**Exhibit 10.3**

 

 

 

GRAMERCY CAPITAL CORP.

 

DIRECTORS’ DEFERRAL PROGRAM

 

 

 

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**TABLE OF CONTENTS**

 
| 1.     | Definitions                                                        |   |
|--------|--------------------------------------------------------------------|--------|
|   |                                                               |   |
| 2.     | Grants  Under the Equity Incentive Plan; Administration of Program |   |
|   |                                                               |   |
| 3.     | Effective  Date of Program; Termination of the Program             |   |
|   |                                                               |   |
| 4.     | Eligibility                                                        |   |
|   |                                                               |   |
| 5.     | Cash Fees and Options                                              |   |
|   |                                                               |   |
| 6.     | Phantom Shares                                                     |   |
|   |                                                               |   |
| 7.     | Dividend Equivalent Rights                                         |   |
|   |                                                               |   |
| 8.     | Settlement and Withdrawal                                          |   |
|   |                                                               |   |
| 9.     | Amendment and Modification                                         |   |
|   |                                                               |   |
| 10.    | Captions                                                           |   |

 

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GRAMERCY CAPITAL CORP.

 

DIRECTORS’ DEFERRAL PROGRAM

 

Gramercy Capital Corp., acorporation organized under the laws of the State of Maryland, maintains theEquity Incentive Plan.  Among the formsof compensation contemplated by the Equity Incentive Plan are awards to Directors.  The Company wishes to align further theinterests of Directors and stockholders and generally increase theeffectiveness of its compensation structure for Directors, by implementing theProgram.  In furtherance thereof, and bythe authority to make grants under the Equity Incentive Plan, the Program isadopted to implement certain such grants, and to govern the manner in which theShares underlying such grants shall be delivered, as set forth herein.  In addition, the Program provides for otherdeferrals of certain directors’ fees and Shares received upon the exercise ofcertain options in accordance with the terms hereof.

 

1.                                       Definitions.

 

Capitalized terms usedherein without definitions shall have the meanings given to those terms in theEquity Incentive Plan.  In addition,whenever used herein, the following terms shall have the meanings set forthbelow except as the context requires otherwise:

 

“Account” means adeferred compensation account established for a Participant in accordance with Section 4.2(d).

 

“Equity Incentive Plan”means the Gramercy Capital Corp. 2004 Equity Incentive Plan, as amended fromtime to time.

 

“Participant” means aDirector of the Company who is credited hereunder with one or more PhantomShares or who has otherwise deferred receipt of fees hereunder as permitted bythe Board.

 

“Program” means theCompany’s Directors’ Deferral Program, as set forth herein and as the same mayfrom time to time be amended.

 

2.                                       Grants Under the Equity IncentivePlan; Administration of Program.

 

The grants of PhantomShares and Dividend Equivalent Rights shall constitute grants under andgoverned by the Equity Incentive Plan to Directors.  Thus, the Phantom Shares shall be subject inall respects to the provisions of the Equity Incentive Plan governing grants toDirectors; provided that the Committee shall not be designated to acthereunder, and all functions of the Committee shall be fulfilled by theBoard.  Cash payments under the Programnot relating to Phantom Shares or Dividend Equivalent Rights shall also begoverned by the same rules as are established under the Equity IncentivePlan as to interpretation, beneficiary designation, exculpation (andindemnification) and all other matters of administration.  Without limiting the generality of theforgoing, the provisions of Sections 7.4 and 7.5 of the Plan shall beapplicable in respect of the Account, credits thereto and distributionstherefrom.

 

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3.                                       Effective Date of Program;Termination of the Program.

 

The effective date of theProgram is                   ,2005.  The Program shall terminate on,and no Phantom Shares or Dividend Equivalent Rights shall be granted or otherdeferrals made hereunder on or after, the 10-year anniversary of, the effectivedate of the Program (and, in the case of Phantom Shares and Dividend EquivalentRights, the date of termination or expiration of the Equity Incentive Plan, ifearlier).

 

4.                                       Eligibility.

 

Except as otherwisedetermined by the Board, each individual who is a Director of the Company shallbe eligible to participate in the Program.

 

5.                                       Cash Fees and Options.

 

5.1                                 Types of Fees.

 

In consideration of eachDirector’s service as a member of the Board, each Director may be eligible fromtime to time, under the Company’s director compensation arrangements, toreceive as compensation (i) periodic retainer fees, a portion of which ispayable in cash or Shares, as elected by the Participant (a “Cash Retainer”),and a portion of which is payable in Shares (an “Equity Retainer”); (ii) inthe case of the chairman of each of the committees of the Board, additionalperiodic retainer fees (“Chairmen’s Retainers”); (iii) a fee per Boardmeeting attended, to be paid following each meeting (a “Meeting Fee”); and (iv) afee per committee meeting attended, to be paid following each meeting (a “CommitteeMeeting Fee”).  These amounts are subjectto deferral under the Program, as set forth herein.

 

5.2                                 Election to Defer Cash Fees.

 

(a)                                  The Participant may elect that up to 100%(in increments of 1%) of the Participant’s Cash Retainer, Chairmen’s Retainer,Meeting Fee and Committee Meeting Fee (collectively, the “Cash Fees”) shall bepayable as compensation deferred under the Program.  With respect to a Participant’s election todefer all or a portion of the Cash Fees for a calendar year, such electionshall be made prior to December 1st of the year preceding such calendaryear, except that (i) with respect to 2005, a Participant may make anelection prior to                   , 2005 with respect to Cash Fees otherwise payable in2005 for services performed after the date of such election, and (ii) inthe case of a new Participant, the Participant may make an election within 30days after such Participant first becomes eligible to participate in accordancewith Section 4, with respect to Cash Fees otherwise payable in thecalendar year of the election, for services performed after the effective dateof such election.  All deferrals underthis Section 5.2 shall be fully vested; provided that, before orconcurrently with any deferral, and in the event that there are vestingconditions applicable in respect of the underlying Cash Fees, the Board mayprovide for vesting conditions to be applicable in respect of the correspondingdeferral.

 

(b)                                 The election described in Section 5.2(a) shallbe made in writing substantially in such form as the Board may prescribe fromtime to time, within the times

 

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specified herein.  With respectto a Participant’s election to defer amounts described in Section 5.1,such election shall, except as otherwise permitted by the Board (taking intoaccount, without limitation, the application of Section 409A of the Code, as the Board may deem appropriate), beirrevocable as of the first day of the applicable annual period.  Except as may be permitted by the Board,elections described in Section 5.2(a) shall continue in effect fromyear to year unless revoked prior to the beginning of the applicable year.

 

(c)                                  Unless otherwise elected by theParticipant, Cash Fees deferred under this Section 5.2 of the Programshall not be paid currently but rather shall be credited to such Participant inthe form of Phantom Shares.  Unlessotherwise determined by the Board, the number of Phantom Shares to be creditedwith respect to cash fees deferred pursuant to Section 5.2 (a) aboveshall be equal to (i) the amount of cash fees to be paid divided by (ii) theFair Market Value of a Share on the date such cash fees otherwise would havebeen paid.

 

(d)                                 A Participant may elect, prior to earninga Cash Fee, to defer such a Cash Fee in the form of a credit to the Participant’sAccount, to be adjusted for accruals of any earnings and losses over time asset forth below, rather than in the form of Phantom Shares.  Upon such an election, the amount of thedeferred fee shall not be paid currently but rather shall be credited to theParticipant’s Account.  Such creditsshall be made when Cash Fees would otherwise have been paid to the Participantbut for an election pursuant to Section 5.2(a).  A separate subaccount under each Participant’sAccount may in the discretion of the Board be established to record each year’sdeferrals, and the credits and deductions with respect thereto.  With respect to credits under this Section 5.2(d),earnings and losses shall accrue on the balance in the applicable Participant’sAccount at the rate or rates specified in advance of the effective time of theapplicability of such rate or rates, and from time to time, by the Board.  As determined by the Board, such rate orrates may be a fixed rate, and may be established by reference to an index orindices, or may be a return on one or more specific investments or on aspecific investment fund or funds.  Ifthe Board does not select a rate, the rate shall be equal to the 30-day LIBORrate in effect at the beginning of a month plus 2%.  Earnings and losses shall be credited toParticipants’ Accounts as of the end of each calendar month and, with respectto any particular Participant’s Account, shall continue to be credited theretountil all amounts are distributed with respect to the Participant’s Account inaccordance with the Program.  Upondistribution, any accrued earnings shall be credited to the Participant’sAccount and distributed therewith, and any accrued losses shall reduce theamount of distributions hereunder.

 

(e)                                  Subject to Section 8, the Board maypermit a Participant to elect, one time during each 12-month period, to convertas of the end of the calendar month of the election, Phantom Shares to Accountcredits, and vice-versa, in whole or in part (but, in the case of PhantomShares, only in whole Phantom Shares) with credits and liquidation of PhantomShares to be effected based on the Phantom Share Value as of the end of suchmonth, and credits and liquidation of Accounts to be effected based on Accountvalues as of the end of such month.

 

(f)                                    The establishment and maintenance of, andcredits to and deductions from, the Participant’s Account shall be merebookkeeping entries, and shall not vest in the Participant or his beneficiaryany right, title or interest in or to any specific assets of the Company.  A

 

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separate subaccount under each Participant’s Account shall beestablished to record each year’s deferrals, and the credits and deductionswith respect thereto.

 

5.3                                 Stock Options.

 

Subject to the provisionsof the Program, and notwithstanding the terms of any applicable AwardAgreement, the Board may permit, on such terms and conditions as it may adopt(taking into account, without limitation, the application of Section 409Aof the Code, as the Board may deemappropriate), a Director to be credited with Phantom Shares pursuant tothe Director’s election to defer delivery of shares of Common Stock whichotherwise would be delivered to him or her upon exercise of a previouslyunexercised stock option.

 

6.                                       Phantom Shares.

 

6.1                                 Credits of Phantom Shares.

 

Each Director may electto receive a credit of Phantom Shares in respect of each portion of an EquityRetainer that would be payable on any particular date without regard to theProgram.  With respect to a Participant’selection to defer an Equity Retainer for a calendar year, such election shallbe made prior to December 1st of the year preceding such calendar year,except that (i) with respect to 2005, a Participant may make an electionprior to                 , 2005 with respect to the Equity Retainer otherwisepayable in 2005 for services performed after the date of such election, and (ii) inthe case of a new Participant, the Participant may make an election within 30days after such Participant first becomes eligible to participate in accordancewith Section 4, with respect to the Equity Retainer otherwise payable inthe calendar year of the election, for services performed after the effectivedate of such election.

 

6.2                                 Vesting.

 

Phantom Shares deferredunder Section 6.1 shall be fully vested; provided that, before orconcurrently with any grant under Section 6.1, the Board may provide(consistently with such vesting conditions as may be applicable in respect ofthe underlying Cash Fee or Equity Retainer, as applicable) for differentvesting conditions to be applicable to such grant.

 

7.                                       Dividend Equivalent Rights.

 

(a)                                  Except as may otherwise be provided bythe Board at or before the time the applicable Phantom Share is credited,Directors will receive a Dividend Equivalent Right in respect of any creditedPhantom Shares (whether from deferred Cash Fees or from the Equity Retainer, orin connection with the exercise of stock options), which right consists of theright to receive a cash payment in an amount equal to the regular cash dividenddistributions paid on a Share from time to time. Except as provided in Section 7(b),or as may otherwise be provided by the Board at or before the time theapplicable Phantom Share is paid, payment in respect of a Dividend EquivalentRight shall be made at the same time as dividends are paid on the Common Stock.

 

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(b)                                 Instead of the form of payment ascontemplated by Section 7(a) above, except as may otherwise may beprovided by the Board, a Participant may elect, in accordance with the rules ofSection 5.2(a), to have Phantom Shares credited, or credits to the Participant’sAccount made, in respect of the Dividend Equivalent Rights referred to in Section 7(a).  Unless otherwise determined by the Board, thenumber of Phantom Shares (if any) to be credited with respect to a DividendEquivalent Right shall be equal to (i) the amount of the payment inrespect of the Dividend Equivalent Right otherwise to be made divided by (ii) theFair Market Value of a Share on the date the corresponding dividenddistribution is made to stockholders of the Company; provided that such PhantomShare shall vest at such time as the underlying Phantom Share vests.  In the case of a credit to the Account, theamount of the credit shall be equal to the amount of the applicable cashdividend (such credit to be made on the date the corresponding dividenddistribution is made to stockholders of the Company); provided that the portionof the Account relating to such credit, as adjusted for earnings and losses,shall vest at such time as the underlying Phantom Share vests.

 

8.                                       Settlement and Withdrawal.  

 

Distributionswith respect to vested Phantom Shares will be made in cash (in accordance withthe Plan) or, if elected in accordance with rules provided by the Board(taking into account, without limitation, the application of Section 409Aof the Code, as the Board may deem appropriate), in Shares (in accordance withthe Plan); provided, however, that (x) Phantom Shares into which Accountcredits are converted under Section 5.2(e) (if any) shall always bedistributed in cash and (y) Phantom Shares payable in Shares may not beconverted into Account credits under Section 5.2(e).  Distributions with respect to cash deferralsfrom a Participant’s Account will be settled by a cash payment to theParticipant, in an amount equal to the value of the Participant’s Account as ofthe last day of the calendar month coincident with or immediately prior to thedate of such distribution, or as of such additional dates as the Board mydesignate.  The rules governing thetiming and form of distributions from the Account shall be substantiallysimilar to those governing distributions in respect of Phantom Shares, asdetermined in the discretion of the Board (taking into account, withoutlimitation, the application of Section 409A of the Code, as the Board maydeem appropriate).

 

9.                                       Amendment and Modification.

 

(a)                                  The Board may amend the Program as itshall deem advisable, except that no amendment may adversely affect aParticipant with respect to deferred Cash Fees or equity awards previouslycredited unless such amendments are required in order to comply with applicablelaws; provided that the Board may not make any amendment to the Program thatwould, if such amendment were not approved by the holders of the Common Stock,cause the Program to fail to comply with any requirement of applicable law orregulation, unless and until the approval of the holders of such Common Stockis obtained.

 

(b)                                 The Board may make such changes to theProgram as may be necessary or appropriate to comply with the rules andregulations of any government authority or to obtain tax benefits applicable todeferred equity units.

 

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(c)                                  Notwithstanding any election under anAward Agreement, to the extent any deferral under the Program is determined bythe Board to be ineffective for U.S. federal income tax purposes or otherwiseinconsistent with the U.S. federal tax laws, due to a change in U.S. federaltax law, such amounts shall be distributed to the Participant as soon aspracticable following such determination.

 

10.                                 Captions.

 

The use of captions inthe Program is for convenience.  Thecaptions are not intended to provide substantive rights.

 

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