Exhibit 10.2


 


EXECUTION COPY


 


 


SUBSCRIPTION
AGREEMENT


This
Subscription Agreement (the “Agreement”), dated as of November 2, 2007,
is by and among Gramercy Capital Corp., a Maryland corporation (the “Company”),
GKK Capital LP, a Delaware limited partnership (the “Operating Partnership”),
SSF III Gemini, LP, a Delaware limited partnership (the “Subscriber”)
and solely for the purposes of Section 1.1(b) and Section 1.4(a) hereof, Morgan
Stanley Real Estate Special Situations Fund III, L.P., a Delaware limited
partnership (the “Guarantor”). 
For purposes of this Agreement, certain terms used herein shall have the
meanings ascribed to them in Section 8 of this Agreement.


WHEREAS:


A.            The
Company, the Operating Partnership and the Subscriber are executing and delivering
this Agreement in reliance upon the exemption from securities registration
afforded by Section 4(2) of the Securities Act of 1933, as amended (the “Securities
Act”).


B.            The Subscriber wishes to purchase,
and the Company wishes to sell, upon the terms and conditions stated in this
Agreement, shares of the common stock, par value $0.001 per share, of the
Company (“Common Stock”).


C.            Concurrently with the execution
hereof, and as a condition of the willingness of the Company and the Subscriber
to enter into this Agreement, the Company, SL Green Operating Partnership,
L.P., a Delaware limited partnership (“SLG OP”) and the Subscriber are
entering into the Stockholders Agreement and the Registration Rights Agreement,
each of which shall become effective as of the Closing Date.


NOW,
THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company, the Operating
Partnership, the Subscriber and the Guarantor agree as follows:


1.             Subscription;
Closing


1.1   Subscription.


(a)           Upon the terms and subject to the conditions set forth in
this Agreement, the Subscriber hereby subscribes for and agrees to purchase
(the “Purchase”) from the Company, and the Company agrees to sell,
3,809,524 shares of Common Stock (the “Purchased Common Stock”) at
a price equal to $26.25 per share, or $100,000,005 in the aggregate (the “Purchase
Price”).  The Purchase shall be
completed (the “Closing”) on the date (the “Closing Date”) as
soon as practicable following the satisfaction or waiver of each of the
conditions set forth in Sections 1.3 and 1.4 hereof (other than those
conditions to be satisfied at the Closing, but subject to the satisfaction or
waiver thereof), but no later than November 7, 2007, or at such other time and
date as the parties hereto shall agree in writing, at the offices of Clifford
Chance US LLP, 31 West 52nd Street, New York, NY 10019.


(b)           The Guarantor hereby agrees to pay the Purchase Price to
the Company on the Closing Date in the event that the Subscriber fails to do so
but is otherwise obligated to hereunder.


 


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1.2   Adjustments. In the event of any stock split,
subdivision, dividend or distribution payable in shares of Common Stock (or
other securities or rights convertible into, or entitling the holder thereof to
receive directly or indirectly shares of Common Stock), combination or other
similar recapitalization or event occurring after the date hereof, each
reference in any Transaction Document to a number of shares or a price per
share shall be amended to appropriately account for such event.


1.3   Closing Deliveries of the Company.  At the Closing, the Company shall deliver to
the Subscriber, and the obligation of the Subscriber to consummate the
transactions contemplated by this Agreement shall be subject to receipt (or
waiver) by the Subscriber of, the following:


(a)           Certificate. 
The Company shall deliver to the Subscriber one or more stock
certificates (the “Certificates”), containing only the legends expressly
provided for in Section 2 hereof, evidencing the Purchased Common Stock;


(b)           Cross Receipt. 
The Company shall have executed a cross receipt certifying that it has
received a wire transfer as of the Closing Date in an amount equal to the
Purchase Price;


(c)           Registration Rights Agreement.  The Company and SLG OP shall have executed
and delivered to the Subscriber the Registration Rights Agreement;


(d)           Stockholders Agreement.  The Company and SLG OP shall have executed
and delivered to the Subscriber the Stockholders Agreement;


(e)           Legal Opinion. 
The Company and the Subscriber shall have received a legal opinion from
Clifford Chance US LLP, substantially in the form of Exhibit C hereto, dated as
of the Closing Date;


(f)            Tax Matters Opinion.  The Subscriber shall have received an opinion
of the Company’s tax counsel, Clifford Chance US LLP, dated as of the Closing
Date, substantially in the form attached hereto as Exhibit D and
such counsel may rely on customary assumptions and representations from the
Company under the Code as to its organization, ownership and method of
operating; and


(g)           Limited Waiver of Ownership Limitations.  Pursuant to Section 11 of the Articles of
Incorporation of the Company, the Board of Directors of the Company shall have
waived the Ownership Limit (as defined in the Articles of Incorporation of the
Company) with respect to the Subscriber and the Subscriber’s purchase of the
Purchased Common Stock hereunder (it being understood that such waiver shall
not cover any other Company securities (including Common Stock) other than the
Purchased Common Stock), and the Subscriber shall have been provided with
evidence of such waiver in form and substance satisfactory to the Subscriber.


1.4   Closing Deliveries of the Subscriber.  At the Closing, the Subscriber shall deliver
to the Company, and the obligations of the Company to consummate the
transactions contemplated by this Agreement shall be subject to receipt (or
waiver) by the Company of, the following:


(a)           Purchase Price. 
The Subscriber, or the Guarantor, shall have paid the Purchase Price by
wire transfer of United States dollars in immediately available funds to 


 


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an account specified by the Company to the
Subscriber in writing at least one (1) Business Day prior to the Closing Date;


(b)           Cross Receipt. The Subscriber shall have executed a
cross-receipt executed certifying that it has received the Purchased Common
Stock;


(c)           Registration Rights Agreement.  The Subscriber and SLG OP shall have executed
and delivered to the Company the Registration Rights Agreement;


(d)           Stockholders Agreement.  The Subscriber and SLG OP shall have executed
and delivered to the Company the Stockholders Agreement; and


(e)           Representation Letter. The Company shall have
received an executed representation letter from the Subscriber in connection
with the Company’s waiver of the Ownership Limit, substantially in the form
attached hereto as Exhibit E.


2.             Securities
Law Matters: The Subscriber understands and agrees that the Purchased
Common Stock is being offered in a transaction not involving any public
offering within the United States within the meaning of the Securities
Act and that the Purchased Common Stock has not been registered under the
Securities Act and, unless so registered, may not be resold except as permitted
in the following sentence.  The
Subscriber agrees that, if in the future it decides to offer, resell, pledge or
otherwise transfer such Purchased Common Stock, such Purchased Common Stock may
be offered, resold, pledged or otherwise transferred only (a) to the
Company or a subsidiary thereof, (b) pursuant to a registration statement
that has been declared and is effective under the Securities Act or
(c) pursuant to any other available exemption from the registration
requirements of the Securities Act, and subject to compliance with any
applicable state securities laws.  The Subscriber
understands, unless and until the Company notifies the Subscriber otherwise in
writing, that the registrar and transfer agent for the Purchased Common Stock
will not be required to accept for registration of transfer any Purchased
Common Stock, and that the Company reserves the right to restrict any offer,
sale or other transfer of the Purchased Common Stock, in each case, pursuant to
clause (c) above, except upon delivery of an opinion of counsel selected
by the transferor and reasonably acceptable to the Company (it being understood
that the law firm of Fried, Frank, Harris, Shriver & Jacobson LLP is
acceptable to the Company), the form and substance of which opinion shall be
reasonably satisfactory to the Company, to the effect that transfer does not
require registration under the Securities Act.  
In addition, the Subscriber understands that, unless and until the
Company notifies the Subscriber otherwise in writing, the Company reserves the
right to restrict any offer, sale or other transfer of the Purchased Common
Stock pursuant to clause (c) above in any sale other than a transaction
described in Rule 144(f) or Rule 144(k) (in which case appropriate customary
documentation thereof will be delivered to the Company and the transfer agent)
promulgated under the Securities Act (or any successor rules) unless the
Company receives from the transferee in such sale a completed and executed
Transferee’s Letter substantially in the form attached hereto as Appendix A.  The Subscriber further understands that any
certificates representing the Purchased Common Stock will bear the following
legend (the “Legend”):


THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN
RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT
OR PURSUANT TO AN 


 


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AVAILABLE
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE
SECURITIES LAWS OR BLUE SKY LAWS.


[IF
APPLICABLE] [THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE, INCLUDING A LOCK-UP PERIOD, AS SET
FORTH IN CERTAIN DEFINITIVE AGREEMENTS BETWEEN THE COMPANY AND THE ORIGINAL
HOLDERS OF THESE SECURITIES, COPIES OF WHICH MAY BE OBTAINED AT THE PRINCIPAL
OFFICE OF THE COMPANY.]


The Company shall reissue promptly certificates without such Legend at
the request of any holder thereof if the holder shall have obtained opinion of
counsel reasonably acceptable to the Company (it being understood that the law
firm of Fried, Frank, Harris, Shriver & Jacobson LLP is acceptable to the
Company), to the effect that, or the Company is otherwise satisfied that, the
securities proposed to be disposed of may lawfully be so disposed of without
registration under the Securities Act.


3.     Representations
and Warranties of the Subscriber. 
The Subscriber hereby represents and warrants to the Company and the
Operating Partnership as follows:


3.1   Authorization.  The
Subscriber has the requisite, limited partnership power and authority to enter
into and to consummate the transactions contemplated by this Agreement and each
of the other Transaction Documents and otherwise to carry out its obligations
hereunder and thereunder.  The execution
and delivery of this Agreement and each of the other Transaction Documents by
the Subscriber and the consummation by it of the transactions contemplated
hereby and thereby have been duly authorized by all necessary action on the
part of the Subscriber and no further consent or action is required by the
Subscriber or any of its equity holders. 
This Agreement and each of the other Transaction Documents has been (or
upon delivery will be) duly executed by the Subscriber and is, or when
delivered in accordance with the terms hereof, will constitute, the valid and
binding obligation of the Subscriber enforceable against it in accordance with
its terms, except as may be limited by (i) applicable bankruptcy,
insolvency, reorganization or other laws of general application relating to or
affecting the enforcement of creditors rights generally, and (ii) the
effect of rules of law governing the availability of specific performance and
other equitable remedies.


3.2   Organization.  The
Subscriber has been duly organized and is validly existing in good standing
under the laws of the State of its organization and has power and authority to
own, lease and operate its properties and to conduct its business as currently
conducted and to enter into and perform its obligations under this Agreement
and the other Transaction Documents.  The
Subscriber is duly qualified as a foreign limited partnership to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business.


3.3   Consents. In connection with the execution, delivery or
performance of this Agreement, the Subscriber is not required to make or obtain
any consents or approvals of, or filings or registrations with, any court,
administrative agency or commission or other Governmental Entity, including the
United States Securities and Exchange Commission (“SEC”), or with any
third party, except for filings pursuant to Section 13 and Section 16 of the
Securities 


 


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Exchange Act of 1934, as amended (the “Exchange
Act”), and the rules and regulations promulgated thereunder.


3.4   Securities Law Matters. 
The Subscriber acknowledges that the Subscriber must qualify under the
standards described below, in order to qualify for the purchase of Purchased
Common Stock.


(a)           The Subscriber is a “qualified institutional buyer,” as
such term is defined in Rule 144A under the Securities Act, and is an “accredited
investor,” as such term is defined in Regulation D under the Securities Act.


(b)           The Subscriber acknowledges that it is able to bear the
economic risk of an investment in the Purchased Common Stock.


(c)           The Subscriber acknowledges that the controlling Person of
the Subscriber has prior investment experience, including investment in
non-listed and non-registered securities, or the Subscriber has employed the
services of an investment advisor, attorney or accountant to read all of the
documents furnished or made available by the Company to the Subscriber and to
evaluate the merits and risks of such an investment on the Subscriber’s behalf.


(d)           The Subscriber has received such information as the
Subscriber deems necessary in order to make an investment decision with respect
to the Purchased Common Stock.  The Subscriber
acknowledges that the Subscriber and the Subscriber’s advisor(s), if any, have
had the right to ask questions of and receive answers from the Company and its
officers and directors, and to obtain such information concerning the terms and
conditions of this offering of the Purchased Common Stock, as the Subscriber
and the Subscriber’s advisor(s), if any, deem necessary to verify the accuracy
of any information that the Subscriber deems relevant to making an
investment in the Purchased Common Stock. 
The Subscriber represents and agrees that prior to the execution of this
Agreement, the Subscriber and the Subscriber’s advisor(s), if any, will have
asked such questions, received such answers and obtained such information as
the Subscriber deems necessary to verify the accuracy of any information that
the Subscriber deems relevant to making an investment in the Purchased Common
Stock.  The Subscriber became aware of
this offering of the Purchased Common Stock and the Purchased Common Stock was
offered to the Subscriber solely by means of direct contact between the
Subscriber (or its controlling person) and the Company.  The Subscriber did not become aware of, nor
were the shares of the Purchased Common Stock offered to the Subscriber by any
other means, including, in each case, by any form of general solicitation or
general advertising.  In making the
decision to purchase the Purchased Common Stock, the Subscriber relied solely
on the information, including current, quarterly and annual reports and information,
documents and other reports with respect to the Company filed with the SEC
pursuant to the Exchange Act and other information obtained by the Subscriber
directly from the Company as a result of any inquiries by the Subscriber or the
Subscriber’s advisor(s).


(e)           The Subscriber hereby acknowledges that the sale of
Purchased Common Stock has not been reviewed by, and the fairness of such
Purchased Common Stock has not been determined by, the SEC or any state
regulatory authority, because the offering is 


 


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intended to be a private placement pursuant
to Section 4(2) of the Securities Act and Regulation D promulgated
thereunder.


(f)            The Subscriber understands that the Purchased Common
Stock has not been registered under the Securities Act or any state securities
or “blue sky” laws and is being sold in reliance on exemptions from the
registration requirements of the Securities Act and such laws.  The Subscriber agrees to offer, sell or
otherwise transfer any such Purchased Common Stock only in accordance with the
terms thereof or an exemption therefrom and in accordance with this Agreement,
the Stockholders Agreement and the Registration Rights Agreement.


(g)           The Subscriber is acquiring the Purchased Common Stock for
investment purposes and not with a view to, or for offer or sale in connection
with, any distribution in violation of the Securities Act.  The sole limited partner of the Subscriber
was not formed for the specific purpose of acquiring the Purchased Common
Stock.


(h)           The Subscriber is acquiring the Purchased Common Stock for
the Subscriber’s own account.


(i)            The Subscriber consents to the placement of the Legend on
the certificate representing the Purchased Common Stock.  The Subscriber is aware that the Company will
make a notation in its appropriate records with respect to the restrictions on
the transferability of the Purchased Common Stock.


3.5   Affiliate Status. 
The Subscriber is not an “affiliate” (as defined in Rule 144 under the
Securities Act) of the Company or acting on behalf of an affiliate of the
Company.


3.6   ERISA.  The
Subscriber is not and for so long as it holds Common Stock will not be
(i) an employee benefit plan (as defined in Section 3(3) of ERISA),
subject to Title I of ERISA, (ii) a plan subject to Section 4975 of the
Internal Revenue Code of 1986, as amended (the “Code”), (iii) an
entity whose underlying assets include “plan assets” (as defined in Section
3(42) of ERISA) by reason of a plan’s investment in such entity (including but
not limited to an insurance company general account), or (iv) an entity
that otherwise constitutes a “benefit plan investor” within the meaning of the
DOL Regulation Section 2510.3-101 (29 C.F.R. Section 2510.3-101), as modified
by Section 3(42) of ERISA (any of the foregoing, a “Benefit Plan Investor”).


3.7   Benefit Plan.  Except
for transactions set forth in Section 2 hereof, the Subscriber acknowledges
that the Purchased Common Stock may not be purchased by or otherwise acquired
by any Benefit Plan Investor.


3.8   Ownership.  The
Subscriber represents that as of the date of this Agreement and prior to the
issuance of the Purchased Common Stock by the Company, neither the Subscriber
nor any Affiliate whose beneficial ownership would be aggregated with the
Subscriber or any Person who controls the Subscriber owns any Common Stock
other than 128,000 shares of Common Stock.


3.9   Reliance.  The
foregoing representations, warranties and agreements shall be true and correct
in all respects on and as of the date of this Agreement and the Closing Date,
as if made on and as of each such date, and if there should be any material
change in such information prior to the Closing Date of the sale of the
Purchased Common Stock, the Subscriber shall immediately 


 


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furnish in writing such revised or corrected
information to the Company.  The
Subscriber understands that the Company will rely upon the accuracy and truth
of the foregoing representations, warranties and agreements, and the Subscriber
hereby consents to such reliance.


3.10 Disclosure.  The
Company is irrevocably authorized to produce this Agreement or a copy hereof
(i) to any interested party in any administrative or legal proceeding or
official inquiry with respect to the matters covered hereby and (ii) in
connection with the filing of this Agreement as an exhibit to a Current Report
on Form 8-K of the Company.


4.     Representations
and Warranties of the Company and the Operating Partnership. The Company
and the Operating Partnership hereby represent and warrant as follows:


4.1   No Material Adverse Change in Business.  Except as otherwise stated in the SEC
Documents, (A) since December 31, 2006, there has been no material adverse
change or any development involving a prospective material adverse change in
the operations, condition (financial or otherwise), or in the earnings,
business affairs or business prospects of the Company and its subsidiaries,
including, without limitation, the Operating Partnership, considered as one
enterprise, whether or not arising in the ordinary course of business (a “Material
Adverse Effect”); provided, however, that a mere change in
the price of the Company’s Common Stock in the absence of any other change or
event that would be considered a material adverse event shall not be deemed a
material adverse change for this purpose, (B) since December 31, 2006,
neither the Company nor any of its subsidiaries has incurred or undertaken any
liabilities or obligations, direct or contingent, which are material to the
Company and its subsidiaries, including without limitation the Operating
Partnership, considered as one enterprise, except for liabilities or
obligations which are described in the SEC Documents, and (C) there has
been no dividend or distribution of any kind declared, paid or made by the
Company on any class of its stock.


4.2   SEC Documents.  The
SEC Documents, when they became effective or at the time they were or hereafter
are filed with the SEC, complied and will comply in all material respects with
the requirements of the Securities Act and the rules and regulation thereunder
(the “Securities Act Regulations”) or the Exchange Act and the rules and
regulations of the SEC thereunder (the “Exchange Act Regulations”), as
applicable, and did not and will not contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading.


4.3   Company Authorization of Agreement.  The execution and delivery of each of this
Agreement, the Stockholders Agreement and the Registration Rights Agreement by
the Company and the consummation by it of the transactions contemplated hereby
and thereby have been duly authorized by the Company.  Each of this Agreement, the Stockholders
Agreement and the Registration Rights Agreement has been duly executed by the
Company and is the valid and binding obligation of the Company enforceable
against the Company in accordance with its terms, except as may be limited by
(i) applicable bankruptcy, insolvency, reorganization or other laws of
general application relating to or affecting the enforcement of creditors
rights generally, and (ii) the effect of rules of law governing the
availability of specific performance and other equitable remedies.


4.4   Operating Partnership Authorization of Agreement.  The execution and delivery of this Agreement
by the Operating Partnership and the consummation by it of the transactions
contemplated hereby have been duly authorized by the Operating
Partnership.  This Agreement 


 


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has been duly executed by the Operating
Partnership and is the valid and binding obligation of the Operating
Partnership enforceable against the Operating Partnership in accordance with
its terms, except as may be limited by (i) applicable bankruptcy,
insolvency, reorganization or other laws of general application relating to or
affecting the enforcement of creditors rights generally, and (ii) the
effect of rules of law governing the availability of specific performance and
other equitable remedies.


4.5   Authorization of Management Agreement and Origination Agreement.  The amended and restated management agreement
(the “Management Agreement”), effective as of April 19, 2006, and
further amended by the First Amendment to the Management Agreement dated
September 18, 2007, among the Company, the Operating Partnership and GKK
Manager LLC (the “Manager”) has been duly authorized, executed and
delivered by each of the Company and the Operating Partnership and constitutes
a valid and binding agreement of each of the Company and the Operating
Partnership enforceable in accordance with its terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization or
other laws affecting enforcement of creditors’ rights or by general equitable
principles.  The amended and restated
origination agreement (the “Origination Agreement”), effective as of
April 19, 2006, among the Company, the Operating Partnership and SLG OP has
been duly authorized, executed and delivered by each of the Company and the
Operating Partnership and constitutes a valid and binding agreement of each of
the Company and the Operating Partnership enforceable in accordance with its
terms, except to the extent that enforcement thereof may be limited by
bankruptcy, insolvency, reorganization or other laws affecting enforcement of
creditors’ rights or by general equitable principles.


4.6   Financial Statements. 
The financial statements of the Company and its subsidiaries, together
with the related schedules (if any) and notes (the “Company Financial
Statements”), included in the SEC Documents, and any financial statements
required by Rule 3-14 of Regulation S-X (the “Acquisition Financial
Statements”), included in the SEC Documents, present fairly the financial
position of the Company and its consolidated subsidiaries at the dates
indicated, or, if applicable, with respect to the Acquisition Financial
Statements, the respective property or tenant; and all such financial
statements have been prepared in conformity with United States generally
accepted accounting principles (“GAAP”) applied on a consistent basis
throughout the periods involved and comply with all applicable accounting
requirements under the Securities Act and the Securities Act Regulations.  The supporting schedules, if any, included in
the SEC Documents, present fairly, in accordance with GAAP, the information
required to be stated therein.  There are
no financial statements or schedules required to be included in the SEC
Documents, under the Securities Act or the Securities Act Regulations which are
not so included.  If applicable, the
unaudited pro forma financial information (including the related notes)
included in the SEC Documents, complies as to form in all material respects
with the applicable accounting requirements of the Securities Act and the
Securities Act Regulations, and management of the Company believes that the assumptions
underlying the pro forma adjustments are reasonable.  If applicable, such pro forma adjustments
have been properly applied to the historical amounts in the compilation of the
information and such information fairly presents with respect to the Company
and its consolidated subsidiaries, the financial position, results of
operations and other information purported to be shown therein at the
respective dates and for the respective periods specified.  No pro forma financial information is
required to be included in the SEC Documents, which is not so included.


 


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4.7   Good Standing of the Company and the Operating Partnership.  The Company has been duly organized and is
validly existing as a corporation in good standing under the laws of the State
of Maryland and has power and authority to own, lease and operate its
properties and to conduct its business and to enter into and perform its
obligations under this Agreement; and the Operating Partnership has been duly
formed and is validly existing as a limited partnership in good standing under
the laws of the State of Delaware and has authority to own, lease and operate
its properties and to conduct its business. 
Each of the Company and the Operating Partnership is duly qualified as a
foreign corporation to transact business and is in good standing in the State
of New York and in each other jurisdiction in which such qualification is
required, whether by reason of the ownership or leasing of property or the conduct
of business, except (solely in the case of jurisdictions other than the State
of New York) where the failure so to qualify or to be in good standing would
not result in a Material Adverse Effect.


4.8   The Partnership Agreement. 
The Amended and Restated Agreement of Limited Partnership of the
Operating Partnership (the “Partnership Agreement”) has been duly and
validly authorized, executed and delivered by the Company, as general partner
of the Operating Partnership, and is a valid and binding agreement, enforceable
against the Company in accordance with its terms, except to the extent that
enforcement thereof may be limited by bankruptcy, insolvency, reorganization or
other laws affecting enforcement of creditors’ rights or by general equitable
principles.  The Partnership Agreement
has been duly executed and delivered by the other parties thereto and, to the
Company’s knowledge, is a valid and binding agreement enforceable against such
parties in accordance with its terms, except to the extent that enforcement
thereof may be limited by bankruptcy, insolvency, reorganization or other laws
affecting enforcement of creditors’ rights or by general equitable principles.


4.9   Capitalization.  As
of the date hereof, the authorized capital stock of the Company consisted of
100,000,000 shares of Common Stock and 25,000,000 shares of preferred stock,
par value $0.001 per share, of which 30,902,000 shares of Common Stock are
issued and outstanding and 4,600,000 shares of preferred stock are issued and
outstanding.  The issued and outstanding
shares of stock of the Company have been duly authorized and are validly
issued, fully paid and nonassessable; and none of the outstanding shares of
stock of the Company was issued in violation of any preemptive rights, rights of
first refusal or other similar rights of any securityholder of the Company or
any other Person.  The authorized, issued
and outstanding units of partnership interest in the Operating Partnership,
including the Class B Limited Partner interests (the “OP Units”), have
been duly authorized and validly issued; and all of such OP Units have been
sold in compliance with applicable laws (including, without limitation, federal
and state securities laws).


4.10 Authorization of the Purchased Common Stock.  The Purchased Common Stock to be offered
pursuant to this Agreement has been duly authorized for issuance and sale to
the Purchaser pursuant to this Agreement and, when issued and delivered by the
Company pursuant to this Agreement against payment of the consideration set
forth herein, will be validly issued, fully paid and nonassessable, and free
and clear of all liens, claims, security interests or other encumbrances; no
holder of the Purchased Common Stock is or will be subject to personal
liability by reason of being such a holder; and the issuance of the Purchased
Common Stock is not subject to any preemptive right, right of first refusal or
other similar right of any securityholder of the Company or any other person.


4.11 Absence of Defaults and Conflicts.  Neither the Company, the Operating
Partnership nor any of their respective subsidiaries is in violation of its
Organizational 


 


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Documents (as defined below)
or in default in the performance or observance of any obligation, agreement,
covenant or condition contained in any Company Document (as defined below),
except for such defaults that would not result in a Material Adverse
Effect.  The execution, delivery and
performance of this Agreement and the issuance and delivery of the shares of
Purchased Common Stock and the consummation of the transactions contemplated
herein have been duly authorized by all necessary action and compliance by the
Company and the Operating Partnership with their obligations under this Agreement
do not and will not, whether with or without the giving of notice or passage of
time or both, conflict with or constitute a breach of, or default under, or
result in the creation or imposition of any Lien upon any property or assets of
the Company, the Operating Partnership or any of their respective subsidiaries
pursuant to any Company Documents, nor will such action result in any violation
of the provisions of the Organizational Documents of the Company, the Operating
Partnership or any of their respective subsidiaries or any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any government,
government instrumentality or court, domestic or foreign, having jurisdiction
over the Company, the Operating Partnership or any of their respective
subsidiaries or any of their respective assets, properties or operations.  The term “Company Documents” as used
herein means any contracts, indentures, mortgages, deeds of trust, loan or
credit agreements, bonds, notes, debentures, evidences of indebtedness, leases
or other instruments or agreements to which the Company, the Operating
Partnership or any of their respective subsidiaries is a party or by which the
Company, the Operating Partnership or any of their respective subsidiaries is
bound or to which any of the property or assets of the Company, the Operating
Partnership or any of their respective subsidiaries is subject.  The term “Organizational Documents” as
use herein means (a) in the case of a corporation, its charter and by-laws;
(b) in the case of a limited or general partnership, its partnership
certificate, certificate of formation or similar organizational document and
its partnership agreement; (c) in the case of a limited liability company,
its articles of organization, certificate of formation or similar
organizational documents and its operating agreement, limited liability company
agreement, membership agreement or other similar agreement; (d) in the
case of a trust, its certificate of trust, certificate of formation or similar
organizational document and its trust agreement or other similar agreement; and
(e) in the case of any other entity, the organizational and governing
documents of such entity.


4.12 Absence of Proceedings. 
There is no action, suit, proceeding, inquiry or investigation before or
brought by any Governmental Entity, now pending, against or affecting the
Company, the Operating Partnership or any of their respective subsidiaries or
which has as a subject thereof, any officer or director of the Company in their
capacity as such or as would otherwise be required to be disclosed in the SEC
Documents (other than disclosed therein). 
To the knowledge of the Company or the Operating Partnership, there is
no action, suit, proceeding, inquiry or investigation before or brought by any
Governmental Entity, threatened, against or affecting the Company, the
Operating Partnership or any of their respective subsidiaries except as would
not have a Material Adverse Effect or which has as a subject thereof, any
officer or director of the Company in their capacity as such or as would
otherwise be required to be disclosed in the SEC Documents (other than
disclosed therein).


4.13 Possession of Intellectual Property.  The Company, the Operating Partnership and
their respective subsidiaries own or possess or have the right to use on
reasonable terms all material patents, patent rights, patent applications,
licenses, inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential information, systems
or procedures), trademarks, service marks, trade names, service names and other
intellectual property (collectively, “Intellectual Property”) necessary
to carry on their 


 


10

















 


respective businesses as described in the SEC
Documents and as proposed to be conducted, except as, individually or in the
aggregate, would not result in a Material Adverse Effect; and neither the
Company, the Operating Partnership nor any of their respective subsidiaries has
received any notice or is otherwise aware of any infringement of or conflict
with asserted rights of others with respect to any Intellectual Property or of
any facts or circumstances which would render any Intellectual Property invalid
or inadequate to protect the interest of the Company, the Operating Partnership
or any of their respective subsidiaries therein, and which infringement or
conflict (if the subject of any unfavorable decision, ruling or finding) or
invalidity or inadequacy, individually or in the aggregate, would result in a
Material Adverse Effect.


4.14 Absence of Further Requirements.  (A) No filing with, or authorization,
approval, consent, license, order, registration, qualification or decree of,
any Governmental Entity, (B) no authorization, approval, vote or other
consent of any stockholder or creditor of the Company or the Operating
Partnership, (C) no waiver or consent under any Company Document, and
(D) no authorization, approval, vote or other consent of any other person
or entity, is necessary or required for the performance by the Company or the
Operating Partnership of their respective obligations under this Agreement, for
the offering, issuance, sale or delivery of the Securities hereunder, or for
the consummation of any of the other transactions contemplated by this
Agreement, the Stockholders Agreement or the Registration Rights Agreement, in
each case on the terms contemplated by this Agreement and the SEC Documents,
except such as have been already obtained under the Securities Act or the
Securities Act Regulations, and such as may be required under state securities
laws.


4.15 Possession of Licenses and Permits.  The Company, the Operating Partnership and
their respective subsidiaries possess such permits, licenses, approvals,
consents and other authorizations issued by the appropriate federal, state,
local or foreign regulatory agencies or bodies (collectively, “Governmental
Licenses”) as are necessary to conduct the business now operated by them;
the Company and its subsidiaries are in compliance with the terms and
conditions of all such Governmental Licenses, except where the failure so to
comply would not, individually or in the aggregate, have a Material Adverse
Effect; all of the Governmental Licenses are valid and in full force and
effect, except when the invalidity of such Governmental Licenses or the failure
of such Governmental Licenses to be in full force and effect would not have a
Material Adverse Effect; and neither the Company, the Operating Partnership nor
any of their respective subsidiaries has received any notice of proceedings
relating to the revocation or modification of any such Governmental Licenses
which, individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would result in a Material Adverse Effect.


4.16 Investment Company Act. 
The Company is not, and upon the issuance and sale of the Purchased
Common Stock as herein contemplated and the application of the proceeds
therefrom, will not be, an “investment company” or an entity “controlled” by an
“investment company” as such terms are defined the Investment Company Act of
1940, as amended.


4.17 No General Solicitation. Neither the Company, the Operating
Partnership, nor any of their respective Affiliates, nor any Person acting on
its or their behalf, has engaged in any form of general solicitation or general
advertising (within the meaning of Rule 506 of Regulation D as promulgated by
the SEC in connection with the offer or sale of the Purchased Common Stock.


4.18 Absence of Registration Rights.  Except as disclosed in the SEC Documents,
there are no persons with registration rights or other similar rights to have
any securities (debt or 


 


11

















 


equity) (A) included in
the offering contemplated by this Agreement or (B) otherwise registered by
the Company under the Securities Act. 
There are no persons with tag-along rights or other similar rights to
have any securities (debt or equity) included in the offering contemplated by
this Agreement or sold in connection with the sale of Purchased Common Stock by
the Company pursuant to this Agreement.


4.19 Certificates.  The form
of certificate used to evidence the Purchased Common Stock complies in all
material respects with all applicable statutory requirements, with any
applicable requirements of the organizational documents of the Company and the
requirements of the New York Stock Exchange.


4.20 Insurance.  The
Company, the Operating Partnership and each of their respective subsidiaries
are insured by insurers of recognized financial responsibility against such
losses and risks and in such amounts as are prudent and customary in the
businesses in which they are engaged; all policies of insurance and any
fidelity or surety bonds insuring the Company, the Operating Partnership or any
of their respective subsidiaries or their respective businesses, assets,
employees, officers and directors are in full force and effect; the Company,
the Operating Partnership and their respective subsidiaries are in compliance
with the terms of such policies and instruments in all material respects; there
are no claims by the Company, the Operating Partnership or any of their
respective subsidiaries under any such policy or instrument as to which any
insurance company is denying liability or defending under a reservation of
rights clause; neither the Company, the Operating Partnership nor any such
subsidiary has been refused any insurance coverage sought or applied for; and
neither the Company, the Operating Partnership nor any such subsidiary has any
reason to believe that it will not be able to renew its existing insurance
coverage as and when such coverage expires or to obtain similar coverage from
similar insurers as may be necessary to continue its business at a cost that
would not have a Material Adverse Effect.


4.21 Disclosure and Controls and Procedures.  The Company and the Operating Partnership
have established and maintain disclosure controls and procedures (as such term
is defined in Rule 13a-15(e) under the Exchange Act) that (i) are designed
to ensure that material information required to be disclosed by the Company in
the reports that it files or submits under the Exchange Act is accumulated  and communicated to the Company’s management,
including the Company’s principal executive officer and principal financial
officer, particularly during the preparation of the reports that it files or
submits under the Exchange Act; and (ii) are effective to ensure that
information required to be disclosed by the Company in the reports that it
files or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the SEC’s rules and forms.


4.22 Accounting Controls. 
The Company, the Operating Partnership and each of their respective
subsidiaries maintain a system of internal control over financial reporting
sufficient to provide reasonable assurance that financial reporting is reliable
and financial statements for external purposes are prepared in accordance with
GAAP and includes policies and procedures that (i) pertain to the
maintenance of records that in reasonable detail accurately and fairly reflect
the transactions and dispositions of the assets of the Company;
(ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
GAAP, and to maintain asset accountability; (iii) access to assets is
permitted only in accordance with management’s general or specific authorization;
and (iv) the recorded accountability for assets is compared with the existing
assets at reasonable intervals and appropriate action is taken with respect to
any differences.


 


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4.23 ERISA.  Except as set
forth in the Company’s financial statements, the Company does not have any
material liabilities under the Employee Retirement Income Security Act of 1974,
as amended, or Section 4975 of the Code.


4.24 REIT Status. 
Commencing with the Company’s taxable year ended December 31, 2004, the
taxable year ended December 31, 2005 of the First Private REIT and the taxable
year ending December 31, 2007 of the Second Private REIT, each of the Company
and the Private REITs has been organized and operated in conformity with the
requirements for qualification and taxation as a REIT under the Code, and each
of the Company’s and the Private REITs’ current and proposed method of
operations as described in the SEC Documents will enable it to continue to meet
the requirements for qualification and taxation as a REIT under the Code for
its taxable year ending December 31, 2007 and in future taxable years. No
transaction or other event has occurred which could cause the Company or the
Private REITs to not be able to qualify as a REIT for its taxable year ending
December 31, 2007 or future taxable years.


4.25 Tax Returns.  All tax
returns required to be filed as of the date hereof by the Company and each of
its subsidiaries have been timely filed (or valid extensions to such filings
have been obtained), all such tax returns are true, correct and complete in all
material respects, and all material taxes and other assessments of a similar
nature (whether imposed directly or through withholding) including any
interest, additions to tax or penalties applicable thereto due or claimed to be
due from such entities have been paid, other than those being contested in good
faith and for which adequate reserves have been provided.


4.26 Related Party Transactions. 
There are no business relationships or related-party transactions
involving the Company or the Operating Partnership required to be described in
the SEC Documents which have not been so described as required.


4.27 No Unlawful Contributions or Other Payments.  Neither the Company, the Operating
Partnership nor any subsidiary nor, to the best of the Company’s knowledge, any
employee or agent of the Company, the Operating Partnership or any subsidiary,
has made any contribution or other payment to any official of, or candidate for,
any federal, state or foreign office in violation of any law or of the
character required to be disclosed in the SEC Documents.


4.28 No Prohibition on Subsidiaries from Paying Dividends or Making
Other Distributions.  Other than as
disclosed in the SEC Documents, no subsidiary is currently prohibited, directly
or indirectly, from paying any dividends to the Company, from making any other
distribution on such subsidiary’s capital stock or other equity interests, from
repaying to the Company any loans or advances to such subsidiary from the
Company or from transferring any of such subsidiary’s property or assets to the
Company or any other subsidiary.


4.29 Title to Real and Personal Property.  The Company and its subsidiaries, including
the Operating Partnership, have (or in the case of a Joint Venture, such
limited partnership, limited liability company or other joint venture entity
has) good and marketable title in fee simple to, or a valid leasehold interest
in, any real property currently leased or owned or controlled by them, or to be
leased or owned or to be controlled by them (collectively, the “Real Property”)
and good and marketable title to any and all personal property owned by the
Company or any of its Subsidiaries that is material to the business of the
Company or the Operating Partnership, in each case free and clear of all Liens,
except as described in the SEC Documents or such as would not reasonably be
expected to result in a Material Adverse Effect; and any real property,
buildings and equipment held under lease by the Company and its subsidiaries
are held by them under 


 


13

















 


valid, subsisting and enforceable leases
(the ”Leases”) with such exceptions as are disclosed in the SEC
Documents or such as would not reasonably be expected to result in a Material
Adverse Effect; (ii) neither the Company nor any of its subsidiaries has
received notice of any claim that has been or may be asserted by anyone adverse
to the rights of the Company or any subsidiary with respect to any such Real
Properties, personal property or Leases or affecting or questioning the rights
of the Company to the continued ownership, lease, possession or occupancy of
such Real Properties, personal property or Leases, except for such claims that
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect; (iii) no person or entity, including, without
limitation, any tenant under the leases, if any, for the Real Properties has an
option or right of first refusal or any other right to purchase any of such
Real Properties, except as disclosed in the SEC Documents; (iv) all of the
Leases are in full force and effect, except where the failure to be in full
force or effect would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, and neither the Company nor any of
its subsidiaries is in default in the payment of any amounts due under any such
Leases or in any other default thereunder and neither the Company nor any of
its subsidiaries knows or an event which, with the passage of time or the
giving of notice or both, would constitute a default under any such Lease,
except such defaults that would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect; and (v) there is
no pending or, to the knowledge of the Company or its subsidiaries, threatened
condemnation, zoning change, or other proceeding or action that would in any
manner affect the size of, use of, improvements on, construction on or access
to any Real Property, except such proceedings or actions that, either
individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect.


4.30 Title Insurance.  The
Company and its subsidiaries, or as applicable a joint venture, has either
(i) an owner’s or leasehold title insurance policy, from a title insurance
company licensed to issue such policy, on any Real Property, that insures the
fee or leasehold interest, as the case may be, which policies include only
commercially reasonable exceptions, and with coverages in amounts at least
equal to amounts that the Company believes are generally commercially
reasonable in the markets where the Real Properties are located or
(ii) with respect to mortgage loans extended by the Company and its
subsidiaries, the Company or its subsidiary has one or more lender’s title
insurance policies insuring the Lien of the mortgages encumbering the real
property underlying such loans with coverages, in the aggregate, equal to at
least the maximum aggregate principal amount of such loan.


4.31 Compliance with
Environmental Laws.  Except to
an extent that would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect or as otherwise disclosed in
the SEC Documents: (i) neither the Company nor any of its subsidiaries
nor, to the knowledge of the Company, any other owners of the Real Property at
any time, or to the knowledge of the Company, any other party has at any time,
handled, stored, treated, transported, manufactured, spilled, leaked, or
discharged, dumped, transferred or otherwise disposed of or dealt with,
Hazardous Materials (as hereinafter defined) on, to or from any Real Property,
other than by any such action taken in material compliance with all applicable
Environmental Statutes (as hereinafter defined) or by the 


 


14

















 


Company, any of its subsidiaries or any other
party in connection with the ordinary use of residential, retail or commercial
properties owned by the Company or any subsidiary; (ii) the Company and
its subsidiaries do not intend to use the Real Property or any subsequently
acquired properties for the purpose of handling, storing, treating, transporting,
manufacturing, spilling, leaking, discharging, dumping, transferring or
otherwise disposing of or dealing with Hazardous Materials other than by any
such action taken in material compliance with all applicable Environmental
Statutes or by the Company, any of its subsidiaries or, to the knowledge of the
Company, any other party in connection with the ordinary use of residential,
retail or commercial properties owned by the Company or any subsidiary;
(iii) the Company and the Operating Partnership do not know of any
seepage, leak, discharge, release, emission, spill, or dumping of Hazardous
Materials from the Real Property into waters on or adjacent to the Real
Property or from the Real Property onto any real property owned or occupied by
any other party, or onto lands from which Hazardous Materials might seep, flow
or drain into such waters other than in material compliance with Environmental
Statutes; (iv) neither the Company nor any of its subsidiaries has received any
notice of, or has knowledge of, any occurrence or circumstance which, with
notice or passage of time or both, would give rise to a claim under or pursuant
to any U.S. federal, state or local environmental statute or regulation or
under common law, pertaining to Hazardous Materials on or originating from any
of the Real Property or arising out of the conduct of the Company or any of its
subsidiaries, including without limitation a claim under or pursuant to any
Environmental Statute (as hereinafter defined); and (v) neither the Real
Property is included nor, to the Company’s or the Operating Partnership’s
knowledge, is proposed for inclusion on the National Priorities List issued
pursuant to CERCLA (as hereinafter defined) by United States Environmental
Protection Agency (the “EPA”) or, to the Company’s or to the Operating
Partnership’s knowledge, proposed for inclusion on any similar list or
inventory issued pursuant to any other Environmental Statute or issued by any
other governmental authority.


As used herein, “Hazardous Materials” shall include, without
limitation, any flammable explosives, radioactive materials, hazardous
materials, hazardous wastes, toxic substances, or related materials, asbestos
or any hazardous material as defined by any U.S. federal, state or local
environmental law, ordinance, rule or regulation including without limitation
the Comprehensive Environmental Response, Compensation, and Liability Act of
1980, as amended, 42 U.S.C. Sections 9601-9675 (“CERCLA”), the Hazardous
Materials Transportation Act, as amended, 49 U.S.C. Sections 1801-1819, the
Resource Conservation and Recovery Act, as amended, 42 U.S.C. Sections
6901-6992K, the Emergency Planning and Community Right-to-Know Act of 1986, 42
U.S.C. Sections 11001-11050, the Toxic Substances Control Act, 15 U.S.C.
Sections 2601-2671, the Federal Insecticide, Fungicide and Rodenticide Act, 7
U.S.C. Sections 136-136y, the Clean Air Act, 42 U.S.C. Sections 7401-7642, the
Clean Water Act (Federal Water Pollution Control Act), 33 U.S.C. Sections
1251-1387, the Safe Drinking Water Act, 42 U.S.C. Sections 300f-330j-26, and
the Occupational Safety and Health Act, 29 U.S.C. Sections 651-678, as any of
the above statutes may be amended from time to time, and in the regulations
promulgated pursuant to each of the foregoing (individually, an “Environmental
Statute”) or by any Governmental Entity.


4.32 Compliance with ADA. 
The Company and its subsidiaries and each Real Property are currently in
compliance with all presently applicable provisions of the Americans with
Disabilities Act, as amended, except for any such non-compliance that would
not, individually or in aggregate, reasonably be expected to have a Material
Adverse Effect.


4.33 No Breach or Default under Loans.  To the Company’s knowledge, there is no
breach of, or default under (nor has any event occurred which with notice,
lapse of time, or both would constitute a breach of, or default under) the
loan documents relating to the debt instruments acquired or originated by the
Company (collectively, the “Loans”) which breach or default, if uncured,
would result in a Material Adverse Effect. 
To the Company’s knowledge without due inquiry, there is no breach or
default under (nor has any event occurred which with notice, lapse of time, or
both would constitute a breach of, or default under) the loan documents
relating to any 


 


15

















 


loans senior to the Loans, which breach or
default, if uncured, would result in a Material Adverse Effect.


4.34 Sarbanes-Oxley Act. 
The Company and each of the Company’s directors and officers, in their
capacities as such, are in full compliance with all applicable provisions of
the Sarbanes-Oxley Act of 2002 and the rules and regulations promulgated in
connection therewith (the “Sarbanes-Oxley Act”), including Section 402
related to loans and Sections 302 and 906 related to certifications.


4.35 No Registration.  The
Purchased Common Stock to be sold to the Purchaser pursuant to this Agreement
will be issued and sold pursuant to the registration exemption provided by
Regulation D and Section 4(2) of the Securities Act as a transaction not
involving a public offering and the requirements of any other applicable state
securities laws and the respective rules and regulations thereunder.


4.36 Form S-3.  The Company
is eligible to register the Purchased Common Stock for resale by the Subscriber
using Form S-3 promulgated under the Securities Act.


4.37 Reliance.  The Company
and the Operating Partnership understand that the Subscriber will rely upon the
accuracy and truth of the foregoing representations, warranties and agreements,
and the Company and the Operating Partnership hereby consent to such reliance.


5.     Additional
Covenants.


5.1   NYSE Listing. 
Promptly following the Closing, the Company shall prepare and submit to
the New York Stock Exchange a listing application covering the Purchased Common
Stock and shall take all actions reasonably necessary to obtain approval for
the listing of such shares.


5.2   Further Action.  Each
of the parties hereto shall use its commercially reasonable best efforts to
take all action necessary in order to consummate the transactions contemplated
by Section 1 hereof on or before November 7, 2007.


5.3   Voting Agreement. 
Upon the request of the Company, Subscriber shall enter into a voting agreement
substantially in the form of Exhibit F hereto with respect to the
merger agreement attached as Exhibit A to such voting agreement.


5.4   Dividend Declaration. The Company agrees that between the
date hereof and the Closing Date (assuming such date is not later than November
7, 2007) it will not declare a dividend on its Common Stock or set a record
date for such dividend on or prior to the Closing Date (assuming such date is
not later than November 7, 2007).


5.5   SLG OP Preemptive Right. The Company acknowledges that SLG
OP has declined to exercise its right under the Origination Agreement to
purchase, and the Company agrees not to sell and issue to SLG OP, Common Stock
in connection with the Company’s sale and issuance of the Purchased Common
Stock to the Subscriber pursuant to this Agreement.


5.6   Tax Status.  The
Company will, upon request of the Subscriber, issue to the Subscriber (i) the
statement described in Treas. Reg. Section 1.897-2(h) as to whether or not the
stock of the Company constitutes a U.S. real property interest as of the date
specified in such 


 


16

















 


notice and (ii) a statement, to the Company’s
actual knowledge, without independent inquiry, as to whether the Company is a “domestically
controlled qualified investment entity” within the meaning of Section 897(h) of
the Code as of the date specified in such notice; provided, however, that the
Company will only be required to comply with clause (i) above one time each
year if the Subscriber makes such request and the Subscriber shall be obligated
to pay all reasonable costs and expenses incurred by the Company with respect
to such request.  In complying with
clause (i) above, the Company may use, if entitled, the method provided for in
Treas. Reg. Section 1.897-2(b)(2) to determine if the Company is a U.S. real
property holding corporation.


6.     Indemnification.


6.1   Indemnification by the
Company and the Operating Partnership.  Each of the Company and the Operating
Partnership, jointly and severally, agrees to indemnify and hold harmless the
Subscriber against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising in whole or in part out of any untrue
statement or alleged untrue statement of a material fact contained in the SEC
Documents, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading.


6.2   Indemnification by the
Subscriber.  The Subscriber
severally agrees to indemnify and hold harmless the Company, its directors and
officers and the Operating Partnership against any and all loss, liability,
claim, damage and expense whatsoever, as incurred, arising in whole or in part
out of any breach by the Subscriber of any representation, warranty, agreement
or obligation of the Subscriber contained in this Agreement or any certificate,
instrument or document contemplated hereby and delivered on or prior to the
Closing Date.


7.     Survival.  No representations and warranties set forth
in Section 3 or Section 4 shall survive the Closing Date except for the
representations and warranties set forth in Sections 3.1 (Authorization), 3.2
(Organization), 3.4 (Securities Law Matters), 3.5 (Affiliate Status), 3.6
(ERISA), 3.7 (Benefit Plan), 3.8 (Ownership), 3.9 (Reliance), 4.3 (Company
Authorization of Agreement), 4.4 (Operating Partnership Authorization of
Agreement), 4.9 (Capitalization), 4.10 (Authorization of the Purchased Common
Stock), 4.36 (Form S-3), and 4.37 (Reliance), which shall survive the Closing
Date indefinitely.  All covenants and
agreements contained herein shall survive until, by their respective terms,
they are fully performed and no longer operative.


8.     Certain
Defined Terms.  For purposes of this
Agreement, the following terms shall have the respective meanings assigned to
them below:


8.1   “Affiliate” of a Person means any Person that, directly or
indirectly through one or more intermediaries, controls or is controlled by or
is under common control with such Person, as such terms are used in and
construed under Rule 144 under the Securities Act.


8.2   “Business Day” means any day other than a Saturday, Sunday,
or a legal holiday for commercial banks in New York, New York.


8.3   “Governmental Entity” means any international, national,
federal, state, provincial or local governmental, regulatory or administrative
authority, agency, commission, board, court, tribunal, arbitral body,
self-regulated entity or similar body, whether domestic or foreign.


 


17

















 


8.4   “Person” means any individual or corporation, partnership,
trust, incorporated or unincorporated association, joint venture, limited
liability company, or joint stock company.


8.5   “Pledgee” shall mean any lender who has made a loan to
Subscriber or any Permitted Transferee (as defined in the Stockholders
Agreement) or any Affiliate thereof and to whom either Subscriber, any
Permitted Transferee (as defined in the Stockholders Agreement) or Affiliate
thereof has pledged their direct or indirect interests in any Common Stock as
security for such loan.


8.6   “Registration Rights Agreement” means the Registration
Rights Agreement in the form attached hereto as Exhibit A between the
Company and the Subscriber.


8.7   “SEC Documents” means all reports filed by the Company
prior to the date hereof under the Exchange Act, including pursuant to Section
13(a), or 15(d) thereof, since December 31, 2006.


8.8   “Stockholders Agreement” means the Stockholders Agreement
in the form attached hereto as Exhibit B, among the Company, the
Subscriber, and SLG OP.


8.9   “Transaction Documents” means this Agreement, the
Stockholders Agreement and the Registration Rights Agreement.


9.     Miscellaneous


9.1   Notices.  Any and all
notices or other communications or deliveries required or permitted to be
provided hereunder shall be in writing and shall be deemed given and effective
on the earliest of (a) upon confirmation of transmission and receipt, if
such notice or communication is delivered via facsimile at the facsimile number
specified in this Section 9.1 prior to 6:30 p.m. (New York City time)
(b) the Business Day following the date of deposit with a nationally
recognized overnight courier service, or (c) upon actual receipt by the
party to whom such notice is required to be given.  The addresses and facsimile numbers for such
notices and communications are those set forth on the signature pages hereof,
or such other address or facsimile number as may be designated in writing hereafter,
in the same manner, by any such Person.


9.2   Governing Law.  This
Agreement shall be governed by and construed in accordance with the laws of the
State of New York applicable to contracts made and to be performed entirely in
such State.  The parties consent to the
exclusive jurisdiction of the United States District Court for the Southern
District of New York in connection with any civil action concerning any
controversy, dispute or claim arising out of or relating to this Agreement, or
any other agreement contemplated by, or otherwise with respect to, this
Agreement or the breach hereof, unless such court would not have subject matter
jurisdiction thereof, in which event the parties consent to the jurisdiction of
the State of New York.  The parties hereby
waive and agree not to asset in any litigation concerning this Agreement the
doctrine of forum non conveniens.


9.3   Amendments; Waivers. 
No provision of this Agreement may be waived or amended except in a
written instrument signed, in the case of an amendment, by the Company and the
Subscriber or, in the case of a waiver, by the party against whom enforcement
of any such waiver is sought.  No waiver
of any default with respect to any provision, condition or requirement of this
Agreement shall be deemed to be a continuing waiver in the future or a waiver
of any 


 


18

















 


subsequent default or a waiver of any other
provision, condition or requirement hereof, nor shall any delay or omission of
either party to exercise any right hereunder in any manner impair the exercise
of any such right.


9.4   Construction.  The
headings herein are for convenience only, do not constitute a part of this
Agreement and shall not be deemed to limit or affect any of the provisions
hereof.  The language used in this
Agreement will be deemed to be the language chosen by the parties to express
their mutual intent, and no rules of strict construction will be applied
against any party.


9.5   Entire Agreement. 
This Agreement constitutes the entire agreement between the parties hereto
with respect to the subject matter hereof and may be amended only in a writing
that is executed by each of the parties hereto.


9.6   No Third Party Beneficiaries.  This Agreement shall inure to the benefit of
and be binding upon the Company and the Subscriber.  Nothing in this Agreement is intended, or
shall be construed, to give any other person or entity any right hereunder or
by virtue hereof.  This Agreement may not
be assigned by the Company or the Subscriber without the prior written consent
of the other party hereto.  As set forth
in Section 4 of the Stockholders Agreement, in the event that any Pledgee
exercises its rights to foreclosure under a pledge relating to the Purchased
Common Stock, this Agreement, the Stockholders Agreement and the Registration
Rights Agreement shall immediately terminate without any further action.


9.7   Expenses.  All
expenses incurred by any party to this Agreement or on its behalf (including
those payable to its representatives) in connection with this Agreement and the
transactions contemplated by this Agreement will be paid by the party incurring
such expenses..


9.8   Severability.  In the
event that any provisions hereof shall be determined to be invalid or
unenforceable in any respect, such determination shall not affect such
provision in any other respect or any other provision hereof, which shall
remain in full force and effect.  This
Agreement may be executed in separate counterparts, each of which shall be
deemed an original and all of which together shall be deemed to constitute one
and the same instrument.


9.9   Execution.  This
Agreement may be executed in two or more counterparts, all of which when taken
together shall be considered one and the same agreement and shall become
effective when counterparts have been signed by each party and delivered to the
other party, it being understood that both parties need not sign the same
counterpart.  In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid and binding obligation of the party executing (or on whose behalf such
signature is executed) with the same force and effect as if such facsimile
signature page were an original thereof.


*****


[Signature on following page]


 


19
















                IN
WITNESS WHEREOF, the parties hereto have caused this Subscription Agreement to
be duly executed by their respective authorized signatories as of the date
first indicated above.


	
  Date: November 2, 2007

  	
  GRAMERCY
  CAPITAL CORP.,

  a Maryland corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ MARC
  HOLLIDAY

  
	
   

  	
   

  	
  Name: Marc Holliday

  
	
   

  	
   

  	
  Title: Chief Executive Officer and President

  
	
   

  	
   

  
	
   

  	
  Address for Notice:

  420 Lexington Avenue

  New York, New York 10170

  
	
   

  	
   

  
	
   

  	
  GKK CAPITAL LP,
  a Delaware limited 

  partnership

  
	
   

  	
   

  
	
   

  	
  By: GRAMERCY
  CAPITAL CORP., a 

  Maryland corporation, its General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ MARC HOLLIDAY

  
	
   

  	
   

  	
  Name: Marc Holliday

  
	
   

  	
   

  	
  Title: Chief Executive Officer and
  President

  
	
   

  	
   

  
	
   

  	
  Address for Notice:

  420 Lexington Avenue

  New York, New York 10170

  



 

















	
   

  	
  SSF III
  GEMINI, LP, a Delaware limited 

  partnership

  
	
   

  	
   

  
	
   

  	
  By:
  SSF III GEMINI GP, LLC,

  its General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ HUGH
  MACDONNELL

  
	
   

  	
   

  	
  Name: Hugh
  MacDonnell

  
	
   

  	
   

  	
  Title:
  Authorized Person

  
	
   

  	
   

  
	
   

  	
  Address
  for Notice:

  c/o SSF III Gemini GP, LLC

  1585 Broadway, 37th Floor

  New York, NY 10036

  



 

















Solely for purposes of Section 1.1(b) and Section 1.4(a):


	
   

  	
  MORGAN STANLEY REAL ESTATE 

  SPECIAL SITUATIONS FUND III, L.P.,
  a 

  Delaware limited partnership, as Guarantor

  
	
   

  	
   

  
	
   

  	
  By: MORGAN
  STANLEY REAL ESTATE 

  SPECIAL SITUATIONS FUND III—GP, L.L.C., 

  its General Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ HUGH
  MACDONNELL

  
	
   

  	
   

  	
  Name: Hugh
  MacDonnell

  
	
   

  	
   

  	
  Title: Authorized
  Person

  
	
   

  	
   

  
	
   

  	
  Address
  for Notice:

  c/o Morgan Stanley Real Estate Special Situations

  Fund III—GP, L.L.C.
 1585 Broadway, 37th Floor

  New York, NY 10036