EXHIBIT 10.1

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “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 Jeffrey A. Patterson, 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 are parties to that
certain Second Amended and Restated Employment Agreement (the “Existing
Agreement”) made and entered into as of October 21, 2004 pursuant to which
Executive is currently serving as President and Chief Executive Officer of PGRT
and Prime, managing the day to day businesses and affairs of PGRT and Prime in
such capacity, and serving as a member of the Board (as defined below).

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 President and Chief Executive Officer of
Employer (as defined in Section 1 hereof) and as a member of the Board 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.

 

 

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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:

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 President and Chief
Executive Officer 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 Board of Trustees of PGRT (the "Board") may from time to time
further define and clarify Executive’s duties and services hereunder as
President and Chief Executive Officer 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 President and Chief
Executive Officer 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 6. During the Employment Term, Executive shall also
serve as a member of the Board and Parent shall elect, or shall cause PGRT to
nominate and elect, Executive to the Board.

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 $412,000
(“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 Board and/or the Compensation
Committee (the “Committee”) of the Board, based on periodic reviews of
Executive’s performance conducted on at least an annual basis, provided,
however, that commencing on January 1, 2006, Executive’s Base Compensation shall
be not less than $424,000; provided, further, however, that commencing on
January 1, 2007 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.

 

 

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(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 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 $5 million.

(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. Employer shall also reimburse Executive for all monthly
and athletic fees associated with his membership in one downtown club and one
country club of his selection, up to an aggregate maximum of $10,000 per annum.

(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 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) $1,369,000, which represents the base
salary portion of such sum, plus (B) $102,153.42, which represents the bonus
portion of such sum assuming that the Effective Date is June 30, 2005, plus (C)
$564.38 for each day between June 30, 2005 and the Effective Date if the
Effective Date occurs after June 30, 2005, minus (D) $564.38 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 5 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

 

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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.

4.            Equity Opportunity. Parent shall provide to Executive an
opportunity to purchase equity on terms and conditions set forth on Exhibit B
hereto.

5.            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
5(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 5(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)
and Exhibit A hereof (including without limitation any guaranteed bonus for such
year) 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) and Exhibit A 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 5(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 5(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 5(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

 

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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).

(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) and Exhibit A hereof (including without
limitation any guaranteed bonus for such year) 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) and Exhibit A 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 5(d) hereof. This Section 5(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 two years 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

 

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Termination Compensation pursuant to Section 5(d)(ii), and (ii) the compensation
due Executive pursuant to clause (B) of this Section 5(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)
and Exhibit A hereof (including without limitation any guaranteed bonus for such
year) 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) and Exhibit A 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 5(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 9 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 5(b)(i).

For purposes of this Section 5(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 any title below President
and Chief Executive

 

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Officer and the failure of Executive to be elected and re-elected a member of
the Board) 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 5(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 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 5(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

 

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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
5(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 which such termination occurs in accordance with Section 3(b) and
Exhibit A hereof (including without limitation any guaranteed bonus for such
year) 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) and Exhibit A 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 5(d) hereof. For purposes of this Section 5(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) and Exhibit A hereof (including without limitation
any guaranteed bonus for such year) 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) and Exhibit A
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 5(d) hereof. This Section 5(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 5(a)(i) (by Employer without cause), 5(a)(iii)
(disability), 5(b)(i) (change of control), 5(b)(iii) (by Executive for good
reason) or 5(c) (death) hereof, Employer shall pay to Executive, within thirty
(30) days of termination (or upon the occurrence of a change

 

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of control as provided in Section 5(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.

 

6.

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-Competition. During the Employment Term and, in the event of
the termination of this Agreement pursuant to the provisions of Section 5(a)(ii)
(by Employer with cause) or 5(b)(ii) (by Executive without good reason) hereof,
for a period of twelve (12) months thereafter, Executive shall not, directly or
indirectly, in any capacity whatsoever, either on Executive’s own behalf or on
behalf of any other person or entity with whom Executive may be employed or
associated, own any interest in, participate or engage in the day-to-day
supervision, management, development, marketing or operation of any office or
industrial real estate facilities or such other business as Employer may be
engaged in during the Employment Term (the “Business”) which is competitive with
any of Employer’s facilities. For purposes hereof, a facility will be deemed
competitive with one of Employer’s facilities if such facility is located within
ten (10) miles of a facility owned, operated or managed by Employer or within
ten (10) miles of a facility which Employer is developing or with respect to
which Employer has signed a letter of intent or term sheet or binding contract
for the acquisition, development or management thereof dated on or prior to the
date of such termination and such facility is not de minimis. A facility will be
deemed de minimis if the purchase price of such facility does not exceed $10
million. Furthermore, for a period of twelve (12) months after any applicable
Section 5(a)(ii) or 5(b)(ii) termination event, Executive shall not, directly or
indirectly, solicit, attempt to hire or hire any employee or client of Employer
or solicit or attempt to lease space to or lease space to any tenant of
Employer. Notwithstanding the foregoing, nothing herein shall prohibit Executive
from owning 5% or less of any securities of a competitor engaged in the same
Business if such securities are listed on a nationally recognized securities
exchange or traded over-the-counter on the National Association of Securities
Dealers Automated Quotation System or otherwise.

(c)          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 6(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.

(d)          Business Opportunities. During the Employment Term, Executive
agrees to bring to Employer any and all business opportunities which come to
Executive’s attention for the acquisition, development, management, leasing or
marketing of real estate for industrial or office use. In the event that
Employer elects not to participate or take advantage of any such business
opportunity, upon termination of Executive’s employment with Employer for any
reason, Executive shall be free to pursue such business opportunity, provided
that such business opportunity does not cause any tenant to relocate from a
facility owned and/or operated by Employer, PGRT or any of their respective
subsidiaries.

(e)          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.

(f)           Equitable Relief. In the event of any breach by Executive of any
of the covenants contained in this Section 6, 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.

(g)          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 Section 6
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.

7.            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 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.

 

 

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8.            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.

9.            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 5(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.

10.          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:

Jeffrey A. Patterson

200 Glendale Avenue

Hinsdale, IL 60521

With a copy 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

 

 

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With a copy to:

Prime Group Realty Trust

Suite 3900

77 West Wacker Drive

Chicago, IL 60601

Attn: General Counsel

Any notice, claim, demand, request or other communication given as provided in
this Section 10, 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 10.

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

12.          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.

13.          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.

14.          Indemnification by Executive. Executive shall indemnify Employer
for any and all damages, costs and expenses resulting from any material harm to
Employer, its business, assets or employees through an act of dishonesty,
material conflict of interest, gross misconduct or willful malfeasance by
Executive. Executive also shall indemnify Employer for any and all damages,
costs and expenses resulting from Executive’s acts of omission constituting
reckless disregard of Executive’s duties to Employer following notice thereof by
Employer after it becomes aware of such conduct and Executive’s failure to so
cure within thirty (30) days.

 

 

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

 

 

15.          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 Amended and Restated
Employment Agreement as of the date first written above.

 

PRIME OFFICE COMPANY, LLC

 

 

 

By:      /s/ Bruno de Vinck

 

Name: Bruno de Vinck

 

Title:   Authorized Signatory

 

 

 

/s/ Jeffrey A. Patterson

 

Jeffrey A. Patterson

 

 

                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/ James F. Hoffman

 

Name: James F. Hoffman

 

Title:   Executive Vice President - General

 

Counsel and Secretary

 

 

 

PRIME GROUP REALTY, L.P.

 

 

 

By:       PRIME GROUP REALTY TRUST

 

Its:        General Partner

 

 

 

By:       /s/ James F. Hoffman

 

Name: James F. Hoffman

 

Title:   Executive Vice President - General

 

Counsel and Secretary

 

 

 

 

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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:

 

 

 

(1)        Guaranteed Bonus. For the remainder of 2005, Executive shall receive
a guaranteed bonus equal to $500,000 minus the Pre-Effective Date 2005 Bonus
described above, such difference to be payable within 45 days after year-end
2005.

 

 

 

(2)        PNOI Bonus. In addition, Executive shall receive a net PNOI Bonus for
2005, payable within 45 days after year-end 2005. The “net PNOI Bonus” shall be
equal to the gross PNOI Bonus for 2005 determined as described below, minus the
guaranteed bonus paid in accordance with paragraph (1) above.

 

 

 

B.          2006 and 2007

 

 

 

1)          Annual Bonus/Guaranteed Bonus: Executive shall participate in the
annual bonus program Employer shall establish for its senior executives (the
“Annual Bonus Program”); provided that under such Annual Bonus Program for each
of calendar years 2006 and 2007, Executive shall receive a guaranteed bonus
equal to not less than $500,000, payable within 45 days after the applicable
year end.

 

 

 

2)          PNOI Bonus: In addition, Executive shall receive a net PNOI Bonus
for each of 2006 and 2007, and payable within 45 days after the applicable year
end. The “net PNOI Bonus” shall be equal to the gross PNOI Bonus determined as
described below, minus the guaranteed bonus paid in accordance with paragraph
(1) immediately above.

 

 

 

C.          2008 and Thereafter

 

 

 

With respect to each calendar year after 2007 in the Employment Term, Executive
shall receive a PNOI Bonus equal to the gross PNOI Bonus determined as described
below, payable within 45 days after the applicable year end. Executive shall
also 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.

 

 

 

 

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

 

 

 

 

 

D.         PNOI Bonus

 

 

 

With respect to each calendar year during the Employment Term, Executive shall
be entitled to receive a gross PNOI Bonus equal to 10% of the positive increase,
if any, in PNOI (as defined below) for the calendar year with respect to which
the PNOI Bonus is being determined (“Bonus Year”) over PNOI for the prior
calendar year (“Base Year”).

 

For purposes of this calculation, PNOI shall be equal to the aggregate net
property operating income of all of Employer’s properties based upon the
property specific operating statements, exclusive of debt and other financing
costs. PNOI for the Bonus Year and/or Base Year will be subject to such
adjustments as the Board and Executive may agree to take into account for known
or anticipated lease expirations or inceptions or other events; provided, that
with respect to new leases involving free or discounted lease payment periods at
inception, income shall be rolled forward into such periods using a discount
factor of 8%; and, provided further, that with respect to properties that are
not wholly-owned, there will be taken into account from the operating statements
of such properties only that portion of the results that reflects the Employer’s
ownership portion. For purposes of determining the PNOI Bonus for 2005, the PNOI
for the 2004 Base Year shall be $59,700,000.

 

 

 

 

 

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

 

 

Exhibit B to Employment Agreement

 

The following sets forth the principal terms to be reflected in an agreement
between Executive and Prime Office Company, LLC to be effective immediately
following the Effective Date, the terms of which shall be mutually satisfactory
to Executive, Prime Office Company, LLC and their respective counsel.

 

Equity-Based Arrangements

Equity Investment

The Executive will be permitted to purchase up to 3.5% of the equity ownership
(the “Equity”) of the operating L.P. (the “Company”) in the form of L.P. or
similar units of the same class at a price on substantially the same other
economic terms as Prime Office Company LLC’s other initial equity investors (the
“Investors”). This option will expire 18-months after the closing date, subject
to earlier termination upon Executive’s employment termination.

To the extent the Company is funded through additional issuances of equity, the
Executive shall be given an opportunity to purchase additional equity in an
amount necessary to preserve the Executive’s 3.5% percent of ownership. The
price for such additional Equity shall be the purchase price paid for the
additional equity issuance that gave rise to the additional Equity purchase
opportunity.

The Company will provide Executive at least ten business days notice prior to
any cash distributions resulting from financing or sale transactions (as opposed
to from operations) to the Investors such that Executive shall have an
opportunity to purchase Equity prior thereto and thereby be entitled to share in
any such distribution. This notice obligation shall cease once Executive has
purchased all of the Equity.

 

Purchase Loan

The Lightstone Group LLC or an affiliate thereof (“Lightstone”) will make a loan
(“Loan”) available to the Executive for his purchase of the Equity. The
principal and interest on the loan will be subject to a ten-year balloon
repayment with interest accruing annually at 7%; provided that Executive shall
be required to apply the net after-tax cash proceeds of any distributions from
the Company towards payment of the Loan. The Loan shall be secured by the Equity
and non-recourse to the Executive.

 

The Loan may be prepaid without penalty. The Loan will accelerate and become due
to the extent of any transfer or sale of Equity by Executive other than as
permitted below.

Transfer Restrictions

No Equity issued to the Executive may be transferred (subject to customary
exceptions for estate planning, transfers at death and transfers to an entity
controlled solely by the Executive and formed solely for the benefit of the
Executive and his immediate family), except as permitted under drag-along,
tag-along or registration rights.

 

 

 

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Tag-Along, Drag-Along and Registration Rights

Executive’s Equity will be subject to customary tag-along drag-along and
registration rights.

Termination of Restrictions

The restrictions on transfer shall terminate in the event of an IPO or other
transaction whereby the Equity becomes publicly traded, subject to any lock-up
restrictions imposed on other employee shareholders or Company or its
affiliates.

 

Any capitalized terms used in this Term Sheet that are not defined herein shall
have the respective meanings given to such terms in the Employment Agreement to
which this Exhibit B is attached.

 

 

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June 29, 2005

Jeffrey A. Patterson

200 Glendale Avenue

Hinsdale, IL 60521

 

Re:

Amendment of Employment Agreement

Dear Jeff:

This letter confirms our agreement to amend your Employment Agreement with Prime
Office Company LLC, dated May 31, 2005.

We have agreed that Section 3(f) is amended to provide that no Pre-Effective
Date 2005 Bonus amount will be paid to you and that for purposes of Exhibit A of
the Agreement, the Pre-Effective Date 2005 Bonus will be zero and the bonus
compensation described under the caption “Post-Effective Date” in Section A of
Exhibit A is bonus compensation for the full year of 2005.

Please acknowledge your agreement to this amendment by signing the enclosed copy
of this letter and returning it to me.

 

 

Yours very truly,

 

 

 

PRIME OFFICE COMPANY LLC

 

 

 

/s/ Bruno de Vinck

 

Bruno de Vinck, Authorized Person

 

 

Acknowledged and agreed:

 

/s/ Jeffrey A. Patterson

 

Jeffrey A. Patterson

 

 

 

Copy to:

Vedder Price Kaufman & Kammholz, P.C.

 

 

222 North LaSalle Street

 

 

Suite 2600

 

 

Chicago, IL 60601

 

 

Attn: Thomas P. Desmond