xxxxx X. Xxxxx Page 2 of 17
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.
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.) You may manage your
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personal investments, as long as the 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,
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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 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 without
Termination 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.
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.
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
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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 term or provision that is valid
and enforceable and that comes closest to expressing
the intention of the invalid or unenforceable term or
provision.
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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 the Company. This Agreement
supersedes all prior or contemporaneous negotiations,
commitments, agreements, and writings with respect to
the subject matter of this Agreement. All
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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
President and Chief Executive Officer
I accept and agree to the terms of employment set
forth in this Agreement:
--------------------------
Xxxxx X. Xxxxx
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
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legitimate competitive 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 of
Business 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 The Market Area consists of the United States.
Area
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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.
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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, 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.
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
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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
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.
Employment Agreement with Xxxxx X. Xxxxx Page 17 of 17
