**EXHIBIT 10.18**

 

**THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT**

 

**THIS THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT** (the “Third Restated Agreement”), dated as of January 1, 2004, by and betweenPrentiss Properties Trust, a Maryland real estate investment trust (the “Company”) and Michael V. Prentiss (the “Executive”), recites and provides as follows: 

 

**W I T N E S S E T H:**

 

**WHEREAS**, the Company is a self-administered Maryland real estate investment trust, which has been formed to continue and expand the nationalacquisition, property management, leasing, development and construction business of Prentiss Properties Limited, Inc., and its Affiliates (collectively, the “Prentiss Group”); 

 

**WHEREAS**, the Company’s primary objective is to maximize the profitability of its Properties by continuing thePrentiss Group’s success in renewing leases, maintaining high occupancy rates, reducing operating costs and growing through the acquisition of additional office and industrial properties and through development primarily on a build-to-suitbasis; 

 

**WHEREAS**, for over 25 years, Executive has beencontinuously and actively engaged in various aspects of real estate development, acquisitions, and investment management on the national level, both personally and for companies and joint ventures controlled by or affiliated with Executive,including, without limitation, the owning, development, asset management and management of Office or Industrial Properties; 

 

**WHEREAS**, the Company entered into an Employment Agreement with the Executive, dated as of October 22, 1996, which was amended and restated as ofMay 10, 2000, further amended by a side letter between the Company and the Executive, dated June 26, 2000 and subsequently amended and restated as the Second Amended and Restated Employment Agreement dated as of February 14, 2001 (collectively, the“Original Employment Agreement”); 

 

**WHEREAS**,the Company desires to further amend and restate the Original Employment Agreement in order to, among other things, extend the term and modify Executive’s compensation and benefits; 

 

**WHEREAS**, the Company desires to continue to employ the Executive to devote a significant portion of his time to thebusiness of the Company, including, without limitation, executive management of the Company and the Properties, and to serve as the Chairman of the Board of Trustees of the Company; and 

 

**WHEREAS**, the Executive desires to be so employed on the terms and subject to the conditions hereinafter stated.

**NOW, THEREFORE, IN CONSIDERATION** of the mutual covenants, promises and obligations of the partiesprovided for in this Third Restated Agreement and the benefits to be received by the Executive, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

**A. DEFINITIONS.**

 

For purposes of this Third Restated Agreement, the following terms shallhave the following meanings (applicable to both the singular and plural forms of the terms defined): 

 

1. “Acquisition of Office or Industrial Property” means engaging in the activity of soliciting, seeking to acquire, obtaining an option or firstright of refusal to acquire, or acquiring, any interest in an Office or Industrial Property or in real property planned for development as an Office or Industrial Property. 

 

2. “Affiliate” means (i) any person directly or indirectly controlling, controlled by, or under common controlwith such other person, (ii) any executive officer, director, trustee or general partner of such other person, and (iii) any legal entity for which such person acts as an executive officer, director, trustee or general partner. The term“person” means and includes any natural person, corporation, partnership, association, limited liability company or any other legal entity. 

 

3. “Board” means the Board of Trustees of the Company. 

 

4. “Change in Control” shall mean that (a) the Company has consummated a transaction pursuant to any agreement with any person or entity thatinvolves the transfer of ownership of more than fifty percent (50%) of the Company’s total assets or earnings power on a consolidated basis, as reported in the Company’s consolidated financial statements filed with the Securities andExchange Commission (including an agreement for the acquisition of the Company by merger, consolidation, or statutory share exchange regardless of whether the Company is intended to be the surviving or resulting entity after the merger,consolidation, or statutory share exchange or for the sale of substantially all of the Company’s assets to the person or entity), (b) as the direct or indirect result of, or in connection with, a cash tender or exchange offer, a merger or otherbusiness combination or combination of these transactions, the persons who were trustees of the Company before such transactions cease to constitute a majority of the Board, or any successor’s board, within two years of the last suchtransaction, (c) any person or entity is or becomes an Acquiring Person, or (d) during any period of two consecutive calendar years, the Continuing Trustees cease for any reason to constitute a majority of the Board. For purposes of the precedingsentence, “Continuing Trustee” means any member of the Board, while a member of the Board and (1) who was a member of the Board prior to May 15, 2003 or (2) whose subsequent nomination or election to the Board was recommended or approvedby a majority of the Continuing Trustees; and “Acquiring Person” means that (i) a person, considered alone or together with all Affiliates and associates of that person or entity, becomes directly or indirectly 

 

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the beneficial owner of securities representing at least twenty percent (20%) of the Company’s outstandingsecurities entitled to vote generally in the election of the Board, or (ii) a person or entity enters into an agreement that would result in that person or entity satisfying the conditions in subsection (i) or that would result in anAffiliate’s failure to be an Affiliate. 

 

5.“Competitive Activity” means engaging in directly, through an Affiliate, or being employed by any entity undertaking, or otherwise undertaking to do any of the following: (i) Acquisition of Office or Industrial Property, (ii) Office orIndustrial Property Ownership or Leasing, (iii) Office or Industrial Property Construction, (iv) Office or Industrial Property Entitlements, (v) Speculation, or (vi) Office or Industrial Property Management and Operation. 

 

6. “Effective Date” shall mean January 1, 2004. 

 

7. “Employment Term” means the period of five years, commencing onthe Effective Date and continuing until the fifth anniversary of the Effective Date, unless terminated earlier as provided herein. After the fifth anniversary of the Effective Date, the Employment Term shall terminate, unless the parties mutuallyagree to extend the Employment Term. 

 

8. “GoodReason” shall mean: 

 

(a) theExecutive’s relocation more than fifty (50) miles from the Executive’s primary office, without such Executive’s consent; 

 

(b) a material adverse alteration in the nature, title or status of his position; 

 

(c) a reduction by the Company of the Executive’sannual base salary or target bonus; 

 

(d) anassignment of duties to the Executive that are materially inconsistent with his job description; or 

 

(e) the intentional breach by the Company of any material provision of this Third Restated Agreement that continues for a period of 14days after the Independent Trustees on the Board receive written notice of such breach. 

 

9. “Independent Trustee” shall mean a member of the Board who is defined as an “Independent Trustee” in Section 4 of Article V of the Amended and Restated Declaration of Trust of the Company, datedas of October 16, 1996, as amended. 

 

10. “NoncompetitionPeriod” means the period beginning on (a) the date the Executive has terminated his employment without Good Reason (excluding a resignation for any reason or no reason after a Change in Control) or (b) the date the Executive experiences aTermination With Cause, and ending two years from the date of either such termination of employment. 

 

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11. “Office or Industrial Property” means any Property in excess of 20,000 square feet that isused in whole or in part for office or industrial space or office or industrial related purposes, whether in fee or leasehold, together with all improvements and fixtures now or hereafter located thereon, all rights, privileges and easementsappurtenant thereto, and all tangible and intangible personal property used in connection therewith. 

 

12. “Office or Industrial Property Construction” means the construction, renovation or repair of improvements on an Office or IndustrialProperty by Executive or an Affiliate of Executive. 

 

13.“Office or Industrial Property Entitlements” means engaging in the process by which a person with an interest in an Office or Industrial Property obtains necessary or desirable governmental approvals, licenses, permits, entitlements oragreements for the commencement of Office or Industrial Property Construction. 

 

14. “Office or Industrial Property Management and Operation” means engaging in directly or through an Affiliate, or being employed by any entity undertaking, or otherwise undertaking the day-to-daymanagement and operation of an Office or Industrial Property, whether pursuant to a master lease, management agreement or any other arrangement. 

 

15. “Property” means any real property or any interest therein. 

 

16. “Speculation” means engaging in the activity of soliciting, seeking to acquire, obtaining an option or a firstright of refusal to acquire, or acquiring, any interest in a Office or Industrial Property with the intention at any time of acquiring (or obtaining an option or a first right of refusal to acquire) or holding an Office or Industrial Property forsubsequent sale or other transfer to any person for purposes of Competitive Activity. 

 

17. “Termination Without Cause” means the termination of the Executive’s employment by the Company for any reason other than Voluntary Termination or Termination With Cause. 

 

18. “Termination With Cause” means the termination of theExecutive’s employment by act of the Board for any of the following reasons: 

 

(a) willful misconduct of the Executive in connection with the performance of any of his duties, including, without limitation,misappropriation of funds or property of the Company or any of its Affiliates or securing or attempting to secure personally any profit in connection with any transaction entered into on behalf of the Company or any of its Affiliates; 

 

(b) conduct by the Executive that would result in materialinjury to the reputation of the Company if he were retained in his position with the Company, including, without limitation, conviction of a felony under the laws of the United States or any State thereof, or of an equivalent crime under the laws ofany other jurisdiction, bankruptcy, insolvency or general assignment for the benefit of his creditors; 

 

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(c) continued or deliberate neglect by the Executive of any of his duties hereunder;

 

(d) any failure to comply substantially withany written rules, regulations, policies or procedures of the Company, if such non-compliance could be expected to have a material and adverse effect on the Company’s business and which has not been cured after reasonable notice; 

 

(e) any willful failure to comply with the Company’sinternal policies regarding insider trading or insider dealing which has not been cured after reasonable notice; or 

 

(f) any material breach of this Third Restated Agreement which has not been cured after notice and a reasonable opportunity to be heard.

 

19. “Voluntary Termination” means theExecutive’s voluntary termination of his employment hereunder for any reason other than Good Reason. 

 

**B. THE EMPLOYMENT RELATIONSHIP.**

 

1. Employment. The Company shall employ the Executive, and the Executive agrees to be so employed, in the capacity of Chairman of the Board toserve for the Employment Term, subject to earlier termination as herein provided. 

 

2. Services. The Executive shall devote a significant portion of his business time, attention and effort to the Company’s affairs, except for such reasonable time as shall be required for the Executive tooversee and manage his horse farm in North Wales, Virginia. Specifically, the Executive shall: (a) supervise, direct and assist the President and Chief Executive Officer of the Company; (b) formulate the long-range growth strategy of the Company,consistent with directions from the Board; (c) review and approve all proposed real estate acquisitions, dispositions, and new development projects; and (d) act as a mentor to, and provide leadership and direction to, the Company’s RegionalDirectors. 

 

3. Compensation. 

 

(a) The Company initially shall pay the Executive for hisservices an annual base salary that for 2004 shall be $500,000. The annual base salary shall be increased $50,000 annually for each of calendar years 2005 and 2006 and thereafter shall be subject to discretionary increases to be determined by theBoard or the Compensation Committee established by the Board. Executive’s salary shall be paid in semi-monthly payments. 

 

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(b) In addition, the Company shall also pay the Executive a discretionary annual bonus inan amount to be determined by the Board or the Compensation Committee established by the Board. 

 

4. Benefits. The Company agrees to provide the Executive with the following benefits during the Term of this Third Restated Agreement: 

 

(a) Vacation. The Executive shall be entitled eachyear to four weeks vacation, during which time his compensation shall be paid in full. 

 

(b) Employee Benefits. The Executive shall be entitled to all rights, benefits and privileges to which other management levelemployees of the Company are entitled, including, but not limited to, any retirement, pension, profit-sharing, insurance, hospital or other plans which may now be in effect or which may hereafter be adopted by the Company. 

 

(c) Tax and Estate Planning. The Company shallprovide the Executive with annual personal tax and estate planning services. In addition, the Company shall provide the services of an accountant to keep the Executive’s financial records and to assist in tax reporting. 

 

(d) Country Club Fees. The Company shall reimbursethe Executive for his membership dues at the following country clubs: Brookhollow Golf Club in Dallas, Texas; Robert Trent Jones Golf Club in Northern Virginia; Preston Trails Club in Dallas, Texas; and Oyster Harbors Club in Cape Cod,Massachusetts. 

 

(e) Flight Time. TheCompany shall provide the Executive with 100 hours per year of flight time on a Challenger (the “Aircraft”) through its fractional ownership with Flex Jets. At the Executive’s discretion, such hours may be used in the performance ofhis duties hereunder or for personal use. If the Company owns the interest in the Aircraft, then the Company shall pay all costs associated with the Aircraft; provided however, if any of such hours are used for the Executive’s personal use, theExecutive shall reimburse the Company at the variable hourly rate for such usage. If the Executive owns the interest in the Aircraft, then the Company shall reimburse the Executive for (i) the interest costs on the loan for the acquisition of theinterest in the Aircraft, (ii) the monthly management fee associated with the interest in the Aircraft and (iii) the variable hourly rate for usage of the Aircraft for business purposes. The parties acknowledge that the current hourly charge for theAircraft is $2,390. 

 

5. Expenses. The Company recognizesthat the Executive will have to incur certain out-of-pocket expenses, including, but not limited to, travel expenses, related to his services and the Company’s business, and the Company agrees to reimburse the Executive for all reasonableexpenses necessarily incurred by him in the performance of his duties upon presentation of a voucher or documentation indicating the amount and business purposes of any such expenses. 

 

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6. Termination in Case of Death or Disability. In case of the Executive’s death or permanentdisability (defined as complete physical or mental inability, confirmed by a licensed physician, to perform substantially all of the services described herein that continues for a period of 180 consecutive days), the Company may elect to terminatethe Executive pursuant to the terms of Section B, Paragraph 8 hereof. 

 

7. Termination With Cause; Voluntary Termination. The Company may terminate this Third Restated Agreement upon a determination that an event has occurred within the definition of Termination With Cause; provided, however, in the caseof a Termination With Cause based upon clauses (b) or (c) of such definition, the Company shall provide the Executive written notice of such grounds for termination, and the Executive shall have a period of 14 days to cure such cause to thereasonable satisfaction of the Board. If the Executive shall suffer Termination With Cause or shall cease being an employee of the Company on account of a Voluntary Termination, then the Executive shall receive accrued compensation until theeffective date of such Voluntary Termination or Termination without Cause and shall not be entitled to any compensation after the effective date of such Voluntary Termination or Termination With Cause (except compensation accrued but unpaid on thedate of such event). Any continued rights and benefits the Executive may have under employee benefit plans and programs of the Company upon such a termination, if any, shall be determined in accordance with the terms of such plans and programsprovided however, that the Executive, including his immediate, family shall be able to continue to participate in the Company’s medical/health insurance or coverage program with the same level of benefits as he was entitled to receiveimmediately prior to the time of termination, but the Executive shall bear all costs of such medical/health insurance or coverage. Any period during which benefits are continued pursuant to this Paragraph 7 of Section B shall be considered to be insatisfaction of the Company’s obligation to provide “continuation coverage” pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended, and the period of coverage under Section 4980B shall be reduced by the periodduring which benefits are provided pursuant to this Paragraph 7 of Section B. 

 

8. Death or Disability; Termination Without Cause; or Termination of Employment by Executive for Good Reason. If the Executive shall suffer a termination of employment due to death or disability or aTermination Without Cause or shall terminate his employment for Good Reason, then the Company: (i) shall pay the Executive, (a) in the case of a termination of employment due to death or disability, cash compensation in a lump sum equal to oneyear’s base salary, based on the Executive’s base salary at the time of such death of termination due to disability; or (b) in the case of a Termination Without Cause or a termination of employment by Executive for Good Reason, cashcompensation in a lump sum equal to the sum of (x) two years’ base salary (based on the Executive’s base salary at the time of such Termination Without Cause or termination by the Executive for Good Reason) and (y) two times the sum of (A)the average of the annual cash bonuses paid to the Executive with respect to calendar years 1999 and 2000 and (B) the average of the current value of the long-term incentives earned with respect to calendar years 1999 and 2000; and (ii) continue toprovide for a period of three years after such death, disability or termination, at its expense, on behalf of the Executive and his spouse, dependents and beneficiaries (collectively, “Dependents”) (a) annual 

 

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physicals, medical, health, dental and prescription drug benefits, (b) long-term disability coverage, (c) life insuranceand other death benefits coverage, and (d), all the benefits and privileges set forth in subparagraphs (c), (d), and (e) of Paragraph 4 of Section B, but only to the extent permitted under the terms of any plan, policy, or program that offers suchbenefits, coverage and privileges. For the same three-year period (except in the case of death), the Executive shall be entitled to retain, at the Company’s expense, his current office or a similar office and a secretary. The coverage andbenefits (including deductibles, costs and contributions by the Executive, if any) provided under this Paragraph 8 of Section B shall be no less favorable to the Executive and his Dependents than the most favorable of such coverage and benefitsprovided the Executive and his Dependents during the 90-day period immediately prior to such death, disability or termination. The obligation under this Paragraph 8 of Section B with respect to the foregoing benefits shall be limited if theExecutive obtains any such benefits pursuant to a subsequent employer’s benefit plans, in which case the Company may reduce or eliminate the coverage and benefits it is required to provide the Executive hereunder as long as the aggregatecoverage and benefits of the combined benefit plans is no less favorable to the Executive than the coverage and benefits required to be provided hereunder. Any continued rights and benefits that the Executive, or the Executive’s estate or otherlegal representatives, may have under employee benefit plans and programs of the Company upon such death, disability or termination shall be determined in accordance with the terms and provisions of such plans and programs, except as provided inthis Paragraph 8. The foregoing notwithstanding, if the Executive has received, or is entitled to receive, the payments under Paragraph 9 of Section B, no payments or benefits shall be payable under this Paragraph 8. Any period during which benefitsare continued pursuant to this Paragraph 8 of Section B shall be considered to be in satisfaction of the Company’s obligation to provide “continuation coverage” pursuant to Section 4980B of the Internal Revenue Code of 1986, asamended, and the period of coverage under Section 4980B shall be reduced by the period during which benefits are provided pursuant to this Paragraph 8 of Section B. 

 

9. Change in Control. Within fifteen (15) days of a Change in Control, the Company shall pay Executive a lump sumpayment of $3,500,000 if a Change in Control occurs in 2004. If a Change in Control occurs in any year after 2004, the lump sum payment shall be $3,000,000. In addition, after a Change in Control, the Executive may resign for any reason or noreason, and the Company shall continue to provide for a period of three years after such resignation, at its expense, on behalf of the Executive and his Dependents (i) annual physicals, medical, health, dental and prescription drug benefits, (ii)long-term disability coverage, (iii) life insurance and other death benefits coverage, and (iv), all the benefits and privileges set forth in subparagraphs (c), (d), and (e) of Paragraph 4 of Section B, but only to the extent permitted under theterms of any plan, policy, or program that offers such benefits, coverage and privileges. For the same three-year period (except in the case of death), the Executive shall be entitled to retain, at the Company’s expense, his current office or asimilar office and a secretary. The coverage and benefits (including deductibles, costs and contributions by the Executive, if any) provided under this Paragraph 9 of Section B shall be no less favorable to the Executive and his Dependents than themost favorable of such coverage and benefits provided the Executive and his Dependents during the 90-day period immediately prior to 

 

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the Change in Control or as of any date following the Change in Control but preceding the Executive’s resignation.The obligation under this Paragraph 9 of Section B with respect to the foregoing benefits shall be limited if the Executive obtains any such benefits pursuant to a subsequent employer’s benefit plans, in which case the Company may reduce oreliminate the coverage and benefits it is required to provide the Executive hereunder as long as the aggregate coverage and benefits of the combined benefit plans is no less favorable to the Executive than the coverage and benefits required to beprovided hereunder. Any period during which benefits are continued pursuant to this Paragraph 9 of Section B shall be considered to be in satisfaction of the Company’s obligation to provide “continuation coverage” pursuant to Section4980B of the Internal Revenue Code of 1986, as amended, and the period of coverage under Section 4980B shall be reduced by the period during which benefits are provided pursuant to this Paragraph 9 of Section B. 

 

10. Termination after Five Years. Upon a termination of employment dueto the expiration of the Employment Term on the fifth anniversary of the Effective Date, the Company shall continue to provide at its expense, from the period that begins on the fifth anniversary of the Effective Date and ends on theExecutive’s sixty-eighth (68th) birthday, on behalf of the Executive and his Dependents (a) annual physicals,medical, health, dental and prescription drug benefits, (b) long-term disability coverage, (c) life insurance and other death benefits coverage, and (d), all the benefits and privileges set forth in subparagraphs (c), (d), and (e) of Paragraph 4 ofSection B, but only to the extent permitted under the terms of any plan, policy, or program that offers such benefits, coverage and privileges. For the same period, the Executive shall be entitled to retain, at the Company’s expense, hiscurrent office or a similar office and a secretary. The coverage and benefits (including deductibles, costs and contributions by the Executive, if any) provided under this Paragraph 10 of Section B shall be no less favorable to the Executive and hisDependents than the most favorable of such coverage and benefits provided the Executive and his Dependents during the 90-day period immediately prior to expiration of the Employment Term. The obligation under this Paragraph 10 of Section B withrespect to the foregoing benefits shall be limited if the Executive obtains any such benefits pursuant to a subsequent employer’s benefit plans, in which case the Company may reduce or eliminate the coverage and benefits it is required toprovide the Executive hereunder as long as the aggregate coverage and benefits of the combined benefit plans is no less favorable to the Executive than the coverage and benefits required to be provided hereunder. Any continued rights and benefitsthat the Executive, or the Executive’s estate or other legal representatives, may have under employee benefit plans and programs of the Company upon the expiration of the Employment Term shall be determined in accordance with the terms andprovisions of such plans and programs, except as provided in this Paragraph 10. Any period during which benefits are continued pursuant to this Paragraph 10 of Section B shall be considered to be in satisfaction of the Company’s obligation toprovide “continuation coverage” pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended, and the period of coverage under Section 4980B shall be reduced by the period during which benefits are provided pursuant to thisParagraph 10 of Section B. 

 

 

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11. Gross-Up Payment. 

 

(a) In the event it shall be determined that any payment or distribution of any type to or for the benefit of the Executive,by the Company, any Affiliate, any person who acquires ownership or effective control of the Company or ownership of a substantial portion of the Company’s assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, asamended (the “Code”), and the regulations thereunder) or any Affiliate of such person, whether paid or payable or distributed or distributable pursuant to any of the terms of this Third Restated Agreement or otherwise (the “TotalPayments”), is or will be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred toas the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposedwith respect to such taxes), including any income tax, employment tax or Excise Tax, imposed upon the Gross Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Total Payments. 

 

(b) All mathematical determinations, and all determinations as to whether anyof the Total Payments are “parachute payments” (within the meaning of Section 280G of the Code), that are required to be made under this subparagraph (b), including determinations as to whether a Gross-Up Payment is required, the amount ofsuch Gross-Up Payment and amounts relevant to the last sentence of this subparagraph (b), shall be made by an independent accounting firm selected by the Executive from among the five (5) largest accounting firms in the United States (the“Accounting Firm”), which shall provide its determination (the “Determination”), together with detailed supporting calculations regarding the amount of any Gross-Up Payment and any other relevant matter, both to the Company andthe Executive by no later than ten (10) days following the Change in Control, or such earlier time as is requested by the Company or the Executive (if the Executive reasonably believes that any of the Total Payments may be subject to the ExciseTax). If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive and the Company with a written statement that such Accounting Firm has concluded that no Excise Tax is payable (including thereasons therefor) and that the Executive has substantial authority not to report any Excise Tax on his federal income tax return. If a Gross-Up Payment is determined to be payable, it shall be paid to the Executive within twenty (20) days after theDetermination (and all accompanying calculations and other material supporting the Determination) is delivered to the Company by the Accounting Firm. Any determination by the Accounting Firm shall be binding upon the Company and the Executive,absent manifest error. As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the Company should havebeen made (“Underpayment”), or that Gross-Up Payments will have been made by the Company which should not have been made (“Overpayments”). In either such event, the Accounting Firm shall determine the amount of the Underpaymentor Overpayment that has occurred. In the case of an Underpayment, the amount of such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive. In the case of an Overpayment, the Executive shall, at the direction andexpense of the Company, take 

 

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such steps as are reasonably necessary (including the filing of returns and claims for refund), follow reasonableinstructions from, and procedures established by, the Company, and otherwise reasonably cooperate with the Company to correct such Overpayment, provided, however, that (i) the Executive shall not in any event be obligated to return tothe Company an amount greater than the net after-tax portion of the Overpayment that he has retained or has recovered as a refund from the applicable taxing authorities and (ii) this provision shall be interpreted in a manner consistent with theintent of this Paragraph 11 of Section B, which is to make the Executive whole, on an after-tax basis, from the application of the Excise Tax, it being understood that the correction of an Overpayment may result in the Executive repaying to theCompany an amount which is less than the Overpayment. 

 

**C.AGREEMENT NOT TO COMPETE.**

 

Except as explicitlyprovided herein, the Executive agrees, for the entire Employment Term and, if applicable, the entire Noncompetition Period, to the following covenants, effective within the United States: 

 

1. Competitive Activity Restriction. Executive, personally or throughany Affiliate of Executive, shall not conduct any Competitive Activity other than through the Company, unless a majority of the Board, which majority must include a majority of the Independent Trustees, have determined that such Competitive Activitywill not have a material adverse effect on the operations of any Office or Industrial Property that the Company either owns or has a right to acquire. Notwithstanding any other provision of this Third Restated Agreement, the Executive agrees that,during the time he is employed by the Company, the Executive shall present to the Company all opportunities that arise to engage in Competitive Activities. 

 

2. No Beneficial Ownership. Executive shall not beneficially own directly or indirectly any beneficial interest in any entity engaged in anyCompetitive Activity other than the Company, except for (i) any interest in a company traded on a nationally recognized public securities exchange (including The NASDAQ National Market), provided such interest does not exceed five percent of theoutstanding capital stock of such company, and (ii) the Executive’s 6% limited partnership interest in the Chesapeake & Potomac Telephone Building in Baltimore Maryland. 

 

3. Loans. Executive shall not directly or indirectly make any loan to, or hold any note evidencing a loan from, anyentity engaged in any Competitive Activity. 

 

4. CompetitiveEntity. Executive shall not be a director or trustee, officer, or employee of, or consultant to (whether for compensation or not) any entity engaged in any Competitive Activity. 

 

5. Notification to Independent Trustees. If Executive or any Affiliate of Executive desires to engage in anyCompetitive Activity, Executive shall describe fully the proposed activity in a written notice (the “Disclosure Notice”) to the Company and the Independent Trustees. A Disclosure Notice shall only pertain to a specific proposed 

 

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project and the referenced proposed project shall be described therein with specificity as to timing, location, scope andthe extent of Executive’s involvement, financially and in terms of his time commitment. A Disclosure Notice may not request approval for any conceptual or non-project specific activity or for any activity that is prohibited by this ThirdRestated Agreement. 

 

**D. MISCELLANEOUS PROVISIONS.**

 

1. Notices. All notices or deliveries authorized orrequired pursuant to this Agreement shall be deemed to have been given when in writing and when (i) deposited in the U.S. mail, certified, return receipt requested, postage prepaid, or (ii) otherwise delivered by hand or by overnight delivery,against written receipt, by a common carrier or commercial courier or delivery service addressed to the parties at the following addresses or to such other addresses as either may designate in writing to the other party: 

 

To the Company:
  Prentiss Properties Trust   3890 West Northwest Highway, Suite 400   Dallas, Texas 75220   Phone (214) 761-1440
To the Executive:
  Michael V. Prentiss   5006 Seneca Drive   Dallas, Texas 75209   214-350-3011
 

2. EntireAgreement. This Third Restated Agreement contains the entire understanding between the parties hereto with respect to the subject matter hereof and shall not be modified in any manner except by instrument in writing signed, by or on behalf of,the parties hereto. This Third Restated Agreement shall be binding upon and inure to the benefit of the heirs, successors and assigns of the parties hereto. 

 

3. Effective Date. Notwithstanding the date of this Third Restated Agreement, the terms and provisions of and rights and obligations under thisThird Restated Agreement shall become effective on the Effective Date. 

 

4. Applicable Law. This Third Restated Agreement shall be governed and construed in accordance with the laws of the State of Texas. 

 

5. Assignment. The Executive acknowledges that his services are unique and personal. The Executive may not assign his rights or delegate his dutiesor obligations under this Third Restated Agreement except (a) his rights to compensation and benefits hereunder may be transferred by will or operation of law and (b) his rights under employee benefit plans or programs described in Section B,Paragraph 4(b) may be assigned or transferred in accordance with the terms of such plans or programs, or regular practices thereunder. The Executive’s rights and obligations under this Third Restated Agreement shall inure to the benefit of andshall be binding upon the Executive’s heirs and personal representatives. 

 

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6. Titles and Headings. Titles and headings to sections and paragraphs in this Third RestatedAgreement are inserted for the convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Third Restated Agreement. 

 

7. Counterparts. This Third Restated Agreement may be executed in one or more counterparts, each of which shall bedeemed to be an original, but all of which together shall constitute one and the same instrument. 

 

8. Amendments. No amendment, modification or supplement to this Third Restated Agreement shall be binding on any of the parties hereto unless it isin writing and signed by the parties in interest at the time of the modification, and further provided any such modification is approved by a majority of the Independent Trustees. 

 

9. No Third-Party Beneficiaries. This Third Restated Agreement is solely for the benefit of the parties to this ThirdRestated Agreement and should not be deemed to confer upon third parties any remedy, claim, liability, reimbursement, claims or action or other right in excess of those existing without reference to this Third Restated Agreement. 

 

10. Maximum Legal Enforceability; Time of Essence. Any provision ofthis Third Restated Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Anysuch prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Without prejudice to any rights or remedies otherwise available to any party to this Third RestatedAgreement, each party hereto acknowledges that damages would not be an adequate remedy for any breach of the provisions of this Third Restated Agreement and agrees that the obligations of the parties hereunder shall be specifically enforceable. Timeshall be of the essence as to each and every provision of this Third Restated Agreement. 

 

11. Specific Performance. The Executive acknowledges that the obligations undertaken by him pursuant to this Third Restated Agreement are unique and that the Company will not have an adequate remedy at law ifhe shall fail to perform any of his obligations hereunder, and the Executive therefore confirms that the Company’s right to specific performance of the terms of this Third Restated Agreement is essential to protect the rights, interest andgoodwill of the Company. Accordingly, in addition to any other remedies that the Company may have at law or in equity, the Company shall have the right to have all obligations, covenants, agreements and other provisions of this Third RestatedAgreement specifically performed by the Executive, and the Company shall have the right to obtain preliminary and permanent injunctive relief to secure specific performance and to prevent a breach or contemplated breach of this Third RestatedAgreement by the Executive. The Executive acknowledges that the Company will have the right to have the provisions of this Third Restated Agreement enforced in any court of competent jurisdiction, it being agreed that any breach or threatened breachof this Third Restated Agreement would cause irreparable injury to the Company and its business and that money damages would not provide an adequate remedy to the Company. 

 

 

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12. Operations of Affiliated Parties. The Executive agrees that he will refrain from authorizingany Affiliate to perform any activities that would be prohibited by the terms of this Third Restated Agreement if they were performed by him. Notwithstanding anything to the contrary contained in this Third Restated Agreement, the Executive shallnot be required by the terms of this Third Restated Agreement to violate any fiduciary duty existing on the date hereof that he owes to a third party. 

 

13. Further Assurances. The parties to this Third Restated Agreement will execute and deliver or cause the execution and delivery of such furtherinstruments and documents and will take such other actions as any other party to the Third Restated Agreement may reasonably request in order to effectuate the purpose of this Third Restated Agreement and to carry out the terms hereof. 

 

**IN WITNESS WHEREOF**, the parties hereto have caused this ThirdRestated Agreement to be duly executed as of the day and year first written above. 

 
**THE EXECUTIVE**
/s/ Michael V. Prentiss

MICHAEL V. PRENTISS
**THE COMPANY**
PRENTISS PROPERTIES TRUST

By:
 
/s/ Lawrence A. Wilson
  
LAWRENCE A. WILSON
  
Its: Chairman Compensation

Committee for the Board of

Directors

 

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