BE
GRANTED 14,000 SHARES OF RESTRICTED COMMON STOCK OR, AT THE EMPLOYER'S OPTION,
CLASS A UNITS ("OP UNITS") IN THE OP, ON JUNE 1, 2007, IN ACCORDANCE WITH AND
SUBJECT TO DEFINITIVE DOCUMENTATION WHICH IS CONSISTENT WITH THE TERMS
SUMMARIZED ON EXHIBIT A HERETO AND WHICH IS OTHERWISE CONSISTENT WITH THE
EMPLOYER'S GENERAL PRACTICES FOR DOCUMENTATION.
IN ADDITION, THE EMPLOYER SHALL
PAY TO EXECUTIVE AN AMOUNT EQUAL TO THE DIVIDENDS AND DISTRIBUTIONS THAT
EXECUTIVE WOULD HAVE RECEIVED WITH RESPECT TO THE 14,000 SHARES OF RESTRICTED
COMMON STOCK OR OP UNITS TO BE ISSUED UNDER THIS SECTION 3(C) IN RESPECT OF ALL
DIVIDENDS AND DISTRIBUTIONS HAVING A RECORD DATE PRIOR TO THE ISSUANCE DATE OF
SUCH SHARES OR OP UNITS AND ON OR AFTER JANUARY 1, 2007.
WITH RESPECT TO EACH
SUCH DIVIDEND OR DISTRIBUTION, THIS PAYMENT SHALL BE MADE ON THE LATER OF (I)
THE DATE HEREOF OR (II) THE PAYMENT DATE ESTABLISHED FOR ALL STOCKHOLDERS OR
UNITHOLDERS FOR SUCH DIVIDEND OR DISTRIBUTION.
IN ADDITION, THE EMPLOYER SHALL
PAY EXECUTIVE AN ADDITIONAL CASH AMOUNT (THE "FULL VALUE GROSS-UP AMOUNT") WITH
RESPECT TO THE SHARES OF RESTRICTED COMMON STOCK OR OP UNITS GRANTED PURSUANT TO
THIS SECTION 3(C), INTENDED TO SERVE GENERALLY AS A TAX GROSS-UP, UPON EACH DATE
ON WHICH ANY OF SUCH SHARES OR OP UNITS VEST, EQUAL TO 40% OF THE VALUE OF SUCH
SHARES OR OP UNITS INCLUDED IN EXECUTIVE'S TAXABLE INCOME ON SUCH DATE.
(D)
GKKM BONUS.
EXECUTIVE SHALL BE ENTITLED TO RECEIVE FROM THE
EMPLOYER THE INCENTIVE BONUS DESCRIBED IN EXHIBIT B HERETO (THE "GKKM BONUS") IF
ANY SALE EVENT (AS DEFINED
2
IN THAT CERTAIN FIRST AMENDED AND RESTATED LIMITED LIABILITY COMPANY OPERATING
AGREEMENT OF GKK MANAGER LLC ("GKKM"), AS AMENDED FROM TIME TO TIME) OCCURS
DURING THE EMPLOYMENT PERIOD.
THE AMOUNT OF THE GKKM BONUS TO BE PAID SHALL BE
BASED ON THE PURCHASE PRICE FOR GKKM (THE "GKKM PURCHASE PRICE") IN SUCH SALE
EVENT AS SET FORTH ON EXHIBIT B. ANY GKKM BONUS PAYABLE PURSUANT TO THIS SECTION
MAY BE PAID IN THE FORM OF CASH OR ANY OTHER NON-CASH CONSIDERATION CONSTITUTING
PART OF THE GKKM PURCHASE PRICE, AT THE OPTION OF THE EMPLOYER, AND, IN
ADDITION, IF ALL OF THE EQUITY HOLDERS OF GKKM RECEIVE THEIR DISTRIBUTIONS FROM
GKKM RELATING TO A SALE EVENT IN SHARES OF STOCK IN GRAMERCY CAPITAL CORP.
("GKK"), THEN THE EMPLOYER MAY PAY THE GKKM BONUS IN THE FORM OF SUCH SHARES.
ANY NON-CASH CONSIDERATION CONSTITUTING PART OF THE GKKM PURCHASE PRICE SHALL BE
DEEMED TO HAVE SUCH VALUE AS IS DETERMINED BY THE EMPLOYER, IN ITS REASONABLE
DISCRETION, FOR PURPOSES OF DETERMINING WHETHER ANY GKKM BONUS IS PAYABLE AND
VALUING ANY NON-CASH CONSIDERED PAID TO EXECUTIVE AS THE GKKM BONUS.
(E)
EXPENSES.
EXECUTIVE SHALL BE REIMBURSED FOR ALL REASONABLE
BUSINESS RELATED EXPENSES INCURRED BY EXECUTIVE AT THE REQUEST OF OR ON BEHALF
OF THE EMPLOYER, PROVIDED THAT SUCH EXPENSES ARE INCURRED AND ACCOUNTED FOR IN
ACCORDANCE WITH THE POLICIES AND PROCEDURES ESTABLISHED BY THE