3.              Compensation and Benefits .  In consideration of Executive’s services hereunder, the Employer shall compensate Executive as provided in this Agreement, and the Employer shall have the obligations as set forth herein.

(a)            Base Salary .  The Employer shall pay Executive a minimum annual salary at the rate of $500,000 per annum during the Employment Period (“Base Salary”).  Base Salary shall be payable bi-weekly in accordance with the Employer’s normal business practices and shall be reviewed by the Employer at least annually.

(b)            Signing Bonus; Incentive Compensation Bonuses .  In addition to Base Salary, during the Employment Period, Executive shall be eligible for and shall receive from the Employer such discretionary annual bonuses as the Employer, in its sole discretion, may deem appropriate to reward Executive for job performance.  The target discretionary annual bonus for each year after 2008 shall be at least $800,000; provided that the actual bonus paid shall be determined by the Employer, in its sole discretion, based on such factors as it deems relevant.  Any bonuses awarded for a fiscal year shall be paid after the end of such fiscal year and on or before the 15 th  day of the third month of the following fiscal year (e.g., a bonus for 2009 will be paid sometime between January 1, 2010 and March 15, 2010), provided that, in 2009, the Employer will pay $250,000 of Executive’s bonus in advance on June 30, 2009.  In lieu of a bonus for 2008, the Employer shall pay Executive a signing bonus of $200,000 (the “Signing Bonus”) on the 30 th  day following the Effective Date; provided that Executive remains employed by the Employer on such date.

(c)            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 Employer.  Any expenses incurred during the Employment Period but not reimbursed by the Employer by the end of the Employment Period, shall remain the obligation of the Employer to so reimburse Executive.

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

(e)            Vacations .  Executive shall be entitled to paid vacations in accordance with the then regular procedures of the Employer governing senior executive officers, except that Executive shall be credited with a minimum of 20 vacation days per calendar year, pro-rated for any partial year.  The Employer will pay Executive for unused accrued vacation upon termination of his employment.

(f)             Other Benefits .  During the Employment Period, the Employer shall provide to Executive such other benefits, as generally made available to other senior executives of the Employer.  In addition, the Employer shall maintain term life insurance for the benefit of Executive’s beneficiaries in a face amount equal to $5,000,000; provided, however, that such coverage shall only be required if available to the Employer at reasonable rates; and provided, further, that Executive cooperates as reasonably requested by the Employer in the Employer’s efforts to obtain such insurance.  If such insurance is not available at reasonable rates, then the

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Employer shall provide such coverage on a self-insured basis, with a benefit to Executive’s beneficiaries not to exceed the amount of cash severance that Executive would receive upon a termination by the Employer without Cause (as defined in Section 6(a)(iii) below) under Section 7(a)(i) and (ii).

4.              Indemnification and Liability Insurance .  The Employer agrees to indemnify Executive to the full extent permitted by applicable law, as the same exists and may 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 the Employer to defend Executive and judgments, fines and amounts paid in settlement actually and reasonably incurred by or imposed on such indemnified party) with respect to any action, suit or proceeding, whether civil, criminal administrative or investigative (a “Proceeding”) in which Executive is made a party or threatened to be made a party or is otherwise involved, either with regard to his entering into this Agreement with the Employer or in his capacity as an officer or director, or former officer or director of the Employer, Gramercy (to extent Executive served or is serving in such capacity at the request of the Employer) or any affiliate thereof for which he may serve in such capacity; provided however, that, to the extent the indemnification provided for herein relates to a Proceeding in which Executive is made a party or threatened to be made a party or is otherwise involved in his capacity as an officer or director, or former officer or director, of Gramercy, the Employer will only provide such indemnification to the extent that Gramercy does not do so.  The Employer also agrees to secure promptly and maintain officers and directors liability insurance providing coverage for Executive, with such coverage to be reasonably comparable to the coverage maintained by SL Green Realty Corp., for such time as SL Green Realty Corp. controls the Employer.  The provisions of this Section 4 shall remain in effect after this Agreement is terminated irrespective of the reasons for termination.

5.              Employer’s Policies .  Executive agrees to observe and comply with the reasonable written rules and regulations of the Employer regarding the performance of his duties and to carry out and perform orders, directions and policies communicated to him from time to time by the Employer, so long as same are otherwise consistent with this Agreement.

6.              Termination .  Executive’s employment hereunder may be terminated under the following circumstances:

(a)            Termination by the Employer .

(i)             Death .  Executive’s employment hereunder shall terminate upon his death.

(ii)            Disability .  If, as a result of Executive’s incapacity due to physical or mental illness or disability, Executive shall have been incapable of performing his duties hereunder even with a reasonable accommodation on a full-time basis for the entire 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 Section 6(d)) is given he shall not have returned to the performance of Executive’s duties hereunder on a full-time basis, the Employer may terminate Executive’s employment hereunder.

(iii)           Cause .  The Employer may terminate Executive’s employment hereunder for Cause.  For purposes of this Agreement, “Cause” shall mean Executive’s:  (A) engaging in conduct which is a felony; (B) material breach of any of his obligations under Sections 8(a) through 8(e) of this Agreement; (C) willful misconduct of a material nature or gross negligence with regard to the Employer or Gramercy or any of their

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affiliates; (D) material fraud with regard to the Employer or Gramercy or any of their affiliates; (E) willful or material violation of any reasonable written rule, regulation or policy of the Employer or Gramercy applicable to senior executives unless such a violation is cured within 30 days after written notice of such violation by the Employer or Gramercy; or (F) failure to competently perform his duties which failure is not cured within 30 days after receiving notice from the Employer specifically identifying the manner in which Executive has failed to perform (it being understood that, for this purpose, the manner and level of Executive’s performance shall not be determined based on the financial performance (including without limitation the performance of the stock of Gramercy) of the Employer or Gramercy).

(iv)           Without Cause .  Executive’s employment hereunder may be terminated by the Employer at any time without Cause (as defined in Section 6(a)(iii) above), subject only to the severance provisions specifically set forth in Section 7.

(b)            Termination by Executive .

(i)             Disability .  Executive may terminate his employment hereunder for Disability within the meaning of Section 6(a)(ii) above.

(ii)            With Good Reason .  Executive’s employment hereunder may be terminated by Executive with Good Reason effective immediately by written notice to the Employer providing at least ten (10) days notice prior to such termination. For purposes of this Agreement, termination with “Good Reason” shall mean termination following:

(A)             a material change in Executive’s duties, responsibilities, status or positions with the Employer that does not represent a promotion from or maintaining of Executive’s duties, responsibilities, status or positions (which material change, so long as Executive is the Chief Executive Officer of Gramercy, shall include the appointment of another person as co-Chief Executive Officer of Gramercy), except in connection with the termination of Executive’s employment for Cause, disability, retirement or death;

(B)              a failure by the Employer to pay compensation when due in accordance with the provisions of Section 3, which failure has not been cured within 10 business days after the notice of the failure (specifying the same) has been given by Executive to the Employer;

(C)              a material breach by the Employer of any provision of this Agreement, which breach has not been cured within 30 days after notice of noncompliance (specifying the nature of the noncompliance) has been given by Executive to the Employer;

(D)             the Employer requiring Executive to be based in an office more than 50 miles outside of Manhattan;

(E)              a reduction by the Employer in Executive’s Base Salary to less than the minimum Base Salary set forth in Section 3(a);

(F)              the failure by the Employer to continue in effect an equity award program or other substantially similar program under which Executive is eligible

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to receive awards;

(G)              a material reduction in Executive’s benefits under any benefit plan (other than an equity award program) compared to those currently received (other than in connection with and proportionate to the reduction of the benefits received by all or most senior executives or undertaken in order to maintain such plan in compliance with any federal, state or local law or regulation governing benefits plans, including, but not limited to, the Employee Retirement Income Security Act of 1974; or

(H)             the failure by the Employer to obtain from any successor to the Employer an agreement to be bound by this Agreement pursuant to Section 15 hereof, which has not been cured within 30 days after the notice of the failure (specifying the same) has been given by Executive to the Employer.

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

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

(i)             A “Change-in-Control” shall be deemed to have occurred if:

(A)             any “person,” including a “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding the Employer, SL Green Realty Corp. (or a successor thereto that directly or indirectly acquires all or substantially all of the assets of SL Green Realty Corp., whether by merger, consolidation, asset acquisition or otherwise) (“SL Green”), any entity controlling, controlled by or under common control with the Employer, or SL Green, any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Employer, Gramercy, SL Green or any such entity, and Executive and any “group” (as such term is used in Section 13(d)(3) of the Exchange Act) of which Executive is a member), is or becomes the “beneficial owner” (as defined in Rule 13(d)(3) under the Exchange Act), directly or indirectly, of securities of Gramercy representing 25% or more of either (1) the combined voting power of Gramercy’s then outstanding securities or (2) the then outstanding common stock (or other similar equity interest, in the case of a company other than a corporation) of Gramercy (in either such case other than as a result of an acquisition of securities directly from Gramercy); or

(B)              any consolidation or merger of Gramercy where the shareholders of Gramercy, as applicable, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defied in Rule 13d-3 under the Exchange Act), directly or indirectly, shares representing in the aggregate 50% or more of the combined voting power of the securities of the corporation issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any); or

(C)              there shall occur (1) any sale, lease, exchange or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of Gramercy, other

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than a sale or disposition by Gramercy of all or substantially all of Gramercy’s assets to an entity at least 50% of the combined voting power of the voting securities of which are owned by “persons” (as defined above) in substantially the same proportion as their ownership of Gramercy, as applicable, immediately prior to such sale, or (2) the approval by shareholders of Gramercy, as applicable, of any plan or proposal for the liquidation or dissolution of Gramercy, as applicable; or

(D)             the members of the Board (the “Directors”) at the beginning of any consecutive 24-calendar-month period (the “Incumbent Directors”) cease for any reason other than due to death to constitute at least a majority of the members of the Board; provided that any Director whose election, or nomination for election by Gramercy’s shareholders was approved or ratified by a vote of at least a majority of the members of the Board then still in office who were members of the Board at the beginning of such 24-calendar-month period shall be deemed to be an Incumbent Director.

Notwithstanding the foregoing, a Change-in-Control shall not be deemed to have occurred if SL Green Realty Corp. (or a successor thereto that directly or indirectly acquires all or substantially all of the assets of SL Green Realty Corp., whether by merger, consolidation, asset acquisition or otherwise) or one of its direct or indirect subsidiaries continues to be the external manager of Gramercy at the applicable time.

(d)            Notice of Termination .  Any termination of Executive’s employment by the Employer or by Executive (other than on account of death) shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 11 of this Agreement.  For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and, as applicable, shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provision so indicated.  Executive’s employment shall terminate as of the effective date set forth in the Notice of Termination (the “Termination Date”), which date shall not be more than thirty (30) days after the date of the Notice of Termination.  For avoidance of doubt, a notice of non-renewal pursuant to Section 1 shall not be considered a Notice of Termination.

(e)            Resignation Upon Termination .  In the event that Executive’s employment with the Employer is terminated, Executive (i) shall, within five business days of receipt of a written request for resignation, resign as a director of Gramercy, and shall resign all other positions (including, without limitation, as officer, employee, director and member of any committee) with the Employer and Gramercy and their subsidiaries and affiliates, and (ii) shall provide such written confirmation thereof as may be reasonably required by the Employer.  In the event that Executive’s service with Gramercy is terminated other 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 Gramercy and its subsidiaries, and (ii) shall provide such written confirmation thereof as may be reasonably required by the Employer.

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7.              Compensation Upon Termination; Change-in-Control .

(a)            Termination By the Employer Without Cause or By Executive With Good Reason .  If (i) Executive is terminated by the Employer without Cause pursuant to Section 6(a)(iv) above, or (ii) Executive shall terminate his employment hereunder with Good Reason pursuant to Section (6)(b)(ii) above, then the Employment Period shall terminate as of the Termination Date and Executive shall be entitled to the following payments and benefits, subject to Executive’s execution of a mutual release agreement in form and substance satisfactory to the Employer, whereby, in general, each party releases the other from all claims such party may have against the other party (other than (A) claims against the Employer relating to the Employer’s obligations under this Agreement and certain other specified agreements arising in connection with or after Executive’s termination, including, without limitation, the Employer’s obligations hereunder to provide severance payments and benefits and accelerated vesting of equity awards and (B) claims against Executive relating to or arising out of any act of fraud, intentional misappropriation of funds, embezzlement or any other action with regard to the Employer or any of its affiliated companies that constitutes a felony under any federal or state statute committed or perpetrated by Executive during the course of Executive’s employment with the Employer or its affiliates, in any event, that would have a material adverse effect on the Employer, or any other claims that may not be released by the Employer under applicable law) (the “Release Agreement”), and the effectiveness thereof on or within 30 days after the Termination Date (with the date of such effectiveness being referred to herein as the “Release Effectiveness Date”):

(i)             Executive shall receive any earned and accrued but unpaid Base Salary (at the rate in effect on the date of his termination) on the first regular payroll payment date for the period in which the Termination Date occurs, and shall continue to receive Base Salary (at the rate in effect on the date of his termination) for a period of twelve (12) months following the Termination Date on the same periodic payment dates as payment would have been made to Executive had Executive not been terminated; provided that no payments of continued Base Salary will be made until the first regular payroll payment date that commences 30 days after the Termination Date, provided that the Release Effectiveness Date has occurred (with the first such payment to include a catch up payment covering amounts that would otherwise have been paid prior to such date but for the application of this provision).

(ii)            the Employer shall pay Executive annual performance bonuses as follows: (A) if the Termination Date is during 2009 or any later year, a prorated annual performance bonus (the “Prorated Annual Bonus”) equal to (x) Executive’s annual performance bonus for the most recent prior fiscal year for which the amount of such bonus had been determined or, if the Termination Date occurs prior to Executive’s annual performance bonus for 2009 having been determined, the amount of $800,000 (with the applicable amount being referred to herein as the “Prior Annual Bonus”) multiplied by (y) a fraction, the numerato