NON-COMPETITION AND RESTRICTION AGREEMENT
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THIS NON-COMPETITION AND RESTRICTION AGREEMENT (this "Agreement") is made
and entered into as of November __, 1997, by and among PRIME GROUP REALTY TRUST,
a Maryland real estate investment trust (the "Company"), PRIME GROUP REALTY,
L.P., a Delaware limited partnership (the "Operating Partnership"), THE PRIME
GROUP, INC., an Illinois corporation ("TPG"), PRIME GROUP LIMITED PARTNERSHIP,
an Illinois limited partnership ("PGLP" and, together with TPG, the "TPG
Group"), and XXXXXXX X. XXXXXXX, an individual ("Xxxxxxx").
W I T N E S S E T H:
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WHEREAS, the Company, through its subsidiaries and affiliates, is engaged
primarily in the business of the acquisition, development, leasing, marketing
and management of office and industrial real estate properties;
WHEREAS, on the date hereof the Company and the Operating Partnership are
entering into a series of related transactions pursuant to which, among other
things, they will acquire substantially all of the interests of the office and
industrial real estate development, leasing and management business of the TPG
Group and its affiliates (the "Formation");
WHEREAS, Xxxxxxx and the TPG Group will continue to engage in certain real
estate-related activities after the date hereof; and
WHEREAS, as a condition to the consummation of the transactions described
above, and in an effort to eliminate potential conflicts of interest that may
arise in the future as a result of the continuing activities of Xxxxxxx and the
TPG Group, the parties hereto desire, subject to certain conditions and
exceptions set forth herein, to enter into this Agreement restricting certain
activities of Xxxxxxx and the TPG Group while Xxxxxxx is Chairman of the Board
of the Company or while the TPG Group, Xxxxxxx and their Affiliates (as
hereinafter defined) own, in the aggregate, five percent (5%) or more of the
issued and outstanding common shares of beneficial interest of the Company
("Common Shares") and limited partner interests in the Operating Partnership
exchangeable into Common Shares on a fully diluted basis after giving effect to
the exchange into Common Shares of all limited partner interests in the
Operating Partnership and after taking into consideration the interests of all
general partners in the Operating Partnership.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. Certain capitalized terms used but not otherwise defined
herein shall have the meanings set forth below:
"Affiliate" means (i) any entity in which Xxxxxxx and the TPG Group
(either individually or collectively) own or control, directly or indirectly,
fifty percent (50%) or more of the outstanding equity interests, (ii) any entity
with respect to which Xxxxxxx and the TPG Group (either individually or
collectively) have the right or power, directly or indirectly, to cause such
entity to acquire an interest in any property within the Primary Business of the
Company without the consent or approval of a third party equity owner and (iii)
any entity with respect to which Xxxxxxx and the TPG Group (either individually
or collectively) have the right or power, directly or indirectly, to withhold
consent or approval of an acquisition by such entity of an interest in any
property within the Primary Business of the Company where such consent or
approval is required as a condition to consummation of such acquisition.
"Primary Business of the Company" means any interest in any real
property within the office and industrial real estate acquisition, ownership,
development, leasing and management business, unless and until any such business
is no longer within the primary business of the Company, as determined from time
to time by a majority vote of the independent trustees of the Company.
2. Prohibitions Relating to Office and Industrial Properties.
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(a) Subject to subsections 2(b) and 2(c) below, from and after the
date hereof and during the term of this Agreement, neither Xxxxxxx, the TPG
Group nor any Affiliate will own any real estate property or acquire any real
estate property or any direct or indirect interest therein (except any ownership
resulting from foreclosure of indebtedness), or manage any real estate property,
that is within the Primary Business of the Company, provided, however, that the
foregoing shall not prohibit Xxxxxxx, the TPG Group or any Affiliate from
providing any mortgage financing, from acting as lessor in a sale-leaseback
transaction, from providing any other subordinated debt with respect to any
facilities or properties of the type included within the Primary Business of the
Company or from obtaining a preferred equity position in any owner or lessee of
any such type of facilities or properties.
(b) Excluded from the restrictions set forth in subsection 2(a) are
the following properties and interests: (i) any interest in the Company or the
Operating Partnership; (ii) any activity which a majority of the independent
members of the board of trustees of the Company determine not to be competitive
with any facility or property which the Company or Operating Partnership owns or
intends to acquire; (iii) any properties in which the TPG Group or Xxxxxxx or
any Affiliate had a direct or indirect interest prior to the Formation; (iv) the
ownership by the TPG Group or
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Xxxxxxx of less than five percent (5%) of any class of securities listed on a
national securities exchange or included in the Nasdaq National Market; and (v)
subject to the proviso at the end of this clause (v), any facilities or
properties acquired after the date of this Agreement in the Primary Business of
the Company, but only to the extent such facilities or properties are acquired
in connection with the acquisition of a group of facilities or properties;
provided, that in the event of any such acquisition permitted by this clause
(v), the Company or the Operating Partnership shall have the right and
opportunity to purchase the facilities or properties within the Primary Business
of the Company from Xxxxxxx, the TPG Group or any Affiliate, as applicable, at a
price equal to the fair market value thereof (as determined (1) by an
independent appraiser acceptable to both Xxxxxxx, the TPG Group or such
Affiliate, as applicable, on the one hand, and the Company or the Operating
Partnership, on the other hand, or (2) by any other means mutually acceptable to
Xxxxxxx, the TPG Group or such Affiliate, on the one hand, and the Company or
the Operating Partnership, on the other hand).
(c) The restrictions set forth in subsection 2(a) shall not prohibit
the sale, lease or other disposition, or any activities incident thereto, of any
property in which the TPG Group or Xxxxxxx or any Affiliate has an interest on
the date hereof.
3. Term. This Agreement shall be in effect from and after the date hereof
and shall continue in effect until (a) Xxxxxxx ceases to serve as Chairman of
the Board of the Company and (b) Xxxxxxx, the TPG Group and their Affiliates
cease to own five percent (5%) or more of the Common Shares of the Company and
limited partner interests in the Operating Partnership exchangeable for Common
Shares, on a fully-diluted basis after giving effect to the exchange into Common
Shares of any limited partner interests in the Operating Partnership owned by
such parties and any other party and after taking into consideration the
interests of all general partners in the Operating Partnership.
4. Reasonable Limit. The parties hereto have attempted to set forth
certain restrictions only to the extent necessary to protect the interests of
the Company. Each of Xxxxxxx and the TPG Group expressly acknowledges that the
restrictive covenant contained in subsection 2(a) above along with the
exceptions thereto contained in subsections 2(b) and 2(c) above, constitutes a
reasonable restriction. If, however, the scope of enforceability of the
restrictive covenant contained in this Agreement is disputed at any time, a
court or other trier of fact may modify and enforce the covenant to the extent
that it believes is reasonable under the circumstances existing at the time.
5. Breach of Agreement.
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(a) A party aggrieved shall notify the other party in writing of any
conflicts, disputes or claims of breach arising
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under this Agreement. Within ten (10) business days after such notice is sent,
the parties shall meet, shall develop, as fully as possible, the facts relating
to the conflict, dispute or alleged breach, and shall attempt to resolve the
same, it being understood and agreed that any such resolution shall be subject
to the consent and approval of a majority of the Company's independent trustees.
If resolution of the dispute is not made to the satisfaction of the aggrieved
party within thirty (30) days after the notice is sent, the aggrieved party may
pursue its legal and equitable remedies.
(b) In the event of breach of this Agreement, each of Xxxxxxx and the
TPG Group acknowledges that the remedy at law would be inadequate and that, in
addition to monetary damages, the Company shall be entitled, after compliance
with the dispute mechanism described in subsection 5(a) above, to seek an
injunctive order restraining such breach.
6. Transferability. The parties hereto agree that this Agreement shall
inure to the benefit of the Company, and its successors and assigns and shall be
transferrable and assignable by the Company in connection with the sale or other
transfer of a controlling (50%) interest in the Company to an entity that is not
an Affiliate. Upon such transfer or assignment, this Agreement shall remain in
full force and effect, under the terms herein, between Xxxxxxx, the TPG Group
and such transferees, assignees or successors in interest. This Agreement shall
be binding upon the successors and assigns of all or substantially all of the
business of the TPG Group.
7. Waiver. The waiver by an party to this Agreement of a breach by any
party or any provision of this Agreement shall not operate or be construed as a
waiver of any subsequent breach by any other party. No waiver of any provision
of this Agreement shall be effective, unless in writing and signed by the party
waiving its rights, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given, provided
further that no waiver by the Company shall be effective unless accompanied by a
certificate of an executive officer of the Company certifying that a majority of
the independent trustees of the Company have consented to and approved such
waiver.
8. Notices. All notices, requests, demands and other communications given
by any party hereto shall be in writing and shall be deemed to be duly given if
delivered, or if mailed first class, return receipt requested addressed as
follows:
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To the Company or the To the TPG Group or any member
Operating Partnership: thereof:
Prime Group Realty Trust c/o The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx 00 X. Xxxxxx Xxxxx
Xxxxxxx, XX 00000 Xxxxxxx, XX 00000
Attention: Chief Executive Officer Attention: Xxxxxxx X. Xxxxxxx
With a copy to: With a copy to:
Prime Group Realty Trust The Prime Group, Inc.
00 Xxxx Xxxxxx Xxxxx 00 Xxxx Xxxxxx Xxxxx
Xxxxxxx, XX 00000 Xxxxxxx, XX 00000
Attention: General Counsel Attention: General Counsel
To Xxxxxxx X. Xxxxxxx:
c/o The Prime Group, Inc.
00 X. Xxxxxx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx
9. Entire Agreement. This instrument supersedes all prior understandings
and agreements of the parties hereto and contains the entire agreement of the
parties with respect to the subject matter hereof and may not be amended or
changed, except by an agreement in writing entered into by the parties hereto.
10. Applicable Law. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Illinois.
11. Severability. If a court of competent jurisdiction adjudicates any
one or more of provisions of this Agreement as invalid, illegal or unenforceable
in any respect, such provision(s) shall be ineffective only to the extent and
duration of such invalidity, illegality or unenforceability and such invalidity,
illegality or unenforceability shall not affect the remaining substance of such
provision or any of this Agreement's other provisions, and this Agreement shall
be construed as if it had never contained such invalid, illegal and
unenforceable provision.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Non-
Competition and Restriction Agreement to be duly executed as of the date first
above written.
COMPANY: XXXXXXX AND THE TPG GROUP:
PRIME GROUP REALTY TRUST,
a Maryland real estate
investment trust __________________________
Xxxxxxx X. Xxxxxxx
By: ___________________________
Its:__________________________ THE PRIME GROUP, INC.,
an Illinois corporation
PRIME GROUP REALTY, L.P.,
a Delaware limited partnership By:_______________________
Its:______________________
By: Prime Group Realty Trust,
its Managing General
Partner PRIME GROUP LIMITED
PARTNERSHIP, an Illinois
By:________________________ limited partnership
Its:_______________________
By:_________________________
Xxxxxxx X. Xxxxxxx,
Managing General Partner
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