EXHIBIT NO. 10.1
Separation Agreement
This Separation Agreement (the "Agreement") is made and entered into this
8th day of April, 2002, by and between Prime Group Realty Trust, a Maryland real
estate investment trust ("PGRT") and the sole general partner of Prime Group
Realty, L.P., a Delaware limited partnership (the "Operating Partnership"),
(PGRT and the Operating Partnership are sometimes hereinafter together referred
to as the "Company"), and Xxxxxxx X. Xxxxxxx, an individual domiciled in the
State of Illinois (the "Executive").
Witnesseth
Whereas, PGRT, the Operating Partnership and the Executive entered into the
Amended and Restated Employment Agreement dated September 1, 2000 (the
"Employment Agreement"); and
Whereas, pursuant to the Employment Agreement the Executive is employed by
the Company as its Chairman of the Board and the Executive is a member of PGRT's
Board of Trustees (the "Board"); and
Whereas, the Executive and the Company desire to sever their employment
relationship and the Executive's membership on all boards of directors of any
subsidiaries of the Company on amicable and agreeable terms effective April 8,
2002 (the "Separation Date").
Now, Therefore, in consideration of the foregoing and the mutual covenants
herein set forth, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged by each of the parties hereto, the
parties agree as follows:
1. Separation from Employment. The Executive hereby elects to terminate his
employment with the Company without "Good Reason" (as such term is defined in
Section 5(b)(ii) of the Employment Agreement) effective as of the Separation
Date. The Executive hereby resigns from the boards of directors of all
subsidiaries of the Company upon which the Executive currently serves as of the
Separation Date. This resignation is not applicable to the Executive's
membership on the Board. The parties hereto waive any advance notice of such
termination that may be required under the terms of the Employment Agreement.
2. Separation Payments. The Executive is entitled to receive the following
payments, subject to applicable withholdings, on account of his separation
(collectively, the "Separation Payments"):
(a) Accrued Base Compensation. The Company will pay to the Executive all
accrued but unpaid amounts of Base Compensation (as such term is defined in the
Employment Agreement) through the Separation Date. The payment will be made on
or prior to the 10th day following the Separation Date;
(b) Compensation in Lieu of 30 Days' Notice Pay. In lieu of any advance
notice period required by the Employment Agreement, the Company will pay to the
Executive an amount equal to the Base Compensation to which the Executive would
otherwise have been entitled during the 30-day period immediately following the
Separation Date. The payment will be made on or prior to May 8, 2002; and
(c) Termination Compensation. The Company will pay to Executive an amount
equal to the sum of (i) $625,000 (the "Severance Distribution") and (ii)
$41,826.80 (the "Deemed Bonus Payment"), (collectively referred to as the
"Termination Compensation"), of which $112,500 shall be paid in six equal
monthly installments of $18,750 payable on the 8th day of each month (or, in the
event such day is not a business day on the next succeeding business day)
commencing May 8, 2002. The balance shall be payable, with interest as
determined below, on or before November 8, 2002. Notwithstanding the foregoing,
upon the occurrence of a liquidity event sufficient, as determined by the Board
in its sole discretion, to satisfy the Company's severance obligations set forth
in this subparagraph (c), the Company shall pay any remaining balance not yet
distributed, with interest as determined below, to the Executive in a single
lump sum as soon as practicable.
The unpaid portion of the Termination Compensation not paid on or before
May 8, 2002 shall accrue interest monthly at an annual rate equal to the prime
rate as published from time to time in the Midwestern edition of The Wall Street
Journal and adjusted as of the 8th day of each month.
In the event any payment or distribution pursuant to this subparagraph (c)
is not made within 15 days after the Company's receipt of written notice of
delinquency or, if the Company is Bankrupt (as defined below), then all
remaining obligations of the Company under this subparagraph (c) shall
immediately become due and payable. The Company shall be considered "Bankrupt"
for purposes of this Agreement if (i) the Company voluntarily files a petition
of bankruptcy or (ii) a third party files an involuntary petition of bankruptcy
of the Company that is not dismissed within 60 days.
The Company may withhold from any payment that it is required to make under
Section 2 of this Agreement amounts sufficient to satisfy the minimum applicable
withholding requirements under any federal, state or local law.
The Company agrees and acknowledges that any ancillary claims, other than
claims arising out of or in connection with this Agreement and the enforcement
thereof, it may assert against the Executive will not be used to offset the
Company's severance obligations set forth in this subparagraph (c).
3. Business Expenses and Board Compensation. The Executive shall, in accordance
with the Company's customary policies and procedures, be reimbursed for all
appropriate business expenses incurred through and including the Separation Date
for which the Executive submits appropriate invoices and similar records.
Notwithstanding the foregoing, the Executive shall, in accordance with the
Company's customary policies and procedures and in the same manner as all other
non-employee members of the Board, be reimbursed for all appropriate business
expenses incurred in connection with his service as a member of the Board for
which the Executive submits appropriate invoices and similar records. In
addition, the Executive shall be entitled to receive compensation as a
non-employee member of the Board in accordance with the Company's customary
policies and procedures.
4. Employee Benefits. The Executive and his eligible dependents are entitled to
receive Company-provided health insurance benefits, of a type and nature
available generally to employees of the Company, for the 6-month period
beginning on the Separation Date.
Notwithstanding the foregoing, the Company-provided health benefits will
terminate prior to the expiration of the 6-month period if the Executive becomes
covered by a subsequent employer's health insurance program that provides
comparable benefits to the Executive and imposes no pre-existing condition
exclusion with regard to his coverage or his eligible dependents' coverage. The
Executive agrees that he will immediately notify the Company in writing of his
obtaining subsequent employment which provides health and welfare benefits
during the 6-month period beginning on the Separation Date. Following the
6-month period of Company-provided health insurance benefits described above,
the Executive will be entitled to all rights afforded to him under the federal
Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA") to purchase
continuation coverage of such health insurance benefits for himself and his
eligible dependents for the maximum period permitted by law. To the extent
required by applicable law, the Executive will be deemed to have elected to
exercise his rights under COBRA as of the first day of such 6-month period.
The Executive is entitled to receive all vested benefits under the
Company's 401(k) plan. Except as otherwise set forth in this Section 4, no
accrual of service time will be possible after the Separation Date for purposes
of the Executive's entitlement to any employee benefit, including a pension,
401(k) or profit sharing benefit, long-term disability benefit or vacation pay.
The Executive will be eligible for a matching contribution under the Company's
401(k) plan, if the plan so permits, for any elective deferrals made by the
Executive on or before the Separation Date. The Company shall, if the plan so
permits, allow the Executive to withdraw any vested amount in the Company's
401(k) plan.
5. Restricted Stock Awards and Stock Options. The Executive acknowledges and
agrees that as of the Separation Date he is no longer eligible to exercise any
outstanding unvested stock options received by him under any of the Company's
option and incentive programs. The Executive agrees to surrender as of the
Separation Date all unvested restricted stock awards received by him under any
of the Company's option and incentive compensation programs. The Executive
agrees to execute and deliver any documentation the Company reasonably requests
to effect the surrender of such unvested awards. Exhibit A attached hereto sets
forth certain information with respect to the options and restricted stock
awards granted to the Executive under the Company's option and incentive plans.
6. Indemnification Matters.
(a) After the Separation Date, the Executive shall, to the same extent and
on the same terms and conditions provided for in the Employment Agreement,
indemnify and hold harmless the Company against all damages, costs and expenses
resulting from any material harm to the Company, its business, assets or
employees for actions or inactions occurring during the period of the
Executive's employment with the Company.
(b) To the extent permitted by applicable law, PGRT's Amended and Restated
By-laws, as amended and supplemented (the "By-laws") and PGRT's Articles of
Amendment and Restatement, as amended and supplemented (the "Articles"), and in
the same manner as all other former officers of the Company, the Executive will
continue to be entitled to the protections afforded by the indemnification
provisions of the By-laws and the Articles. To the extent permitted by
applicable law, the By-laws and the Articles, and in the same manner as all
other non-employee members of the Board (or former non-employee members of the
Board as the case may be), the Executive will continue to be entitled to the
protections afforded by the indemnification provisions of the By-laws and the
Articles.
(c) For the remaining term of the Company's directors' and officers'
liability insurance policy, as in effect on the Separation Date, or any
successor policy that the Company may reasonably acquire (subject to the
limitations set forth below), the Executive will enjoy the same protection as
all other former officers of the Company, subject to all existing policy
exclusions, with respect to any claims incurred in connection with any action or
omission in his capacity as an officer of the Company occurring on or before the
Separation Date. For the remaining term of the Company's directors' and
officers' liability insurance policy, as in effect on the Separation Date, or
any successor policy that the Company may reasonably acquire (subject to the
limitations set forth below), the Executive will continue to enjoy the same
protection as all other non-employee members of the Board, subject to all
existing policy exclusions, with respect to any claims incurred in connection
with any action or omission in his capacity as a member of the Board occurring
during the period of the Executive's service as a member of the Board.
Notwithstanding the foregoing, the Company is under no obligation to maintain
directors' and officers' liability insurance coverage or to have such directors'
and officers' liability insurance cover any or all former officers of the
Company and/or members of the Board, if the cost of maintaining and/or providing
the coverage for any or all of such former officers and/or members of the Board,
is unreasonably expensive in the judgment of the Company.
7. Restrictive Covenants. The Executive acknowledges and agrees that the
restrictions set forth in the Non-Competition and Restriction Agreement, dated
November 17, 1997, by and among PGRT, the Operating Partnership, the Executive,
The Prime Group, Inc., an Illinois corporation, and Prime Group Limited
Partnership, an Illinois limited partnership (the "Restriction Agreement"),
shall continue to apply, to the same extent and on the same terms and conditions
provided for in the Restriction Agreement.
8. Breach of Agreement. In the event of any actual or threatened breach of
Section 1 of this Agreement, the Executive acknowledges and agrees that the
Company may seek to enforce the terms of this Agreement in a court of law or
equity and that the remedy at law or equity for any breach will be inadequate.
Therefore, the Company shall be entitled, in addition to any other remedy at law
or equity, to injunctive relief. In the event of any actual or threatened breach
of Sections 1 or 4 of this Agreement, the Company acknowledges and agrees that
the Executive may seek to enforce the terms of this Agreement in a court of law
or equity and that the remedy at law or equity for any breach will be
inadequate. Therefore, the Executive shall be entitled, in addition to any other
remedy at law or equity, to injunctive relief.
9. No Admissions. This Agreement results from a mutual decision and does not
constitute an admission by Executive, PGRT or the Operating Partnership, of any
violation of any federal, state or local law, regulation, ordinance or statute
or of any employment contract (including the Employment Agreement and/or the
Restriction Agreement), whether written or oral.
10. Amendment or Termination of Agreement. This Agreement may be amended at any
time by written agreement between PGRT, the Operating Partnership and the
Executive. This Agreement shall remain in full force and effect until terminated
upon mutual consent of the parties in writing.
11. Entire Agreement. This Agreement constitutes the entire agreement between
the parties with respect to the subject matter hereof. Except as set forth
herein, this Agreement supersedes any and all other agreements (including, but
not without limit, the Employment Agreement), either oral or written, between
the parties hereto with respect to the subject matter hereof.
12. Successors and Assigns. All provisions of this Agreement shall inure to the
benefit of and be enforceable by the Executive's personal and legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees and the successors and assigns of PGRT and the Operating
Partnership. If the Executive should die while any amounts are still payable to
him hereunder, all such amounts shall be paid in accordance with the terms of
this Agreement to the Executive's devisees, legatees or other designee or, if
there be no such designee, to the Executive's estate. The Company 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 the Company, as the case may be, expressly, absolutely and
unconditionally to assume and agree to perform this Agreement in the same manner
and to the same extent that the Company would be required to perform it if no
such succession or assignment had taken place. Any failure of the Company to
obtain such agreement prior to the effectiveness of any such succession or
assignment will be a material breach of this Agreement.
13. Notices. Any notice required or permitted to be given under this Agreement
will be sufficient if in writing and if delivered in person or sent by any
national overnight delivery service or by certified mail to the following
addresses (or to any other address that any party may designate by notice to the
other parties hereto):
(a) if to the Executive, to:
Xxxxxxx X. Xxxxxxx
000 Xxxx Xxxx Xxxxx Xxxxx, Xxxx 0XX
Xxxxxxx, Xxxxxxxx 00000
with a copy to:
XxXxxxx Xxxxx LLP
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxxxxx Xxxxxxxx
(b) if to PGRT or the Operating Partnership:
Prime Group Realty Trust
00 Xxxx Xxxxxx Xxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxxx
Attn: General Counsel
with a copy to:
Winston & Xxxxxx
00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxx
14. 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.
15. Severability. The Company and the Executive each expressly agree and
contract that it is not the intention of any of the parties hereto to violate
any public policy, statutory or common law, and that if any sentence, paragraph,
clause or combination of the same of this Agreement is in violation of the law
of any state where applicable, such sentence, paragraph, clause or combination
of the same shall be void in the jurisdictions where it is unlawful, and the
remainder of such paragraph and this Agreement shall remain binding on the
parties to make the covenants of this Agreement binding only to the extent that
it may be lawfully done under existing applicable laws. In the event that any
part of any covenant of this Agreement is determined by a court of competent
jurisdiction to be overly broad thereby making the covenant unenforceable, the
parties hereto agree, and it is their desire that such court shall substitute a
judicially enforceable limitation in its place, and that as so modified the
covenant shall be binding upon the parties as if originally set forth herein.
16. No Waiver. No failure or delay by the Company or the Executive in enforcing
or exercising any right or remedy hereunder shall operate as a waiver hereof. No
modification, amendment or waiver of this Agreement nor consent to any departure
by either party from any of the terms or conditions thereof, shall be effective
unless in writing and signed by an authorized officer representative of the
respective party. Any such waiver or consent shall be effective only in the
specific instance and for the purpose for which given.
17. Counterparts. The parties may execute this Agreement in one or more
counterparts, all of which together shall constitute but one Agreement.
[Remainder of Page Intentionally Left Blank; Signature Page to Follow]
In Witness Whereof, the parties have executed this Agreement effective as
of the date first above written.
Executive: Prime Group Realty Trust
/s/ Xxxxxxx X. Xxxxxxx By: /s/ Xxxxxxx X. Xxxxx
----------------------- ----------------------
Title: Acting Chairman of the Board
Name: Xxxxxxx X. Xxxxx
Prime Group Realty, L.P.
By: Prime Group Realty Trust,
its General Partner
By: /s/ Xxxxxxx X. Xxxxx
----------------------
Title: Acting Chairman of the Board
Name: Xxxxxxx X. Xxxxx
Exhibit A
---------
Stock Options
-------------
Total
Shares Exercise Expiration
Grant Subject Vested Unvested Price Per Date Following
Date to Option Shares Shares Share Separation
---- --------- ------ ------ ----- ----------
11/17/97 175,000 175,000 0 $20 4/07/03
12/17/98 48,611 48,611 0 $14 4/07/03
12/17/98 35,000 35,000 0 $14 4/07/03
12/16/99 62,500 62,500 0 $13.188 4/07/03
12/16/99 50,000 37,500 12,500 $13.188 4/07/03
1/23/01 10,700 5,350 5,350 $14.3125 4/07/03
------- ------- ------
Totals 381,811 363,961 17,850 N/A N/A
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Restricted Stock
----------------
Total Shares Unvested
Grant Subject to Vested Unvested
Date Award Shares Shares
---- ----- ------ ------
12/17/98 2,775 2,775 0
12/16/99 6,634 6,634 0
12/16/99 5,179 3,885 1,294
1/23/00 6,793 6,793 0
1/23/00 18,500 9,250 9,250
------ ------ ------
Totals 39,881 29,337 10,544
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