EXHIBIT 10.38
|__| Employee's Copy
|__| Partnership's Copy
CAPITAL AUTOMOTIVE L.P.
Employment Agreement
To Xxxxx X. Xxx:
This Agreement establishes the terms of your employment with Capital
Automotive L.P., a Maryland limited partnership (the "Partnership"). It
replaces your prior employment agreement with Capital Automotive REIT, a
Maryland real estate investment trust (the "Company"), under which the Company
assigned your agreement to the Partnership. You remain an employee of the
Company, but your primary responsibility is as an employee of the Partnership.
Employment You and the Partnership agree to your employment as Vice
and Duties President and Chief Financial Officer on the terms contained
herein. In such position, you will report directly to the
Company's Chief Executive Officer (the "CEO") and to the General
Partner of the Partnership. You agree to perform whatever duties
the Partnership 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 Partnership otherwise
agrees from time to time). You agree to faithfully serve the
Partnership, to conform to and comply with the lawful and good
faith directions and instructions given you by the Partnership,
and to use your best efforts to promote and serve the interests
of the Partnership. You agree to comply with the noncompetition,
secrecy, and other provisions of Exhibit A to this Agreement.
Term of Your employment under this Agreement begins as of January 1,
Employment 1998 (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 the Effective Date 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 Partnership (or, in its discretion, the Company) will pay you
an annual salary (the "Salary") from October 27, 1997 at the rate
of not less than $150,000 in accordance with its payroll
practices. The Partnership or the Compensation Committee of the
General Partner ("Compensation Committee") will review your
Salary annually and consider you for increases.
Bonus The Partnership or the 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.
Employee While you are employed under this Agreement, the Partnership
Benefits will provide you with the same benefits, including medical
insurance coverage, as the Partnership makes generally available
from time to time to the Partnership'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 Partnership's benefit plans will be subject to the terms
of the applicable plan documents and the Partnership's generally
applied policies, and the Partnership in its sole discretion may
from time to time adopt, modify, interpret, or discontinue such
plans or policies.
Place of Your principal place of employment will be at the Partnership's
Employment headquarters in the Washington metropolitan area (or such other
offices as the Partnership 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.
Indemni- The Partnership will indemnify you to the fullest extent
fication 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 manager, officer, or
employee of the Partnership or serve or served any other entity
as a director, officer, or employee at the Partnership's request;
provided, however, that you must repay the Partnership for any
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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
Partnership is not permissible under applicable law.
Expenses The Partnership will reimburse you for reasonable and necessary
travel and other business-related expenses you incur for the
Partnership 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 Partnership and within 60 days
after incurring the expense.
No Other For so long as you are employed by the Partnership, you agree
Employment 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
Partnership without the Partnership's prior written consent.
(This prohibition excludes any work performed at the
Partnership's direction including any work for the Company.) You
may manage your 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
Partnership.
You represent to the Partnership 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 You confirm that you have fully disclosed to the Partnership and
of Interest the Company, 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 Partnership or the Company. You further agree
to fully disclose to the Partnership any such circumstances that
might arise during the Term. You agree to fully comply with the
Partnership's policy and practices relating to conflicts of
interest.
No Payments You will neither pay nor permit payment of any remuneration
to Governmen- to or on behalf of any governmental official other than payments
tal Officials required or permitted by applicable law.
Termination Subject to the provisions of this section, the Partnership may
terminate your employment, or you may resign, except that, if you
voluntarily resign, you must provide the Partnership with 90
days' prior written notice (unless the Partnership has previously
waived such notice in writing or authorized a shorter notice
period).
For Cause The Partnership 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;
(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 Partnership. 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 Partnership and consistent with
your duties and obligations under this Agreement.
Your termination for Cause under (i) and (ii) will be effective
immediately upon the Partnership's mailing or transmission of
such notice. Before terminating your employment for Cause under
(iii) or (iv), the Partnership will specify in writing to you the
nature of the act, omission, refusal, or failure that it deems to
constitute Cause. The Partnership 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 Partnership agrees to provide you no less than 15 days for
such correction.
Without Subject to the provisions below under Payments on Termination,
Cause the Partnership may terminate your employment under this
Agreement before the end of the Term without Cause.
Good You may resign for Good Reason with 45 days' advance written
Reason notice as provided below. "Good Reason" means the occurrence,
without your written consent, of any of the following
circumstances:
the Partnership'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
responsibilities as in effect on the date of this Agreement,
the Partnership's relocation of its 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
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 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 Partnership 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 Partnership an
opportunity to cure the condition within 30 days after your
notice. If the Partnership 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
Partnership had Cause to terminate your employment as of the date
of your notice of resignation.
Disability If you become "disabled" (as defined below), the Partnership may
terminate your employment. You are "disabled" if you are unable,
despite whatever reasonable accommodations the law requires, to
render services to the Partnership 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 Partnership'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 If the Partnership terminates your employment for or without
on Termin- Cause or because of disability or death or because the Company
ation does not consummate its IPO or you resign, the Partnership 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 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
Partnership'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
Partnership 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 Partnership
terminates your employment without Cause or you resign for
Good Reason before the end of the Term, the Partnership 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 Partnership 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 Partnership 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 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 Partnership may assign or otherwise transfer this Agreement
and any and all of its rights, duties, obligations, or interests
under it to
the Company or any of the affiliates or subsidiaries of the
Company or the 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 Partnership or to which the Company or the
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 Partnership 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
Partnership, its successors or assigns, and your heirs and the
personal representatives of your estate. Without the
Partnership'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 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; Neither you nor the Partnership may modify, amend, or waive
Waiver the terms of this Agreement other than by a written instrument
signed by you and a duly authorized representative of the General
Partner of the Partnership. 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 Partnership will reduce its compensatory payments to you for
withholding and FICA taxes and any other withholdings and
contributions required by law.
Third Party You understand and agree that the Company is a third party
Beneficiary 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 Partnership's headquarters. The Partnership will send or
deliver any notice given to you at your address as reflected on
the Partnership's personnel records. You and the Partnership may
change the address for notice by like notice to the others. You
and the Partnership 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 This Agreement supersedes any prior oral or written employment,
Effect severance, option, or fringe benefit agreements between you and
the Company or the Partnership. 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 L.P.
General Partner:
CAPITAL AUTOMOTIVE REIT, a Maryland real
estate investment trust
By:
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Its:
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I accept and agree to the terms of employment set
forth in this Agreement:
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Xxxxx X. Xxx
Dated:
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Exhibit A
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No Competition In consideration of your employment by the Partnership 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
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 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 or the Partnership's, you will
inform the Partnership 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
Partnership will analyze the proposed employment and make a
good faith determination as to whether it would threaten the
Partnership's legitimate competitive interests. If the
Partnership
determines that the proposed employment would not pose an
unacceptable threat to its interests, the Partnership 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 Partnership 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 Partnership or the
Company Group or about which you acquire knowledge while
working for the Partnership 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
No Interference; During the Restricted Period, you agree that you will not,
directly
No Solicitation or indirectly, whether for yourself or for any other
individual or entity (other than the Partnership 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 Partnership under and, if
Partnership applicable, before this Agreement has given and will give
Confidences 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 Partnership 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 Partnership that you will not
at any time, except in performing your employment duties to
the Partnership or the Company Group under this Agreement (or
with the Partnership'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
Partnership or the Company Group or any of their
predecessors, or use any such information in a manner
detrimental to the interests of the Partnership or the
Company Group.
Preserving You agree not to use in working for the Company Group and not
Others' to disclose to the Company Group any trade secrets or other
Confidences 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 Partnership in
writing of any patents, copyrights, trademarks, or other
proprietary rights known to you that the Partnership or the
Company Group might violate because of information you
provide.
Confidential "Confidential Information" includes, without limitation,
Information information the Partnership or the Company Group has not
previously disclosed to the public or to the trade with
respect to the Partnership'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
Partnership'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 Partnership
or the Company Group that may be of value to the Partnership
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 Partnership
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 Partnership or the Company Group.
Exclusive You confirm that all Confidential Information is and must
Property remain the exclusive property of the Partnership 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 Partnership relating to the Partnership or
any member of the Company Group must be and remain the
property of the Partnership or the relevant member of the
Company Group. Upon the termination of this Agreement with
the Partnership or upon the Partnership's request at any
time, you must promptly deliver to the Partnership 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
Partnership 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 Partnership'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 Partnership agree to reduce the
limitations to the maximum permissible limitation, and you
and the Partnership 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 Partnership,
you acknowledge
that a breach of any of the covenants in this Exhibit A
may result in material irreparable injury to the
Partnership 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 Partnership 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.
