Exhibit 10.20


 


COLLATERAL MANAGEMENT
AGREEMENT


 


This Collateral Management Agreement, dated as of July 14,
2005 (the “Agreement”),
is entered into by and between GRAMERCY REAL ESTATE CDO 2005-1, Ltd., an
exempted company incorporated with limited liability under the laws of the
Cayman Islands (together with successors and assigns permitted hereunder, the “Issuer”), and GKK MANAGER
LLC, a limited liability company organized under the laws of the State of Delaware
(together with its successors and assigns the “Collateral Manager”).  Capitalized terms used herein but not
otherwise defined herein shall have the respective meanings ascribed thereto in
the Indenture, dated as of July 14, 2005 (the “Indenture”), by and among the Issuer, Gramercy
Real Estate CDO 2005-1 LLC, as co-issuer (the “Co-Issuer”), Wells Fargo Bank, National
Association, as trustee (in such capacity, the “Trustee”), calculation agent, transfer agent,
custodial securities intermediary, backup advancing agent and notes registrar, and
GKK Liquidity LLC, as advancing agent.


 


WHEREAS, the Issuer desires to engage the Collateral
Manager to provide the services described herein and the Collateral Manager
desires to provide such services;


 


NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth herein, the parties hereto hereby agree as
follows:


 


1.                                       Management
Services.  The Collateral Manager is
hereby appointed as the Issuer’s exclusive agent to provide to the Issuer
certain services in relation to the Assets specified herein and in the
Indenture.  Accordingly, the Collateral
Manager accepts such appointment and shall provide to the Issuer the following
services (in accordance with all applicable requirements of the Indenture and
this Agreement including without limitation the Collateral Manager Servicing
Standard):


 


(a)                                  determining
specific Collateral Debt Securities to be purchased or Collateral Debt
Securities to be sold and the timing of such purchases and sales, in each case
as permitted by the Indenture;


 


(b)                                 determining
specific Eligible Investments to be purchased or sold and the timing of such
purchases and sales, in each case as permitted by the Indenture;


 


(c)                                  effecting
or directing the purchase of Collateral Debt Securities and Eligible
Investments, effecting or directing the sale of Collateral Debt Securities and
Eligible Investments, and directing the investment or reinvestment of proceeds
therefrom, in each case as permitted by the Indenture;


 


(d)                                 negotiating
with the issuers of Collateral Debt Securities as to proposed modifications or
waivers of the documentation governing such Collateral Debt Securities;


 





















 


(e)                                  taking
action, or advising the Trustee with respect to actions to be taken, with
respect to the Issuer’s exercise of any rights (including, without limitation,
voting rights, tender rights and rights arising in connection with the
bankruptcy or insolvency of an issuer or the consensual or non-judicial
restructuring of the debt or equity of an issuer) or remedies in connection
with the Collateral Debt Securities and Eligible Investments, as provided in
the related Underlying Instruments, including in connection with an Offer or a
default, and participating in the committees or other groups formed by
creditors of an issuer, or taking any other action with respect to Collateral
Debt Securities and Eligible Investments which the Collateral Manager
determines in the reasonable exercise of the Collateral Manager’s business
judgment is in the best interests of the Noteholders in accordance with and as
permitted by the terms of the Indenture;


 


(f)                                    consulting
with the Rating Agencies at such times as may be reasonably requested by the
Rating Agencies and providing to the Rating Agencies any information reasonably
requested in connection with the Rating Agencies’ maintenance of their ratings
of the Notes and their assigning credit indicators to prospective Collateral
Debt Securities, if applicable;


 


(g)                                 determining
whether specific Collateral Debt Securities are Credit Risk Securities,
Defaulted Securities or Written Down Securities and determining whether such
Collateral Debt Securities, and any other Collateral Debt Securities that are
permitted or required to be sold pursuant to the Indenture, should be sold, and
directing the Trustee to effect a disposition of any such Collateral Debt Securities,
subject to and in accordance with the Indenture;


 


(h)                                 (i) monitoring
the Assets on an ongoing basis and (ii) providing or causing to be
provided to the Issuer and/or the other applicable parties specified in the
Indenture all reports, schedules and certificates which relate to the Assets
and which the Issuer is required to prepare and deliver under the Indenture,
which are not prepared and delivered by the Trustee on behalf of the Issuer
under the Indenture, in the form and containing all information required
thereby (including, in the case of the Monthly Reports and the Note Valuation
Reports, providing to the Trustee the information as specified in Sections 10.9(c) and
10.9(e) of the Indenture in sufficient time for the Trustee to prepare the
Monthly Reports and the Note Valuation Reports) and, if applicable, in
sufficient time for the Issuer to review such required reports and schedules
and to deliver them to the parties entitled thereto under the Indenture;


 


(i)                                     managing
the Issuer’s investments in accordance with the Indenture, including the
limitations relating to the Eligibility Criteria, the Coverage Tests, the
Collateral Quality Tests, the Reinvestment Criteria and the other requirements
of the Indenture, and taking any action that the Collateral Manager deems
appropriate and consistent with the Indenture, the Collateral Manager Servicing
Standard and the standard of care set forth herein with respect to any portion
of the Assets that does not constitute Collateral Debt Securities or Eligible
Investments;


 


(j)                                     monitoring
all Hedge Agreements and determining whether and when the Issuer should
exercise any rights available under any Hedge Agreement, and causing the Issuer


 


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to enter into additional or
replacement Hedge Agreements or terminating (in part or in whole) existing
Hedge Agreements, in each case in accordance with the Indenture;


 


(k)                                  providing
notification promptly, in writing, to the Trustee and the Issuer upon receiving
actual notice that a Collateral Debt Security is subject to an Offer or has
become a Defaulted Security, a Written Down Security or a Credit Risk Security;


 


(l)                                     providing
notification promptly, in writing, to the Trustee and the Issuer upon becoming
actually aware of a Default or an Event of Default under the Indenture;


 


(m)                               determining
(subject to the Indenture) whether, in light of the composition of Collateral
Debt Securities, general market conditions and other factors considered
pertinent by the Collateral Manager, investments in additional Collateral Debt
Securities would, at any time during the Reinvestment Period, be either impractical
or not beneficial to the Holders of the Preferred Shares;


 


(n)                                 if
the Collateral Manager elects to amortize the Notes pursuant to and in
accordance with Section 9.7 of the Indenture, providing notification, in
writing, to the Trustee, the Issuer, the Co-Issuer and each Hedge Counterparty
of (A) such election and (B) the amount of proceeds that will be used
to so amortize the Notes;


 


(o)                                 taking
reasonable action on behalf of the Issuer to effect any Optional Redemption,
any Tax Redemption, any Auction Call Redemption or any Clean-up Call in
accordance with the Indenture;


 


(p)                                 on
the Stated Maturity of the Notes or in connection with any Optional Redemption,
any Tax Redemption, any Auction Call Redemption or any Clean-up Call,
liquidating any remaining Hedge Agreements;


 


(q)                                 monitoring
the ratings of the Collateral Debt Securities and the Issuer’s compliance with
the covenants by the Issuer in the Indenture;


 


(r)                                    assisting
the Issuer in (i) taking any action in order to effect and/or maintain the
listing of any of the Notes on the Irish Stock Exchange or (ii) obtaining
any waiver from the Irish Stock Exchange, or (iii) providing other
information related to the Issuer that is reasonably available to the
Collateral Manager, in each case, when specifically requested by the Irish
Stock Exchange;


 


(s)                                  complying
with such other duties and responsibilities as may be specifically required of
the Collateral Manager by the Indenture or this Agreement;


 


(t)                                    complying
in all material respects with the Investment Advisers Act of 1940, as amended
(the “Advisers Act”),
with respect to the Issuer;


 


(u)                                 in
order to render the Securities eligible for resale pursuant to Rule 144A
under the Securities Act, while any of such Securities remain outstanding,
making available, upon request, to any Holder or prospective purchaser of such Securities,
additional information regarding the Issuer and the Assets if such information
is reasonably available to the Collateral


 


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Manager and constitutes Rule 144A
Information required to be furnished by the Issuer pursuant to Section 7.13
of the Indenture, unless the Issuer furnishes information to the United States
Securities and Exchange Commission pursuant to Section 13 or Section 15(d) of
the Exchange Act;


 


(v)                                 upon
reasonable request, assisting the Trustee or the Issuer with respect to such
actions to be taken after the Closing Date, as is necessary to maintain the
clearing and transfer of the Notes through DTC; and


 


(w)                               in
accordance with the Collateral Manager Servicing Standard, enforcing the rights
of the Issuer as holder of the Collateral Debt Securities, including without
limitation taking such action as is necessary to enforce the Issuer’s rights
with respect to remedies related to breaches of representations, warranties or
covenants in the Underlying Instruments for the benefit of the Issuer.


 


In furtherance of the foregoing, the Issuer hereby
appoints the Collateral Manager the Issuer’s true and lawful agent and
attorney-in-fact, with full power of substitution and full authority in the
Issuer’s name, place and stead and without any necessary further approval of
the Issuer, in connection with the performance of the Collateral Manager’s
duties provided for in this Agreement, including the following powers:  (i) in accordance with the terms and
conditions of the Indenture and this Agreement, to buy, sell, exchange, convert
and otherwise trade Collateral Debt Securities and Eligible Investments, and (ii) to
execute (under hand, under seal or as a deed) and deliver all necessary and
appropriate documents and instruments on behalf of the Issuer to the extent
necessary or appropriate to perform the services referred to in (a) through
(w) above of this Section 1 and under the Indenture.  The foregoing power of attorney is a
continuing power, coupled with an interest, and shall remain in full force and
effect until revoked by the Issuer in writing by virtue of the termination of
this Agreement pursuant to Section 12 hereof or an assignment of this
Agreement pursuant to Section 17 hereof; provided that any such
revocation shall not affect any transaction initiated prior to such revocation.  Nevertheless, if so requested by the
Collateral Manager, a purchaser of a Collateral Debt Security or Eligible
Investment or a Hedge Counterparty, the Issuer shall ratify and confirm any
such sale or other disposition by executing and delivering to the Collateral
Manager, such purchaser or such Hedge Counterparty all proper bills of sale,
assignments, releases and other instruments as may be designated in any such
request.


 


The Collateral Manager does not hereby guarantee that
sufficient funds will be available on each Payment Date to satisfy any such
payment obligations.  The Collateral
Manager shall perform its obligations hereunder and under the Indenture with
reasonable care and in good faith, using a degree of skill and attention no
less than that which it (a) exercises with respect to comparable assets
that it manages for itself and (b) exercises with respect to comparable
assets that it manages for others, and in a manner consistent with the
practices and procedures then in effect followed by reasonable and prudent
institutional managers of national standing relating to assets of the nature
and character of the Assets, except as expressly provided in this Agreement or
in the Indenture.  In addition, the
Collateral Manager shall use commercially reasonable efforts to ensure that
directions to the Trustee with respect to the purchase of Eligible Investments
are made by the Collateral Manager only if, in the Collateral Manager’s
commercially reasonable judgment at the time of such direction, payment at


 


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settlement in respect of
any such purchase could be made without any breach or violation of, or default
under, the terms of the Indenture or this Agreement.  The Collateral Manager shall comply with and
perform all the duties and functions that have been specifically delegated to
the Collateral Manager under the Indenture. 
The Collateral Manager shall be bound to follow any amendment,
supplement or modification to the Indenture of which it has received written
notice at least ten Business Days prior to the execution and delivery thereof
by the parties thereto; provided, however, that, with respect to
any amendment, supplement, modification or waiver to the Indenture which may affect
the Collateral Manager, the Collateral Manager shall not be bound thereby (and
the Issuer agrees that it will not permit any such amendment, supplement,
modification or waiver to become effective) unless the Collateral Manager has
been given prior written notice thereof and gives its written consent thereto
(which consent shall not be unreasonably withheld) to the Trustee and the
Issuer prior to the effectiveness thereof.


 


The Collateral Manager shall take all actions
reasonably requested by the Trustee to facilitate the perfection of the Trustee’s
security interest in the Assets pursuant to the Indenture.


 


2.                                       Delegation
of Duties.  The Collateral Manager
may delegate to third parties (including its Affiliates), which it shall select
with reasonable care, and employ third parties to execute any or all of the
duties assigned to the Collateral Manager hereunder; provided, however,
that (i) the Collateral Manager shall not be relieved of any of its duties
hereunder as a result of such delegation to or employment of third parties, (ii) the
Collateral Manager shall be solely responsible for the fees and expenses
payable to any such third party, except as set forth in Section 6 hereof,
and (iii) such delegation does not constitute an “assignment” under the
Advisers Act.


 


3.                                       Purchase
and Sale Transactions; Brokerage.


 


(a)                                  The
Collateral Manager shall seek to obtain the best overall terms for all orders
placed with respect to the Assets, considering all reasonable circumstances,
including, if applicable, the conditions or terms of early redemption of the Securities,
it being understood that the Collateral Manager has no obligation to obtain the
lowest prices available.  Subject to the foregoing
objective, the Collateral Manager may take into consideration all factors the
Collateral Manager reasonably determines to be relevant, including, without
limitation, timing, general relevant trends and research and other brokerage
services and support equipment and services related thereto furnished to the
Collateral Manager or its Affiliates by brokers and dealers in compliance with Section 28(e) of
the Exchange Act or, if Section 28(e) of the Exchange Act is not
applicable, in accordance with the provisions set forth herein.  Such services may be used in connection with
the other advisory activities or investment operations of the Collateral
Manager and/or its Affiliates.  In
addition, the Collateral Manager may take into account available prices, rates
of brokerage commissions and size and difficulty of the order, in addition to
other relevant factors (such as, without limitation, execution capabilities,
reliability (based on total trading rather than individual trading), integrity,
financial condition in general, execution and operational capabilities of
competing brokers and/or dealers, and the value of the ongoing relationship
with such brokers and/or dealers), without having to demonstrate that such
factors are of a direct benefit to the Issuer in any specific transaction.  The Issuer acknowledges and agrees that (i) the
determination by the Collateral Manager of any benefit to the Issuer is
subjective and represents


 


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the Collateral Manager’s
evaluation at the time that the Issuer will be benefited by relatively better
purchase or sales prices, lower brokerage commissions and beneficial timing of
transactions or a combination of any of these and/or other factors and (ii) the
Collateral Manager shall be fully protected with respect to any such
determination to the extent the Collateral Manager acts in good faith, and in
accordance with the Collateral Manager Servicing Standard (to the extent
applicable), and without gross negligence, willful misconduct or reckless
disregard of the obligations of the Issuer hereunder or under the terms of the
Indenture.


 


The Collateral Manager may aggregate sales and
purchase orders of securities placed with respect to the Assets with similar
orders being made simultaneously for other accounts managed by the Collateral
Manager or with accounts of the Affiliates of the Collateral Manager if in the
Collateral Manager’s sole judgment, exercised in good faith, such aggregation will
not have an adverse effect on the Issuer. 
When any such aggregate sales or purchase orders occur, the objective of
the Collateral Manager (and any of its Affiliates involved in such
transactions) shall be to allocate the executions among the accounts in a manner
fair and equitable to all such accounts and generally to seek to allocate
securities available for investment to all such accounts pro rata in proportion
to the optimum amount sought by the Collateral Manager for each respective
account.  In connection with the
foregoing, the objective of the Collateral Manager shall be to allocate investment
opportunities and the purchases or sales of instruments in a manner believed by
the Collateral Manager, in good faith, taking into account the Collateral
Manager’s Servicing Standard (to the extent applicable), to be fair and
equitable.


 


In connection with any purchase of a portfolio of
assets other than securities, the objective of the Collateral Manager shall be
to allocate such assets (and the aggregate purchase price paid for such assets)
among the Collateral Manager’s clients (including the Issuer) in a manner
believed by the Collateral Manager to be fair and equitable.  The Issuer acknowledges and agrees that the
Collateral Manager shall be fully protected with respect to any such allocation
to the extent the Collateral Manager acts in good faith, taking into account the
Collateral Manager’s Servicing Standard (to the extent applicable), and without
gross negligence, willful misconduct or reckless disregard of the obligations
of the Issuer hereunder or under the terms of the Indenture.


 


All purchases and sales of Eligible Investments and
Collateral Debt Securities by the Collateral Manager on behalf of the Issuer
shall be conducted in compliance with all applicable laws (including, without
limitation, Section 206(3) of the Advisers Act) and the terms of the
Indenture.  After (and excluding) the
Closing Date, the Collateral Manager shall cause any purchase or sale of any
Collateral Debt Security or Eligible Investment to be conducted on an arm’s-length
basis or, if applicable, in compliance with Section 3(b) hereof.  The parties hereto acknowledge and agree that
all purchases (including, without limitation, purchases from Affiliates of the
Collateral Manager) of Eligible Investments and Collateral Debt Securities by
the Collateral Manager on behalf of the Issuer on the Closing Date (including,
without limitation, all such purchases from Affiliates of the Collateral
Manager) in a manner contemplated by the final Offering Memorandum, dated July 8,
2005 (the “Offering Memorandum”), related to the Classes of Notes
offered thereby (or any supplement thereto) are hereby approved.


 


(b)                                 The
Collateral Manager, subject to and in accordance with the Indenture, may effect
direct trades between the Issuer and the Collateral Manager or any of its
Affiliates


 


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acting as principal or agent (any
such transaction, a “Related Party Trade”); provided, however,
that a Related Party Trade after (and excluding) the Closing Date, other than
Credit Risk/Defaulted Security Cash Purchases, sales of property or securities
in accordance with the Origination Agreement and sales of Assets pursuant to an
auction in connection with an Auction Call Redemption or in connection with a
redemption of the Notes pursuant to Article 9 of the Indenture, may be
effected only (i) upon disclosure to and with the prior consent of an
advisory committee containing at least one member independent from the
Collateral Manager (whose affirmative vote will be required to grant such
consent) acting as a surrogate for, and in the best interest of, the holders of
the Securities that has been appointed from time to time as needed by the
Issuer or by the Collateral Manager following the resignation of any member (the
“Advisory Committee”) and based on the Advisory Committee’s
determination that such transaction is on terms substantially as favorable to
the Issuer as would be the case if a such transaction were effected with
Persons not so affiliated with the Collateral Manager or any of its Affiliates
and (ii) subject to a requirement that the purchase price in respect of
any Collateral Debt Security acquired by the Issuer from a Seller pursuant to
such a direct trade may not exceed the Principal Balance thereof plus accrued
and unpaid interest thereon (or, in the case of a Preferred Equity Security,
all accrued and unpaid dividends or other distributions not attributable to the
return of capital by its governing documents). 
The Advisory Committee, if any, shall be formed subject to the Advisory
Committee Guidelines attached hereto as Exhibit A (the “Advisory
Committee Guidelines”).  The Issuer
consents and agrees that, if any transaction relating to the Issuer, including
any transaction effected between the Issuer and the Collateral Manager or its Affiliates,
shall be subject to the disclosure and consent requirements of Section 206(3) of
the Advisers Act, such requirements shall be satisfied with respect to the
Issuer and all Holders of the Securities if disclosure shall be given to, and
consent obtained from, the Advisory Committee. 
For avoidance of doubt, it is hereby understood and agreed by the
parties hereto that no disclosure to, or consent of, the Advisory Committee
shall be required with respect to Credit Risk/Defaulted Security Cash Purchases,
sales of property or securities in accordance with the Origination Agreement and
sales of Assets pursuant to an auction in connection with an Auction Call
Redemption or in connection with a redemption of the Notes pursuant to Article 9
of the Indenture.  Notwithstanding the
foregoing, to the extent such provisions are determined not to satisy the
requirements of the Advisers Act, the Collateral Manager shall take such
actions in connection with any Related Party Trade as will satisfy the
requirements of Section 206(3) of the Advisers Act.


 


4.                                       Representations
and Warranties of the Issuer.  The
Issuer represents and warrants to the Collateral Manager that:


 


(a)                                  the
Issuer (i) has been duly incorporated and registered as an exempted
company and is validly existing under the laws of the Cayman Islands, (ii) has
full power and authority to own the Issuer’s assets and the securities proposed
to be owned by the Issuer and included among the Assets and to transact the
business for which the Issuer was organized, and (iii) is duly qualified
under the laws of each jurisdiction where the Issuer’s ownership or lease of
property or the conduct of the Issuer’s business requires or the performance of
the Issuer’s obligations under this Agreement and the Indenture would require
such qualification, except for failures to be so qualified that would not in
the aggregate have a material adverse effect on the business, operations,
assets or financial condition of the Issuer or the ability of the Issuer to
perform its obligations under, or on the validity or enforceability of, this
Agreement and the


 


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Indenture; the Issuer has full
power and authority to execute, deliver and perform the Issuer’s obligations
hereunder and thereunder; this Agreement and the Indenture have been duly
authorized, executed and delivered by the Issuer and constitute legal, valid
and binding agreements enforceable against the Issuer in accordance with their
terms except that the enforceability thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium, receivership, conservatorship or other
similar laws now or hereafter in effect relating to creditors’ rights and (ii) general
principles of equity (regardless of whether such enforcement is considered in a
proceeding in equity or at law);


 


(b)                                 no
consent, approval, authorization or order of or declaration or filing with any
government, governmental instrumentality or court or other Person is required
for the performance by the Issuer of its duties hereunder or under the
Indenture, except those that may be required under state securities or “blue
sky” laws or the applicable laws of any jurisdiction outside of the United
States, and such as have been duly made or obtained;


 


(c)                                  neither
the execution, delivery and performance of this Agreement or the Indenture nor
the performance by the Issuer of its duties hereunder or thereunder (i) conflicts
with or will violate or result in a default under the Issuer’s Governing
Documents or any material contract or agreement to which the Issuer is a party
or by which it or its assets may be bound, or any law, decree, order, rule, or
regulation applicable to the Issuer of any court or regulatory, administrative
or governmental agency, body or authority or arbitrator having jurisdiction
over the Issuer or its properties, or (other than as contemplated or permitted
by the Indenture) will result in a lien on any of the property of the Issuer
and (ii) would have a material adverse effect upon the ability of the
Issuer to perform its duties under this Agreement or the Indenture;


 


(d)                                 the
Issuer and its Affiliates are not in violation of any Federal, state or Cayman
Islands laws or regulations, and there is no charge, investigation, action,
suit or proceeding before or by any court or regulatory agency pending or, to
the best knowledge of the Issuer, threatened that, in any case, would have a
material adverse effect upon the ability of the Issuer to perform its duties
under this Agreement or the Indenture;


 


(e)                                  the
Issuer is not an “investment company” under the Investment Company Act; and


 


(f)                                    the
assets of the Issuer do not and will not at any time constitute the assets of
any plan subject to the fiduciary responsibility provisions of ERISA or of any
plan within the meaning of Section 4975(e)(1) of the Code.


 


5.                                       Representations
and Warranties of the Collateral Manager.  The Collateral Manager represents and warrants
to the Issuer that:


 


(a)                                  the
Collateral Manager (i) has been duly organized, is validly existing and is
in good standing under the laws of the State of Delaware, (ii) has full
power and authority to own the Collateral Manager’s assets and to transact the
business in which it is currently engaged, and (iii) is duly qualified and
in good standing under the laws of each jurisdiction where the Collateral
Manager’s ownership or lease of property or the conduct of the Collateral
Manager’s business requires, or the performance of this Agreement and the
Indenture would require, such


 


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qualification, except for
failures to be so qualified that would not in the aggregate have a material
adverse effect on the business, operations, assets or financial condition of
the Collateral Manager or the ability of the Collateral Manager to perform its
obligations under, or on the validity or enforceability of, this Agreement and
the provisions of the Indenture applicable to the Collateral Manager; the
Collateral Manager has full power and authority to execute, deliver and perform
this Agreement and the Collateral Manager’s obligations hereunder and the
provisions of the Indenture applicable to the Collateral Manager; this
Agreement has been duly authorized, executed and delivered by the Collateral
Manager and constitutes a legal, valid and binding agreement of the Collateral Manager,
enforceable against it in accordance with the terms hereof, except that the
enforceability hereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors’ rights and (ii) general principles of equity
(regardless of whether such enforcement is considered in a proceeding in equity
or at law);


 


(b)                                 neither
the Collateral Manager nor any of its Affiliates is in violation of any Federal
or state securities law or regulation promulgated thereunder that would have a
material adverse effect upon the ability of the Collateral Manager to perform
its duties under this Agreement or the Indenture, and there is no charge,
investigation, action, suit or proceeding before or by any court or regulatory
agency pending or, to the best knowledge of the Collateral Manager, threatened
which could reasonably be expected to have a material adverse effect upon the
ability of the Collateral Manager to perform its duties under this Agreement or
the Indenture;


 


(c)                                  neither
the execution and delivery of this Agreement nor the performance by the
Collateral Manager of its duties hereunder or under the Indenture conflicts
with or will violate or result in a breach or violation of any of the terms or
provisions of, or constitutes a default under: 
(i) the limited liability company agreement of the Collateral
Manager, (ii) the terms of any indenture, contract, lease, mortgage, deed
of trust, note agreement or other evidence of indebtedness or other agreement,
obligation, condition, covenant or instrument to which the Collateral Manager
is a party or by which the Collateral Manager is bound, (iii) any law,
decree, order, rule or regulation applicable to the Collateral Manager of
any court or regulatory, administrative or governmental agency, body or
authority or arbitrator having jurisdiction over the Collateral Manager or its
properties, and which would have, in the case of any of (i), (ii) or (iii) of
this subsection (c), either individually or in the aggregate, a material
adverse effect on the business, operations, assets or financial condition of
the Collateral Manager or the ability of the Collateral Manager to perform its
obligations under this Agreement or the Indenture;


 


(d)                                 no
consent, approval, authorization or order of or declaration or filing with any
government, governmental instrumentality or court or other Person is required
for the performance by the Collateral Manager of its duties hereunder and under
the Indenture, except such as have been duly made or obtained;


 


(e)                                  the
Section entitled “The Collateral Manager” in the Offering Memorandum, as
of the date thereof (including as of the date of any supplement thereto) and as
of the Closing Date does not contain any untrue statement of a material fact
and does not omit to state any material fact necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading; and


 


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(f)                                    the
Collateral Manager is not required to register as an investment adviser under
the Advisers Act.


 


6.                                       Expenses.
 Both parties hereto acknowledge and
agree that a portion of the gross proceeds received from the issuance and sale
of the Securities will be used to pay certain organizational and structuring
fees and expenses of the Co-Issuers, including the legal fees and expenses of
counsel to the Collateral Manager.  The
Collateral Manager shall pay all expenses and costs incurred by it in the
course of performing its obligations under this Agreement; provided, however,
that the Collateral Manager shall not be liable for, and (subject to the
Priority of Payments set forth in the Indenture and to the extent funds are
available therefor) the Issuer shall be responsible for the payment of,
reasonable expenses and costs (including, without limitation, reasonable travel
expenses) of (i) independent accountants, consultants and other advisers
retained by the Issuer or by the Collateral Manager on behalf of the Issuer in
connection with the services provided by the Collateral Manager hereunder, (ii) legal
advisers retained by the Issuer or by the Collateral Manager on behalf of the
Issuer in connection with the services provided by the Collateral Manager hereunder
and (iii) the Collateral Manager (A) to the extent of reasonable
expenses disbursed or allocated in valuing the Assets, disbursed or allocated
software and technology expenditures relating to the monitoring and
administration of the Assets and any other reasonable expenses incurred by the
Collateral Manager in connection with matters arising in the performance of its
duties under this Agreement and (B) for an allocable share of the cost of
certain credit databases used by the Collateral Manager in providing services
to the Issuer under this Agreement.


 


7.                                       Fees.
 As compensation for the performance of
its obligations as Collateral Manager hereunder and under the Indenture, the
Collateral Manager will be entitled to receive (i) a fee, payable
quarterly in arrears on each Payment Date in accordance with the Priority of
Payments, equal to 0.15% per annum of the Net Outstanding Portfolio Balance
(the “Senior Collateral
Management Fee”) and (ii) an additional fee, payable
quarterly in arrears on each Payment Date in accordance with the Priority of
Payments, equal to 0.25% per annum of the Net Outstanding Portfolio Balance
(the “Subordinate Collateral
Management Fee” and, together with the Senior Collateral
Management Fee, the “Collateral
Management Fee”).  Each
Collateral Management Fee will be calculated for each Interest Accrual Period
assuming a 360-day year with 12 thirty-day months.  The Collateral Management Fee will be
calculated based on the Net Outstanding Portfolio Balance as of the first day
of the applicable Interest Accrual Period. 
If on any Payment Date there are insufficient funds to pay such fees
(and/or any other amounts due and payable to the Collateral Manager) in full, in
accordance with the Priority of Payments, the amount not so paid shall be
deferred and such amounts shall be payable on such later Payment Date on which
funds are available therefor as provided in the Priority of Payments set forth
in the Indenture.  Any accrued and unpaid
Senior Collateral Management Fee that is deferred due to the operation of the
Priority of Payments shall accrue interest at LIBOR in effect for the
applicable Interest Accrual Period computed on an actual 360-day basis.  Any accrued and unpaid Subordinate Collateral
Management Fee that is deferred due to the operation of the Priority of
Payments shall accrue interest at LIBOR in effect for the applicable Interest
Accrual Period on an actual 360-day basis. 
Notwithstanding any other provision hereof, the aggregate amount of all
accrued but unpaid Subordinate Collateral Management Fee payable on the final
Payment Date or, if earlier, following the winding up of the Issuer shall be
equal to the lesser of (a) the nominal amount thereof and (b) the
amount available for payment under the Priority of


 


10





















 


Payments. The Collateral
Manager hereby agrees not to cause the filing of a petition in bankruptcy
against the Issuer for the nonpayment to the Collateral Manager of any amounts
due it hereunder except in accordance with Section 18 hereof and, subject
to the provisions of Section 12, to continue to serve as Collateral
Manager.  If this Agreement is terminated
pursuant to Section 12 hereof or otherwise, the accrued fees payable to
the Collateral Manager shall be prorated for any partial periods between the
Payment Dates during which this Agreement was in effect and shall be due and
payable on the first Payment Date following the date of such termination,
together with all expenses payable to the Collateral Manager in accordance with
Section 6 hereof, and subject to the provisions of the Indenture and the
Priority of Payments.


 


8.                                       Non-Exclusivity.
 Nothing herein shall prevent the
Collateral Manager or any of its Affiliates or any of their officers or
directors from engaging in any other businesses or providing investment
management, advisory or any other types of services to any Persons, including
the Issuer, the Trustee and the Noteholders, to the fullest extent permitted by
applicable law; provided, however, that the Collateral Manager
may not take any of the foregoing actions which the Collateral Manager knows or
reasonably should know would require the Issuer or the pool of Assets to
register as an “investment company” under the Investment Company Act.


 


9.                                       Conflicts
of Interest.


 


(a)                                  After
(but excluding) the Closing Date and the sales by Affiliates of the Collateral
Manager of Collateral Debt Securities to the Issuer on the Closing Date (and
except in the case of Credit Risk/Defaulted Security Cash Purchases, sales of
property or securities in accordance with the Origination Agreement and sales
of Assets pursuant to an auction in connection with an Auction Call Redemption
or in connection with a redemption of the Notes pursuant to Article 9 of
the Indenture), the Collateral Manager will not cause the Issuer to enter into
any transaction with the Collateral Manager or any of its Affiliates as
principal unless the applicable terms and conditions set forth in Section 3(b) are
complied with.


 


(b)                                 The
Collateral Manager shall perform its obligations hereunder in accordance with
the requirements of the Advisers Act and the Indenture. The Issuer acknowledges
that (i) the Collateral Manager and/or its Affiliates will acquire on the
Closing Date 100% of each of the Class J Notes, the Class K Notes and
the Preferred Shares, (ii) Affiliates of the Collateral Manager will sell
Collateral Debt Securities to the Issuer on or prior to the Closing Date, and (iii) the
Collateral Manager, its Affiliates and funds or accounts for which the
Collateral Manager or its Affiliates acts as investment adviser may at times
own Notes of one or more additional Classes. 
After the Closing Date, the Collateral Manager agrees to provide to the
Trustee written notice upon the acquisition or transfer (after, but excluding,
the Closing Date) of any Securities held by the Collateral Manager, any of its
Affiliates or any fund managed or controlled by the Collateral Manager or any
Affiliate thereof.


 


(c)                                  Nothing
herein shall prevent the Collateral Manager or any of its Affiliates or officers
and directors of the Collateral Manager from engaging in other businesses
(including financing, purchasing, owning, holding, originating or disposing of
any assets or investments), or from rendering services of any kind to the
Issuer and its Affiliates, the Trustee, the Holders or any other Person or
entity, whether or not any of the foregoing may be competitive with the


 


11





















 


business of the Issuer or
the Co-Issuer.  Without prejudice to the
generality of the foregoing, directors, officers, members, partners, employees
and agents of the Collateral Manager, Affiliates of the Collateral Manager, and
the Collateral Manager may, among other things:


 


(i)                    serve
as directors (whether supervisory or managing), officers, employees, partners, members,
managers, agents, nominees or signatories for the Issuer or any Affiliate
thereof, or for any obligor in respect of any of the Collateral Debt Securities
or Eligible Investments, or any of their respective Affiliates, except to the
extent prohibited by their respective Underlying Instruments, as from time to
time amended; provided that (x) in the reasonable judgment of the
Collateral Manager, such activity will not have a material adverse effect on
the ability of the Issuer or the Trustee to enforce its respective rights with
respect to any Assets and (y) nothing in this paragraph shall be deemed to
limit the duties of the Collateral Manager set forth in Section 1 hereof;


 


(ii)                 perform,
and receive fees for the performance of, services of whatever nature rendered
to an obligor in respect of any of the Collateral Debt Securities or Eligible
Investments, including acting as master servicer, sub-servicer or special
servicer with respect to any CMBS Securities or with respect to any commercial
mortgage loan constituting or underlying any Collateral Debt Security; provided
that, in the reasonable judgment of the Collateral Manager, such activity will
not have a material adverse effect on the ability of the Issuer or the Trustee to
enforce its respective rights with respect to any of the Assets; provided,
further, with respect to such services, the Collateral Manager is not
acting as an agent for the Issuer;


 


(iii)              be retained to provide services unrelated
to this Agreement to the Issuer or its Affiliates and be paid therefor;


 


(iv)             be
a secured or unsecured creditor of, or hold an equity interest in, the Issuer,
its Affiliates or any obligor of any Collateral Debt Security or Eligible
Investment; provided, however, that the Collateral Manager may
not be such a creditor or hold any of such interests if, in the opinion of
counsel to the Issuer, the existence of such interest would require
registration of the Issuer or the Assts as an “investment company” under the
Investment Company Act or violate any provisions of Federal or applicable state
law or any law, rule or regulation of any governmental body or agency
having jurisdiction over the Issuer;


 


(v)                own
equity in or own or make loans to any issuer of REIT Debt Securities including any
issuer of REIT Debt Securities obligated on any of the Collateral Debt
Securities, so long as that doing so will not cause any such Collateral Debt
Security to fail to comply with the Eligibility Criteria;


 


(vi)             make,
hold or sell an investment in an issuer’s securities that may be pari passu,
senior or junior in ranking to a Collateral Debt Security;


 


(vii)          except as otherwise provided in this Section 9,
sell any Collateral Debt Security or Eligible Investment to, or purchase any
Collateral Debt Security from, the Issuer while acting in the capacity of
principal or agent; and


 


12





















 


(viii)       subject to its obligations in Section 1
hereof to protect the Holders, serve as a member of any “creditors’ board” with
respect to any Defaulted Security, Eligible Investment or with respect to any
commercial mortgage loan underlying or constituting any Collateral Debt
Security or the respective borrower for any such commercial mortgage loan.


 


It is understood that the Collateral Manager and its
Affiliates may engage in any other business, whether or not any of the
foregoing may be competitive with the business of the Issuer or the Co-Issuer
(including financing, purchasing, owning, holding, originating or disposing of
any assets or investments), and furnish investment management and advisory
services to others, including Persons that may have investment policies similar
to those followed by the Collateral Manager with respect to the Assets and that
may own instruments of the same class, or of the same type, as the Collateral
Debt Securities or other instruments of the issuers of Collateral Debt
Securities and may manage portfolios similar to the Assets.  The Collateral Manager and its Affiliates
shall be free, in their sole discretion, to make recommendations to others, or
effect transactions on behalf of themselves or for others, which may be the
same as or different from those the Collateral Manager causes the Issuer to
effect with respect to the Assets.


 


The Collateral Manager and its Affiliates may, and may
cause or advise their respective clients to, invest in assets, investments or instruments
that would be appropriate for the Issuer or the Co-Issuer or as security for
the Notes and shall have no duty or obligation to offer any such asset,
investment or instrument to the Issuer or the Co-Issuer.  Such investments may be different from those
made to or on behalf of the Issuer.  The
Collateral Manager, its Affiliates and their respective clients may have
ongoing relationships with Persons whose instruments are pledged to secure the
Notes and may own instruments issued by, or loans to, issuers of the Collateral
Debt Securities or to any borrower or Affiliate of any borrower on any
commercial mortgage loans underlying or constituting the Collateral Debt
Securities or the Eligible Investments.  The
Collateral Manager and its Affiliates may cause or advise their respective
clients to invest in instruments that are senior to, or have interests
different from or adverse to, the instruments that are pledged to secure the
Notes.


 


Nothing contained in this Agreement shall prevent the
Collateral Manager or any of its Affiliates from themselves buying or selling,
or from recommending to or directing any other account to buy or sell, at any
time, securities of the same kind or class, or securities of a different kind
or class of the same issuer, as those directed by the Collateral Manager to be
purchased or sold hereunder.  It is
understood that, to the extent permitted by applicable law, the Collateral
Manager, its Affiliates, and any member, manager, officer, director,
stockholder or employee of the Collateral Manager or any such Affiliate or any
member of their families or a Person advised by the Collateral Manager may have
an interest in a particular transaction or in securities of the same kind or
class, or securities of a different kind or class of the same issuer, as those
purchased or sold by the Collateral Manager hereunder.  When the Collateral Manager is considering
purchases or sales for the Issuer and one or more of such other accounts at the
same time, the Collateral Manager shall allocate available investments or
opportunities for sales in its discretion and make investment recommendations
and decisions that may be the same as or different from those made with respect
to the Issuer’s investments, in accordance with applicable law and the
Collateral Manager Servicing Standard, to the extent applicable.


 


13





















 


Subject to the Indenture and the provisions of this
Agreement, the Collateral Manager shall not be obligated to pursue any specific
investment strategy or opportunity that may arise with respect to the Assets.


 


The Issuer hereby acknowledges and consents to the
various potential and actual conflicts of interests that may exist with respect
to the Collateral Manager as described above; provided, however,
that nothing contained in this Section 9 shall be construed as altering
the duties of the Collateral Manager set forth in this Agreement or in the
Indenture.


 


10.                                 Records;
Confidentiality.  The Collateral
Manager shall maintain appropriate books of account and records relating to
services performed hereunder, and such books of account and records shall be
accessible for inspection by an authorized representative of the Issuer, the
Trustee and the Independent accountants appointed by the Issuer pursuant to the
Indenture at a mutually agreed-upon time during normal business hours and upon
reasonable prior notice; provided that the Collateral Manager shall not
be obligated to provide access to any non-public information if the Collateral
Manager in good faith determines that the disclosure of such information would
violate any applicable law, regulation or contractual arrangement.  The Collateral Manager shall follow its
customary procedures to keep confidential all information obtained in
connection with the services rendered hereunder and shall not disclose any such
information except (i) with the prior written consent of the Issuer (which
consent shall not be unreasonably withheld), (ii) such information as the
Rating Agencies shall reasonably request in connection with their rating or
evaluation of the Notes and/or the Collateral Manager, as applicable, (iii) as
required by law, regulation, court order or the rules, regulations, or request
of any regulatory or self-regulating organization, body or official (including
any securities exchange on which the Notes may be listed from time to time)
having jurisdiction over the Collateral Manager or as otherwise required by law
or judicial process, (iv) such information as shall have been publicly
disclosed other than in violation of this Agreement, (v) to its members,
officers, directors, and employees, and to its attorneys, accountants and other
professional advisers in conjunction with the transactions described herein, (vi) such
information as may be necessary or desirable in order for the Collateral
Manager to prepare, publish and distribute to any Person any information
relating to the investment performance of the Assets, (vii) in connection
with the enforcement of the Collateral Manager’s rights hereunder or in any
dispute or proceeding related hereto, (viii) to the Trustee, (ix) to
the extent required pursuant to any Hedge Agreement of the Issuer and (x) to
Holders and potential purchasers of any of the Securities.


 


Subject to compliance with the requirements of any
law, rule or regulation applicable to the Collateral Manager, nothing
contained herein shall prevent the Collateral Manager from discussing its
activities hereunder in a general way in the normal course of its business,
including, without limitation, general discussions with other Persons regarding
its ability to act as a collateral manager and its past performance in such
capacity.  In addition, subject to
compliance with the requirements of any law, rule or regulation applicable
to the Collateral Manager, with respect to information that the Collateral
Manager obtains or develops regarding the Collateral Debt Securities or Eligible
Investments (including, without limitation, information regarding ratings,
yield, creditworthiness, financial condition and prospects of any issuer
thereof) in connection with the performance of its services hereunder, nothing
in this Section 10 shall prevent the Collateral Manager or its Affiliates,
in the conduct of their


 


14





















 


respective businesses,
from using such information or disclosing such information to others so long as
such other use does not, in its reasonable judgment, disadvantage the
Issuer.  Notwithstanding anything to the
contrary contained in this Agreement, all persons may disclose to any and all
persons, without limitation of any kind, the U.S. Federal, state and local tax
treatment of the Securities and the Co-Issuers, any fact that may be relevant
to understanding the U.S. Federal, state and local tax treatment of the
Securities and the Issuers, and all materials of any kind (including opinions
or other tax analyses) relating to such U.S. Federal, state and local tax
treatment and that may be relevant to understanding such tax treatment.


 


11.                                 Term.
 This Agreement shall become effective on
the Closing Date and shall continue in full force and effect until the first to
occur of the following:  (a) the
payment in full of the Notes and the termination of the Indenture in accordance
with its terms, (b) the liquidation of the Assets and the final
distribution of the proceeds of such liquidation to the Holders and the Issuer,
or (c) the termination of this Agreement pursuant to Section 12
hereof.


 


12.                                 Termination.  (a)  The Collateral Manager may be
removed upon at least 30 days’ prior written notice if (A) Holders of at
least 75% by Aggregate Outstanding Amount of each Class of Notes (voting
as a separate Class) and (B) Holders of at least 75% of the Preferred
Shares give written notice to the Collateral Manager, the Issuer, each Hedge
Counterparty and the Trustee of such removal (including in any such calculation
any Securities held by the Collateral Manager, any of its Affiliates or by any
fund managed or controlled by the Collateral Manager or any Affiliate thereof);
provided that if the Collateral Manager is removed pursuant to this
clause (a), any successor Collateral Manager will not be permitted to be a
Holder of or an Affiliate of any Holder of Securities.  Notice of any such removal shall be delivered
by the Trustee on behalf of the Issuer to the Holders of each Class of
Notes, the Holders of the Preferred Shares, each Rating Agency and each Hedge
Counterparty.


 


(b)                                 This
Agreement may be terminated, and the Collateral Manager may be removed, by the
Issuer or the Trustee for cause, upon 30 days’ prior written notice by the
Issuer, at the direction of (i) Holders of at least a majority by Aggregate
Outstanding Amount of each Class of Notes (excluding any Notes owned by
the Collateral Manager or any of its Affiliates or any fund managed or
controlled by the Collateral Manager or any Affiliate thereof, each voting as a
separate Class) and (ii) Holders of at least a Majority of the Preferred
Shares (excluding any Preferred Shares owned by the Collateral Manager or any
of its Affiliates or any fund managed or controlled by the Collateral Manager
or any Affiliate thereof); provided, however, upon the occurrence
of an event described in clause (iii) of this Section 12(b),
termination of the Collateral Manager will be automatic and without advance notice
required from the Issuer, the Trustee or any other Person.  Notice of any such removal for cause shall be
delivered by the Trustee on behalf of the Issuer to each Rating Agency, each
Hedge Counterparty and the Holders of the Notes and the Preferred Shares.  In no event will the Trustee be required to
determine whether or not cause exists for the removal of the Collateral Manager.  As used in this Section 12, “cause”
means any of the following events:


 


(i)                    the
Collateral Manager (A) willfully breaches, or takes any action that it
knows violates, any provision of this Agreement or any term of the Indenture
applicable to the Collateral Manager (not including a willful breach or knowing
violation that results from a good faith dispute regarding alternative courses
of action or interpretation of


 


15





















 


instructions), which breach or action has (or could reasonably be
expected to have) a material adverse effect on the Noteholders and (B) fails
to cure such breach within 30 days after the first to occur of (1) notice
of such failure is given to the Collateral Manager or (2) the Collateral
Manager having actual knowledge of such breach or violation;


 


(ii)                 the
Collateral Manager breaches any material provision of this Agreement or any
material terms of the Indenture applicable to the Collateral Manager and fails
to cure such breach within 90 days after the first to occur of (A) notice
of such failure being given to the Collateral Manager or (B) the
Collateral Manager having actual knowledge of such breach;


 


(iii)              the Collateral Manager (A) ceases to
be able to, or admits in writing the Collateral Manager’s inability to, pay the
Collateral Manager’s debts when and as they become due, (B) files, or
consents by answer or otherwise to the filing against the Collateral Manager
of, a petition for relief or reorganization or arrangement or any other
petition in bankruptcy, for liquidation or takes advantage of any bankruptcy,
insolvency, reorganization, moratorium or other similar law of any
jurisdiction, (C) makes an assignment for the benefit of the Collateral
Manager’s creditors, (D) consents to the appointment of a custodian,
receiver, trustee or other officer with similar powers with respect to the
Collateral Manager or with respect to any substantial part of the Collateral
Manager’s property, or (E) is adjudicated as insolvent or to be
liquidated;


 


(iv)             the
occurrence of an act by the Collateral Manager or any of its Affiliates that
constitutes fraud or criminal activity in the performance of its obligations
under this Agreement or the indictment of the Collateral Manager or any of its
respective officers or directors for a criminal offense involving an investment
or investment-related business, fraud, false statements or omissions, wrongful
taking of property, bribery, forgery, counterfeiting or extortion;


 


(v)                the
failure of any representation, warranty, certificate or statement of the
Collateral Manager in or pursuant to this Agreement or the Indenture to be
correct in any material respect and (x) such failure has (or could
reasonably be expected to have) a material adverse effect on the Noteholders,
the Issuer or the Co-Issuer and (y) if such failure can be cured, no
correction is made for 45 days after the Collateral Manager becomes aware of
such failure or receives notice thereof in writing from the Trustee;


 


(vi)             the
occurrence and continuation of any of the Events of Default described in
Sections 5.1(a) or 5.1(b) of the Indenture; or


 


(vii)          the Collateral Manager consolidates or
amalgamates with, or merges with or into, or transfers all or substantially all
its assets to, another Person and either (A) at the time of such
consolidation, amalgamation, merger or transfer, the resulting, surviving or
transferee Person fails to or cannot assume all the obligations of the
Collateral Manager under this Agreement, or (B) the resulting, surviving
or transferee Person lacks the legal capacity to perform the obligations of the
Collateral Manager hereunder and under the Indenture.


 


16





















 


The Collateral Manager shall notify the Trustee, the Rating
Agencies and the Issuer in writing promptly upon becoming aware of any event
that constitutes cause under this Section 12(b).


 


(c)                                  The
Collateral Manager may resign, upon 30 days’ prior written notice to the
Issuer, the Co-Issuer, the Trustee, each Rating Agency and each Hedge
Counterparty; provided, however, that (i) no such
termination or resignation shall be effective until the date as of which a
successor Collateral Manager shall have agreed in writing to assume all of the
Collateral Manager’s duties and obligations pursuant to this Agreement and (ii) the
Issuer shall use its best efforts to appoint a successor Collateral Manager to
assume such duties and obligations.  Notwithstanding
the notice required above, the Collateral Manager shall have the right to
resign without prior notice if, due to a change in any applicable law or
regulation or interpretation thereof, the performance by the Collateral Manager
of its duties under the Collateral Management Agreement would (i) adversely
affect (A) Gramercy Capital Corp.’s status as a REIT, (B) SL Green
Realty Corp.’s status as a REIT or (C) the Issuer’s status as a qualified
REIT subsidiary (within the meaning of Section 856(i)(2) of the Code)
or (ii) constitute a violation of any applicable law or regulation.


 


(d)                                 No
removal, termination or resignation of the Collateral Manager or termination of
this Agreement shall be effective unless (x) a successor Collateral
Manager (a “Replacement Manager”)
has been appointed by the Issuer and has agreed in writing to assume all of the
Collateral Manager’s duties and obligations pursuant to this Agreement and (y) written
notification shall have been provided in accordance with Sections 12(a), (b) or
(c), as applicable.  The appointment of
any Replacement Manager shall be subject to satisfaction of the Rating Agency
Condition and each such Replacement Manager (i) shall have demonstrated an
ability to professionally and competently perform duties similar to those
imposed upon the Collateral Manager, (ii) is legally qualified and has the
capacity to act as collateral manager, (iii) by its appointment will not
cause the Issuer, the Co-Issuer or the pool of Assets to, or result in the
Issuer, the Co-Issuer or the pool of Assets becoming, an “investment company”
under the Investment Company Act, (iv) has accepted its appointment in
writing and (v) by its appointment will not cause the Issuer, the
Co-Issuer or the pool of Assets to become subject to income or withholding tax
that would not have been imposed but for such appointment.


 


(e)                                  Upon
any resignation or removal of the Collateral Manager while any of the Notes are
Outstanding, the Holders of at least a Majority of the Preferred Shares shall
have the right to instruct the Issuer to appoint an institution identified by
such Holders as Replacement Manager; provided that (i) the Issuer
provides to the Noteholders notice of such appointment and a majority by
Aggregate Outstanding Amount of each Class of Notes (excluding any Notes
owned by the Collateral Manager or any of its Affiliates or any fund managed or
controlled by the Collateral Manager or any Affiliate thereof, each voting as a
separate Class) does not object to such appointment within thirty (30) days, (ii) the
Rating Agency Condition has been satisfied with respect to such appointment and
(iii) the requirements set forth in Section 12(d)(i) through (v) above
have been satisfied.


 


(f)                                    In
the event that the Collateral Manager resigns pursuant to Section 12(c) or
is terminated pursuant to Sections 12(a) or (b) hereof and the
Issuer has not appointed a successor prior to the day following the termination
(or resignation) date specified in such notice, the Collateral Manager will be
entitled to propose a successor and will so appoint such proposed


 


17





















 


entity as successor thirty (30)
days thereafter, unless a majority of any Class of Notes objects to such
appointment with such thirty (30) day period in which case the Controlling Class of
Notes (excluding any Notes owned by the Collateral Manager or any of its
Affiliates or any fund managed or controlled by the Collateral Manager or any
Affiliate thereof, each voting as a separate Class) will be entitled to propose
a successor and will appoint such proposed entity as successor thirty (30) days
thereafter unless a majority by Aggregate Outstanding Amount of any other Class of
Notes (excluding any Notes owned by the Collateral Manager or any of its
Affiliates or any fund managed or controlled by the Collateral Manager or any
Affiliate thereof, each voting as a separate Class) objects to such appointment
within such thirty (30) day period, in each case subject to the requirements
set forth in Section 12(d) above. 
In the event a proposed successor Collateral Manager is not appointed pursuant
to the foregoing procedures, the resigning or removed Collateral Manager may
petition any court of competent jurisdiction for the appointment of a successor
Collateral Manager, which appointment will not require the consent of, or be
subject to the disapproval of, the Issuer, any Noteholder or any Holder of the
Preferred Shares.


 


Notwithstanding any provision contained in this
Agreement, the Indenture or otherwise, so long as the Collateral Manager
continues to perform its obligations hereunder, the Collateral Management Fee
shall continue to accrue for the benefit of the Collateral Manager until
termination of this Agreement under this Section 12 shall become effective
as set forth herein.  In addition, the
Collateral Manager shall, subject to Section 6, be entitled to
reimbursement of out-of-pocket expenses incurred in cooperating with the
Replacement Manager, including in connection with the delivery of any documents
or property.  In the event that the
Collateral Manager is removed or resigns and a Replacement Manager is
appointed, such former Collateral Manager nonetheless shall be entitled to
receive payment of all unpaid Collateral Management Fees, including the Senior
Collateral Management Fee and the Subordinated Collateral Management Fee, accrued
through the effective date of the removal or resignation, to the extent that
funds are available for that purpose in accordance with the Priority of
Payments, and such payments shall rank in the Priority of Payments pari passu
with the Collateral Management Fees due to the Replacement Manager.  In addition, following the removal or
resignation of the Collateral Manager hereunder, the removed or resigning Collateral
Manager shall be granted access to the books of account and records of the Issuer
and the Trustee to the extent such removed or resigning Collateral Manager
deems necessary to confirm the proper payment of any amounts owing to such removed
or resigning Collateral Manager hereunder.


 


(g)                                 Upon
the effective date of termination of this Agreement, the Collateral Manager
shall as soon as practicable:


 


(i)                                     deliver
to the Issuer all property and documents of the Trustee or the Issuer or
otherwise relating to the Assets then in the custody of the Collateral Manager
(although the Collateral Manager may keep copies of such documents for its
records); and


 


(ii)                                  deliver
to the Trustee an accounting with respect to the books and records delivered to
the Issuer or the Replacement Manager appointed pursuant to this Section 12
hereof.


 


18





















 


The Collateral Manager shall reasonably assist and
cooperate with the Trustee and the Issuer (as reasonably requested by the
Trustee or the Issuer) in the assumption of the Collateral Manager’s duties by
any Replacement Manager as provided for in this Agreement, as applicable.  Notwithstanding such termination, the
Collateral Manager shall remain liable to the extent set forth herein (but
subject to Section 13 hereof) for the Collateral Manager’s acts or
omissions hereunder arising prior to its termination as Collateral Manager
hereunder and for any expenses, losses, damages, liabilities, demands, charges
and claims (including reasonable attorneys’ fees) in respect of or arising out
of a breach of the representations and warranties made by it in Section 5
hereof or from any failure of the Collateral Manager to comply with the
provisions of this Section 12(g).


 


(h)                                 The
Collateral Manager agrees that, notwithstanding any termination, the Collateral
Manager shall reasonably cooperate in any Proceeding arising in connection with
this Agreement, the Indenture or any of the Assets (excluding any such
Proceeding in which claims are asserted against the Collateral Manager or any
Affiliate of the Collateral Manager) so long as the Collateral Manager shall
have been offered (in its judgment) reasonable security, indemnity or other
provision against the cost, expenses and liabilities that might be incurred in
connection therewith, but, in any event, shall not be required to make any
admission or to take any action against the Collateral Manager’s own interests
or the interests of other funds and accounts advised by the Collateral Manager.


 


(i)                                     If
this Agreement is terminated pursuant to Sections 12(a), (b) or (c) hereof,
such termination shall be without any further liability or obligation of the
Issuer or the Collateral Manager to the other, except as provided in Sections
6, 7, 12 and 13 and the last sentence of Section 10 hereof.


 


(j)                                     Upon
expiration of the applicable notice period with respect to termination
specified in Section 12(d) hereof, all authority and power of the
Collateral Manager under this Agreement and the Indenture, whether with respect
to the Assets or otherwise, shall automatically and without further action by
any person or entity pass to and be vested in the Replacement Manager.


 


13.                                 Liability
of Collateral Manager.  (a)  The
Collateral Manager assumes no responsibility under this Agreement other than to
render the services called for from the Collateral Manager hereunder and under
the Indenture in the manner prescribed herein and therein.  The Collateral Manager and its Affiliates,
and each of their respective partners, shareholders, members, managers,
officers, directors, employees, agents, accountants and attorneys shall have no
liability to the Noteholders, the Holders of the Preferred Shares, the Trustee,
the Issuer, the Co-Issuer, any Hedge Counterparty, the Initial Purchaser, or
any of their respective Affiliates, partners, shareholders, officers,
directors, employees, agents, accountants and attorneys, or any other Person, for
any error of judgment, mistake of law, or for any claim, loss, liability,
damage, settlement, costs, or other expenses (including reasonable attorneys’
fees and court costs) of any nature whatsoever (collectively “Liabilities”) that
arise out of or in connection with any act or omissions of the Collateral
Manager in the performance of its duties under this Agreement or the Indenture
or for any decrease in the value of the Collateral Debt Securities or Eligible
Investments, (i) except by reason of acts or omissions constituting bad
faith, willful misconduct or gross negligence in the performance of, or
reckless disregard of, the


 


19





















 


duties of the Collateral
Manager hereunder and under the terms of the Indenture and (ii) with
respect to the information concerning the Collateral Manager under the heading “The
Collateral Manager” in the Offering Memorandum containing any untrue statement
of material fact or omitting to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.  The Issuer
agrees that the Collateral Manager shall not be liable for any consequential,
special, exemplary or punitive damages hereunder.  The acts, failure to act or breaches
described in this clause (a) are collectively referred to for purposes of
this Section 13 as “Collateral Manager Breaches.”


 


(b)                                 The
Collateral Manager shall indemnify, defend and hold harmless the Issuer and
each of its partners, shareholders, members, managers, officers, directors,
employees, agents, accountants and attorneys (each, an “Issuer Indemnified Party”)
from and against any claims that may be made against an Issuer Indemnified
Party by third parties and any damages, losses, claims, liabilities, costs or
expenses (including all reasonable legal and other expenses) which are incurred
as a direct consequence of the Collateral Manager Breaches, except for
liability to which such Issuer Indemnified Party would be subject by reason of
willful misconduct, bad faith, gross negligence in the performance of, or
reckless disregard of the obligations of the Issuer hereunder and under the
terms of the Indenture.


 


(c)                                  The
Issuer shall reimburse, indemnify and hold harmless the Collateral Manager, its
members, managers, directors, officers, stockholders, partners, agents and
employees and any Affiliate of the Collateral Manager and its directors,
officers, stockholders, partners, members, agents and employees (the Collateral
Manager and such other persons collectively, the “Collateral Manager Indemnified Parties”) from any
and all Liabilities, as are incurred in investigating, preparing, pursuing or
defending any claim, action, proceeding or investigation (whether or not such
Collateral Manager Indemnified Party is a party) caused by, or arising out of
or in connection with this Agreement, the Indenture and the transactions
contemplated hereby and thereby, including the issuance of the Notes, or any
acts or omissions of any Collateral Manager Indemnified Parties except those
that are the result of Collateral Manager Breaches.  Any amounts payable by the Issuer under this Section 13(c) shall
be payable only subject to the Priority of Payments set forth in the Indenture
and to the extent Assets are available therefor.


 


(d)                                 With
respect to any claim made or threatened against an Issuer Indemnified Party or
a Collateral Manager Indemnified Party (each an “Indemnified Party”), or compulsory process or
request or other notice of any loss, claim, damage or liability served upon an
Indemnified Party, for which such Indemnified Party is or may be entitled to
indemnification under this Section 13, such Indemnified Party shall (or,
with respect to Indemnified Parties that are directors, managers, officers,
stockholders, members, managers, agents or employees of the Issuer or the
Collateral Manager, the Issuer or the Collateral Manager, as the case may be,
shall cause such Indemnified Party to):


 


(i)                                     give
written notice to the indemnifying party of such claim within ten Business Days
after such Indemnified Party’s receipt of actual notice that such claim is made
or threatened, which notice to the indemnifying party shall specify in
reasonable detail the nature of the claim and the amount (or an estimate of the
amount) of the claim; provided, however, that the failure of any
Indemnified Party to provide such notice to the


 


20





















 


indemnifying party shall not relieve the indemnifying party of its
obligations under this Section 13 unless the rights or defenses available
to the Indemnified Party are materially prejudiced or otherwise forfeited by
reason of such failure;


 


(ii)                                  at
the indemnifying party’s expense, provide the indemnifying party such
information and cooperation with respect to such claim as the indemnifying
party may reasonably require, including making appropriate personnel available
to the indemnifying party at such reasonable times as the indemnifying party
may request;


 


(iii)                               at the indemnifying
party’s expense, cooperate and take all such steps as the indemnifying party
may reasonably request to preserve and protect any defense to such claim;


 


(iv)                              in
the event suit is brought with respect to such claim, upon reasonable prior
notice, afford to the indemnifying party the right, which the indemnifying
party may exercise in its sole discretion and at its expense, to participate in
the investigation, defense and settlement of such claim;


 


(v)                                 neither
incur any material expense to defend against nor release or settle any such
claim or make any admission with respect thereto (other than routine or
incontestable admissions or factual admissions the failure to make of which
would expose such Indemnified Party to unindemnified liability) nor permit a
default or consent to the entry of any judgment in respect thereof, in each
case without the prior written consent of the indemnifying party; and


 


(vi)                              upon
reasonable prior notice, afford to the indemnifying party the right, in such
party’s sole discretion and at such party’s sole expense, to assume the defense
of such claim, including the right to designate counsel reasonably acceptable
to the Indemnified Party and to control all negotiations, litigation, arbitration,
settlements, compromises and appeals of such claim; provided that, if
the indemnifying party assumes the defense of such claim, it shall not be
liable for any fees and expenses of counsel for any Indemnified Party incurred
thereafter in connection with such claim except that, if such Indemnified Party
reasonably determines that counsel designated by the indemnifying party has a
conflict of interest, such indemnifying party shall pay the reasonable fees and
disbursements of one counsel (in addition to any local counsel) separate from
such indemnifying party’s own counsel for all Indemnified Parties in connection
with any one action or separate but similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances; and provided,
further, that the indemnifying party shall not have the right, without
the Indemnified Party’s written consent, to settle any such claim if, in a case
where the Issuer is the indemnifying party, the Issuer does not make available
(in accordance with the Priority of Payments), in a segregated account
available only for this purpose, the full amount required to pay any amounts
due from the Indemnified Party under such settlement or, in any case, such
settlement (A) arises from or is part of any criminal action, suit or
proceeding, (B) contains a stipulation to, confession of judgment with
respect to, or admission or acknowledgement of, any liability or wrongdoing on
the part of the Indemnified Party, (C) relates to any Federal, state or
local tax matters or (D) provides


 


21





















 


for injunctive relief, or other relief other than damages, which is
binding on the Indemnified Party.


 


(e)                                  In
the event that any Indemnified Party waives its right to indemnification
hereunder, the indemnifying party shall not be entitled to appoint counsel to
represent such Indemnified Party nor shall the indemnifying party reimburse
such Indemnified Party for any costs of counsel to such Indemnified Party.


 


(f)                                    Nothing
herein shall in any way constitute a waiver or limitation of any rights that
the Issuer or the Collateral Manager may have under any United States Federal
or state securities laws.


 


14.                                 Obligations
of Collateral Manager.  (a) The
Collateral Manager to the extent required under the Indenture, and on behalf of
the Issuer, shall:  (i) engage the
services of an Independent certified accountant to prepare any United States
Federal, state or local income tax or information returns and any non-United
States income tax or information returns that the Issuer may from time to time
be required to file under applicable law (each a “Tax Return”), (ii) deliver, at least 30 days
before any applicable due date upon which penalties and interest would accrue,
each Tax Return, properly completed, to the Company Administrator for signature
by an Authorized Officer of the Issuer and (iii) file or deliver such Tax
Return on behalf of the Issuer within any applicable time limit with any
authority or Person as required under applicable law.


 


(b)                                 Unless
otherwise required by any provision of the Indenture or this Agreement or by
applicable law, the Collateral Manager shall not take any action which it
knows, or acting with gross negligence, would (a) materially adversely
affect the Issuer for purposes of United States federal or state law or any
other law known to the Collateral Manager to be applicable to the Issuer, (b) not
be permitted under the Issuer’s Memorandum and Articles of Association or the
Co-Issuer’s limited liability company agreement, (c) require registration of
the Issuer, the Co-Issuer or the Assets as an “investment company” under the
Investment Company Act or (d) cause the Issuer to violate the terms of the
Indenture, it being understood that in connection with the foregoing the
Collateral Manager will not be required to make any independent investigation
of any facts or laws not otherwise known to it in connection with its
obligations under this Agreement and the Indenture or the conduct of its
business generally.  The Collateral
Manager will perform its duties under this Agreement and the Indenture in a
manner reasonably intended not to subject the Issuer to U.S. federal or state
income taxation, it being understood that, notwithstanding anything to the
contrary set forth herein or in the Indenture, the Collateral Manager shall be
deemed to have complied with the requirements of the Indenture and any
certifications, certificates or other related documents required pursuant to
the Indenture if it satisfies the requirements set forth in this sentence and
will not be liable to the Trustee, the Holders of the Notes, the Co-Issuers,
the Co-Issuers’ creditors or any other Person as a result of the Issuer
engaging, or a determination that the Issuer has engaged, in a U.S. trade or
business for U.S. federal income tax purposes. 
The Collateral Manager shall use all commercially reasonable efforts to
ensure that no action is taken by it, and shall not intentionally or with
reckless disregard take any action, which the Collateral Manager knows or
reasonably should know would have a materially adverse United States federal or
state income tax effect on the Issuer.


 


22





















 


(c)                                  Notwithstanding
anything to the contrary herein, the Collateral Manager or any of its Affiliates
may take any action that is not specifically prohibited by the Indenture, this
Agreement or applicable law that the Collateral Manager or any Affiliate of the
Collateral Managers deems to be in its (or in its portfolio’s) best interest
regardless of its impact on the Collateral Debt Securities.


 


15.                                 No
Partnership or Joint Venture.  The
Issuer and the Collateral Manager are not partners or joint venturers with each
other, and nothing herein shall be construed to make them such partners or
joint venturers or impose any liability as such on either of them.  The Collateral Manager’s relation to the
Issuer shall be that of an independent contractor and not a general agent.  Except as expressly provided in this
Agreement and in the Indenture, the Collateral Manager shall not have authority
to act for or represent the Issuer in any way and shall not otherwise be deemed
to be the Issuer’s agent.


 


16.                                 Notices.
 Any notice from a party under this
Agreement shall be in writing and sent by answer-back facsimile or addressed
and delivered or sent by certified mail, postage prepaid, return receipt
requested or sent by overnight courier service guaranteeing next day delivery
to the other party at such address as such other party may designate for the
receipt of such notice.  Until further
notice to the other party, it is agreed that the address of the Issuer for this
purpose shall be:


 


Gramercy
Real Estate CDO 2005-1, Ltd.

c/o Maples Finance Limited

P.O. Box 1093 GT

Queensgate House

South Church Street

George Town

Grand Cayman, Cayman Islands

Attention:  The Directors

Fax:  +1 345 945 7099

Telephone:  +1 345 945 7100


 


with two
copies to the Collateral Manager (as addressed below).


 


the address of the Collateral Manager for this purpose
shall be:


 


GKK Manager LLC

c/o SL Green Realty Corp.


420
Lexington Avenue


19th
Floor


New
York, New York 10170

Telephone:  212-594-2700

Fax:  212-216-1785

Attention:  Marc Holliday


Attention:  Andrew Levine


 


23





















 


17.                                 Succession;
Assignment.  (a)  This Agreement
shall inure to the benefit of and be binding upon the successors to the parties
hereto. No assignment of this Agreement shall be made without the consent of
the other party except as set forth below and without satisfaction of the
Rating Agency Condition (except as permitted under clauses (b) and (c) below),
provided that the Issuer may collaterally assign its interest in this
Agreement to the Trustee under the Indenture.


 


(b)                                 Upon
satisfaction of the Rating Agency Condition, this Agreement may be assigned by
the Collateral Manager to an Affiliate thereof that has substantially the same
personnel, or personnel with comparable expertise, as the Collateral Manager
and that is capable of performing the obligations of the Collateral Manager
under this Agreement; provided that satisfaction of the Rating Agency
Condition shall not be required in connection with any assignment involving an
internalization of the Collateral Manager or any assignment to a successor upon
merger or acquisition.  Notwithstanding
the foregoing, the Collateral Manager shall provide S&P with prompt notice
of any assignment involving an internalization of the Collateral Manager.


 


(c)                                  This
Agreement may be assigned by the Collateral Manager to any Person other than an
Affiliate only upon satisfaction of the Rating Agency Condition and approval by
a Majority of the Controlling Class.


 


(d)                                 Upon
the execution and delivery of a counterpart by the assignee, the Collateral
Manager shall be released from further obligations pursuant to this Agreement,
except with respect to the Collateral Manager’s obligations arising under Section 13
of this Agreement prior to such assignment and except with respect to the
Collateral Manager’s obligations under the last sentence of Section 10 and
Sections 7 and 12 hereof


 


18.                                 No
Bankruptcy Petition/Limited Recourse.  The Collateral Manager covenants and agrees
that, prior to the date that is one year and one day (or, if longer, the
applicable preference period then in effect) after the payment in full of all
Notes issued by the Issuer under the Indenture, the Collateral Manager will not
institute against, or join any other Person in instituting against, the Issuer
or the Co-Issuer any bankruptcy, reorganization, arrangement, insolvency or
liquidation proceedings or other proceedings under any bankruptcy, insolvency,
reorganization or similar law; provided, however, that nothing in
this Section 18 shall preclude, or be deemed to stop, the Collateral
Manager from taking any action prior to the expiration of the aforementioned
one year and one day period (or, if longer, the applicable preference period
then in effect) in (x) any case or proceeding voluntarily filed or
commenced by the Issuer or the Co-Issuer, as the case may be, or (y) any
involuntary insolvency proceeding filed or commenced against the Issuer or the
Co-Issuer, as the case may be, by a Person other than the Collateral Manager.  The Collateral Manager hereby acknowledges
and agrees that the Issuer’s obligations hereunder will be solely the corporate
obligations of the Issuer, and the Collateral Manager will not have recourse to
any of the directors, officers, employees, shareholders or affiliates of the
Issuer, or any members of the Advisory Committee, with respect to any claims,
losses, damages, liabilities, indemnities or other obligations in connection
with any transaction contemplated hereby. 
Notwithstanding any provision hereof, all obligations of the Issuer and
any claims arising from this Agreement or any transactions contemplated by this
Agreement shall be limited solely to the Collateral Debt Securities and the
other Assets and


 


24





















 


payable in accordance with the
Priority of Payments.  If payments on any
such claims from the Assets are insufficient, no other assets shall be
available for payment of the deficiency and, following liquidation of all the
Assets, any claims of the Collateral Manager arising from this Agreement and
the obligations of the Issuer to pay such deficiencies shall be extinguished.  The Issuer hereby acknowledges and agrees
that the Collateral Manager’s obligations hereunder shall be solely the limited
liability company obligations of the Collateral Manager, and the Issuer shall
not have any recourse to any of the members, managers, directors, officers,
employees, shareholders or Affiliates of the Collateral Manager with respect to
any claims, losses, damages, liabilities, indemnities or other obligations in
connection with any transactions contemplated hereby.


 


19.                                 Miscellaneous.  (a)  This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York without regard to the conflict of laws principles thereof.  With respect to any suit, action or proceedings
relating to this Agreement (“Proceedings”),
each party irrevocably (i) submits to the nonexclusive jurisdiction of the
courts of the State of New York and the United States District Court located in
the Borough of Manhattan in New York City and (ii) waives any objection
that such party may have at any time to the laying of venue of any Proceedings
brought in any such court, waives any claim that such Proceedings have been
brought in an inconvenient forum and further waives the right to object, with respect
to such Proceedings, that such court does not have any jurisdiction over such
party.  Nothing in this Agreement
precludes either party from bringing Proceedings in any other jurisdiction, nor
shall the bringing of Proceedings in any one or more jurisdictions preclude the
bringing of Proceedings in any other jurisdiction.  The Collateral Manager irrevocably consents
to the service of any and all process in any action or proceeding by the
mailing or delivery of copies of such process to the Collateral Manager at the
office of the Collateral Manager, c/o SL Green Realty Corp., 420 Lexington
Avenue, 19th Floor, New York, New York 10170, Attention:  Andrew Levine, or such other address as the
Collateral Manager may advise the Issuer in writing.  The Issuer irrevocably consents to the
service of any and all process in any action or proceeding by the mailing or
delivery of copies of such process to CT Corporation System at 111 8th
Avenue, New York, New York 10011 (and any successor entity), as its authorized agent
to receive and forward on its behalf service of any and all process which may
be served in any such suit, action or proceeding in any such court and agrees
that service of process upon CT Corporation System shall be deemed in every
respect effective service of process upon it in any such suit, action or
proceeding and shall be taken and held to be valid personal service upon it.  Each party hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.


 


EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY
LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
TRANSACTIONS CONTEMPLATED HEREBY.


 


(b)                                 The
captions in this Agreement are included for convenience only and in no way
define or limit any of the provisions hereof or otherwise affect their
construction or effect.


 


25





















 


(c)                                  In
the event any provision of this Agreement shall be held invalid or
unenforceable by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provision hereof.


 


(d)                                 This
Agreement (including Exhibit A attached hereto) may not be amended
or modified or any provision thereof waived (i) except by an instrument in
writing signed by both of the parties hereto or, in the case of a waiver, by
the party waiving compliance and (ii) in each case, in compliance with Section 15.1(f) of
the Indenture, including with respect to satisfaction of the Rating Agency
Condition.  This Agreement (including Exhibit A
attached hereto) may be modified without the prior written consent of the Trustee,
any Hedge Counterparty or the holders of Notes to correct any inconsistency or
cure any ambiguity or mistake.  Any other
amendment of this Agreement (including Exhibit A attached hereto) shall
require the prior written consent of the Trustee and each Hedge Counterparty,
which consent shall not be unreasonably withheld and is subject to the
satisfaction of the Rating Agency Condition.


 


(e)                                  This
Agreement constitutes the entire understanding and agreement between the
parties hereto and supersedes all other prior and contemporaneous
understandings and agreements, whether written or oral, between the parties
hereto concerning this subject matter (other than the Indenture).


 


(f)                                    In
the event the Issuer acquires the Mayacama Loan after the Closing Date, the Collateral
Manager agrees to use commercially reasonable efforts, on behalf of the Issuer,
to appoint GMACCMC as the primary servicer for the Mayacama Loan to the extent
it has discretion to do so in accordance with the related Underlying
Instruments.


 


(g)                                 The
Collateral Manager hereby agrees and consents to the terms of Section 15.1(f) of
the Indenture applicable to the Collateral Manager and shall perform any
provisions of the Indenture made applicable to the Collateral Manager by the
Indenture as required by Section 15.1(f) of the Indenture.


 


(h)                                 This
Agreement may be executed in any number of counterparts, each of which so
executed shall be deemed an original, but all such counterparts shall together
constitute one and the same instrument.


 


(i)                                     The
words “include,” “includes” and “including” shall be deemed to be followed by
the phrase “but not limited to.”


 


(j)                                     Subject
to the last sentence of the penultimate paragraph of Section 1 hereof, in
the event of a conflict between the terms of this Agreement and the Indenture,
including with respect to the obligations of the Collateral Manager hereunder
and thereunder, the terms of this Agreement shall be controlling.


 


(k)                                  No
failure or delay on the part of any party hereto to exercise any right or
remedy under this Agreement shall operate as a waiver thereof, and no waiver
shall be effective unless it is in writing and signed by the party granting
such waiver.


 


26





















 


(l)                                     This
Agreement is made solely for the benefit of the Issuer, the Collateral Manager
and the Trustee, on behalf of the Noteholders, the Holders of Preferred Shares
and each Hedge Counterparty, their successors and assigns, and no other person
shall have any right, benefit or interest under or because of this Agreement.


 


(m)                               The
Collateral Manager hereby irrevocably waives any rights it may have to set off
against the Assets.


 


27





















 


IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be executed (as a deed in the case of the Issuer) by their
respective authorized representatives as of the day and year first above
written.


 


 


	
   

  	
  Executed as a
  Deed

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  GRAMERCY REAL
  ESTATE CDO 2005-1,

  LTD., as Issuer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Witness:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GKK MANAGER LLC,

  as Collateral Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 





















 


EXHIBIT A


 


Advisory Committee
Guidelines


 


1.                                       General.


 


If
the Collateral Manager desires to direct a trade between the Issuer and the
Collateral Manager or any of its Affiliates, acting as principal (other than
with respect to Credit Risk/Defaulted Security Cash Purchases, sales of
property or securities in accordance with the Origination Agreement and
sales of Assets pursuant to an auction in connection with an Auction Call
Redemption or in connection with a redemption of the Notes pursuant to Article 9
of the Indenture, none of which
shall require the approval of the Advisory Committee) (each such trade, a “Restricted
Transaction”), before effecting such trade, it shall first present such
Restricted Transaction to the Advisory Committee for review and prior approval.


 


2.                                       Composition of the Advisory Committee.


 


The
Advisory Committee must be comprised of at least one person (which may be an
individual or an entity), who is Independent (as defined in the Indenture) of
the Collateral Manager (each such person, an “Independent Member”), who
acts as a surrogate for, and in the best interest of, the holders of the
Securities.


 


The
Advisory Committee also may have one or more members appointed by the
Collateral Manager and employed by the Collateral Manager or an Affiliate
thereof (each such person, an “Affiliated Member”).


 


3.                                       Requisite Experience.


 


Each
member of the Advisory Committee must at the time of appointment and at all
relevant times thereafter have Requisite Experience.


 


The
Collateral Manager and the Issuer will have the right to accept a
representation and warranty from a member regarding its Requisite Experience,
in the absence of actual knowledge by a responsible officer of the Collateral
Manager to the contrary.


 


“Requisite
Experience” means experience as a sophisticated investor, including,
without limitation, in fixed income investing (directly and/or through
investment vehicles) and/or substantial experience and knowledge in and of the
commercial real estate loan market and related investment arenas, such that the
relevant Advisory Committee member believes that it is capable of determining whether
or not to participate in Advisory Committee decisions on the basis of the
provisions described herein.  Such person
need not be a professional loan investor or loan originator.


 


A-1





















 


4.                                       Appointment of Initial Members of the
Advisory Committee.


 


The
initial members of the Advisory Committee will be appointed by the Collateral
Manager.  Thereafter the Collateral
Manager will have the right to appoint a member to replace any member that
resigns.  Notwithstanding the foregoing, in
the event of a resignation of the Independent Member, a replacement Independent
Member may be appointed by the Issuer if the Collateral Manager does not promptly
appoint a replacement Independent Member.


 


5.                                       Term.


 


Each
member of the Advisory Committee will serve until it resigns, dies or is
removed.


 


6.                                       Approval Process.


 


If
the Collateral Manager wants the Issuer to consider a Restricted Transaction,
the Collateral Manager will give notice of the proposed Restricted Transaction
to the members of the Advisory Committee. 
The notice will contain the request by the Collateral Manager for the
Advisory Committee’s consent to the Restricted Transaction.  The notice will be accompanied by:


 


•                  an investment memorandum; and


 


•                  an underwriting analysis.


 


The
investment memorandum will (a) be a reasonably detailed (anticipated to be
approximately two pages) description of the proposed investment, the issuer
thereof and related information and (b) include information about the
identity of any Affiliated Person involved in the proposed investment and the
capacity in which it will be acting and a narrative about why, in the judgment
of the Collateral Manager, the investment is appropriate to be purchased or
sold by the Issuer, as the case may be. 
The notice will contain the Collateral Manager’s offer to provide
additional information as requested to the Advisory Committee.


 


7.                                       Unanimous Written Consent.


 


Regardless
of the composition of the Advisory Committee, each Restricted Transaction must
be approved in writing by each member of the Advisory Committee.


 


The
members of the Advisory Committee are under no obligation to consent to a
Restricted Transaction.


 


•                  If all of the members of the Advisory
Committee approve a Restricted Transaction in writing, the Issuer will effect
it at the option of the Collateral Manager (subject to the others terms of this
Agreement and the Indenture).


 


•                  If the members of the Advisory Committee
notify the Collateral Manager that the Advisory Committee will not approve the
Restricted Transaction, the Issuer will not effect the Restricted Transaction.


 


A-2





















 


If
at any time the Advisory Committee does not have at least one Independent
Member or any member does not have Requisite Experience, the Collateral Manager
will not be permitted to use the Advisory Committee to approve any Restricted
Transaction.


 


8.                                       Compensation.


 


Each
Independent Member shall receive arm’s length compensation by the Issuer for
serving on the Advisory Committee as agreed between such member and the Issuer.


 


A-3





















 


EXHIBIT B-1


 


Additional Advisory
Committee Guidelines


 


Independent Member


 


1.                                       Independent Member Duties.


 


As
an Independent Member of the Advisory Committee, the Member shall:


 


(a)                                  serve on the Advisory Committee and attend
meetings of the Advisory Committee at such times and places (and/or
telephonically or by correspondence or otherwise) as shall be reasonably
requested by the Issuer and the Collateral Manager;


 


(b)                                 promptly consider certain actions to be taken
with respect to certain Restricted Transactions presented by the Collateral
Manager (as further described in the Advisory Committee Guidelines);


 


(c)                                  in connection with considering Restricted
Transactions, promptly review and consider investment memoranda, underwriting
analyses and other information presented to the Member on behalf of the Issuer
to the Advisory Committee in connection with the foregoing; and


 


(d)                                 take such other actions as may be reasonably
necessary or advisable in connection with the foregoing;


 


provided, however,
that (i) if the Member believes that the Member or an Affiliate thereof,
or any of their respective officers, directors, employees, stockholders,
partners, members or managers, has an interest in any Restricted Transaction,
the Member shall promptly disclose such interest to the Issuer and the
Collateral Manager and shall recuse himself from any consideration of such
Restricted Transaction (in each case unless the Collateral Manager and each
other member of the Advisory Committee (assuming that at least one such member
of the Advisory Committee is an Independent Member and is not affiliated with
the Restricted Transaction at issue) shall determine that such interest does
not create a disabling conflict) and (ii) if the Member believes that,
because of an actual or potential conflict of interest relating to a Restricted
Transaction, it would be inappropriate or inadvisable for the Member to receive
any Confidential Information (as defined in Paragraph 8 of this Exhibit B-1),
the Member shall recuse himself from any consideration of such Restricted
Transaction.


 


2.                                       Representations and Warranties.


 


The
Member, by its execution of an Advisory Committee Member Acknowledgement and
Agreement (the “Acknowledgment and Agreement”), will be deemed to
represent and warrant that:


 


(a)                                  the Member is Independent of the Collateral
Manager (including, for this purpose, an employee, partner, member or director
thereof); and


 


B-1-1





















 


(b)                                 the Member has the Requisite Experience (as
set forth in the Advisory Committee Guidelines).


 


If
the representations and warranties set forth in this Paragraph 2 shall at any
time fail to be true and correct, the Member shall promptly notify the Issuer
and the Collateral Manager of that fact and shall immediately resign from the
Advisory Committee.


 


3.                                       Compensation.


 


During
the Term (as defined in Paragraph 7 of this Exhibit B-1), the Issuer shall
pay the Member a per annum fee (the “Fee”) at a rate to be established
between the Collateral Manager and the Member, payable on each Payment Date (as
defined in the Indenture), subject to the Priority of Payments (as defined in
the Indenture).  The Fee payable on any
specified Payment Date (as defined in the Indenture) shall accrue during each
period from and including the preceding Payment Date (or, with respect to the
first payment, from and including the date hereof) to but excluding such
specified Payment Date (or, if earlier, to but excluding the last day of the
Term), calculated on the basis of the actual number of days elapsed over a year
of 365 or 366 days, as the case may be. 
If any Fee is not paid when due as a result of lack of available funds
under the Priority of Payments, such Fee shall be deferred and shall be payable
on subsequent Payment Dates in accordance with the Priority of Payments.


 


The
Issuer shall reimburse the Member, promptly after demand therefor accompanied
by reasonable supporting documentation, for any reasonable authorized expenses
incurred in connection with any meetings of or actions by the Advisory
Committee.


 


4.                                       Exculpation and Indemnification.


 


(a)                                  The Member shall not be liable to the Issuer,
the Co-Issuer, any holder of the Notes, any holder of the Preferred Shares, any
holder of ordinary shares of the Issuer or the Collateral Manager (i) for
any losses incurred as a result of the actions taken or omitted to be taken by
the Member pursuant to the provisions of this Exhibit B-1 or the Advisory
Committee Guidelines, except that the Member may be so liable to the extent
such losses are the result of acts or omissions constituting willful
misconduct, fraud or gross negligence by the Member in the performance of its
obligations hereunder or under the Advisory Committee Guidelines or (ii) for
the acts or omissions of any other member of the Advisory Committee.


 


(b)                                 The Issuer shall indemnify the Member for,
and hold the Member harmless against, any loss, liability or expense (including
without limitation reasonable attorneys’ fees and expenses) incurred arising
out of or in connection with the Member’s service as a member of the Advisory
Committee, including the costs and expenses of defense against any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder (collectively, “Losses”); provided, however,
that the Issuer shall not indemnify the Member for any Losses incurred as a
result of acts or omissions constituting willful misconduct, fraud or gross
negligence by the Member in the performance of its obligations hereunder or
under the Advisory Committee Guidelines.


 


B-1-2





















 


(c)                                  If any action shall be instituted involving
the Member for which indemnification hereunder may be applicable, such Member
shall promptly notify the Issuer and the Collateral Manager in writing and the
Issuer shall have the right to retain counsel reasonably satisfactory to the
Issuer and the Collateral Manager to represent the Member and any others the
Issuer may designate in such proceeding and shall pay the reasonable fees and
disbursements of such counsel related to such proceeding.  In any such proceeding, the Member shall have
the right to retain individual counsel, but the fees and expenses of such
counsel shall be at the expense of the Member unless (i) the Issuer and
the Member shall have agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
the Member and the Issuer and representation of all such parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them.  It is understood that the
Issuer shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for the Member and any other
members of the Advisory Committee, and that all such reasonable fees and expenses
shall be reimbursed as they are incurred. 
The Issuer shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent or if
there be a final judgment for the plaintiff, the Issuer agrees, subject to the
limitations noted herein, to indemnify the Member from and against any loss or
liability by reason of such settlement or judgment.  The Issuer shall not, without the prior
written consent of the Member, effect any settlement of any pending or
threatened proceeding in respect of which the Member is or is likely to have
been a party, unless such settlement includes an unconditional release of the
Member from all liability on claims that are the subject matter of such
proceeding.  Notwithstanding the
foregoing, if any person shall pay the Member any amount of indemnification
pursuant to this Paragraph 4, such person shall succeed to the rights of the
Issuer, to the exclusion of the Issuer, set forth in this Paragraph 4(c) (including,
but not limited to, the right of the Issuer to retain counsel to represent the
Member in any related proceeding and to effect any settlement of any related
pending or threatened proceeding).


 


5.                                       Notices.


 


All
notices, requests, consents, approvals and other communications required or
permitted to be given or delivered hereunder shall be in writing (which shall
include notice by telecopy or like transmission) and shall be deemed to have
been given when delivered personally against receipt, upon receipt of a
transmitted confirmation if sent by telecopy or like transmission, or on the
next business day when sent by overnight courier or similar service, if
addressed to the respective parties as follows:


 


If
to the Issuer, to:


 


Gramercy
Real Estate CDO 2005-1, Ltd.


 


c/o Maples Finance Limited


Queensgate House


P.O. Box 1093 GT


South Church Street


George Town


Telephone:  +
1 345 945-7100


 


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Fax:  +1 (345)
945-7099


Attention: 
The Directors


 


with
a copy to:


 


GKK Manager LLC


c/o SL Green Realty Corp.


420 Lexington Avenue, 19th Floor


New York, New York 10170


Telephone: 
(212) 594-2700


Fax:  (212) 216-1785


Attention: 
Andrew Levine


Attention: 
Marc Holliday


 


If
to the Member, to the address set forth on the Acknowledgement and Agreement,


 


or
to such other address or telephone number as either party shall have specified
by notice in writing to the other party; provided, however, that
any such notice of change of address or facsimile number shall be effective
only upon receipt.


 


6.                                       Monthly Reports.


 


The
Issuer shall provide or cause to be provided to the Member a copy of each
Monthly Report (as defined in the Indenture), substantially and
contemporaneously with its delivery to the Rating Agencies (as defined in the
Indenture) under the Indenture.


 


7.                                       Term; Termination.


 


(a)                                  The Member’s term as an Independent Member of
the Advisory Committee (the “Term”) shall commence on the date of its execution
of the Acknowledgement and Agreement and shall continue until the earlier of: (i) the
liquidation and winding-up of the Issuer; (ii) the payment in full of all
Notes; (iii) the death of the Member; and (iv) the effective date of
any resignation or removal of the Member as an Independent Member of the
Advisory Committee as provided in this Paragraph 7.


 


(b)                                 The Member shall have the right to resign as
a member of the Advisory Committee at any time upon 10 days’ prior written
notice to the Issuer, except that any resignation pursuant to Paragraph 2 shall
be effective immediately.  The Collateral
Manager shall have the right to appoint an Independent Member to replace any
Independent Member that resigns.


 


(c)                                  The holders of 66 2/3%, by outstanding
principal amount, of each Class of Notes voting as a separate Class (excluding
any Notes held by the Collateral Manager, any of its Affiliates or any funds
(other than the Issuer) managed by the Collateral Manager or its Affiliates)
shall have the right to remove the Member for “cause.”  For this purpose, “cause” shall mean:  (i) the Member’s breach of any material
provisions hereof and its failure to cure such breach within ninety (90) days
after the first to occur of (x) notice of such failure is given to the Member
and (y) the Member has actual knowledge of such breach; (ii) an act by the
Member that constitutes fraud or criminal activity in the performance of its
obligations hereunder or the Member is


 


B-1-4





















 


indicted
of a felony offense or other crime involving an investment or
investment-related business, fraud, false statements or omissions, wrongful
taking of property, bribery, forgery, counterfeiting or extortion, in a court
of competent jurisdiction (including the entry of a guilty or nolo contendere
plea) or (iii) the Member becomes affiliated with the Collateral Manager
or any affiliate of the Collateral Manager.


 


(d)                                 The Member also shall be subject to immediate
removal from the Committee for “cause” by the Collateral Manager.  For purposes of this Paragraph 9(d), “cause”
shall mean:  (i) each of the events
listed in clauses (i) through (iii) of the definition of “cause” in
Paragraph 9(c) above; (ii) the Member’s failure to substantially
perform its duties hereunder and/or under the Advisory Committee Guidelines; (iii) any
of the Member’s representations and warranties set forth in Paragraph 2 hereof
becomes untrue; or (iv) the Member fails to respond to a notice provided
by the Collateral Manager with respect to a Restricted Transaction within five
business days after such notice or if the Member is not available to consider a
Restricted Transaction within five business days after such notice.


 


If
the Member’s Term is terminated pursuant to this Paragraph 7, such termination
shall be without any further liability or obligation of either party to the other,
except that any liability or obligation of either party under Paragraph 3 or 4
shall survive the termination of such Member.


 


8.                                       Confidentiality.  The
Member may receive certain information from the Collateral Manager and/or the
Issuer in connection with its service as a member of the Advisory
Committee.  The Member agrees, as set
forth in this Paragraph 10, to treat confidentially any Confidential Material
(as defined below).


 


(a)                                  “Confidential Material” means any
non-public, confidential or proprietary information that is or has been
provided by the Collateral Manager or the Issuer to the Member or the Member’s
employees, attorneys, accountants, advisors or other authorized representatives
(collectively, “Representatives”) in connection with the Member’s
service on the Advisory Committee, regardless of the form in which such
information is communicated or maintained, and all notes, reports, analyses,
compilations, studies, files or other documents or material, whether prepared
by the Member or others, which are based on, contain or otherwise reflect such
information.  However, “Confidential
Material” does not include any information that (i) at the time of
disclosure or thereafter is generally available to and known by the public
(other than as a result of a disclosure in violation of this Paragraph 10
directly or indirectly by the Member or the Member’s Representatives), (ii) was
available to the Member on a non-confidential basis from a source other than
the Collateral Manager or the Issuer or its advisors, or (iii) was
independently acquired or developed by the Member without violating any
provision of this Paragraph 10.


 


(b)                                 The Member agrees that all Confidential
Material shall be kept confidential by the Member and, except with the specific
prior written consent of the Issuer and the Collateral Manager or as expressly
otherwise permitted by the terms hereof, will not be disclosed by the Member to
any person, other than any of the Member’s Representatives that need to know
such information solely for the purpose of the Member’s service on the Advisory
Committee (it being understood that, before disclosing the Confidential
Material or any portion thereof to such Representatives, the Member shall
inform such Representatives of the confidential nature of the Confidential
Material and the restrictions related thereto). 
The Member agrees to be responsible


 


B-1-5





















 


for
any breach of this Paragraph 10 by the Member’s Representatives. The Member
further agrees that the Member shall not use Confidential Material for any
reason or purpose other than in connection with its service on the Advisory
Committee.  In addition, without the
prior written consent of the Issuer and the Collateral Manager, the Member
agrees not to disclose to any person, other than the Member’s Representatives
that need to know such information in connection with the Member’s service on
the Advisory Committee, the fact that Confidential Material has been made
available to the Member or that the Member is considering any investment
presented to it by the Collateral Manager on behalf of the Issuer.


 


(c)                                  If the Member is requested or required, by
oral questions, interrogatories, requests for information or documents,
subpoena, civil investigative demand or similar process, to disclose
Confidential Material, the Member shall provide the Issuer and the Collateral
Manager with prompt notice of such event so that the Issuer and/or the
Collateral Manager may seek a protective order or other appropriate remedy or
waive compliance with the applicable provisions of this Paragraph 10 by the
Member.  If the Issuer or the Collateral
Manager determines to seek such protective order or other remedy, the Member
shall cooperate with the Issuer or the Collateral Manager in seeking such
protective order or other remedy. If neither the Issuer nor the Collateral
Manager is able to seek such protective order or other remedy, the Member shall
seek it as directed by the Issuer or the Collateral Manager.  If such protective order or other remedy is
not obtained and disclosure of Confidential Material is required, or the Issuer
grants a waiver hereunder, the Member (i) may furnish that portion (and
only that portion) of the Confidential Material which the Member is legally
required to disclose and (ii) will exercise reasonable best efforts to
have confidential treatment afforded any Confidential Material so furnished.


 


(d)                                 Upon the termination hereof or upon the
written request of the Issuer or the Collateral Manager at any time, the Member
shall promptly deliver or cause to be delivered to the Issuer or the Collateral
Manager or to a person designated by the Issuer or the Collateral Manager (or
will destroy, with such destruction to be certified to the Issuer and the
Collateral Manager) all documents or other matter furnished to the Member by or
on behalf of the Issuer or the Collateral Manager constituting Confidential
Material, together with all copies thereof in the possession of the
Member.  In such event, all other
documents or other matter constituting Confidential Material prepared by the
Member will be destroyed, with any such destruction certified to the Issuer and
the Collateral Manager.


 


9.                                       Limited Recourse.


 


Notwithstanding
any other provision hereof, the Member acknowledges and agrees that he shall
have recourse only to the Assets in respect of any claim, action, demand or
right arising in respect of, or against, the Issuer and following realization
of the Assets, any claims of the Member against the Issuer shall be extinguished
and shall not thereafter revive. 
Notwithstanding any other provision hereof or in the Indenture, no
member of the Advisory Committee or any Affiliate thereof shall be personally
liable to the Member for any amounts payable, or performance due, by the Issuer
hereunder.  This provision shall survive
termination of the Term.


 


B-1-6





















 


10.                                 Non-Petition.


 


The
Member agrees that, before the date that is one year and one day after the
payment in full of all Notes, or if longer, the expiration of the then
applicable preference period plus one day, the Member shall not acquiesce,
petition, join any other Person in any petition or otherwise invoke or cause
any other Person to invoke the process of any governmental authority for the
purpose of commencing or sustaining a case against the Issuer under any federal
or state bankruptcy, insolvency or similar law of any jurisdiction or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator
or other similar official of the Issuer or any substantial part of its property
or ordering the winding-up or liquidation of the affairs of the Issuer.  This provision shall survive termination of
the Term.


 


11.                                 Amendments.


 


The
provisions of this Exhibit B-1 may be amended only by an instrument in
writing signed by the Issuer and the Member and consented to by the Collateral
Manager.


 


12.                                 Third Parties.


 


Nothing
herein, expressed or implied, shall give to any person, other than the Issuer,
the Member and the Collateral Manager, any benefit or any legal or equitable
right, remedy or claim hereunder.


 


13.                                 Third Party Beneficiary.


 


Each
of the Issuer and the Member agrees that the Collateral Manager is, and that it
is intended that the Collateral Manager be afforded all the benefits of, an
express third-party beneficiary in respect of the provisions hereof.


 


B-1-7





















 


EXHIBIT B-2


 


Additional Advisory
Committee Guidelines


 


Affiliated Member


 


1.                                       Affiliated Member Duties.


 


As
an Affiliated Member of the Advisory Committee, the Member shall:


 


(a)                                  serve on the Advisory Committee and attend
meetings of the Advisory Committee at such times and places (and/or
telephonically or by correspondence or otherwise) as shall be reasonably requested
by the Issuer and the Collateral Manager;


 


(b)                                 promptly consider certain actions to be taken
with respect to certain Restricted Transactions presented by the Collateral
Manager (as further described in the Advisory Committee Guidelines);


 


(c)                                  in connection with considering Restricted
Transactions, promptly review and consider investment memoranda, underwriting
analyses and other information presented to the Member on behalf of the Issuer
to the Advisory Committee in connection with the foregoing; and


 


(d)                                 take such other actions as may be reasonably
necessary or advisable in connection with the foregoing;


 


provided, however,
that (i) if the Member believes that the Member or an Affiliate thereof,
or any of their respective officers, directors, employees, stockholders,
partners, members or managers, has an interest in any Restricted Transaction,
the Member shall promptly disclose such interest to the Issuer and the
Collateral Manager and shall recuse himself from any consideration of such
Restricted Transaction (in each case unless the Collateral Manager and each
other member of the Advisory Committee (assuming that at least one such member
of the Advisory Committee is an Independent Member and is not affiliated with
the Restricted Transaction at issue) shall determine that such interest does
not create a disabling conflict) and (ii) if the Member believes that,
because of an actual or potential conflict of interest relating to a Restricted
Transaction, it would be inappropriate or inadvisable for the Member to receive
any confidential information related to such Restricted Transaction, the Member
shall recuse himself from any consideration of such Restricted Transaction.


 


2.                                       Representations and Warranties.


 


The
Member, by its execution of an Advisory Committee Member Acknowledgement and
Agreement (the “Acknowledgment and Agreement”), will be deemed to
represent and warrant that the Member has the Requisite Experience (as set
forth in the Advisory Committee Guidelines).


 


B-2-1





















 


If
the representations and warranties set forth in this Paragraph 2 shall at any
time fail to be true and correct, the Member shall promptly notify the Issuer
and the Collateral Manager of that fact and shall immediately resign from the
Advisory Committee.


 


3.                                       Exculpation and Indemnification.


 


(a)                                  The Member shall not be liable to the Issuer,
the Co-Issuer, any holder of the Notes, any holder of the Preferred Shares, any
holder of ordinary shares of the Issuer or the Collateral Manager (i) for
any losses incurred as a result of the actions taken or omitted to be taken by
the Member pursuant to the provisions of this Exhibit B-2 or the Advisory
Committee Guidelines, except that the Member may be so liable to the extent
such losses are the result of acts or omissions constituting willful
misconduct, fraud or gross negligence by the Member in the performance of its
obligations hereunder or under the Advisory Committee Guidelines or (ii) for
the acts or omissions of any other member of the Advisory Committee.


 


(b)                                 The Issuer shall indemnify the Member for,
and hold the Member harmless against, any loss, liability or expense (including
without limitation reasonable attorneys’ fees and expenses) incurred arising
out of or in connection with the Member’s service as a member of the Advisory
Committee, including the costs and expenses of defense against any claim or
liability in connection with the exercise or performance of any of its powers
or duties hereunder (collectively, “Losses”); provided, however,
that the Issuer shall not indemnify the Member for any Losses incurred as a
result of acts or omissions constituting willful misconduct, fraud or gross
negligence by the Member in the performance of its obligations hereunder or
under the Advisory Committee Guidelines.


 


(c)                                  If any action shall be instituted involving
the Member for which indemnification hereunder may be applicable, such Member
shall promptly notify the Issuer and the Collateral Manager in writing and the
Issuer shall have the right to retain counsel reasonably satisfactory to the
Issuer and the Collateral Manager to represent the Member and any others the
Issuer may designate in such proceeding and shall pay the reasonable fees and
disbursements of such counsel related to such proceeding.  In any such proceeding, the Member shall have
the right to retain individual counsel, but the fees and expenses of such
counsel shall be at the expense of the Member unless (i) the Issuer and
the Member shall have agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
the Member and the Issuer and representation of all such parties by the same
counsel would be inappropriate due to actual or potential differing interests
between them.  It is understood that the
Issuer shall not, in connection with any proceeding or related proceedings in
the same jurisdiction, be liable for the fees and expenses of more than one
separate firm (in addition to any local counsel) for the Member and any other
members of the Advisory Committee, and that all such reasonable fees and
expenses shall be reimbursed as they are incurred.  The Issuer shall not be liable for any
settlement of any proceeding effected without its written consent, but if settled
with such consent or if there be a final judgment for the plaintiff, the Issuer
agrees, subject to the limitations noted herein, to indemnify the Member from
and against any loss or liability by reason of such settlement or judgment.  The Issuer shall not, without the prior
written consent of the Member, effect any settlement of any pending or
threatened proceeding in respect of which the Member is or is likely to have
been a party, unless such settlement includes an unconditional release of the
Member from all liability on claims that are the subject matter of such
proceeding.


 


B-2-2





















 


Notwithstanding
the foregoing, if any person shall pay the Member any amount of indemnification
pursuant to this Paragraph 3, such person shall succeed to the rights of the
Issuer, to the exclusion of the Issuer, set forth in this Paragraph 3(c) (including,
but not limited to, the right of the Issuer to retain counsel to represent the
Member in any related proceeding and to effect any settlement of any related
pending or threatened proceeding).


 


4.                                       Notices.


 


All
notices, requests, consents, approvals and other communications required or
permitted to be given or delivered hereunder shall be in writing (which shall
include notice by telecopy or like transmission) and shall be deemed to have
been given when delivered personally against receipt, upon receipt of a
transmitted confirmation if sent by telecopy or like transmission, or on the
next business day when sent by overnight courier or similar service, if
addressed to the respective parties as follows:


 


If
to the Issuer, to:


 


Gramercy
Real Estate CDO 2005-1, Ltd.


 


c/o Maples Finance Limited


Queensgate House


P.O. Box 1093 GT


South Church Street


George Town


Telephone:  +
1 345 945-7100


Fax:  +1 (345)
945-7099


Attention: 
The Directors


 


with
a copy to:


 


GKK Manager LLC


c/o SL Green Realty Corp.


420 Lexington Avenue, 19th Floor


New York, New York 10170


Telephone: 
(212) 594-2700


Fax:  (212) 216-1785


Attention: 
Andrew Levine


Attention: 
Marc Holliday


 


If
to the Member, to the address set forth on the Acknowledgement and Agreement,


 


or
to such other address or telephone number as either party shall have specified
by notice in writing to the other party; provided, however, that any such notice
of change of address or facsimile number shall be effective only upon receipt.


 


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5.                                       Monthly Reports.


 


The
Issuer shall provide or cause to be provided to the Member a copy of each
Monthly Report (as defined in the Indenture), substantially and
contemporaneously with its delivery to the Rating Agencies (as defined in the
Indenture) under the Indenture.


 


6.                                       Term; Termination.


 


(a)                                  The Member’s term as a Member of the Advisory
Committee (the “Term”) shall commence on the date of its execution of
the Acknowledgement and Agreement and shall continue until the earlier of: (i) the
liquidation and winding-up of the Issuer; (ii) the payment in full of all
Notes; (iii) the death of the Member; and (iv) the effective date of
any resignation or removal of the Member as an Affiliated Member of the
Advisory Committee as provided in this Paragraph 6.


 


(b)                                 The Member shall have the right to resign as
a member of the Advisory Committee at any time upon 10 days’ prior written
notice to the Issuer, except that any resignation pursuant to Paragraph 2 shall
be effective immediately.  The Collateral
Manager shall have the right to appoint a Member to replace any Member that
resigns.


 


(c)                                  The holders of 66 2/3%, by outstanding
principal amount, of each Class of Notes voting as a separate Class (excluding
any Notes held by the Collateral Manager, any of its Affiliates or any funds
(other than the Issuer) managed by the Collateral Manager or its Affiliates)
shall have the right to remove the Member for “cause.”  For this purpose, “cause” shall mean:  (i) the Member’s breach of any material
provisions hereof and its failure to cure such breach within ninety (90) days
after the first to occur of (x) notice of such failure is given to the Member
and (y) the Member has actual knowledge of such breach; or (ii) an act by
the Member that constitutes fraud or criminal activity in the performance of
its obligations hereunder or the Member is convicted of a felony offense or
other crime involving an investment or investment-related business, fraud,
false statements or omissions, wrongful taking of property, bribery, forgery,
counterfeiting or extortion, in a court of competent jurisdiction (including
the entry of a guilty or nolo contendere plea). 
Any replacement Affiliated Member shall be appointed by the Collateral
Manager.


 


(d)                                 The Collateral Manager will have the right to
remove any Affiliated Member at any time in its sole discretion (with or
without cause), and such removal will not be subject to the appointment of any
successor Affiliated Member.


 


If
the Member’s Term is terminated pursuant to this Paragraph 6, such termination
shall be without any further liability or obligation of either party to the
other, except that any liability or obligation of either party under Paragraph
3 shall survive the termination of such Member.


 


7.                                       Limited Recourse.


 


Notwithstanding
any other provision hereof, the Member acknowledges and agrees that he shall
have recourse only to the Assets in respect of any claim, action, demand or
right arising in respect of, or against, the Issuer and following realization
of the Assets, any claims of the Member against the Issuer shall be
extinguished and shall not thereafter revive. 
Notwithstanding


 


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any
other provision hereof or in the Indenture, no member of the Advisory Committee
or any Affiliate thereof shall be personally liable to the Member for any
amounts payable, or performance due, by the Issuer hereunder.  This provision shall survive termination of
the Term.


 


8.                                       Non-Petition.


 


The
Member agrees that, before the date that is one year and one day after the
payment in full of all Notes, or if longer, the expiration of the then
applicable preference period plus one day, the Member shall not acquiesce,
petition, join any other Person in any petition or otherwise invoke or cause
any other Person to invoke the process of any governmental authority for the
purpose of commencing or sustaining a case against the Issuer under any federal
or state bankruptcy, insolvency or similar law of any jurisdiction or
appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator
or other similar official of the Issuer or any substantial part of its property
or ordering the winding-up or liquidation of the affairs of the Issuer.  This provision shall survive termination of
the Term.


 


9.                                       Amendments.


 


The
provisions of this Exhibit B-2 may be amended only by an instrument in
writing signed by the Issuer and the Member and consented to by the Collateral
Manager.


 


10.                                 Third Parties.


 


Nothing
herein, expressed or implied, shall give to any person, other than the Issuer,
the Member and the Collateral Manager, any benefit or any legal or equitable
right, remedy or claim hereunder.


 


11.                                 Third
Party Beneficiary.


 


Each of the Issuer and
the Member agrees that the Collateral Manager is, and that it is intended that
the Collateral Manager be afforded all the benefits of, an express third-party
beneficiary in respect of the provisions hereof.


 


B-2-5