EXHIBIT 10.2

 

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into this 31st
day of May, 2005, to be effective as of the Effective Date (defined below) by
and between Prime Office Company, LLC, a Delaware limited liability company (the
“Parent”), and James F. Hoffman, an individual domiciled in the State of
Illinois (“Executive”).

W I T N E S S E T H

A.           Prime Group Realty Trust, a Maryland real estate investment trust
(“PGRT”), Prime Group Realty, L.P., a Delaware limited partnership and the
operating partnership for PGRT (“Prime”), and Executive entered into that
certain Amended and Restated Severance Agreement (the “Existing Agreement”)
dated as of October 21, 2004 pursuant to which Executive is currently serving as
the Executive Vice President, General Counsel and Secretary of PGRT and Prime.

B.           PGRT and Prime are engaged primarily in the ownership, management,
leasing, marketing, acquisition, development and construction of office and
industrial real estate facilities throughout the Chicago metropolitan area.

C.           Parent, two direct or indirect subsidiaries of Parent, PGRT and
Prime have entered into an Agreement and Plan of Merger, dated as of February
17, 2005 (the “Merger Agreement”) whereby PGRT and Prime will become direct or
indirect wholly-owned subsidiaries or otherwise under the control of Parent upon
consummation of the mergers and other transactions contemplated by the Merger
Agreement (the “Merger”).

D.           The Merger will constitute a change of control under the Existing
Agreement, giving rise to certain payments to Executive upon the closing of the
Merger (the “Effective Date”).

E.            Parent believes that it, PGRT and Prime would benefit from
Executive’s continued service as Executive Vice President, General Counsel and
Secretary of Employer (as defined in Section 1 hereof) after the Merger, and
Parent agrees to employ, or to cause PGRT and Prime to employ, Executive in such
positions on and after the Merger.

F.            Executive wishes to commit to continue to serve Employer in the
position set forth herein on the terms herein provided.

G.           The parties wish to amend and restate the Existing Agreement in its
entirety on the terms and conditions hereinafter set forth, to be effective as
of the Effective Date set forth below.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
herein set forth, and for other good and valuable consideration, Employer and
Executive hereby agree as follows:

 

 

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1.            Employment and Duties. During the Employment Term (as defined in
Section 2 hereof), Parent shall cause Prime and PGRT to employ Executive, and
Executive agrees to be employed by Prime and PGRT, as the Executive Vice
President, General Counsel and Secretary of Prime and PGRT on the terms and
conditions provided in this Agreement (Prime and PGRT, collectively, are
“Employer”). On the Effective Date, Parent shall cause Prime and PGRT to adopt
and assume this Agreement. Executive shall conduct, operate, manage and promote
the business and business concept of Employer. The Chief Executive Officer of
Employer may from time to time further define and clarify Executive’s duties and
services hereunder as Executive Vice President, General Counsel and Secretary of
Employer. Executive agrees to devote Executive’s best efforts and substantially
all of Executive’s business time, attention, energy and skill to perform
Executive’s duties as Executive Vice President, General Counsel and Secretary of
Employer, provided, that it shall not be a violation of this Agreement for
Executive to manage his and his family’s personal investments or engage in
service for such corporate, civil, community or charitable organizations as he
may select, so long as such activities do not substantially interfere with
Executive’s performance of his duties hereunder or violate his obligations under
Section 5.

2.            Term. The term of this Agreement shall commence on the Effective
Date and expire on December 31, 2007 (the “Initial Term”), provided, however,
that this Agreement shall automatically be renewed for successive one year terms
following the Initial Term (each a “Renewal Term” and together with the Initial
Term, the “Employment Term”), unless at least nine (9) months prior to, in the
case of a non-renewal by Employer, or at least thirty (30) days prior to, in the
case of a non-renewal by Executive, the end of the Initial Term or any Renewal
Term, as applicable, either party shall give the other written notice of its
intention to terminate this Agreement.

3.            Compensation and Related Matters. (a) Base Salary. As compensation
for performing the services required by this Agreement during the Employment
Term, Employer shall pay to Executive an annual salary of no less than $226,600
(“Base Compensation”), payable in accordance with the general policies and
procedures for payment of salaries to its executive personnel maintained, from
time to time, by Employer (but no less frequently than monthly), subject to
withholding for applicable federal, state, and local taxes. Increases in Base
Compensation, if any, shall be determined by the Compensation Committee (the
“Committee”) of the Board of Trustees of PGRT (the “Board”) or the Chief
Executive Officer of PGRT, based on periodic reviews of Executive’s performance
conducted on at least an annual basis; provided, however, that commencing on
January 1, 2006 and each calendar year thereafter, Executive’s Base Compensation
shall be increased by no less than three percent (3%) per year.

(b)          Bonus. In addition to Base Compensation, the Executive shall be
paid, or shall have the opportunity to earn, Bonus Compensation, as set forth on
Exhibit A hereto.

(c)          Benefits. During the Employment Term and subject to the limitations
and alternative rights set forth in this Section 3(c), Executive and Executive’s
eligible dependents shall have the right to participate in the medical and
dental benefit plan established by Employer (which may include contributions by
Executive) and in any other retirement, pension, insurance, health or other
benefit plan or program that has been or is hereafter adopted by Employer (or in
which Employer participates), as such plans and programs may be amended or
modified from

 

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time to time by Employer, according to the terms of such plan or program with
all the benefits, rights and privileges as are enjoyed by any other executive
officers of Employer. Employer has in place a life insurance program in which
Executive will be entitled to participate. In addition, Employer shall also
provide Executive with term life insurance coverage that provides Executive’s
beneficiaries with a death benefit of no less than that provided under the
coverage maintained by Employer immediately prior to the Effective Date.

(d)          Expenses. Executive shall be reimbursed, subject to Employer’s
receipt of invoices or similar records as Employer may reasonably request in
accordance with its policies and procedures, as such policies and procedures may
be amended or modified from time to time by Employer, for all reasonable and
necessary expenses incurred by Executive in the performance of Executive’s
duties hereunder, including expenses for business entertainment and meals
(whether in or out of town) and gas for business travel, but excluding
automobile insurance.

(e)          Vacations. During the Employment Term, Executive shall be entitled
to vacation in accordance with Employer’s practices, as such practices may be
amended or modified from time to time by Employer, provided that Executive shall
be entitled to at least four (4) weeks paid vacation in each full calendar year.
Executive may accrue unused vacation time if not used in any calendar year or
years, however, the maximum cumulative amount of vacation time that Executive
may accrue and carry over to the next year is two (2) weeks.

(f)           Compensation Relating to the Merger. To the extent not paid prior
to the Effective Date, on the Effective Date, Employer shall pay, or shall cause
to be paid, to Executive (i) the sum of (A) $376,600.08, which represents the
base salary portion of such sum, plus (B) $56,184.40, which represents the bonus
portion of such sum assuming that the Effective Date is June 30, 2005, plus
(C) $309.60 for each day between June 30, 2005 and the Effective Date if the
Effective Date occurs after June 30, 2005, minus (D) $309.60 for each day
between the Effective Date and June 30, 2005 if the Effective Date occurs prior
to June 30, 2005 (the sum of (B) plus (C) minus (D) is the “Pre-Effective Date
2005 Bonus”), which sum represents the lump sum amount to which Executive is
entitled upon the Merger in accordance with Section 4 of the Existing Agreement,
and (ii) any additional compensation approved by the Board which is payable to
Executive pursuant to Section 5.7(a) of the Merger Agreement.

(g)         Indemnification and Insurance. Employer agrees to indemnify and hold
harmless Executive to the fullest extent permitted by applicable law and upon
terms no less favorable than as provided in Employer’s organizational documents
in effect immediately prior to the Effective Date. At all times during the
Employment Term and for five (5) years following the termination of the
Executive’s employment for any reason, the Executive shall also be covered by a
directors’ and officers’ liability insurance policy maintained by Employer at a
level commensurate with that maintained by Employer immediately prior to the
Effective Date.

 

 

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4.            Termination and Termination Benefits. (a) Termination by Employer.
(i) Without Cause. Employer may terminate this Agreement and Executive’s
employment at any time (other than for Cause, as that term is defined in Section
4(a)(ii) hereof) upon thirty (30) days’ prior written notice to Executive. In
connection with the termination of Executive’s employment pursuant to this
Section 4(a)(i), (A) Employer shall pay to Executive Executive’s Base
Compensation in accordance with Section 3(a) hereof up to the effective date of
such termination, (B) Employer shall pay to Executive a pro rata portion of any
Bonus Compensation otherwise payable to Executive for or with respect to the
calendar year in which such termination occurs in accordance with Section 3(b)
hereof up to the effective date of such termination and, to the extent not
previously paid, Employer shall pay to Executive all Bonus Compensation payable
to Executive in accordance with Section 3(b) hereof for or with respect to any
calendar years prior to the calendar year in which such termination occurs, (C)
Employer shall provide to Executive the benefits set forth in Sections 3(c),
3(d) and 3(e) hereof up to the effective date of such termination and (D)
Employer shall pay to Executive the Termination Compensation specified in
Section 4(d) hereof. For purposes of this Agreement, the “effective date of
termination” shall mean the last day on which Executive is employed with
Employer which may be later than the date of the delivery of any applicable
notice of termination.

(ii)          With Cause. Employer may terminate this Agreement for Cause
immediately upon written notice to Executive. Employer may elect to require
Executive to continue to perform Executive’s duties under this Agreement for an
additional thirty (30) days following notice of termination. In connection with
the termination of Executive’s employment pursuant to this Section 4(a)(ii), (A)
Employer shall pay to Executive Executive’s Base Compensation in accordance with
Section 3(a) hereof up to the effective date of such termination, and, to the
extent not previously paid, Executive shall be entitled to any Bonus
Compensation payable to Executive in accordance with Section 3(b) hereof for or
with respect to any calendar years prior to the calendar year in which such
termination occurs and (B) Employer shall provide to Executive the benefits set
forth in Sections 3(c), 3(d) and 3(e) hereof up to the effective date of such
termination. For purposes of this Section 4(a)(ii), “Cause” shall mean (1) a
finding by the Board that Executive has materially harmed Employer, its
business, assets or employees through an act of dishonesty, material conflict of
interest, gross misconduct or willful malfeasance, (2) Executive’s conviction of
(or plea of nolo contendere to) a felony, (3) Executive’s failure to perform
(which shall not include inability to perform due to disability) in any material
respect Executive’s material duties under this Agreement after written notice
specifying the failure and a reasonable opportunity to cure (it being understood
that if Executive’s failure to perform is not of a type requiring a single
action to fully cure, then Executive may commence the cure promptly after such
written notice and thereafter diligently prosecute such cure to completion), (4)
the breach by Executive of any of Executive’s material obligations hereunder
(other than those covered by clause (3) above) and the failure of Executive to
cure such breach within thirty (30) days after receipt by Executive of a written
notice of Employer specifying in reasonable detail the nature of the breach, or
(5) Executive’s sanction (including restrictions, prohibitions and limitations
agreed to under a consent decree or agreed order) under, or conviction for
violation of, any federal or state securities law, rule or regulation (provided
that in the case of a sanction, such sanction materially impedes or impairs the
ability of Executive to perform Executive’s duties and exercise Executive’s
responsibilities hereunder in a satisfactory manner).

 

 

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(iii)        Disability. If due to illness, physical or mental disability, or
other incapacity, Executive shall fail during any four (4) consecutive months to
perform the duties required by this Agreement, Employer may, upon thirty (30)
days’ written notice to Executive, terminate this Agreement and Executive’s
employment. In the event of any such termination, (A) Employer shall pay to
Executive Executive’s Base Compensation in accordance with Section 3(a) hereof
up to the effective date of such termination, (B) Employer shall pay to
Executive a pro rata portion of any Bonus Compensation otherwise payable to
Executive for or with respect to the calendar year in which such termination
occurs in accordance with Section 3(b) hereof up to the first day of such four
(4) month period and, to the extent not previously paid, Executive shall be
entitled to all Bonus Compensation payable to Executive in accordance with
Section 3(b) hereof for or with respect to any calendar years prior to the
calendar year in which such termination occurs, (C) Employer shall provide to
Executive the benefits set forth in Sections 3(c) (or the after-tax cash
equivalent), 3(d) and 3(e) hereof up to the effective date of such termination
and (D) Employer shall pay to Executive the Termination Compensation specified
in Section 4(d) hereof. This Section 4(a)(iii) shall not limit the entitlement
of Executive, Executive’s estate or beneficiaries to any disability or other
benefits available to Executive under any disability insurance or other benefits
plan or policy which is maintained by Employer for Executive’s benefit (as
opposed to Employer’s benefit). For purposes of this Agreement, the “date of
disability” shall mean the first day of the consecutive period during which
Executive fails to perform the duties required by this Agreement due to illness,
physical or mental disability or other incapacity.

(b)          Termination by Executive. (i) After Change of Control. Executive
may terminate this Agreement upon thirty (30) days’ written notice to Employer
following any “change of control” (as defined below) of Employer which occurs
after the Effective Date and (i) a resulting “diminution event” (as defined
below) or (ii) a resulting relocation of Executive’s office to a location more
than twenty-five (25) miles from 77 West Wacker Drive, Chicago, Illinois, but in
no event later than one year after the change of control event. In addition to
the foregoing, Executive may terminate this Agreement upon thirty (30) days’
written notice to Employer prior to or following any change of control of
Employer (any such notice given prior to a change of control may be contingent
on the timing and actual occurrence of the change of control event) provided
such written notice is given to Employer no later than sixty (60) days after the
change of control event. Executive shall continue to perform, at the election of
Employer, Executive’s duties under this Agreement for an additional thirty (30)
days following notice of termination; provided, however, in the event the notice
of termination is given prior to a change of control (and such notice is
contingent on the occurrence of the change of control), Executive shall perform
Executive’s duties under this Agreement for an additional thirty (30) days
following the change of control, provided, that, as required under this
Agreement, Executive receives payment simultaneously with the closing of the
change of control of (i) the Termination Compensation pursuant to Section
4(d)(ii), and (ii) the compensation due Executive pursuant to clause (B) of this
Section 4(b)(i), and Employer otherwise complies with, and provides the other
compensation and benefits provided for, in this Agreement. In the event of such
termination, (A) Employer shall pay to Executive Executive’s Base Compensation
up to the effective date of such termination, (B) Employer shall pay to
Executive a pro rata portion of any Bonus Compensation otherwise payable to
Executive for or with respect to the calendar year in which such termination
occurs in accordance with Section 3(b) hereof up to the effective date of such
termination and, to the extent not previously paid, Executive shall be entitled
to all Bonus

 

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Compensation payable to Executive in accordance with Section 3(b) hereof for or
with respect to any calendar years prior to the calendar year in which such
termination occurs, (C) Employer shall provide to Executive the benefits set
forth in Sections 3(c), 3(d) and 3(e) hereof up to the effective date of such
termination and (D) Employer shall pay to Executive the Termination Compensation
specified in Section 4(d) hereof (which amounts specified in the foregoing
clauses (B) and (D) shall be paid simultaneously with the occurrence of the
change of control in the event Executive has given a notice of termination prior
to the change of control). For purposes of this Agreement, in the event Employer
defaults in its obligation under Section 8 hereof and, as a consequence thereof,
Executive’s employment with Employer (or Employer’s successor or assign)
terminates, such termination shall be deemed to be a termination under this
Section 4(b)(i).

For purposes of this Section 4(b)(i), (A) a “change of control” of Employer
shall be deemed to have occurred if after the Effective Date: (1) any person (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of
1934, as amended (the “Exchange Act”)), including a “group” as defined in
Section 13(d)(3) of the Exchange Act (but excluding a trustee or other fiduciary
holding securities under an employee benefit plan of Employer), directly or
indirectly, becomes the beneficial owner of shares of beneficial interests or
limited partnership interests, as applicable, of Employer having at least fifty
percent (50%) of the total number of votes that may be cast for the election of
trustees of Employer; (2) the merger or other business combination of Employer,
sale of all or substantially all of Employer’s assets or combination of the
foregoing transactions (a “Transaction”), other than a Transaction immediately
following which the shareholders of Employer immediately prior to the
Transaction continue to have a majority of the voting power in the resulting
entity (excluding for this purpose any shareholder owning directly or indirectly
more than ten percent (10%) of the shares of the other company involved in the
Transaction); or (3) within any twenty-four (24) month period beginning on or
after the Effective Date, the persons who were trustees of Employer at the
beginning of such period (the “Incumbent Directors”) shall cease to constitute
at least a majority of the Board or a majority of the board of trustees of any
successor to Employer, provided that, any trustee who was not a trustee as of
the date immediately following the Effective Date shall be deemed to be an
Incumbent Director if such trustee was elected to the Board by, or on the
recommendation of or with the approval of, at least two-thirds of the trustees
who then qualified as Incumbent Directors either actually or by prior operation
of this provision, unless such election, recommendation or approval was the
result of an actual or threatened election contest of the type contemplated by
Regulation 14a-11 promulgated under the Exchange Act or any successor provision;
and (B) a “diminution event” shall mean any material diminution in (1) the
duties and responsibilities of Executive (including a change of title below
Executive Vice President, General Counsel and Secretary) or (2) the compensation
package for Executive.

In the event that any payment, benefit or distribution by or on behalf of
Employer to or for the benefit of Executive (whether paid or payable or
distributed or distributable pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments required
under this Section 4(b)(i)) (the “Payments”) is determined to be an “excess
parachute payment” pursuant to Code Section 280G or any successor or substitute
provision of the Code, with the effect that Executive is liable for the payment
of the excise tax described in Code Section 4999 or any successor or substitute
provision of the Code (the “Excise Tax”), then Employer shall pay to Executive
an additional amount (the “Gross-Up Payment”) such that the

 

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net amount retained by Executive, after deduction of any Excise Tax on the Total
Payments and any federal, state and local income and employment taxes and Excise
Tax on the Gross-Up Payment, shall be equal to the Total Payments. All
determinations required to be made under this paragraph, and the assumptions to
be utilized in arriving at such determination, shall be made by the certified
public accounting firm used for auditing purposes by Employer immediately prior
to Executive’s employment termination (the “Accounting Firm”), which shall
provide detailed supporting calculations both to Employer and Executive.
Employer shall pay all fees and expenses of the Accounting Firm. Any
determination by the Accounting Firm shall be binding upon Employer and
Executive, except as provided in the following sentence. As a result of the
uncertainty in the application of Code Sections 280G and 4999 at the time of the
initial determination by the Accounting Firm hereunder, it is possible that the
Internal Revenue Service (“IRS”) or other agency will claim that a greater or
lesser Excise Tax is due. In the event that the Excise Tax is finally determined
to be less than the amount taken into account hereunder in calculating the
Gross-Up Payment, Executive shall repay to Employer, at the time that the amount
of such reduction in Excise Tax is finally determined, the portion of the
Gross-Up Payment attributable to such reduction (plus that portion of the
Gross-Up Payment attributable to the Excise Tax and federal, state and local
income and employment taxes imposed on the Gross-Up Payment being repaid by
Executive to the extent that such repayment results in a reduction in Excise Tax
and/or a federal, state or local income or employment tax deduction). In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder in calculating the Gross-Up Payment (including by reason of any
payment the existence or amount of which cannot be determined at the time of the
Gross-Up Payment), Employer shall make an additional Gross-Up Payment in respect
of such excess (plus any interest, penalties or additions payable by Executive
with respect to such excess) at the time that the amount of such excess is
finally determined. Executive and Employer shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to
the Total Payments. Employer shall pay all fees and expenses of Executive
relating to a claim by the IRS or other agency.

(ii)          Without Good Reason. Executive may terminate this Agreement and
Executive’s employment at any time for any reason or for no reason upon thirty
(30) days’ written notice to Employer, during which period Executive shall
continue to perform Executive’s duties under this Agreement if Employer so
elects. In connection with the termination of Executive’s employment pursuant to
this Section 4(b)(ii), (A) Employer shall pay to Executive Executive’s Base
Compensation in accordance with Section 3(a) hereof up to the effective date of
such termination, and, to the extent not previously paid, Executive shall be
entitled to all Bonus Compensation payable to Executive in accordance with
Section 3(b) hereof for or with respect to any calendar years prior to the
calendar year in which such termination occurs and (B) Employer shall provide to
Executive the benefits set forth in Sections 3(c), 3(d) and 3(e) hereof up to
the effective date of such termination.

(iii)         For Good Reason.       Executive may terminate this Agreement for
Good Reason upon thirty (30) days’ written notice to Employer. In connection
with the termination of Executive’s employment pursuant to this Section
4(b)(iii), (A) Employer shall pay to Executive Executive’s Base Compensation in
accordance with Section 3(a) hereof up to the effective date of such
termination, (B) Employer shall pay to Executive a pro rata portion of any Bonus
Compensation otherwise payable to Executive for or with respect to the calendar
year in

 

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which such termination occurs in accordance with Section 3(b) hereof up to the
effective date of such termination and, to the extent not previously paid,
Employer shall pay to Executive all Bonus Compensation payable to Executive in
accordance with Section 3(b) hereof for or with respect to any calendar years
prior to the calendar year in which such termination occurs, (C) Employer shall
provide to Executive the benefits set forth in Sections 3(c), 3(d) and 3(e)
hereof up to the effective date of such termination and (D) Employer shall pay
to Executive the Termination Compensation specified in Section 4(d) hereof. For
purposes of calculating Executive’s pro rata portion of any Bonus Compensation
pursuant to clause (B) in the previous sentence, if the termination takes place
prior to receipt by Executive of any Bonus Compensation, the Bonus Compensation,
a pro rata (based on the number of days in the year) portion of which Executive
shall be entitled to receive, shall be deemed to be 50% of Executive’s then
current annual Base Compensation. For purposes of this Section 4(b)(iii), “Good
Reason” shall mean (1) any material breach by Employer of the terms of this
Agreement which is not cured within thirty (30) days after receipt by Employer
of a written notice from Executive specifying in reasonable detail the nature of
the breach, or (2) any relocation of Executive’s office to a location more than
twenty-five (25) miles from 77 West Wacker Drive, Chicago, Illinois, or (3)
sixty (60) days have elapsed since delivery to Executive by the Employer of a
notice of non-renewal pursuant to Section 2.

(c)          Death. Notwithstanding any other provision of this Agreement, this
Agreement shall terminate on the date of Executive’s death. In such event, (A)
Employer shall pay to Executive Executive’s Base Compensation in accordance with
Section 3(a) hereof up to the date of such death, (B) Employer shall pay to
Executive a pro rata portion of any Bonus Compensation otherwise payable to
Executive for or with respect to the calendar year in which such death occurs in
accordance with Section 3(b) hereof up to the effective date of such death and,
to the extent not previously paid, Executive shall be entitled to all Bonus
Compensation payable to Executive in accordance with Section 3(b) hereof for or
with respect to any calendar years prior to the calendar year in which such
death occurs, (C) Employer shall provide to Executive the benefits set forth in
Sections 3(c) (or the after-tax cash equivalent), 3(d) and 3(e) hereof up to the
date of such death and (D) Employer shall pay to Executive the Termination
Compensation specified in Section 4(d) hereof. This Section 4(c) shall not limit
the entitlement of Executive, Executive’s estate or beneficiaries under any
insurance or other benefits plan or policy which is maintained by Employer for
Executive’s benefit (as opposed to Employer’s benefit).

(d)          Termination Compensation. In the event of a termination of this
Agreement pursuant to Section 4(a)(i) (by Employer without cause), 4(a)(iii)
(disability), 4(b)(i) (change of control), 4(b)(iii) (by Executive for good
reason) or 4(c) (death) hereof, Employer shall pay to Executive, within thirty
(30) days of termination (or upon the occurrence of a change of control as
provided in Section 4(b)(i) above), an amount in one lump sum (“Termination
Compensation”) equal to the aggregate Base Compensation payable to Executive
over the remainder of the Employment Term as in effect immediately prior to the
effective date of termination, determined without regard to such termination.

 

 

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5.

Covenants of Executive.

(a)          No Conflicts. Executive represents and warrants that Executive is
not personally subject to any agreement, order or decree which restricts
Executive’s acceptance of this Agreement and the performance of Executive’s
duties with Employer hereunder.

(b)          Non-Disclosure. During the Employment Term and for as long as such
information is a Trade Secret (as hereinafter defined), Executive shall not
disclose or use, except in the pursuit of the Business for or on behalf of
Employer, any Trade Secret of Employer, whether such Trade Secret is in
Executive’s memory or embodied in writing or other physical form. For purposes
of this Section 5(c), “Trade Secret” means any information which derives
independent economic value, actual or potential, with respect to Employer from
not being generally known to, and not being readily ascertainable by proper
means by, other persons who can obtain economic value from its disclosure or use
and is the subject of efforts to maintain its secrecy that are reasonable under
the circumstances, including, but not limited to, trade secrets, customer lists,
sales records and other proprietary commercial information. Said term, however,
shall not include general “know-how” information acquired by Executive prior to
or during the course of Executive’s service which could have been obtained by
him from public sources without the expenditure of significant time, effort and
expense which does not relate to Employer.

(c)          Return of Documents. Upon termination of Executive’s services with
Employer, Executive shall return all originals and copies of books, records,
documents, customer lists, sales materials, tapes, keys, credit cards and other
tangible property of Employer within Executive’s possession or under Executive’s
control.

(d)          Equitable Relief. In the event of any breach by Executive of any of
the covenants contained in this Section 5, it is specifically understood and
agreed that Employer shall be entitled, in addition to any other remedy which it
may have, to equitable relief by way of injunction, an accounting or otherwise
and to notify any employer or prospective employer of Executive as to the terms
and conditions hereof.

(e)          Acknowledgment. Executive acknowledges that Executive will be
directly and materially involved as a senior executive in all important policy
and operational decisions of Employer. Executive further acknowledges that the
scope of the foregoing restrictions has been specifically bargained between
Employer and Executive, each being fully informed of all relevant facts.
Accordingly, Executive acknowledges that the foregoing restrictions of this
Section 5 are fair and reasonable, are minimally necessary to protect Employer,
its other partners and the public from the unfair competition of Executive who,
as a result of Executive’s performance of services on behalf of Employer, will
have had unlimited access to the most confidential and important information of
Employer, its business and future plans. Executive furthermore acknowledges that
no unreasonable harm or injury will be suffered by him from enforcement of the
covenants contained herein and that Executive will be able to earn a reasonable
livelihood following termination of Executive’s services notwithstanding
enforcement of the covenants contained herein.

 

 

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6.            Prior Agreements. This Agreement amends and restates in its
entirety the Existing Agreement and supersedes and is in lieu of any and all
other employment agreements or arrangements between Executive and Employer or
its predecessor or any subsidiary, including the Existing Agreement, and any and
all such employment agreements and arrangements are hereby terminated and deemed
of no further force or effect; provided, however, that in the event that the
Merger Agreement is terminated prior to the consummation of the mergers and
transactions contemplated thereby, this Agreement shall be void ab initio, and
the Existing Agreement shall remain in full force and effect.

7.            Assignment. Neither this Agreement nor any rights or duties of
Executive hereunder shall be assignable by Executive and any such purported
assignment by him shall be void. Employer may assign all or any of its rights
hereunder provided that substantially all of the assets of Employer are also
transferred to the same party.

8.            Successor to Employer. Employer will require any successor or
assign (whether direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all the business and/or assets of Employer,
as the case may be, by agreement in form and substance reasonably satisfactory
to Executive, expressly, absolutely and unconditionally to assume and agree to
perform this Agreement in the same manner and to the same extent that Employer
would be required to perform it if no such succession or assignment had taken
place. Any failure of Employer to obtain such agreement prior to the
effectiveness of any such succession or assignment shall be a material breach of
this Agreement giving Executive the right to terminate this Agreement, in which
case Executive shall be entitled to receive the compensation specified in
Section 4(b)(i) (change of control) hereof. This Agreement shall inure to the
benefit of and be enforceable by Executive’s personal and legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees. If Executive should die while any amounts are still payable to
Executive hereunder, all such amounts, unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to Executive’s devisee,
legatee or other designee or, if there be no such designee, to Executive’s
estate.

9.            Notices. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and if personally delivered, sent by
courier or by certified mail, postage or delivery charges prepaid, to the
following addresses:

 

(a)

if to Executive, to:

James F. Hoffman

4230 North Greenview Avenue

Chicago, IL 60613

With a copy to:

James F. Hoffman

Prime Group Realty Trust

Suite 3900

77 West Wacker Drive

Chicago, IL 60601

 

 

--------------------------------------------------------------------------------

 

 

and to:

 

Vedder Price Kaufman & Kammholz, P.C.

 

222 N. LaSalle Street; Suite 2600

 

 

Chicago, IL 60601

 

Attn: Thomas P. Desmond

 

(b)

if to Parent and/or Employer, to:

 

Prime Office Company, LLC

 

 

c/o The Lightstone Group LLC

 

 

326 Third Street

 

 

Lakewood, NJ 08701

 

 

Attn: David Lichtenstein

 

 

With a copy to:

Prime Group Realty Trust

Suite 3900

77 West Wacker Drive

Chicago, IL 60601

Attn: Human Resources Director

Any notice, claim, demand, request or other communication given as provided in
this Section 9, if delivered personally, shall be effective upon delivery; and
if given by courier, shall be effective one (1) business day after deposit with
the courier if next day delivery is guaranteed; and if given by certified mail,
shall be effective three (3) business days after deposit in the mail. Either
party may change the address at which it is to be given notice by giving written
notice to the other party as provided in this Section 9.

10.          Amendment. This Agreement may not be changed, modified or amended
except in writing signed by both parties hereto.

11.          Waiver of Breach. The waiver by either party of the breach of any
provision of this Agreement shall not operate or be construed as a waiver of any
subsequent breach by either party.

12.          Severability. Employer and Executive each expressly agree and
contract that it is not the intention of either party to violate any public
policy, statutory or common law, and that if any covenant, sentence, paragraph,
clause or combination of the same of this Agreement (a “Contractual Provision”)
is in violation of the law of any state where applicable, such Contractual
Provision shall be void in the jurisdictions where it is unlawful, and the
remainder of such Contractual Provision, if any, and the remainder of this
Agreement shall remain binding on the parties such that such Contractual
Provision shall be binding only to the extent that such Contractual Provision is
lawful or may be lawfully performed under then applicable laws. In the event
that any part of any Contractual Provision of this Agreement is determined by a
court of competent jurisdiction to be overly broad thereby making the
Contractual Provision unenforceable, the parties hereto agree, and it is their
desire, that such court shall substitute a

 

--------------------------------------------------------------------------------

 

judicially enforceable limitation in its place, and that the Contractual
Provision, as so modified, shall be binding upon the parties as if originally
set forth herein.

13.          Governing Law. This Agreement shall be governed by, and construed,
interpreted and enforced in accordance with the laws of the State of Illinois,
exclusive of the conflict of laws provisions of the State of Illinois.

 

 

 

[SIGNATURE PAGE FOLLOWS]

 

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IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement
as of the date first written above.

 

EMPLOYER:

 

 

 

PRIME OFFICE COMPANY, LLC

 

 

 

By:      /s/ Bruno de Vinck

 

Name: Bruno de Vinck

 

Title:   Authorized Signatory

 

 

 

EXECUTIVE:

 

 

 

/s/ James F. Hoffman

 

James F. Hoffman

 

 

                This Amended and Restated Employment Agreement is hereby assumed
by the undersigned effective as of the Effective Date and the undersigned agree
to perform the obligations of the Employer under this Agreement.

 

 

PRIME GROUP REALTY TRUST

 

 

 

By:       /s/ Jeffrey A. Patterson

 

Name: Jeffrey A. Patterson

 

Title:   President and Chief Executive Officer

 

 

 

PRIME GROUP REALTY, L.P.

 

 

 

By:       PRIME GROUP REALTY TRUST

 

Its:        General Partner

 

 

 

By:       /s/ Jeffrey A. Patterson

 

Name: Jeffrey A. Patterson

 

Title:   President and Chief Executive Officer

 

 

 

 

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Exhibit A to Employment Agreement

 

 

BONUS COMPENSATION

 

 

A.         2005

 

 

 

1)          Pre-Effective Date: Executive shall receive the Pre-Effective Date
2005 Bonus, which is the pro rata bonus compensation for the period in 2005
ending immediately prior to the Effective Date as part of the payment described
in Section 3(f).

 

 

 

2)          Post-Effective Date: For the remainder of 2005, Executive shall
participate in the annual bonus program Employer shall establish for its senior
executives (the “Annual Bonus Program”) and shall be eligible to receive a
full-year 2005 bonus, provided that any such full-year bonus earned shall be
reduced by the Pre-Effective Date 2005 Bonus and such difference to be payable
within 45 days after year-end 2005.

 

 

 

B.          2006 and Thereafter

 

 

 

With respect to each calendar year after 2005 in the Employment Term, Executive
shall participate in the Annual Bonus Program for each such calendar year, and
any such bonus shall be payable within 45 days after the applicable year end.