**Exhibit10.12**

 

**EMPLOYMENTAND NONCOMPETITION AGREEMENT**

 

ThisEMPLOYMENT AND NONCOMPETITION AGREEMENT (“Agreement”) is made as of the      day of July, 2004 between Hugh Hall (“Executive”) and GKK Manager LLC (the “Employer”).

 

# 1.     Term.  The term ofthis Agreement shall commence on July [ ], 2004 and, unless earlierterminated as provided in Section 6 below, shall terminate on the fourthanniversary of the date of this Agreement (the “Original Term”);**provided, however, that Sections 4, 7 and 8 (and any enforcementor other procedural provisions hereof affecting Sections 4, 7 and 8) hereofshall survive the termination of this Agreement as provided therein.  The Original Term may be extended for suchperiod or periods, if any, as may be mutually agreed to in writing by Executiveand the Employer (each a “Renewal Term”). If either party intends not to extend the Original Term, such partyshall give the other party at least three months’ written notice of suchintention.  If either party gives suchnotice with less than three months remaining in the Original Term, the term ofthis Agreement shall be extended until the date which is three months after thedate on which the notice is given.  Theperiod of Executive’s employment hereunder consisting of the Original Term andall Renewal Terms (and any period of extension under the foregoing sentence),if any, is herein referred to as the “Employment Period.”

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# 2.     Employment and Duties.

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## (a)                   Duties.  During the Employment Period, Executive shallbe employed in the business of the Employer and its affiliates.  Executive shall serve the Employer as asenior executive and shall have the title of Managing Director of the Employer.In such capacity, Executive, in conjunction with other senior officers andmanagers of the Employer, shall be responsible for, among other things,structuring and pricing investments, sourcing investments, sourcing creditfacilities and selling, syndicating and securitizing investments in whole or inpart.  In addition, Executive shall serveas Chief Operating Officer of Gramercy Capital Corp. (the “Corporation”), andshall initially be a member of the Board of Directors of the Corporation (the “Board”).  In such capacity, Executive shall have thegeneral powers and duties of management usually vested in the chief operatingofficer of a comparable company in the same industry, including, withoutlimitation, responsibility for the day-to-day operations of the Corporation,overseeing service contracts with third parties and management of any employeesof the Corporation.  Executive’s dutiesand authority shall be as further set forth by the Employer.    Executive will report to the managingmember of the Employer (the “Managing Member”) with respect to functions asManaging Director and to the President and Chief Executive Officer of theCorporation (the “CEO”) with respect to functions as Chief Operating Officer.

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## (b)                   Best Efforts. Executive agrees to his employment as described in this Section 2 andagrees to devote substantially all of his business time and efforts to theperformance of his duties under this Agreement, except as otherwise approved bythe Managing Member and the CEO; provided, however, that nothing herein shallbe interpreted to preclude Executive, so long as there is no material interferencewith his duties hereunder, from (i) participating as an officer or director of,or advisor to, any charitable or other tax-exempt organization or otherwiseengaging in charitable, fraternal or trade group activities; (ii) investing and managing his assets as a passiveinvestor in other entities or business ventures; provided that he performs nomanagement or similar role (or, in the case of investments other than realestate investments, he performs a management role comparable to the role that asignificant

 

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## limited partner would have, but performs no day-to-day management orsimilar role) with respect to such entities or ventures and such investmentdoes not violate Section 8 hereof; and provided, further, that, in any case inwhich another party involved in the investment has a material businessrelationship with the Employer, Executive shall give notice prior written notice tothe Managing Member and the CEO; or (iii) serving as a member of the Board ofDirectors of a for-profit corporation with the approval of the CEO and theManaging Member.

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## (c)                   Travel.  In performinghis duties hereunder, Executive shall be available for all reasonable travel asthe needs of the Employer’s business may require.

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# 3.     Compensation and Benefits. In consideration of Executive’s services hereunder, the Employer shallcompensate Executive as provided in this Agreement, and the Corporation shallhave the obligations as set forth herein.

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## (a)                   Base Salary. The Employer shall pay Executive an aggregate minimum annual salary atthe rate of $350,000 per annum during the Employment Period (“Base Salary”).  Base Salary shall be payable bi-weekly inaccordance with the Employer’s normal business practices and shall be reviewedby the Managing Member at least annually (for purposes of possible, upward, butnot downward, adjustment).

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## (b)                   Incentive Compensation/Bonuses. In addition to Base Salary, during the Employment Period, Executiveshall be eligible for and shall receive from the Employer such discretionaryannual bonuses as the Managing Member, in its sole discretion, may deemappropriate to reward Executive for job performance; provided, however, thatExecutive’s annual performance bonus shall not be less than $250,000 (the “MinimumBonus”).  In addition, Executive shall beeligible to participate in any other bonus or incentive compensation plans ineffect with respect to senior executive officers of the Employer.  If theterm of this Agreement is extended under the penultimate sentence of Section 1,and Executive’s employment terminates as of the expiration of the term as soextended, then (i) upon such termination of employment, Executive shall receive(without duplication) an amount equal to (A) $250,000 multiplied by (B) afraction (x) the numerator of which is the number of days in the fiscal year oftermination during which Executive was employed and (y) the denominator ofwhich is 365, and (ii) no other bonus-related amounts shall be payable underthis Section 3(b) for the fiscal year of termination.

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## (c)                   Equity-Based Awards. In the discretion of the Board or the Compensation Committee thereof,Executive shall be eligible to participate in any current or future equity incentive plan that has been or maybe established by the Corporation for senior executive officers.  It is acknowledged that Executive has beenpreviously granted 25,000 shares of restricted stock under that certainGramercy Capital Corp. 2004 Equity Incentive Plan Restricted Stock AwardAgreement between the Corporation and Executive, and 125,000 options under thatcertain Gramercy Capital Corp. 2004 Equity Incentive Plan Option AwardAgreement between the Corporation and Executive, both dated          ,2004, copies of each are attached hereto as Exhibits A and B, respectively.

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## (d)                   Expenses.  Executive shall be reimbursed for allreasonable business related expenses incurred by Executive at the request of or on behalf of theEmployer or the Corporation, provided that such expenses are incurred andaccounted for in accordance with the policies and procedures established by theEmployer or the Corporation.  Anyexpenses incurred during the Employment Period but not

 

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## reimbursed by theEmployer or the Corporation by the end of the Employment Period, shall remainthe obligation of the Employer or the Corporation, as applicable to soreimburse Executive.

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## (e)                   Health and Welfare Benefit Plans. During the Employment Period, Executive and Executive’s immediate familyshall be entitled to participate in such health and welfare benefit plans asthe Employer shall maintain from time to time for the benefit of seniorexecutive officers of the Employer and their families, on the terms and subjectto the conditions set forth in such plan. Nothing in this Section shall limit the Employer’s right to change ormodify or terminate any benefit plan or program as it sees fit from time totime in the normal course of business so long as it does so for all seniorexecutives of the Employer.

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## (f)                    Vacations.  Executive shallbe entitled to paid vacations in accordance with the then regular procedures ofthe Employer governing senior executive officers.

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## (g)                   Other Benefits. During the Employment Period, the Employer shall provide to Executivesuch other benefits, as generally made available to other senior executives ofthe Employer.

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# 4.     Indemnification and Liability Insurance. The Employer and Corporation together and severally agree to indemnifyExecutive to the full extent permitted by applicable law, as the same exists andmay hereafter be amended, from and against any and all losses, damages, claims,liabilities and expenses asserted against, or incurred or suffered by,Executive (including the costs and expenses of legal counsel retained by theEmployer or the Corporation to defend Executive and judgments, fines andamounts paid in settlement actually and reasonably incurred by or imposed onsuch indemnified party) with respect to any action, suit or proceeding, whethercivil, criminal administrative or investigative (a “Proceeding”) in whichExecutive is made a party or threatened to be made a party or is otherwiseinvolved, either with regard to his entering into this Agreement with theEmployer or in his capacity as an officer or director, or former officer ordirector, of the Employer, the Corporation or any affiliate thereof for whichhe may serve in such capacity.  TheEmployer and the Corporation also agree to secure promptly and maintainofficers and directors liability insurance providing coverage for Executive, thecoverage shall be reasonably comparable to the coverage maintained by SL GreenRealty Corp., for such time as SL Green Realty Corp. controls the Employer, tothe extent that coverage can be obtained on reasonable efforts at a comparablerate.  The provisions of this Section 4shall remain in effect after this Agreement is terminated irrespective of thereasons for termination.

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# 5.     Employer’s Policies.  Executiveagrees to observe and comply with the reasonable rules and regulations of theEmployer and the Corporation from time to time regarding the performance of hisduties and to carry out and perform orders, directions and policiescommunicated to him from time to time by the Employer and the Corporation, solong as same are otherwise consistent with this Agreement.

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# 6.     Termination.  Executive’semployment hereunder may be terminated under the following circumstances:

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## (a)   Termination by the Employer.

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## (i)            Death.  Executive’semployment hereunder shall terminate upon his death.

 

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## (ii)           Disability.  If, as aresult of Executive’s incapacity due to physical or mental illness ordisability, Executive shall have been incapable of performing his dutieshereunder even with a reasonable accommodation on a full-time basis for theentire period of four consecutive months or any 120 days in a 180-day period,and within 30 days after written Notice of Termination (as defined in Section6(d)) is given he shall not have returned to the performance of his dutieshereunder on a full-time basis, the Employer may terminate Executive’semployment hereunder.

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## (iii)          Cause.  The Employermay terminate Executive’s employment hereunder for Cause.  For purposes of this Agreement, “Cause” shallmean:  (i) Executive’s engaging in conductwhich is a felony; (ii) Executive’s engaging in conduct constituting a materialbreach of fiduciary duty, gross negligence or willful and material misconduct,material fraud or willful and material misrepresentation; (iii) Executive’smaterial breach of any of his obligations under Section 8(a) through 8(e) ofthis Agreement; or (iv) Executive’s failure to competently perform his dutiesafter receiving notice from the Employer specifically identifying the manner inwhich Executive has failed to perform (it beingunderstood that, for this purpose, the manner and level of Executive’sperformance shall not be determined based on the financial performace of theEmployer or the Corporation (including, without limitation, the performance ofthe stock of the Corporation)).

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## (iv)          Without Cause. Executive’s employment hereunder may be terminated by the Employer atany time with or without Cause (as defined in Section 6(a)(iii) above), by theManaging Member (or, in the case of the Corporation, by a majority vote of allof the members of the Board) upon written notice to Executive, subject only tothe severance provisions specifically set forth in Section 7.

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## (b)   Termination by Executive.

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## (i)            Disability.  Executive mayterminate his employment hereunder for Disability within the meaning of Section6(a)(ii) above.

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## (ii)           With Good Reason. Executive’s employment hereunder may be terminated by Executive withGood Reason effective immediately by written notice to the Employer.  For purposes of this Agreement, with “GoodReason” shall mean, without Executive’s prior written consent, (i) a failure bythe Employer to pay compensation in accordance with the provisions of Section3, which failure has not been cured within 14 days after the notice of thefailure (specifying the same) has been given by Executive to the Employer; (ii)a material breach by the Employer of any other provision of this Agreementwhich has not been cured within 30 days after notice of noncompliance(specifying the nature of the noncompliance) has been given by Executive to theEmployer, (iii) the Employer requires Executive to relocate his principaloffice more than 60 miles outside of Manhattan other than in connection with achange of the Employer’s principal office to the same new location; or (iv) theEmployer enters into an employment agreement with any person pursuant to whichsuch person will receive an annual base salary or guaranteed bonus in excess ofthe highest salary and guaranteed bonus payable to Executive, and the enteringinto of such employment agreement is in contravention of Section 6.4.11 of theLLC Agreement (as defined in Section 6(c) below).  On and after

 

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## the occurrence of a Change-in-Control (as defined inSection 6(c) below), “Good Reason” shall also include, in addition to theforegoing:

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(A)          a change in duties, responsibilities,status or positions with the Employer that does not represent a promotion fromor maintaining of Executive’s duties, responsibilities, status or positions asin effect immediately prior to the Change-in-Control, or any removal ofExecutive from or any failure to reappoint or reelect Executive to suchpositions, except in connection with the termination of Executive’s employmentfor Cause, disability, retirement or death;

 

(B)           a reduction by the Employer in Executive’sBase Salary or bonus compensation as in effect immediately prior to theChange-in-Control;

 

(C)           the failure by the Employer to continuein effect any of the benefit plans including, but not limited to ongoing stockoption and equity awards, in which Executive is participating at the time ofthe Change-in-Control of the Employer (unless Executive is permitted toparticipate in any substitute benefit plan with substantially the same terms andto the same extent and with the same rights as Executive had with respect tothe benefit plan that is discontinued) other than as a result of the normalexpiration of any such benefit plan in accordance with its terms as in effectat the time of the Change-in-Control, or the taking of any action, or thefailure to act, by the Employer which would adversely affect Executive’scontinued participation in any of such benefit plans on at least as favorable abasis to Executive as was the case on the date of the Change-in-Control orwhich would materially reduce Executive’s benefits in the future under any ofsuch benefit plans or deprive Executive of any material benefits enjoyed byExecutive at the time of the Change-in-Control; provided, however, that any suchaction or inaction on the part of the Employer, including any modification,cancellation or termination of any benefits plan, undertaken in order tomaintain such plan in compliance with any federal, state or local law orregulation governing benefits plans, including, but not limited to, theEmployment Retirement Income Security Act of 1974, as amended, shall notconstitute Good Reason for the purposes of this Agreement;

 

(D)          the failure by the Employer to obtainfrom any successor to the Employer an agreement to be bound by this Agreementpursuant to Section 17 hereof, which has not been cured within 30 days afterthe notice of the failure (specifying the same) has been given by Executive tothe Employer.

 

(iii)          Without Good Reason. Executive shall have the right to terminate his employment hereunderwithout Good Reason, subject to the terms and conditions of this Agreement.

 

## (c)   Definitions. The following terms shall be defined as set forth below.

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### (i)            “Change-in-Control” shall mean thehappening of any of the following:

 

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(A)          any “person,” including a “group” (as such terms areused in Sections 13(d) and 14(d) of the Exchange Act, but excluding theEmployer or the Corporation, any entity controlling, controlled by or undercommon control with the Employer or the Corporation, any trustee, fiduciary orother person or entity holding securities under any employee benefit plan ortrust of the Employer or the Corporation or any such entity, and Executive and any“group” (as such term is used in Section 13(d)(3) of the Exchange Act) of whichExecutive is a member), is or becomes the “beneficial owner” (as defined inRule 13(d)(3) under the Exchange Act), directly or indirectly, of securities ofthe Employer or the Corporation representing 25% or more of either (A) thecombined voting power of the Employer’s or the Corporation’s then outstandingsecurities or (B) the then outstanding common stock (or other similar equityinterest, in the case of  a company otherthan a corporation) of the Employer or the Corporation (in either such caseother than as a result of an acquisition of securities directly from theEmployer or the Corporation); provided, however, that, in no event shall aChange-in-Control be deemed to have occurred upon an initial public offering ofthe common stock (or such other equity interest) of the Employer or theCorporation under the Securities Act; or

 

(B)           any consolidation or merger of the Employer or theCorporation where the shareholders of the Employer or the Corporation, asapplicable, immediately prior to the consolidation or merger, would not,immediately after the consolidation or merger, beneficially own (as such termis defined in Rule 13d-3 under the Exchange Act), directly or indirectly,shares representing in the aggregate 50% or more of the combined voting powerof the securities of the corporation issuing cash or securities in theconsolidation or merger (or of its ultimate parent corporation, if any); or

 

(C)           there shall occur (A) any sale, lease, exchange orother transfer (in one transaction or a series of transactions contemplated orarranged by any party as a single plan) of all or substantially all of theassets of the Employer or the Corporation, other than a sale or disposition bythe Employer or the Corporation of all or substantially all of the Employer’sor the Corporation’s assets to an entity, at least 50% of the combined votingpower of the voting securities of which are owned by “persons” (as definedabove) in substantially the same proportion as their ownership of the Employeror the Corporation, as applicable, immediately prior to such sale or (B) theapproval by shareholders of the Employer or the Corporation, as applicable, ofany plan or proposal for the liquidation or dissolution of the Employer or theCorporation, as applicable; or

 

(D)          the members of the Board (the “Directors”) at thebeginning of any consecutive 24-calendar-month period (the “Incumbent Directors”)cease for any reason other than due to death to constitute at least a majorityof the members of the Board; provided that any Director whose election, ornomination for election by the Corporation’s shareholders was approved orratified by a vote of at least a majority of the members of the Board then stillin office who were members of the Board at the beginning of such24-calendar-month period shall be deemed to be an Incumbent Director.

 

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Notwithstanding theforegoing, (i) a Change-in-Control with respect to the Employer or theCorporation shall not be deemed to have occurred if SL Green Realty Corp.controls the Employer or the Corporation, respectively, at the applicable time (provided, that, at such time, in the case of theEmployer, SL Green Realty Corp. beneficially owns at least 15% of theoutstanding voting or total equity interests of the Employer, and in the caseof the Corporation, SL Green Realty Corp. beneficially owns at least 10% of thevoting or total outstanding equity interests of the Corporation (it beingexpressly understood that the existence of the foregoing 15% and 10% levels ofownership do not establish a presumption of control by SL Green Realty Corp.for these purposes)) and a Change-in-Control with respect to theEmployer shall not be deemed to have occurred if the Corporation controls theEmployer, at the applicable time; and (ii) inno event shall a Change-in-Control be deemed to have occurred upon an initialpublic offering of the common stock of the Corporation under the Securities Actof 1933, as amended.

 

### (ii)           “LLC Agreement” means the Limited Liability Company OperatingAgreement of GKK Manager LLC, dated as of July      ,2004, among Employer, Managing Member, Executive and the other partiesspecified therein.

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### (iii)          “Vesting Agreement”means the Membership Interest Vesting and Repurchase Agreement, dated as ofJuly      , 2004, among Employer, Managing Member andExecutive.

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## (d)           Notice of Termination. Any termination of Executive’s employment by the Employer (or the Corporation)or by Executive (other than on account of death) shall be communicated bywritten Notice of Termination to the other party hereto in accordance withSection 13 of this Agreement.  Forpurposes of this Agreement, a “Notice of Termination” shall mean a notice whichshall indicate the specific termination provision in this Agreement relied uponand, as applicable, shall set forth in reasonable detail the fact andcircumstances claimed to provide a basis for termination of Executive’semployment under the provision so indicated.

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(e)           Resignation Upon Termination.  In the event that Executive’s employment with theEmployer is terminated, Executive (i) shall, within five business days ofreceipt of a written request for resignation, resign as an officer of theCorporation, and shall resign all other positions (including, withoutlimitation, as officer, employee, director and member of any committee) withthe Employer and the Corporation and their subsidiaries and affiliates, and(ii) shall provide such written confirmation thereof as may be reasonablyrequired by the Employer or the Corporation. In the event that Executive’s service with the Corporation is terminatedother than as contemplated by the foregoing sentence, Executive (i) shall,within five business days of receipt of a written request for resignation,resign all other positions (including, without limitation, as officer,employee, director and member of any committee) with the Corporation and itssubsidiaries, and (ii) shall provide such written confirmation thereof as maybe reasonably required by the Corporation.

 

# 7.     Compensation Upon Termination.

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## (a)                   Termination By Employer Without Cause orBy Executive With Good Reason.  If(i) Executive is terminated without Cause pursuant to Section 6(a)(iv)above, or (ii) Executive shall terminate his employment hereunder with GoodReason pursuant to Section (6)(b)(ii) above, then, if Executive has fullycomplied with Section 6(e) above, the Employment Period shall terminate as ofthe

 

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## effective date setforth in the written notice of such termination (the “Termination Date”) andExecutive shall be entitled to the following payment and benefits:

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## (i)                            Executive shall receive any earned andaccrued but unpaid Base Salary on the Termination Date, and any earned andaccrued but unpaid incentive compensation and bonuses payable at such times aswould have applied without regard to such termination.

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## (ii)                           The Employer shall continue to payExecutive’s Base Salary (at the rate in effect on the date of his termination)and the Minimum Bonus for a period of two years commencing on the date of suchtermination, on the same periodic payment dates as payment would have been madeto Executive had the Employment Period not been terminated.

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## (iii)                          Any issued but unvested equity awards(i.e., shares then still subject to restrictions under the applicable awardagreement) granted to Executive by the Employer or the Corporation that wouldotherwise become vested and exercisable during the two-year period followingthe date of Executive’s termination shall become vested (i.e., free from suchrestrictions), and any unexerciseable or unvested stock options granted toExecutive by the Employer or the Corporation that would otherwise become vestedand exercisable during the two-year period following the date of Executive’stermination shall become vested and exercisable on the date of Executive’stermination.  Any unexercised stockoptions granted to Executive by the Employer or the Corporation that havebecome vested and exercisable shall remain exercisable for six months followingthe Termination Date or, if earlier, the expiration of the initial applicableterm stated at the time of the grant.

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Otherthan as may be provided under Section 4 or as expressly provided in thisSection 7(a), the Employer shall have no further obligations hereunderfollowing such termination.

 

## (b)                   Termination By the Employer For Cause orBy Executive Without Good Reason.  If (i)Executive is terminated for Cause pursuant to Section 6(a)(iii) above, or(ii) Executive voluntarily terminates his employment hereunder withoutGood Reason pursuant to Section 6(b)(ii) above, then the Employment Periodshall terminate as of the Termination Date and Executive shall be entitled toreceive his earned and accrued but unpaid Base Salary at the rate then ineffect until the Termination Date.  Inaddition, in such event, Executive shall be entitled to exercise any optionswhich have vested as of the termination of Executive’s employment, but only fora period of three months after the Termination Date (but in no event after theexpiration of the initial applicable term stated at the time of grant) andotherwise in accordance with the terms of the applicable option grant agreementor plan.  Notwithstanding the foregoing, and without limiting such otherforfeitures as may be provided under the documentation controlling theapplicable grants or other acquisitions, (i) in the case of a termination forCause under clause (i), (ii) or (iii) of the second sentence of Section6(a)(iii), all vested options shall expire on the Termination Date and allunvested equity interests in the Corporation which have been awarded under acompensatory arrangement, including without limitation the restricted stock (orequivalent) granted on or before the date hereof, shall automatically beforfeited, and (ii) in the case of a termination for Cause under clause (iv) ofthe second sentence of Section 6(a)(iii), all vested options shall beexercisable for three months from the Termination Date; provided, however, thatnothing in this sentence shall extend the term of any option.  Other than as may be provided underSection 4 or as expressly provided in this Section 7(b), the Employer shallhave no further obligations hereunder following such termination.

 

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## (c)                   Termination by Reason of Death.    If Executive’s employment terminates due to his death, the Employershall pay Executive’s Base Salary plus any applicable pro rata portion of theannual performance bonus described in Section 3(b) above for a period of sixmonths from the date of his death, or such longer period as the Employer maydetermine, to Executive’s estate or to a beneficiary designated by Executive inwriting prior to his death.  In the caseof such a termination, (i) Executive shall be credited with six months aftertermination under any provisions governing restricted stock (or its equivalent)or options relating to the vesting or initial exercisability thereof, and (ii)if such six months of credit would fall within a vesting period, a pro rataportion of the unvested shares of restricted stock (or its equivalent) grantedto Executive that otherwise would have become vested upon the conclusion ofsuch vesting period shall become vested on the date of Executive’s terminationdue to his death, and a pro rata portion of the unexercisable stock optionsgranted to Executive that otherwise would have become exercisable upon theconclusion of such vesting period shall become exercisable on the date ofExecutive’s termination due to such death. Furthermore, upon such death, any vested unexercised stock optionsgranted to Executive shall remain vested and exercisable until the earlier of(A) the date on which the term of such stock options otherwise would haveexpired, or (B) the second January 1 after the date of Executive’s terminationdue to his death.  Other than as may beprovided under Section 4 or as expressly provided in this Section 7(c), theEmployer shall have no further obligations hereunder following suchtermination.

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## (d)                   Termination by Reason of Disability. In the event that Executive’s employment terminates due to hisdisability as defined in Section 6(a)(ii) above, Executive shall be entitled tobe paid his Base Salary plus any applicable pro rata portion of the annualperformance bonus described in Section 3(b) above for a period of six monthsfrom the date of such termination, or for such longer period as such benefitsare then provided with respect to other senior executives of the Employer.  In the case of such a termination, ifExecutive has fully complied with Section 6(e) above, (i) Executive shall becredited with six months after termination under any provisions governing restrictedstock (or its equivalent) or options relating to the vesting or initialexercisability thereof, and (ii) if such six months of credit would fall withina vesting period, a pro rata portion of the unvested shares of restricted stock(or its equivalent) granted to Executive that otherwise would have becomevested upon the conclusion of such vesting period shall become vested on thedate of Executive’s termination due to his disability, and a pro rata portionof the unvested or unexercisable stock options granted to Executive thatotherwise would have become vested or exercisable upon the conclusion of suchvesting period shall become vested and exercisable on the date of Executive’stermination due to such disability. Furthermore, upon such disability, any vested unexercised stock optionsgranted to Executive shall remain vested and exercisable until the earlier of(A) the date on which the term of such stock options otherwise would haveexpired, or (B) the second January 1 after the date of Executive’s terminationdue to his disability.  Other than asexpressly provided in this Section 7(d), the Employer shall have no furtherobligations hereunder following such termination.

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# 8.     Confidentiality; Prohibited Activities. Executive and the Employer (which, for purposes of this Section 8, andany related enforcement provisions hereof, except at the context requiresotherwise, shall include not only GKK Manager LLC, but shall also severallyinclude the Corporation) recognize that due to the nature of his employment andrelationship with the Employer, Executive has access to and developsconfidential business information, proprietary information, and trade secretsrelating to the business and operations of the Employer.  Executive acknowledges that (i) such informationis valuable to the business of the Employer, (ii) disclosure to, or use for thebenefit of, any person or entity other than the Employer, would causeirreparable damage to the Employer, (iii) the principal businesses of theEmployer are originating and acquiring real estate related loans and securitiesassociated with commercial

 

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# and multi-familyproperties (collectively, the “Business”), (iv) the Employer is one of thelimited number of persons who have developed a business such as the Business,and (v) the Business is national in scope. Executive further acknowledges that his duties for the Employer includethe duty to develop and maintain client, customer, employee, and other businessrelationships on behalf of the Employer; and that access to and development ofthose close business relationships for the Employer render his servicesspecial, unique and extraordinary.  Inrecognition that the good will and business relationships described herein arevaluable to the Employer, and that loss of or damage to those relationshipswould destroy or diminish the value of the Employer, and in consideration ofthe compensation (including severance) arrangements hereunder, and other goodand valuable consideration the receipt and sufficiency of which are herebyacknowledged by Executive, Executive agrees as follows:

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## (a)   Confidentiality. During the term of this Agreement (including any renewals), and at alltimes thereafter, Executive shall maintain the confidentiality of allconfidential or proprietary information of the Employer (“ConfidentialInformation”), and, except in furtherance of the business of the Employer or asspecifically required by law or by court order, he shall not directly orindirectly disclose any such information to any person or entity; nor shall heuse Confidential Information for any purpose except for the benefit of theEmployer.  For purposes of thisAgreement, “Confidential Information” includes, without limitation:  client or customer lists, identities,contacts, business and financial information (excluding those of Executiveprior to employment with Employer); investment strategies; pricing informationor policies, fees or commission arrangements of the Employer; marketing plans,projections, presentations or strategies of the Employer; financial and budgetinformation of the Employer; new personnel acquisition plans; and all otherbusiness related information which has not been publicly disclosed by theEmployer.  This restriction shall applyregardless of whether such Confidential Information is in written, graphic,recorded, photographic, data or any machine readable form or is orally conveyedto, or memorized by, Executive.

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## (b)   Prohibited Activities. Because Executive’s services to the Employer are essential and becauseExecutive has access to the Employer’s Confidential Information, Executivecovenants and agrees that:

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## (i)            during the Employment Period, and for theone-year period following the termination of Executive by either party for anyreason including the expiration of the term of this Agreement, Executive willnot, anywhere in the United States, withoutthe prior written consent of the Employer and the unanimous consent of theDirectors other than any other officer of the Employer, directly or indirectly(individually, or through or on behalf of another entity as owner, partner,agent, employee, consultant, or in any other capacity), engage, participate orassist, as an owner, partner, employee, consultant, director, officer, trusteeor agent, in any element of the Business, subject, however, toSection 8(c) below. Notwithstanding the forgoing, in the event that the Employer extends theterm of its existing management agreement by matching a bona fide third-partyoffer which provides for materially less fees than the existing agreement, thensuch period of restriction shall only apply during the remaining period of theterm of this Agreement; and

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## (ii)           during the Employment Period, and during(x) the two-year period following the termination of Executive by either partyfor any reason (including the expiration of the term of the Agreement) in thecase of clause (A) below, or (y) the one-

 

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## year period following such termination in the case ofclause (B) below, Executive will not, without the prior written consent of theEmployer and the unanimous consent of the Directors other than any otherofficer of the Employer, directly or indirectly (individually, or through or onbehalf of another entity as owner, partner, agent, employee, consultant, or inany other capacity), (A) solicit, encourage, or engage in any activity toinduce any employee of the Employer to terminate employment with the Employer,or to become employed by, or to enter into a business relationship with, anyother person or entity; provided, however, that the two-year period otherwiseset forth in clause (x) above shall be one-year in the case of an employeehired after the date hereof by Executive with whom as of the date hereof,Executive has a material pre-existing relationship; or (B) engage in anyactivity intentionally to interfere with, disrupt or damage the Business of theEmployer, or its relationships with any client, supplier or other businessrelationship of the Employer.  Forpurposes of this subsection, the term “employee” means any individual who is anemployee of or consultant to the Employer (or any affiliate) during thesix-month period prior to Executive’s last day of employment.

##  

## (c)   Other Investments. Notwithstanding anything contained herein to the contrary, Executive isnot prohibited by this Section 8 from making investments, (i) expresslydisclosed to the Employer and to the CEO in writing before the date hereof;(ii) solely for investment purposes and without participating in the businessin which the investments are made, in any entity that engages, directly orindirectly, in the acquisition, development, construction, operation,management, financing or leasing of office real estate properties, regardlessof where they are located, if (x) Executive’s aggregate investment in each suchentity constitutes less than one percent of the equity ownership of suchentity, (y) the investment in the entity is in securities traded on anynational securities exchange or the National Association of Securities Dealers,Inc. Automated Quotation System, and (z) Executive is not a controlling personof, or a member of a group which controls, such entity; or (iii) if (A) except with the prior written consent ofthe Employer and the CEO, he has less than a 25% interest in the investment inquestion, (B) except with the prior written consent of the Employer and theCEO, he does not have the role of a general partner or managing member, or anysimilar role, (C) the investment is not an appropriate investment opportunityfor the Employer, and (D) the investment activity is not directly competitivewith the businesses of the Employer.

##  

## (d)   Employer Property. Executive acknowledges that all originals and copies of materials,records and documents generated by him or coming into his possession during hisemployment by the Employer are the sole property of the Employer (“EmployerProperty”).  During his employment, andat all times thereafter, Executive shall not remove, or cause to be removed,from the premises of the Employer, copies of any record, file, memorandum,document, computer related information or equipment, or any other item relatingto the business of the Employer, except in furtherance of his duties under thisAgreement.  When Executive terminates hisemployment with the Employer, or upon request of the Employer at any time,Executive shall promptly deliver to the Employer all originals and copies ofEmployer Property in his possession or control and shall not retain anyoriginals or copies in any form.

##  

## (e)   No Disparagement. For one year following termination of Executive’s employment for anyreason, Executive shall not intentionally disclose or cause to be disclosed anynegative, adverse or derogatory comments or information about (i) the Employerand its parent, affiliates or subsidiaries, if any; (ii) any product or serviceprovided by the Employer and its parent, affiliates

 

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## or subsidiaries, if any; or (iii) the Employer’s andits parent’s, affiliates’ or subsidiaries’ prospects for the future.  For one year following termination ofExecutive’s employment for any reason, the Employer shall not disclose or causeto be disclosed any negative, adverse or derogatory comments or informationabout Executive.  Nothing in this Sectionshall prohibit either the Employer or Executive from testifying truthfully inany legal or administrative proceeding.

##  

## (f)    Remedies.  Executivedeclares that the foregoing limitations in Sections 8(a) through 8(f) above arereasonable and necessary for the adequate protection of the business and thegoodwill of the Employer.  If anyrestriction contained in this Section 8 shall be deemed to be invalid, illegalor unenforceable by reason of the extent, duration or scope thereof, orotherwise, then the court making such determination shall have the right toreduce such extent, duration, scope, or other provisions hereof to make therestriction consistent with applicable law, and in its reduced form suchrestriction shall then be enforceable in the manner contemplated hereby.  In the event that Executive breaches any ofthe promises contained in this Section 8, Executive acknowledges that the Employer’sremedy at law for damages will be inadequate and that the Employer will beentitled to specific performance, a temporary restraining order or preliminaryinjunction to prevent Executive’s prospective or continuing breach and tomaintain the status quo.  The existenceof this right to injunctive relief, or other equitable relief, or the Employer’sexercise of any of these rights, shall not limit any other rights or remediesthe Employer may have in law or in equity, including, without limitation, theright to arbitration contained in Section 9 hereof and the right tocompensatory and monetary damages. Executive hereby agrees to waive his right to a jury trial with respectto any action commenced to enforce the terms of this Agreement.  Executiveshall have remedies comparable to those of the Employer as set forth above inthis Section 8(f) if the Employer breaches Section 8(e).

##  

## (g)   Transition. Regardless of the reason for his departure from the Employer, Executiveagrees that at the Employer’s sole costs and expense, for a period of not morethan 30 days after termination of Executive, he shall take all steps reasonablyrequested by the Employer to effect a successful transition of client andcustomer relationships to the person or persons designated by the Employer,subject to Executive’s obligations to his new employer.

##  

## (h)   Cooperation with Respect to Litigation. During the Employment period and at all times thereafter, Executiveagrees to give prompt written notice to the Employer of any claim relating tothe Employer and to cooperate fully, in good faith and to the best of hisability with the Employer in connection with any and all pending, potential orfuture claims, investigations or actions which directly or indirectly relate toany action, event or activity about which Executive may have knowledge inconnection with or as a result of his employment by the Employerhereunder.  Such cooperation will includeall assistance that the Employer, its counsel or its representatives mayreasonably request, including reviewing documents, meeting with counsel,providing factual information and material, and appearing or testifying as awitness; provided, however, that the Employer will reimburse Executive for allreasonable expenses, including travel, lodging and meals, incurred by him in fulfillinghis obligations under this Section 8(h) and, except as may be required by lawor by court order, should Executive then be employed by an entity other thanthe Employer, such cooperation will not materially interfere with Executive’sthen current employment.

##  

## (i)    Survival.  Theprovisions of this Section 8 shall survive termination of Executive’semployment any other provisions relating to the enforcement thereof.

 

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# 9.     Equity Interest in the Employer. It is expressly acknowledged that Executive has been granted an equityinterest in the Employer by that certain Membership Interest Issuance, Vestingand Repurchase Agreement between Executive and Employer, dated as of the datehereof.

#  

# 10.   Arbitration.  Anycontroversy or claim arising out of or relating to this Agreement or the breachof this Agreement (other than a controversy or claim arising under Section 8,to the extent necessary for the Employer or the Corporation (or theiraffiliates, where applicable) to avail themselves of the rights and remediesreferred to in Section 8(f)) that is not resolved by Executive and the Employeror the Corporation (or their affiliates, where applicable) shall be submittedto arbitration in New York, New York in accordance with New York law and theprocedures of the American Arbitration Association.  The determination of the arbitrator(s) shallbe conclusive and binding on the Employer and the Corporation (or theiraffiliates, where applicable) and Executive and judgment may be entered on thearbitrator(s)’ award in any court having jurisdiction.

#  

# 11.   Conflicting Agreements.  Executivehereby represents and warrants that the execution of this Agreement and theperformance of his obligations hereunder will not breach or be in conflict withany other agreement to which he is a party or is bound, and that he is not nowsubject to any covenants against competition or similar covenants which wouldaffect the performance of his obligations hereunder.

#  

# 12.   No Duplication of Payments. Executive shall not be entitled to receive duplicate payments under anyof the provisions of this Agreement.

#  

# 13.   Notices.  All noticesor other communications required or permitted to be given hereunder shall be inwriting and shall be delivered by hand and or sent by prepaid telex, cable orother electronic devices or sent, postage prepaid, by registered or certifiedmail or telecopy or overnight courier service and shall be deemed given when sodelivered by hand, telexed, cabled or telecopied, or if mailed, three daysafter mailing (one business day in the case of express mail or overnightcourier service), as follows:

 

## (a)   if to Executive:

 

Hugh Hall, at the addressshown on the execution page hereof.

 

With a copy to:

 

Friedman Kaplan Seiler& Adelman LLP

1633 Broadway

New York, NY 10019

Attn: Edward A. Friedman

 

## (b)   if to the Employer:

 

Gramercy ManagerLLC

420 LexingtonAvenue

New York, New York10170

Attn:  Marc Holliday

 

with a copy to:

 

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Clifford Chance US LLP

31 West 52nd Street

New York, New York  10019

Attention:  Robert E. King, Jr.

##  

## (c)   if to the Corporation:

 

Gramercy CapitalCorp.

420 LexingtonAvenue

New York, New York10170

Attn: CorporateSecretary

 

with copies to:

 

Gramercy ManagerLLC

420 LexingtonAvenue

New York, New York10170

Attn:  Marc Holliday

 

and:

 

Clifford Chance US LLP

31 West 52nd Street

New York, New York  10019

Attention:  Robert E. King, Jr.

 

or such other address aseither party may from time to time specify by written notice to the other partyhereto.

 

# 14.   Amendments.  No amendment,modification or waiver in respect of this Agreement shall be effective unlessit shall be in writing and signed by the party against whom such amendment,modification or waiver is sought.

#  

# 15.   Severability.  If anyprovision of this Agreement (or any portion thereof) or the application of anysuch provision (or any portion thereof) to any person or circumstances shall beheld invalid, illegal or unenforceable in any respect by a court of competentjurisdiction, such invalidity, illegality or unenforceability shall not affectany other provision hereof (or the remaining portion hereof) or the applicationof such provision to any other persons or circumstances.

#  

# 16.   Withholding.  The Employershall be entitled to withhold from any payments or deemed payments any amountof tax withholding it reasonably determines to be required by law.

#  

# 17.   Successors and Assigns; Third-Party Beneficiary. This Agreement shall be binding upon and inure to the benefit of theparties and their respective successors and assigns, including any corporationwith which or into which the Employer may be merged or which may succeed to itsassets or business, provided, however, that the obligations of Executive arepersonal and shall not be assigned by him. This Agreement shall inure to the benefit of and be enforceable byExecutive’s personal and legal representatives, executors, administrators,assigns, heirs, distributees, devisees and legatees.  It is

 

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# expresslyacknowledged and agreed that (i) the Corporation is a third-party beneficiaryof any provision hereof running in favor of the Corporation; (ii) the Employermay assign this Agreement in its entirety, and its rights under this Agreement,to the Corporation in connection with a “Sale Event” (as defined in the LLCAgreement); and (iii) at the request of the Employer, Executive shall executean employment agreement with the Corporation on substantially the same terms asare contained herein with respect to the Employer.

#  

# 18.   Counterparts.  ThisAgreement may be executed in one or more counterparts, all of which shall be considered one and the same  agreement, and shall become effective whenone or more such  counterparts have beensigned by each of the parties and delivered to the other party.

#  

# 19.   Governing Law.  ThisAgreement shall be governed by and construed in accordance with the laws of the State of New Yorkapplicable to agreements made and to be performed entirely within  such State, without regard to the conflictsof law principles of such State.

#  

# 20.   Choice of Venue.  Executiveagrees to submit to the  jurisdiction ofthe United States District Court for the Southern District of New York or theSupreme Court of the State of New York, New York County, for the purpose of anyaction to enforce any of the terms of this Agreement.

#  

# 21.   Entire Agreement.  ThisAgreement contains the entire agreement and understanding between the partieshereto with respect to the subject matter hereof and supersedes all prioragreements and understandings relating to such subject matter, includingwithout limitation anything contained in the exhibits to that certainConsulting Agreement between Executive and SL Green Realty Corp. dated as ofFebruary 23, 2004.  The parties heretoshall not be liable or bound to any other party in any manner by anyrepresentations, warranties or covenants relating to such subject matter exceptas specifically set forth herein.

#  

# 22.   Paragraph Headings.  Sectionheadings used in this  Agreement areincluded for convenience of reference only and will  not affect the meaning of any provision ofthis agreement.

 

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# IN WITNESS WHEREOF, this Agreement is entered into asof the date and year first written above, and is being executed on             ,2004.

 
|   | GRAMERCY MANAGER LLC |
|--------|----------------------|
|   |                 |
|   |                 |
|   | By:                  |   |   |
|   |                 | Name: |
|   |                 | Title: |
|   |                 |   |
|   |                 |   |   |
|   |                 | Hugh Hall |
|        |                      |  |  |  |

 

Agreed,as to the rights and obligations of

theCorporation:  GRAMERCY CAPITALCORP.

 

 
| By:    |   |   |   |
|--------|--------|--------|--------|
|   | Name:  |   |   |
|   | Title: |   |   |

 

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