EMPLOYMENT AGREEMENT

Exhibit 10.16

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (this “Agreement”), effective as of December 31, 2006, by and between Lexington Realty Trust, a Maryland real estate investment trust (the “Company”) and Michael L. Ashner (the “Executive”).

W I T N E S S E T H :

WHEREAS, the Board of Trustees of the Company (the “Board”), has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued dedication of the Executive and to provide the Executive with compensation and benefits arrangements which are competitive with those of other real estate investment trusts; and

WHEREAS, the Board believes it is imperative to diminish the inevitable distraction of the Executive by virtue of the personal uncertainties and risks created by a pending or threatened Change in Control (as defined below) and to encourage the Executive’s full attention and dedication to the Company currently and in the event of any threatened or pending Change in Control;

NOW, THEREFORE, in order to accomplish these objectives and in consideration of the mutual covenants and promises contained herein, the parties hereto, each intending to be legally bound hereby, agree as follows:

1.              Employment . Subject to the terms and conditions set forth herein, the Company shall employ the Executive as Chairman and Director of Strategic Transactions, and the Executive accepts such employment for the Employment Term (as defined below). During the Employment Term, the Executive shall perform the duties of Chairman and Director of Strategic Transactions and such other duties as may from time to time be assigned to him by the Board.

2.              Performance . Except as provided below, the Executive will serve the Company faithfully and to the best of his ability and will devote such business time, energy, experience and talents to the business of the Company and its affiliates as is reasonably required to perform his duties hereunder; provided, however , that it shall not be considered a violation of the foregoing for the Executive to engage in “Permitted Activities.” As used herein, the term “Permitted Activities” shall include the Executive’s (i) management of his personal or his family’s investments, (ii) serving as Chairman and Chief Executive Officer of each of Winthrop Realty Trust (“Winthrop”), First Winthrop Corporation (“FWC”) and Winthrop Realty Partners, L.P. (“WRP”) and their respective affiliates, (iii) serving as principal of FUR Advisors LLC, provided that FUR Advisors LLC engages in no business other than acting as advisor for Winthrop, (iv) engaging in Permitted Investments (as defined below) (v) serving on civic or charitable boards or committees, (vi) serving as director or trustee of those public companies listed on Schedule 1 hereto, or, (vii) with the advance written approval of the Board, serving on industry boards or committees, so long as with respect to foregoing clauses (v) through (vii), any such activities do not interfere with the performance of the Executive’s responsibilities as an employee of the Company in accordance with this Agreement. For purposes of this Agreement, “Permitted Investments” shall mean (W) investments in equity securities of publicly traded real

estate entities in an amount not to exceed two percent (2%) of the outstanding equity securities of such entity; (X) passive investments in real estate entities where the investment does not represent the greater of a 10% equity interest in the entity or $1,500,000; and (Y) investments in the entities set forth on Schedule 2 hereto (such entities being hereinafter referred to as “Ashner Entities”) provided that such Ashner Entities only make additional investments in assets related to those assets directly or indirectly currently owned or currently controlled, in each case as of the date hereof, by any Ashner Entity.

3.              Employment Term . Unless earlier terminated pursuant to Section 6 below (including, but not limited to, the Executive’s termination of employment due to death, resignation, or Disability (as defined in Section 5(b)(iii) below)), the employment term shall begin upon January 1, 2007 (the “Effective Date”), and shall continue for a period of three years from such date (the “Initial Term”); provided that such term shall be automatically extended for additional periods of one (1) year commencing on the third anniversary of the Effective Date and each anniversary thereof (such period the “Additional Term”) unless either party shall have given notice to the other party that such party does not desire to extend the term of this Agreement, such notice to be given at least one hundred eighty (180) days prior to the end of Initial Term or Additional Terms (the Initial Term and the Additional Term or Terms, if applicable, collectively, the “Employment Term”).

(a)            Base Salary . As compensation for services hereunder and in consideration of the Executive’s other agreements hereunder, during the Employment Term, the Company shall pay the Executive a base salary, payable in equal installments in accordance with the Company’s procedures, subject to withholding and other applicable taxes, at an annual rate of Four Hundred Fifty Thousand Dollars ($450,000), subject to review by the Company no less frequently than annually for increase (but not to be decreased) (such base salary, as increased from time to time being hereinafter referred to as “Base Salary”).

(b)            Bonuses and Incentive Compensation . During the Employment Term, the Executive shall have opportunities for bonuses and shall have opportunities for incentive compensation comparable to those provided to other senior executives of the Company and shall be eligible to participate in all bonus and incentive compensation plans made available by the Company, from time to time, for its senior executives.

(c)            Medical, Dental, Disability, Life Insurance, Pension and Other Benefits . During the Employment Term, the Executive shall, in accordance with the terms and conditions of the applicable plan documents and all applicable laws, be eligible to participate in the various medical, dental, disability, life insurance, pension and other employee benefit plans made available by the Company, from time to time, for its senior executives.

(d)            Vacation, Sick Leave . During the Employment Term, the Executive shall be entitled to vacation and sick leave in accordance with the Company’s established practices with respect to its senior executives.

(e)            Expenses . The Executive shall be reimbursed by the Company for all reasonable expenses actually incurred by him in connection with the performance of his duties hereunder in accordance with policies established by the Company from time to time and upon receipt of appropriate documentation.

5.              Termination . (a)         The employment of the Executive hereunder shall terminate at the end of the Employment Term. The employment of the Executive hereunder may also be terminated at any time (i) by the Company with or without Cause (as defined in Section 5(b)(i) below); or (ii) by the Executive with or without Good Reason (as defined in Section 5(b)(ii) below) by notice of resignation delivered to the Company. Anything in this Agreement to the contrary notwithstanding, if a Change in Control occurs and if the Executive’s employment with the Company is terminated prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control or (ii) otherwise arose in connection with or anticipation of a Change in Control, then the Executive shall be treated for purposes of this Agreement as if he had been terminated without Cause (such a termination shall be referred to in this Agreement as a “Pre-Change in Control Termination”). At any time after a Disability (as defined in Section 5(b)(iii) below) occurs, provided that the Board, upon advice of a medical doctor selected in accordance with Section 5(b)(iii) hereof, determines that the Executive remains incapable of performing his essential duties and responsibilities hereunder, subject to applicable legal requirements, the Company may terminate the Executive’s employment effective forthwith after giving notice to the Executive of such termination. Further, if the Board, upon advice of a medical doctor selected in accordance with Section 5(b)(iii) hereof, shall reasonably determine that the Executive has become physically or mentally incapable of performing his essential duties and responsibilities as provided in this Agreement and such incapacity is likely to last for a period of at least one hundred eighty (180) days from the onset of such incapacity, the Company may, at its discretion at any time thereafter while the Executive remains incapable of performing his material duties hereunder, and subject to applicable legal requirements, remove the Executive from his then position with the Company; provided, further, that if he returns to full time employment, with the permission of the Board, prior to the time he is determined to have incurred a Disability, he shall be restored to his position or positions with the Company.

(i)         “Cause” shall mean: (A) the Executive’s conviction of, plea of nolo contendere to, or written admission of the commission of, a felony (but not a traffic infraction or similar offense), (B) any breach by the Executive of any material provision of this Agreement; (C) any act by the Executive involving moral turpitude, fraud or misrepresentation with respect to his duties for the Company or its affiliates; or (D) gross negligence or willful misconduct on the part of the Executive in the performance of his duties as an employee, officer or member of the Company or its affiliates (that in only the case of gross negligence results in a material economic harm to the Company); provided, however , that the Company may not

terminate the Executive’s employment under clauses (B), (C) or (D) unless the Company first gives the Executive notice of its intention to terminate and of the grounds for such termination within 90 days of the date a member of the Company’s Board (excluding the Executive), first becomes aware of such event, and in the case of a breach set forth in clause (B) above, the Executive either (X) has not, within 30 days following receipt of such notice, cured such Cause, or (Y) in the event such Cause cannot be cured within such 30-day period, has not taken all reasonable steps to cure such Cause. No termination for Cause shall be effective unless the Board makes a Cause determination after notice to the Executive and the Executive has been provided with the opportunity (with counsel of his choice) to contest the determination at a meeting of the Board.

(ii)        “Good Reason” shall mean the occurrence of one or more of the following events without the Executive’s written consent or, in the case of clause (E) below, without prior written notice to, and the participation or consent of Winthrop, provided that the Executive first gives the Company written notice of his intention to terminate and of the grounds for such termination within 90 days of such event, and, with respect to clauses (A) – (D), the Company has not cured such Good Reason within thirty (30) days of the Executive giving the Company written notice thereof: (A) a material reduction of the Executive’s authority, duties and responsibilities, or the assignment to the Executive of duties materially inconsistent with the Executive’s position or positions with the Company, (B) a reduction in the Executive’s rate of Base Salary; (C) a breach by the Company of any material provision of this Agreement; (D) the Company’s requiring the Executive to be based at any office or location located more than fifty (50) miles from the New York metropolitan area, or (E) the Company acquires or makes an Investment in Real Property other than a Net Lease Asset (as defined in that certain Acquisition Agreement, dated as of November 7, 2005, between Newkirk and First Union Real Estate Equity and Mortgage Investments) except for Investments in Real Property relating to those non-Net Lease Assets which the Company currently owns, is currently under contract to acquire, or has acquired an option to purchase. Notwithstanding anything herein to the contrary, any change of the Executive’s position with the Company to which the Executive consents in writing shall not constitute Good Reason. As used herein, the term “Investment in Real Property” shall mean the direct or indirect ownership of a fee, leasehold interest or other interest in real property or the providing of financing, including a participation interest, secured directly or indirectly by a fee, leasehold or other interest in real property or the ownership interests in an entity that owns, directly or indirectly, a fee, leasehold interest or other interest in real property; provided, however, that investments in equity securities of publicly traded real estate entities in an amount not to exceed two percent (2%) of the outstanding equity securities of such entity shall not be an Investment in Real Property.

(iii)       “Disability” shall mean the mental or physical incapacity of the Executive such that (A) he qualifies for long-term disability benefits under a Company-sponsored long-term disability policy or (B) the Executive has been incapable as a result of illness, disease, mental or physical disability, disorder, infirmity, or impairment or similar cause of performing his essential duties and responsibilities for any period of one hundred eighty (180) days (whether or not consecutive) in any consecutive three hundred sixty-five (365) day period. Disability shall be determined by an approved medical doctor selected by the Company and the Executive. If the Company and the Executive cannot agree on a medical doctor, each party shall

select a medical doctor and the two doctors shall select a third who shall be the approved medical doctor for this purpose.

(A)          The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) (“Beneficial Ownership”) of 20% or more of either (i) the then outstanding common shares of beneficial interest of the Company (the “Outstanding Company Common Stock”) or (ii) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of trustees (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (A), the following acquisitions shall not constitute a Change in Control: (1) any acquisition directly from the Company, (2) any acquisition by the Company, (3) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any entity controlled by the Company or (4) any acquisition by any entity pursuant to a transaction which complies with clauses (1), (2) and (3) of subsection (C) of this Section 5(b)(iv); or

(B)          Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a trustee subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the trustees then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

(C)          Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), in each case, unless, following such Business Combination, (1) all or substantially all of the Persons who had Beneficial Ownership, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination, have Beneficial Ownership, of more than 50%, respectively, of the then outstanding common shares of beneficial interest and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of trustees, as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination) acquires Beneficial Ownership of 20% or more of, respectively, the then outstanding shares of common stock of the entity resulting from such Business Combination or the combined voting power of the then outstanding voting securities of such entity except to the

extent that such ownership existed prior to the Business Combination and (3) at least a majority of the members of the board of directors or board of trustees, as the case may be, of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement with the successor or purchasing entity in respect of such Business Combination, or of the action of the Board, providing for such Business Combination; or

(D)         Approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

(1)           the Executive terminates his employment with the Company for Good Reason; or

(2)           the Executive’s employment is terminated by the Company without Cause; or

(3)           the Executive’s employment is terminated in a Pre-Change in Control Termination;

then, the Company shall have no liability or further obligation to the Executive except as follows: the Executive shall be entitled to receive, subject to Section 6(e):

(i)         within 30 days of such termination of employment, any earned but unpaid Base Salary for the period prior to termination and any earned but unpaid bonuses, in cash, for prior periods which have ended at the time of such termination (“Entitlements”);

(ii)        at the time provided in such plan, any rights to which he is entitled in accordance with such applicable plan or program provisions under any employee benefit plan, program or arrangement, fringe benefit or incentive plan (“Rights”);

(iii)       within 30 days of such termination of employment, severance pay (the “Severance Pay”) in the amount equal to 2.99 times the sum of: (x) the Executive’s Base Salary at termination and (y) his regular target bonus, in cash, assuming achievement of 100% of all targets under Company’s executive bonus plan in effect for the fiscal year in which his termination occurs (by way of example only, 200% of Executive’s Base Salary under the current executive bonus plan) (or, if no such executive bonus plan is in effect, the executive bonus plan in effect for the fiscal year prior to the fiscal year in which his termination occurs); provided that if Executive terminates this Agreement pursuant to clause (E) of the definition of Good Reason, the amount of Severance Pay due to Executive pursuant to this paragraph (iii) shall equal one-half (1/2) of the Severance Pay otherwise due hereunder but all other benefits and payments shall remain the same;

(iv)       a pro rata annual bonus, in cash, determined by (x) the number of days the Executive was employed by the Company during the fiscal year divided by

365, and multiplied by (y) his regular target bonus assuming achievement of 100% of all targets under Company’s executive bonus plan in effect for the fiscal year in which his termination occurs (by way of example only, 200% of Executive’s Base Salary under the current executive bonus plan) (or, if no such executive bonus plan is in effect, the executive bonus plan in effect of the fiscal year prior to the fiscal year in which his termination occurs); and

Additionally, upon the earlier of a Change in Control or a termination of the Executive’s employment under Section 6(a)(1), 6(a)(2) or 6(a)(3) above, all non-vested and/or unearned bonus and long-term incentive awards previously granted to the Executive, including but not limited to restricted stock, deferred share awards, and stock options shall earn and fully vest and become nonforfeitable.

Additionally, medical, dental, disability, life insurance and other employee welfare benefits (the “Welfare Plans”) then provided to senior executives of the Company shall be continued following the date of termination for a period of three (3) years and, if the Executive is precluded from participating in any Welfare Plan by its terms or applicable law during such period, the Company shall pay to the Executive in a lump sum the cash equivalent of the premiums or other contributions that the Company would otherwise pay under the terms of this Agreement as of the date of the Executive’s termination, or date of payment if later, to continue the Executive’s participation in the Welfare Plans for three years. As a condition of receiving the Severance Pay under Section 6(a)(iii) and Section 6(a)(iv) and the vesting of awards under Section 6(a) upon the Executive’s termination of Employment, the Executive agrees to execute a release thereby releasing the Company and its affiliates from any and all obligations and liabilities to the Executive arising from or in connection with the Executive’s employment or termination of employment with the Company and its affiliates and any disagreements with respect to such employment, except that such release shall not apply with respect to any rights of the Executive to indemnification under the Company’s Certificate of Incorporation or By-Laws or to any rights of the Executive to indemnification or directors’ and officers’ liability insurance coverage of the Company and its affiliates.

(b)           If during the Employment Term, the Executive’s employment is terminated on account of death or Disability, the Company shall have no liability or further obligation to the Executive except as follows: the Executive (and his estate or designated beneficiaries under any Company-sponsored employee benefit plan in the event of his death) shall be entitled to receive, subject to Section 6(e):

(i)         any Entitlements within 30 days of such termination of employment or, if later, the date such Entitlement would otherwise be paid to active employees of the Company, and any Rights at the time provided in the relevant plans;

(ii)        within 30 days of such termination of employment, Severance Pay in the amount of one (1) times the Executive’s Base Salary at termination;

(iii)       all non-vested bonus and long-term incentive awards previously granted to the Executive, including but not limited to restricted stock, deferred share awards and stock options, shall earn and fully vest and become nonforfeitable; and

(iv)       at the time such bonuses or payments would otherwise have been paid, a pro rata portion of the bonuses he would have received under the Company’s executive bonus plan in effect at the time of his termination had he remained employed by the Company for the full fiscal year in which his termination occurs, equal to the ratio of the number of days of his employment by the Company during such fiscal year to 365, and a pro rata portion of any payment he would have received or award that would have vested under any performance-based long-term incentive award program of the Company had he remained employed by the Company for the full performance period or periods in which his termination occurs, equal to the ratio of the number of days of his employment by the Company during such period t