**Exhibit 10.20**

 

**COLLATERAL MANAGEMENTAGREEMENT**

 

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., anexempted company incorporated with limited liability under the laws of theCayman Islands (together with successors and assigns permitted hereunder, the “Issuer”), and GKK MANAGERLLC, 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 nototherwise defined herein shall have the respective meanings ascribed thereto inthe Indenture, dated as of July 14, 2005 (the “Indenture”), by and among the Issuer, GramercyReal Estate CDO 2005-1 LLC, as co-issuer (the “Co-Issuer”), Wells Fargo Bank, NationalAssociation, as trustee (in such capacity, the “Trustee”), calculation agent, transfer agent,custodial securities intermediary, backup advancing agent and notes registrar, andGKK Liquidity LLC, as advancing agent.

 

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

 

NOW, THEREFORE, in consideration of the mutualcovenants and agreements set forth herein, the parties hereto hereby agree asfollows:

 

# 1.                                       ManagementServices.  The Collateral Manager ishereby appointed as the Issuer’s exclusive agent to provide to the Issuercertain services in relation to the Assets specified herein and in theIndenture.  Accordingly, the CollateralManager accepts such appointment and shall provide to the Issuer the followingservices (in accordance with all applicable requirements of the Indenture andthis Agreement including without limitation the Collateral Manager ServicingStandard):

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## (a)                                  determiningspecific Collateral Debt Securities to be purchased or Collateral DebtSecurities to be sold and the timing of such purchases and sales, in each caseas permitted by the Indenture;

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## (b)                                 determiningspecific Eligible Investments to be purchased or sold and the timing of suchpurchases and sales, in each case as permitted by the Indenture;

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## (c)                                  effectingor directing the purchase of Collateral Debt Securities and EligibleInvestments, effecting or directing the sale of Collateral Debt Securities andEligible Investments, and directing the investment or reinvestment of proceedstherefrom, in each case as permitted by the Indenture;

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## (d)                                 negotiatingwith the issuers of Collateral Debt Securities as to proposed modifications orwaivers of the documentation governing such Collateral Debt Securities;

 

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## (e)                                  takingaction, or advising the Trustee with respect to actions to be taken, withrespect to the Issuer’s exercise of any rights (including, without limitation,voting rights, tender rights and rights arising in connection with thebankruptcy or insolvency of an issuer or the consensual or non-judicialrestructuring of the debt or equity of an issuer) or remedies in connectionwith the Collateral Debt Securities and Eligible Investments, as provided inthe related Underlying Instruments, including in connection with an Offer or adefault, and participating in the committees or other groups formed bycreditors of an issuer, or taking any other action with respect to CollateralDebt Securities and Eligible Investments which the Collateral Managerdetermines in the reasonable exercise of the Collateral Manager’s businessjudgment is in the best interests of the Noteholders in accordance with and aspermitted by the terms of the Indenture;

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## (f)                                    consultingwith the Rating Agencies at such times as may be reasonably requested by theRating Agencies and providing to the Rating Agencies any information reasonablyrequested in connection with the Rating Agencies’ maintenance of their ratingsof the Notes and their assigning credit indicators to prospective CollateralDebt Securities, if applicable;

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

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## (h)                                 (i) monitoringthe Assets on an ongoing basis and (ii) providing or causing to beprovided to the Issuer and/or the other applicable parties specified in theIndenture all reports, schedules and certificates which relate to the Assetsand 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 Issuerunder the Indenture, in the form and containing all information requiredthereby (including, in the case of the Monthly Reports and the Note ValuationReports, providing to the Trustee the information as specified in Sections 10.9(c) and10.9(e) of the Indenture in sufficient time for the Trustee to prepare theMonthly Reports and the Note Valuation Reports) and, if applicable, insufficient time for the Issuer to review such required reports and schedulesand to deliver them to the parties entitled thereto under the Indenture;

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## (i)                                     managingthe Issuer’s investments in accordance with the Indenture, including thelimitations relating to the Eligibility Criteria, the Coverage Tests, theCollateral Quality Tests, the Reinvestment Criteria and the other requirementsof the Indenture, and taking any action that the Collateral Manager deemsappropriate and consistent with the Indenture, the Collateral Manager ServicingStandard and the standard of care set forth herein with respect to any portionof the Assets that does not constitute Collateral Debt Securities or EligibleInvestments;

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## (j)                                     monitoringall Hedge Agreements and determining whether and when the Issuer shouldexercise any rights available under any Hedge Agreement, and causing the Issuer

 

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

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## (k)                                  providingnotification promptly, in writing, to the Trustee and the Issuer upon receivingactual notice that a Collateral Debt Security is subject to an Offer or hasbecome a Defaulted Security, a Written Down Security or a Credit Risk Security;

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## (l)                                     providingnotification promptly, in writing, to the Trustee and the Issuer upon becomingactually aware of a Default or an Event of Default under the Indenture;

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

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## (n)                                 ifthe Collateral Manager elects to amortize the Notes pursuant to and inaccordance with Section 9.7 of the Indenture, providing notification, inwriting, to the Trustee, the Issuer, the Co-Issuer and each Hedge Counterpartyof (A) such election and (B) the amount of proceeds that will be usedto so amortize the Notes;

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## (o)                                 takingreasonable action on behalf of the Issuer to effect any Optional Redemption,any Tax Redemption, any Auction Call Redemption or any Clean-up Call inaccordance with the Indenture;

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## (p)                                 onthe 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;

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## (q)                                 monitoringthe ratings of the Collateral Debt Securities and the Issuer’s compliance withthe covenants by the Issuer in the Indenture;

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## (r)                                    assistingthe Issuer in (i) taking any action in order to effect and/or maintain thelisting of any of the Notes on the Irish Stock Exchange or (ii) obtainingany waiver from the Irish Stock Exchange, or (iii) providing otherinformation related to the Issuer that is reasonably available to theCollateral Manager, in each case, when specifically requested by the IrishStock Exchange;

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## (s)                                  complyingwith such other duties and responsibilities as may be specifically required ofthe Collateral Manager by the Indenture or this Agreement;

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

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## (u)                                 inorder to render the Securities eligible for resale pursuant to Rule 144Aunder 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 informationis reasonably available to the Collateral

 

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

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## (v)                                 uponreasonable request, assisting the Trustee or the Issuer with respect to suchactions to be taken after the Closing Date, as is necessary to maintain theclearing and transfer of the Notes through DTC; and

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## (w)                               inaccordance with the Collateral Manager Servicing Standard, enforcing the rightsof the Issuer as holder of the Collateral Debt Securities, including withoutlimitation taking such action as is necessary to enforce the Issuer’s rightswith respect to remedies related to breaches of representations, warranties orcovenants in the Underlying Instruments for the benefit of the Issuer.

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In furtherance of the foregoing, the Issuer herebyappoints the Collateral Manager the Issuer’s true and lawful agent andattorney-in-fact, with full power of substitution and full authority in theIssuer’s name, place and stead and without any necessary further approval ofthe Issuer, in connection with the performance of the Collateral Manager’sduties provided for in this Agreement, including the following powers:  (i) in accordance with the terms andconditions of the Indenture and this Agreement, to buy, sell, exchange, convertand otherwise trade Collateral Debt Securities and Eligible Investments, and (ii) toexecute (under hand, under seal or as a deed) and deliver all necessary andappropriate documents and instruments on behalf of the Issuer to the extentnecessary 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 acontinuing power, coupled with an interest, and shall remain in full force andeffect until revoked by the Issuer in writing by virtue of the termination ofthis Agreement pursuant to Section 12 hereof or an assignment of thisAgreement pursuant to Section 17 hereof; provided that any suchrevocation shall not affect any transaction initiated prior to such revocation.  Nevertheless, if so requested by theCollateral Manager, a purchaser of a Collateral Debt Security or EligibleInvestment or a Hedge Counterparty, the Issuer shall ratify and confirm anysuch sale or other disposition by executing and delivering to the CollateralManager, such purchaser or such Hedge Counterparty all proper bills of sale,assignments, releases and other instruments as may be designated in any suchrequest.

 

The Collateral Manager does not hereby guarantee thatsufficient funds will be available on each Payment Date to satisfy any suchpayment obligations.  The CollateralManager shall perform its obligations hereunder and under the Indenture withreasonable care and in good faith, using a degree of skill and attention noless than that which it (a) exercises with respect to comparable assetsthat it manages for itself and (b) exercises with respect to comparableassets that it manages for others, and in a manner consistent with thepractices and procedures then in effect followed by reasonable and prudentinstitutional managers of national standing relating to assets of the natureand character of the Assets, except as expressly provided in this Agreement orin the Indenture.  In addition, theCollateral Manager shall use commercially reasonable efforts to ensure thatdirections to the Trustee with respect to the purchase of Eligible Investmentsare made by the Collateral Manager only if, in the Collateral Manager’scommercially reasonable judgment at the time of such direction, payment at

 

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

 

The Collateral Manager shall take all actionsreasonably requested by the Trustee to facilitate the perfection of the Trustee’ssecurity interest in the Assets pursuant to the Indenture.

 

# 2.                                       Delegationof Duties.  The Collateral Managermay delegate to third parties (including its Affiliates), which it shall selectwith reasonable care, and employ third parties to execute any or all of theduties assigned to the Collateral Manager hereunder; provided, however,that (i) the Collateral Manager shall not be relieved of any of its dutieshereunder as a result of such delegation to or employment of third parties, (ii) theCollateral Manager shall be solely responsible for the fees and expensespayable to any such third party, except as set forth in Section 6 hereof,and (iii) such delegation does not constitute an “assignment” under theAdvisers Act.

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# 3.                                       Purchaseand Sale Transactions; Brokerage.

 

## (a)                                  TheCollateral Manager shall seek to obtain the best overall terms for all ordersplaced 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 thelowest prices available.  Subject to the foregoingobjective, the Collateral Manager may take into consideration all factors theCollateral Manager reasonably determines to be relevant, including, withoutlimitation, timing, general relevant trends and research and other brokerageservices and support equipment and services related thereto furnished to theCollateral Manager or its Affiliates by brokers and dealers in compliance with Section 28(e) ofthe Exchange Act or, if Section 28(e) of the Exchange Act is notapplicable, in accordance with the provisions set forth herein.  Such services may be used in connection withthe other advisory activities or investment operations of the CollateralManager and/or its Affiliates.  Inaddition, the Collateral Manager may take into account available prices, ratesof brokerage commissions and size and difficulty of the order, in addition toother 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 ofcompeting brokers and/or dealers, and the value of the ongoing relationshipwith such brokers and/or dealers), without having to demonstrate that suchfactors are of a direct benefit to the Issuer in any specific transaction.  The Issuer acknowledges and agrees that (i) thedetermination by the Collateral Manager of any benefit to the Issuer issubjective and represents

 

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## the Collateral Manager’sevaluation at the time that the Issuer will be benefited by relatively betterpurchase or sales prices, lower brokerage commissions and beneficial timing oftransactions or a combination of any of these and/or other factors and (ii) theCollateral Manager shall be fully protected with respect to any suchdetermination to the extent the Collateral Manager acts in good faith, and inaccordance with the Collateral Manager Servicing Standard (to the extentapplicable), and without gross negligence, willful misconduct or recklessdisregard of the obligations of the Issuer hereunder or under the terms of theIndenture.

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The Collateral Manager may aggregate sales andpurchase orders of securities placed with respect to the Assets with similarorders being made simultaneously for other accounts managed by the CollateralManager or with accounts of the Affiliates of the Collateral Manager if in theCollateral Manager’s sole judgment, exercised in good faith, such aggregation willnot have an adverse effect on the Issuer. When any such aggregate sales or purchase orders occur, the objective ofthe Collateral Manager (and any of its Affiliates involved in suchtransactions) shall be to allocate the executions among the accounts in a mannerfair and equitable to all such accounts and generally to seek to allocatesecurities available for investment to all such accounts pro rata in proportionto the optimum amount sought by the Collateral Manager for each respectiveaccount.  In connection with theforegoing, the objective of the Collateral Manager shall be to allocate investmentopportunities and the purchases or sales of instruments in a manner believed bythe Collateral Manager, in good faith, taking into account the CollateralManager’s Servicing Standard (to the extent applicable), to be fair andequitable.

 

In connection with any purchase of a portfolio ofassets other than securities, the objective of the Collateral Manager shall beto allocate such assets (and the aggregate purchase price paid for such assets)among the Collateral Manager’s clients (including the Issuer) in a mannerbelieved by the Collateral Manager to be fair and equitable.  The Issuer acknowledges and agrees that theCollateral Manager shall be fully protected with respect to any such allocationto the extent the Collateral Manager acts in good faith, taking into account theCollateral Manager’s Servicing Standard (to the extent applicable), and withoutgross negligence, willful misconduct or reckless disregard of the obligationsof the Issuer hereunder or under the terms of the Indenture.

 

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

 

## (b)                                 TheCollateral Manager, subject to and in accordance with the Indenture, may effectdirect trades between the Issuer and the Collateral Manager or any of itsAffiliates

 

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

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# 4.                                       Representationsand Warranties of the Issuer.  TheIssuer represents and warrants to the Collateral Manager that:

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## (a)                                  theIssuer (i) has been duly incorporated and registered as an exemptedcompany and is validly existing under the laws of the Cayman Islands, (ii) hasfull power and authority to own the Issuer’s assets and the securities proposedto be owned by the Issuer and included among the Assets and to transact thebusiness for which the Issuer was organized, and (iii) is duly qualifiedunder the laws of each jurisdiction where the Issuer’s ownership or lease ofproperty or the conduct of the Issuer’s business requires or the performance ofthe Issuer’s obligations under this Agreement and the Indenture would requiresuch qualification, except for failures to be so qualified that would not inthe aggregate have a material adverse effect on the business, operations,assets or financial condition of the Issuer or the ability of the Issuer toperform its obligations under, or on the validity or enforceability of, thisAgreement and the

 

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## Indenture; the Issuer has fullpower and authority to execute, deliver and perform the Issuer’s obligationshereunder and thereunder; this Agreement and the Indenture have been dulyauthorized, executed and delivered by the Issuer and constitute legal, validand binding agreements enforceable against the Issuer in accordance with theirterms except that the enforceability thereof may be subject to (i) bankruptcy,insolvency, reorganization, moratorium, receivership, conservatorship or othersimilar laws now or hereafter in effect relating to creditors’ rights and (ii) generalprinciples of equity (regardless of whether such enforcement is considered in aproceeding in equity or at law);

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## (b)                                 noconsent, approval, authorization or order of or declaration or filing with anygovernment, governmental instrumentality or court or other Person is requiredfor the performance by the Issuer of its duties hereunder or under theIndenture, except those that may be required under state securities or “bluesky” laws or the applicable laws of any jurisdiction outside of the UnitedStates, and such as have been duly made or obtained;

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## (c)                                  neitherthe execution, delivery and performance of this Agreement or the Indenture northe performance by the Issuer of its duties hereunder or thereunder (i) conflictswith or will violate or result in a default under the Issuer’s GoverningDocuments or any material contract or agreement to which the Issuer is a partyor by which it or its assets may be bound, or any law, decree, order, rule, orregulation applicable to the Issuer of any court or regulatory, administrativeor governmental agency, body or authority or arbitrator having jurisdictionover the Issuer or its properties, or (other than as contemplated or permittedby the Indenture) will result in a lien on any of the property of the Issuerand (ii) would have a material adverse effect upon the ability of theIssuer to perform its duties under this Agreement or the Indenture;

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

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

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

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# 5.                                       Representationsand Warranties of the Collateral Manager.  The Collateral Manager represents and warrantsto the Issuer that:

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

 

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

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## (b)                                 neitherthe Collateral Manager nor any of its Affiliates is in violation of any Federalor state securities law or regulation promulgated thereunder that would have amaterial adverse effect upon the ability of the Collateral Manager to performits duties under this Agreement or the Indenture, and there is no charge,investigation, action, suit or proceeding before or by any court or regulatoryagency pending or, to the best knowledge of the Collateral Manager, threatenedwhich could reasonably be expected to have a material adverse effect upon theability of the Collateral Manager to perform its duties under this Agreement orthe Indenture;

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## (c)                                  neitherthe execution and delivery of this Agreement nor the performance by theCollateral Manager of its duties hereunder or under the Indenture conflictswith or will violate or result in a breach or violation of any of the terms orprovisions of, or constitutes a default under: (i) the limited liability company agreement of the CollateralManager, (ii) the terms of any indenture, contract, lease, mortgage, deedof trust, note agreement or other evidence of indebtedness or other agreement,obligation, condition, covenant or instrument to which the Collateral Manageris a party or by which the Collateral Manager is bound, (iii) any law,decree, order, rule or regulation applicable to the Collateral Manager ofany court or regulatory, administrative or governmental agency, body orauthority or arbitrator having jurisdiction over the Collateral Manager or itsproperties, and which would have, in the case of any of (i), (ii) or (iii) ofthis subsection (c), either individually or in the aggregate, a materialadverse effect on the business, operations, assets or financial condition ofthe Collateral Manager or the ability of the Collateral Manager to perform itsobligations under this Agreement or the Indenture;

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## (d)                                 noconsent, approval, authorization or order of or declaration or filing with anygovernment, governmental instrumentality or court or other Person is requiredfor the performance by the Collateral Manager of its duties hereunder and underthe Indenture, except such as have been duly made or obtained;

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

 

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## (f)                                    theCollateral Manager is not required to register as an investment adviser underthe Advisers Act.

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# 6.                                       Expenses. Both parties hereto acknowledge andagree that a portion of the gross proceeds received from the issuance and saleof the Securities will be used to pay certain organizational and structuringfees and expenses of the Co-Issuers, including the legal fees and expenses ofcounsel to the Collateral Manager.  TheCollateral Manager shall pay all expenses and costs incurred by it in thecourse of performing its obligations under this Agreement; provided, however,that the Collateral Manager shall not be liable for, and (subject to thePriority of Payments set forth in the Indenture and to the extent funds areavailable therefor) the Issuer shall be responsible for the payment of,reasonable expenses and costs (including, without limitation, reasonable travelexpenses) of (i) independent accountants, consultants and other advisersretained by the Issuer or by the Collateral Manager on behalf of the Issuer inconnection with the services provided by the Collateral Manager hereunder, (ii) legaladvisers retained by the Issuer or by the Collateral Manager on behalf of theIssuer in connection with the services provided by the Collateral Manager hereunderand (iii) the Collateral Manager (A) to the extent of reasonableexpenses disbursed or allocated in valuing the Assets, disbursed or allocatedsoftware and technology expenditures relating to the monitoring andadministration of the Assets and any other reasonable expenses incurred by theCollateral Manager in connection with matters arising in the performance of itsduties under this Agreement and (B) for an allocable share of the cost ofcertain credit databases used by the Collateral Manager in providing servicesto the Issuer under this Agreement.

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# 7.                                       Fees. As compensation for the performance ofits obligations as Collateral Manager hereunder and under the Indenture, theCollateral Manager will be entitled to receive (i) a fee, payablequarterly in arrears on each Payment Date in accordance with the Priority ofPayments, equal to 0.15% per annum of the Net Outstanding Portfolio Balance(the “Senior CollateralManagement Fee”) and (ii) an additional fee, payablequarterly in arrears on each Payment Date in accordance with the Priority ofPayments, equal to 0.25% per annum of the Net Outstanding Portfolio Balance(the “Subordinate CollateralManagement Fee” and, together with the Senior CollateralManagement Fee, the “CollateralManagement Fee”).  EachCollateral Management Fee will be calculated for each Interest Accrual Periodassuming a 360-day year with 12 thirty-day months.  The Collateral Management Fee will becalculated based on the Net Outstanding Portfolio Balance as of the first dayof 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, inaccordance with the Priority of Payments, the amount not so paid shall bedeferred and such amounts shall be payable on such later Payment Date on whichfunds are available therefor as provided in the Priority of Payments set forthin the Indenture.  Any accrued and unpaidSenior Collateral Management Fee that is deferred due to the operation of thePriority of Payments shall accrue interest at LIBOR in effect for theapplicable Interest Accrual Period computed on an actual 360-day basis.  Any accrued and unpaid Subordinate CollateralManagement Fee that is deferred due to the operation of the Priority ofPayments shall accrue interest at LIBOR in effect for the applicable InterestAccrual Period on an actual 360-day basis. Notwithstanding any other provision hereof, the aggregate amount of allaccrued but unpaid Subordinate Collateral Management Fee payable on the finalPayment Date or, if earlier, following the winding up of the Issuer shall beequal to the lesser of (a) the nominal amount thereof and (b) theamount available for payment under the Priority of

 

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

#  

# 8.                                       Non-Exclusivity. Nothing herein shall prevent theCollateral Manager or any of its Affiliates or any of their officers ordirectors from engaging in any other businesses or providing investmentmanagement, advisory or any other types of services to any Persons, includingthe Issuer, the Trustee and the Noteholders, to the fullest extent permitted byapplicable law; provided, however, that the Collateral Managermay not take any of the foregoing actions which the Collateral Manager knows orreasonably should know would require the Issuer or the pool of Assets toregister as an “investment company” under the Investment Company Act.

#  

# 9.                                       Conflictsof Interest.

 

## (a)                                  After(but excluding) the Closing Date and the sales by Affiliates of the CollateralManager of Collateral Debt Securities to the Issuer on the Closing Date (andexcept in the case of Credit Risk/Defaulted Security Cash Purchases, sales ofproperty or securities in accordance with the Origination Agreement and salesof Assets pursuant to an auction in connection with an Auction Call Redemptionor in connection with a redemption of the Notes pursuant to Article 9 ofthe Indenture), the Collateral Manager will not cause the Issuer to enter intoany transaction with the Collateral Manager or any of its Affiliates asprincipal unless the applicable terms and conditions set forth in Section 3(b) arecomplied with.

##  

## (b)                                 TheCollateral Manager shall perform its obligations hereunder in accordance withthe requirements of the Advisers Act and the Indenture. The Issuer acknowledgesthat (i) the Collateral Manager and/or its Affiliates will acquire on theClosing Date 100% of each of the Class J Notes, the Class K Notes andthe Preferred Shares, (ii) Affiliates of the Collateral Manager will sellCollateral Debt Securities to the Issuer on or prior to the Closing Date, and (iii) theCollateral Manager, its Affiliates and funds or accounts for which theCollateral Manager or its Affiliates acts as investment adviser may at timesown Notes of one or more additional Classes. After the Closing Date, the Collateral Manager agrees to provide to theTrustee written notice upon the acquisition or transfer (after, but excluding,the Closing Date) of any Securities held by the Collateral Manager, any of itsAffiliates or any fund managed or controlled by the Collateral Manager or anyAffiliate thereof.

##  

(c)                                  Nothingherein shall prevent the Collateral Manager or any of its Affiliates or officersand directors of the Collateral Manager from engaging in other businesses(including financing, purchasing, owning, holding, originating or disposing ofany assets or investments), or from rendering services of any kind to theIssuer and its Affiliates, the Trustee, the Holders or any other Person orentity, whether or not any of the foregoing may be competitive with the

 

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business of the Issuer orthe Co-Issuer.  Without prejudice to thegenerality of the foregoing, directors, officers, members, partners, employeesand agents of the Collateral Manager, Affiliates of the Collateral Manager, andthe Collateral Manager may, among other things:

 

### (i)                    serveas directors (whether supervisory or managing), officers, employees, partners, members,managers, agents, nominees or signatories for the Issuer or any Affiliatethereof, or for any obligor in respect of any of the Collateral Debt Securitiesor Eligible Investments, or any of their respective Affiliates, except to theextent prohibited by their respective Underlying Instruments, as from time totime amended; provided that (x) in the reasonable judgment of theCollateral Manager, such activity will not have a material adverse effect onthe ability of the Issuer or the Trustee to enforce its respective rights withrespect to any Assets and (y) nothing in this paragraph shall be deemed tolimit 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 renderedto an obligor in respect of any of the Collateral Debt Securities or EligibleInvestments, including acting as master servicer, sub-servicer or specialservicer with respect to any CMBS Securities or with respect to any commercialmortgage loan constituting or underlying any Collateral Debt Security; providedthat, in the reasonable judgment of the Collateral Manager, such activity willnot have a material adverse effect on the ability of the Issuer or the Trustee toenforce its respective rights with respect to any of the Assets; provided,further, with respect to such services, the Collateral Manager is notacting as an agent for the Issuer;

###  

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

###  

### (iv)             bea secured or unsecured creditor of, or hold an equity interest in, the Issuer,its Affiliates or any obligor of any Collateral Debt Security or EligibleInvestment; provided, however, that the Collateral Manager maynot be such a creditor or hold any of such interests if, in the opinion ofcounsel to the Issuer, the existence of such interest would requireregistration of the Issuer or the Assts as an “investment company” under theInvestment Company Act or violate any provisions of Federal or applicable statelaw or any law, rule or regulation of any governmental body or agencyhaving jurisdiction over the Issuer;

###  

### (v)                ownequity in or own or make loans to any issuer of REIT Debt Securities including anyissuer of REIT Debt Securities obligated on any of the Collateral DebtSecurities, so long as that doing so will not cause any such Collateral DebtSecurity 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 anyCollateral Debt Security from, the Issuer while acting in the capacity ofprincipal or agent; and

 

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

###  

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

 

The Collateral Manager and its Affiliates may, and maycause or advise their respective clients to, invest in assets, investments or instrumentsthat would be appropriate for the Issuer or the Co-Issuer or as security forthe 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 thosemade to or on behalf of the Issuer.  TheCollateral Manager, its Affiliates and their respective clients may haveongoing relationships with Persons whose instruments are pledged to secure theNotes and may own instruments issued by, or loans to, issuers of the CollateralDebt Securities or to any borrower or Affiliate of any borrower on anycommercial mortgage loans underlying or constituting the Collateral DebtSecurities or the Eligible Investments.  TheCollateral Manager and its Affiliates may cause or advise their respectiveclients to invest in instruments that are senior to, or have interestsdifferent from or adverse to, the instruments that are pledged to secure theNotes.

 

Nothing contained in this Agreement shall prevent theCollateral 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 anytime, securities of the same kind or class, or securities of a different kindor class of the same issuer, as those directed by the Collateral Manager to bepurchased or sold hereunder.  It isunderstood that, to the extent permitted by applicable law, the CollateralManager, its Affiliates, and any member, manager, officer, director,stockholder or employee of the Collateral Manager or any such Affiliate or anymember of their families or a Person advised by the Collateral Manager may havean interest in a particular transaction or in securities of the same kind orclass, or securities of a different kind or class of the same issuer, as thosepurchased or sold by the Collateral Manager hereunder.  When the Collateral Manager is consideringpurchases or sales for the Issuer and one or more of such other accounts at thesame time, the Collateral Manager shall allocate available investments oropportunities for sales in its discretion and make investment recommendationsand decisions that may be the same as or different from those made with respectto the Issuer’s investments, in accordance with applicable law and theCollateral Manager Servicing Standard, to the extent applicable.

 

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

 

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

 

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

#  

Subject to compliance with the requirements of anylaw, rule or regulation applicable to the Collateral Manager, nothingcontained herein shall prevent the Collateral Manager from discussing itsactivities hereunder in a general way in the normal course of its business,including, without limitation, general discussions with other Persons regardingits ability to act as a collateral manager and its past performance in suchcapacity.  In addition, subject tocompliance with the requirements of any law, rule or regulation applicableto the Collateral Manager, with respect to information that the CollateralManager obtains or develops regarding the Collateral Debt Securities or EligibleInvestments (including, without limitation, information regarding ratings,yield, creditworthiness, financial condition and prospects of any issuerthereof) in connection with the performance of its services hereunder, nothingin this Section 10 shall prevent the Collateral Manager or its Affiliates,in the conduct of their

 

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

 

# 11.                                 Term. This Agreement shall become effective onthe Closing Date and shall continue in full force and effect until the first tooccur of the following:  (a) thepayment in full of the Notes and the termination of the Indenture in accordancewith its terms, (b) the liquidation of the Assets and the finaldistribution of the proceeds of such liquidation to the Holders and the Issuer,or (c) the termination of this Agreement pursuant to Section 12hereof.

#  

# 12.                                 Termination.  (a)  The Collateral Manager may beremoved upon at least 30 days’ prior written notice if (A) Holders of atleast 75% by Aggregate Outstanding Amount of each Class of Notes (votingas a separate Class) and (B) Holders of at least 75% of the PreferredShares give written notice to the Collateral Manager, the Issuer, each HedgeCounterparty and the Trustee of such removal (including in any such calculationany Securities held by the Collateral Manager, any of its Affiliates or by anyfund managed or controlled by the Collateral Manager or any Affiliate thereof);provided that if the Collateral Manager is removed pursuant to thisclause (a), any successor Collateral Manager will not be permitted to be aHolder of or an Affiliate of any Holder of Securities.  Notice of any such removal shall be deliveredby the Trustee on behalf of the Issuer to the Holders of each Class ofNotes, the Holders of the Preferred Shares, each Rating Agency and each HedgeCounterparty.

#  

## (b)                                 ThisAgreement may be terminated, and the Collateral Manager may be removed, by theIssuer or the Trustee for cause, upon 30 days’ prior written notice by theIssuer, at the direction of (i) Holders of at least a majority by AggregateOutstanding Amount of each Class of Notes (excluding any Notes owned bythe Collateral Manager or any of its Affiliates or any fund managed orcontrolled by the Collateral Manager or any Affiliate thereof, each voting as aseparate Class) and (ii) Holders of at least a Majority of the PreferredShares (excluding any Preferred Shares owned by the Collateral Manager or anyof its Affiliates or any fund managed or controlled by the Collateral Manageror any Affiliate thereof); provided, however, upon the occurrenceof an event described in clause (iii) of this Section 12(b),termination of the Collateral Manager will be automatic and without advance noticerequired from the Issuer, the Trustee or any other Person.  Notice of any such removal for cause shall bedelivered by the Trustee on behalf of the Issuer to each Rating Agency, eachHedge Counterparty and the Holders of the Notes and the Preferred Shares.  In no event will the Trustee be required todetermine 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)                    theCollateral Manager (A) willfully breaches, or takes any action that itknows violates, any provision of this Agreement or any term of the Indentureapplicable to the Collateral Manager (not including a willful breach or knowingviolation that results from a good faith dispute regarding alternative coursesof action or interpretation of

 

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

###  

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

###  

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

###  

### (iv)             theoccurrence of an act by the Collateral Manager or any of its Affiliates thatconstitutes fraud or criminal activity in the performance of its obligationsunder this Agreement or the indictment of the Collateral Manager or any of itsrespective officers or directors for a criminal offense involving an investmentor investment-related business, fraud, false statements or omissions, wrongfultaking of property, bribery, forgery, counterfeiting or extortion;

###  

### (v)                thefailure of any representation, warranty, certificate or statement of theCollateral Manager in or pursuant to this Agreement or the Indenture to becorrect in any material respect and (x) such failure has (or couldreasonably 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, nocorrection is made for 45 days after the Collateral Manager becomes aware ofsuch failure or receives notice thereof in writing from the Trustee;

###  

### (vi)             theoccurrence and continuation of any of the Events of Default described inSections 5.1(a) or 5.1(b) of the Indenture; or

###  

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

 

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

 

## (c)                                  TheCollateral Manager may resign, upon 30 days’ prior written notice to theIssuer, the Co-Issuer, the Trustee, each Rating Agency and each HedgeCounterparty; provided, however, that (i) no suchtermination or resignation shall be effective until the date as of which asuccessor Collateral Manager shall have agreed in writing to assume all of theCollateral Manager’s duties and obligations pursuant to this Agreement and (ii) theIssuer shall use its best efforts to appoint a successor Collateral Manager toassume such duties and obligations.  Notwithstandingthe notice required above, the Collateral Manager shall have the right toresign without prior notice if, due to a change in any applicable law orregulation or interpretation thereof, the performance by the Collateral Managerof its duties under the Collateral Management Agreement would (i) adverselyaffect (A) Gramercy Capital Corp.’s status as a REIT, (B) SL GreenRealty Corp.’s status as a REIT or (C) the Issuer’s status as a qualifiedREIT subsidiary (within the meaning of Section 856(i)(2) of the Code)or (ii) constitute a violation of any applicable law or regulation.

##  

## (d)                                 Noremoval, termination or resignation of the Collateral Manager or termination ofthis Agreement shall be effective unless (x) a successor CollateralManager (a “Replacement Manager”)has been appointed by the Issuer and has agreed in writing to assume all of theCollateral Manager’s duties and obligations pursuant to this Agreement and (y) writtennotification shall have been provided in accordance with Sections 12(a), (b) or(c), as applicable.  The appointment ofany Replacement Manager shall be subject to satisfaction of the Rating AgencyCondition and each such Replacement Manager (i) shall have demonstrated anability to professionally and competently perform duties similar to thoseimposed upon the Collateral Manager, (ii) is legally qualified and has thecapacity to act as collateral manager, (iii) by its appointment will notcause the Issuer, the Co-Issuer or the pool of Assets to, or result in theIssuer, the Co-Issuer or the pool of Assets becoming, an “investment company”under the Investment Company Act, (iv) has accepted its appointment inwriting and (v) by its appointment will not cause the Issuer, theCo-Issuer or the pool of Assets to become subject to income or withholding taxthat would not have been imposed but for such appointment.

##  

## (e)                                  Uponany resignation or removal of the Collateral Manager while any of the Notes areOutstanding, the Holders of at least a Majority of the Preferred Shares shallhave the right to instruct the Issuer to appoint an institution identified bysuch Holders as Replacement Manager; provided that (i) the Issuerprovides to the Noteholders notice of such appointment and a majority byAggregate Outstanding Amount of each Class of Notes (excluding any Notesowned by the Collateral Manager or any of its Affiliates or any fund managed orcontrolled by the Collateral Manager or any Affiliate thereof, each voting as aseparate Class) does not object to such appointment within thirty (30) days, (ii) theRating Agency Condition has been satisfied with respect to such appointment and(iii) the requirements set forth in Section 12(d)(i) through (v) abovehave been satisfied.

##  

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

 

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## entity as successor thirty (30)days thereafter, unless a majority of any Class of Notes objects to suchappointment with such thirty (30) day period in which case the Controlling Class ofNotes (excluding any Notes owned by the Collateral Manager or any of itsAffiliates or any fund managed or controlled by the Collateral Manager or anyAffiliate thereof, each voting as a separate Class) will be entitled to proposea successor and will appoint such proposed entity as successor thirty (30) daysthereafter unless a majority by Aggregate Outstanding Amount of any other Class ofNotes (excluding any Notes owned by the Collateral Manager or any of itsAffiliates or any fund managed or controlled by the Collateral Manager or anyAffiliate thereof, each voting as a separate Class) objects to such appointmentwithin such thirty (30) day period, in each case subject to the requirementsset forth in Section 12(d) above. In the event a proposed successor Collateral Manager is not appointed pursuantto the foregoing procedures, the resigning or removed Collateral Manager maypetition any court of competent jurisdiction for the appointment of a successorCollateral Manager, which appointment will not require the consent of, or besubject to the disapproval of, the Issuer, any Noteholder or any Holder of thePreferred Shares.

##  

Notwithstanding any provision contained in thisAgreement, the Indenture or otherwise, so long as the Collateral Managercontinues to perform its obligations hereunder, the Collateral Management Feeshall continue to accrue for the benefit of the Collateral Manager untiltermination of this Agreement under this Section 12 shall become effectiveas set forth herein.  In addition, theCollateral Manager shall, subject to Section 6, be entitled toreimbursement of out-of-pocket expenses incurred in cooperating with theReplacement Manager, including in connection with the delivery of any documentsor property.  In the event that theCollateral Manager is removed or resigns and a Replacement Manager isappointed, such former Collateral Manager nonetheless shall be entitled toreceive payment of all unpaid Collateral Management Fees, including the SeniorCollateral Management Fee and the Subordinated Collateral Management Fee, accruedthrough the effective date of the removal or resignation, to the extent thatfunds are available for that purpose in accordance with the Priority ofPayments, and such payments shall rank in the Priority of Payments pari passuwith the Collateral Management Fees due to the Replacement Manager.  In addition, following the removal orresignation of the Collateral Manager hereunder, the removed or resigning CollateralManager shall be granted access to the books of account and records of the Issuerand the Trustee to the extent such removed or resigning Collateral Managerdeems necessary to confirm the proper payment of any amounts owing to such removedor resigning Collateral Manager hereunder.

 

## (g)                                 Uponthe effective date of termination of this Agreement, the Collateral Managershall as soon as practicable:

##  

### (i)                                     deliverto the Issuer all property and documents of the Trustee or the Issuer orotherwise relating to the Assets then in the custody of the Collateral Manager(although the Collateral Manager may keep copies of such documents for itsrecords); and

###  

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

 

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

 

## (h)                                 TheCollateral Manager agrees that, notwithstanding any termination, the CollateralManager shall reasonably cooperate in any Proceeding arising in connection withthis Agreement, the Indenture or any of the Assets (excluding any suchProceeding in which claims are asserted against the Collateral Manager or anyAffiliate of the Collateral Manager) so long as the Collateral Manager shallhave been offered (in its judgment) reasonable security, indemnity or otherprovision against the cost, expenses and liabilities that might be incurred inconnection therewith, but, in any event, shall not be required to make anyadmission or to take any action against the Collateral Manager’s own interestsor the interests of other funds and accounts advised by the Collateral Manager.

##  

## (i)                                     Ifthis Agreement is terminated pursuant to Sections 12(a), (b) or (c) hereof,such termination shall be without any further liability or obligation of theIssuer or the Collateral Manager to the other, except as provided in Sections6, 7, 12 and 13 and the last sentence of Section 10 hereof.

##  

## (j)                                     Uponexpiration of the applicable notice period with respect to terminationspecified in Section 12(d) hereof, all authority and power of theCollateral Manager under this Agreement and the Indenture, whether with respectto the Assets or otherwise, shall automatically and without further action byany person or entity pass to and be vested in the Replacement Manager.

##  

# 13.                                 Liabilityof Collateral Manager.  (a)  TheCollateral Manager assumes no responsibility under this Agreement other than torender the services called for from the Collateral Manager hereunder and underthe 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 noliability to the Noteholders, the Holders of the Preferred Shares, the Trustee,the Issuer, the Co-Issuer, any Hedge Counterparty, the Initial Purchaser, orany of their respective Affiliates, partners, shareholders, officers,directors, employees, agents, accountants and attorneys, or any other Person, forany 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”) thatarise out of or in connection with any act or omissions of the CollateralManager in the performance of its duties under this Agreement or the Indentureor for any decrease in the value of the Collateral Debt Securities or EligibleInvestments, (i) except by reason of acts or omissions constituting badfaith, willful misconduct or gross negligence in the performance of, orreckless disregard of, the

 

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# duties of the CollateralManager hereunder and under the terms of the Indenture and (ii) withrespect to the information concerning the Collateral Manager under the heading “TheCollateral Manager” in the Offering Memorandum containing any untrue statementof material fact or omitting to state a material fact necessary in order tomake the statements therein, in light of the circumstances under which theywere made, not misleading.  The Issueragrees that the Collateral Manager shall not be liable for any consequential,special, exemplary or punitive damages hereunder.  The acts, failure to act or breachesdescribed in this clause (a) are collectively referred to for purposes ofthis Section 13 as “Collateral Manager Breaches.”

#  

## (b)                                 TheCollateral Manager shall indemnify, defend and hold harmless the Issuer andeach 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 IndemnifiedParty by third parties and any damages, losses, claims, liabilities, costs orexpenses (including all reasonable legal and other expenses) which are incurredas a direct consequence of the Collateral Manager Breaches, except forliability to which such Issuer Indemnified Party would be subject by reason ofwillful misconduct, bad faith, gross negligence in the performance of, orreckless disregard of the obligations of the Issuer hereunder and under theterms of the Indenture.

##  

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

##  

## (d)                                 Withrespect to any claim made or threatened against an Issuer Indemnified Party ora Collateral Manager Indemnified Party (each an “Indemnified Party”), or compulsory process orrequest or other notice of any loss, claim, damage or liability served upon anIndemnified Party, for which such Indemnified Party is or may be entitled toindemnification 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 theCollateral Manager, the Issuer or the Collateral Manager, as the case may be,shall cause such Indemnified Party to):

##  

### (i)                                     givewritten notice to the indemnifying party of such claim within ten Business Daysafter such Indemnified Party’s receipt of actual notice that such claim is madeor threatened, which notice to the indemnifying party shall specify inreasonable detail the nature of the claim and the amount (or an estimate of theamount) of the claim; provided, however, that the failure of anyIndemnified Party to provide such notice to the

 

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### indemnifying party shall not relieve the indemnifying party of itsobligations under this Section 13 unless the rights or defenses availableto the Indemnified Party are materially prejudiced or otherwise forfeited byreason of such failure;

###  

### (ii)                                  atthe indemnifying party’s expense, provide the indemnifying party suchinformation and cooperation with respect to such claim as the indemnifyingparty may reasonably require, including making appropriate personnel availableto the indemnifying party at such reasonable times as the indemnifying partymay request;

###  

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

###  

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

###  

### (v)                                 neitherincur any material expense to defend against nor release or settle any suchclaim or make any admission with respect thereto (other than routine orincontestable admissions or factual admissions the failure to make of whichwould expose such Indemnified Party to unindemnified liability) nor permit adefault or consent to the entry of any judgment in respect thereof, in eachcase without the prior written consent of the indemnifying party; and

###  

### (vi)                              uponreasonable prior notice, afford to the indemnifying party the right, in suchparty’s sole discretion and at such party’s sole expense, to assume the defenseof such claim, including the right to designate counsel reasonably acceptableto the Indemnified Party and to control all negotiations, litigation, arbitration,settlements, compromises and appeals of such claim; provided that, ifthe indemnifying party assumes the defense of such claim, it shall not beliable for any fees and expenses of counsel for any Indemnified Party incurredthereafter in connection with such claim except that, if such Indemnified Partyreasonably determines that counsel designated by the indemnifying party has aconflict of interest, such indemnifying party shall pay the reasonable fees anddisbursements of one counsel (in addition to any local counsel) separate fromsuch indemnifying party’s own counsel for all Indemnified Parties in connectionwith any one action or separate but similar or related actions in the samejurisdiction arising out of the same general allegations or circumstances; and provided,further, that the indemnifying party shall not have the right, withoutthe Indemnified Party’s written consent, to settle any such claim if, in a casewhere the Issuer is the indemnifying party, the Issuer does not make available(in accordance with the Priority of Payments), in a segregated accountavailable only for this purpose, the full amount required to pay any amountsdue from the Indemnified Party under such settlement or, in any case, suchsettlement (A) arises from or is part of any criminal action, suit orproceeding, (B) contains a stipulation to, confession of judgment withrespect to, or admission or acknowledgement of, any liability or wrongdoing onthe part of the Indemnified Party, (C) relates to any Federal, state orlocal tax matters or (D) provides

 

21

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### for injunctive relief, or other relief other than damages, which isbinding on the Indemnified Party.

###  

## (e)                                  Inthe event that any Indemnified Party waives its right to indemnificationhereunder, the indemnifying party shall not be entitled to appoint counsel torepresent such Indemnified Party nor shall the indemnifying party reimbursesuch Indemnified Party for any costs of counsel to such Indemnified Party.

##  

## (f)                                    Nothingherein shall in any way constitute a waiver or limitation of any rights thatthe Issuer or the Collateral Manager may have under any United States Federalor state securities laws.

##  

# 14.                                 Obligationsof Collateral Manager.  (a) TheCollateral Manager to the extent required under the Indenture, and on behalf ofthe Issuer, shall:  (i) engage theservices of an Independent certified accountant to prepare any United StatesFederal, state or local income tax or information returns and any non-UnitedStates income tax or information returns that the Issuer may from time to timebe required to file under applicable law (each a “Tax Return”), (ii) deliver, at least 30 daysbefore any applicable due date upon which penalties and interest would accrue,each Tax Return, properly completed, to the Company Administrator for signatureby an Authorized Officer of the Issuer and (iii) file or deliver such TaxReturn on behalf of the Issuer within any applicable time limit with anyauthority or Person as required under applicable law.

#  

## (b)                                 Unlessotherwise required by any provision of the Indenture or this Agreement or byapplicable law, the Collateral Manager shall not take any action which itknows, or acting with gross negligence, would (a) materially adverselyaffect the Issuer for purposes of United States federal or state law or anyother law known to the Collateral Manager to be applicable to the Issuer, (b) notbe permitted under the Issuer’s Memorandum and Articles of Association or theCo-Issuer’s limited liability company agreement, (c) require registration ofthe Issuer, the Co-Issuer or the Assets as an “investment company” under theInvestment Company Act or (d) cause the Issuer to violate the terms of theIndenture, it being understood that in connection with the foregoing theCollateral Manager will not be required to make any independent investigationof any facts or laws not otherwise known to it in connection with itsobligations under this Agreement and the Indenture or the conduct of itsbusiness generally.  The CollateralManager will perform its duties under this Agreement and the Indenture in amanner reasonably intended not to subject the Issuer to U.S. federal or stateincome taxation, it being understood that, notwithstanding anything to thecontrary set forth herein or in the Indenture, the Collateral Manager shall bedeemed to have complied with the requirements of the Indenture and anycertifications, certificates or other related documents required pursuant tothe Indenture if it satisfies the requirements set forth in this sentence andwill 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 Issuerengaging, or a determination that the Issuer has engaged, in a U.S. trade orbusiness for U.S. federal income tax purposes. The Collateral Manager shall use all commercially reasonable efforts toensure that no action is taken by it, and shall not intentionally or withreckless disregard take any action, which the Collateral Manager knows orreasonably should know would have a materially adverse United States federal orstate income tax effect on the Issuer.

 

22

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## (c)                                  Notwithstandinganything to the contrary herein, the Collateral Manager or any of its Affiliatesmay take any action that is not specifically prohibited by the Indenture, thisAgreement or applicable law that the Collateral Manager or any Affiliate of theCollateral Managers deems to be in its (or in its portfolio’s) best interestregardless of its impact on the Collateral Debt Securities.

##  

# 15.                                 NoPartnership or Joint Venture.  TheIssuer and the Collateral Manager are not partners or joint venturers with eachother, and nothing herein shall be construed to make them such partners orjoint venturers or impose any liability as such on either of them.  The Collateral Manager’s relation to theIssuer shall be that of an independent contractor and not a general agent.  Except as expressly provided in thisAgreement and in the Indenture, the Collateral Manager shall not have authorityto act for or represent the Issuer in any way and shall not otherwise be deemedto be the Issuer’s agent.

#  

# 16.                                 Notices. Any notice from a party under thisAgreement shall be in writing and sent by answer-back facsimile or addressedand delivered or sent by certified mail, postage prepaid, return receiptrequested or sent by overnight courier service guaranteeing next day deliveryto the other party at such address as such other party may designate for thereceipt of such notice.  Until furthernotice to the other party, it is agreed that the address of the Issuer for thispurpose shall be:

#  

GramercyReal Estate CDO 2005-1, Ltd.c/o Maples Finance LimitedP.O. Box 1093 GTQueensgate HouseSouth Church StreetGeorge TownGrand Cayman, Cayman IslandsAttention:  The DirectorsFax:  +1 345 945 7099Telephone:  +1 345 945 7100

 

with twocopies to the Collateral Manager (as addressed below).

 

the address of the Collateral Manager for this purposeshall be:

 

GKK Manager LLCc/o SL Green Realty Corp.

420Lexington Avenue

19thFloor

NewYork, New York 10170Telephone:  212-594-2700Fax:  212-216-1785Attention:  Marc Holliday

Attention:  Andrew Levine

 

23

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

#  

## (b)                                 Uponsatisfaction of the Rating Agency Condition, this Agreement may be assigned bythe Collateral Manager to an Affiliate thereof that has substantially the samepersonnel, or personnel with comparable expertise, as the Collateral Managerand that is capable of performing the obligations of the Collateral Managerunder this Agreement; provided that satisfaction of the Rating AgencyCondition shall not be required in connection with any assignment involving aninternalization of the Collateral Manager or any assignment to a successor uponmerger or acquisition.  Notwithstandingthe foregoing, the Collateral Manager shall provide S&P with prompt noticeof any assignment involving an internalization of the Collateral Manager.

##  

## (c)                                  ThisAgreement may be assigned by the Collateral Manager to any Person other than anAffiliate only upon satisfaction of the Rating Agency Condition and approval bya Majority of the Controlling Class.

##  

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

##  

# 18.                                 NoBankruptcy Petition/Limited Recourse.  The Collateral Manager covenants and agreesthat, prior to the date that is one year and one day (or, if longer, theapplicable preference period then in effect) after the payment in full of allNotes issued by the Issuer under the Indenture, the Collateral Manager will notinstitute against, or join any other Person in instituting against, the Issueror the Co-Issuer any bankruptcy, reorganization, arrangement, insolvency orliquidation proceedings or other proceedings under any bankruptcy, insolvency,reorganization or similar law; provided, however, that nothing inthis Section 18 shall preclude, or be deemed to stop, the CollateralManager from taking any action prior to the expiration of the aforementionedone year and one day period (or, if longer, the applicable preference periodthen in effect) in (x) any case or proceeding voluntarily filed orcommenced by the Issuer or the Co-Issuer, as the case may be, or (y) anyinvoluntary insolvency proceeding filed or commenced against the Issuer or theCo-Issuer, as the case may be, by a Person other than the Collateral Manager.  The Collateral Manager hereby acknowledgesand agrees that the Issuer’s obligations hereunder will be solely the corporateobligations of the Issuer, and the Collateral Manager will not have recourse toany of the directors, officers, employees, shareholders or affiliates of theIssuer, or any members of the Advisory Committee, with respect to any claims,losses, damages, liabilities, indemnities or other obligations in connectionwith any transaction contemplated hereby. Notwithstanding any provision hereof, all obligations of the Issuer andany claims arising from this Agreement or any transactions contemplated by thisAgreement shall be limited solely to the Collateral Debt Securities and theother Assets and

 

24

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# payable in accordance with thePriority of Payments.  If payments on anysuch claims from the Assets are insufficient, no other assets shall beavailable for payment of the deficiency and, following liquidation of all theAssets, any claims of the Collateral Manager arising from this Agreement andthe obligations of the Issuer to pay such deficiencies shall be extinguished.  The Issuer hereby acknowledges and agreesthat the Collateral Manager’s obligations hereunder shall be solely the limitedliability company obligations of the Collateral Manager, and the Issuer shallnot have any recourse to any of the members, managers, directors, officers,employees, shareholders or Affiliates of the Collateral Manager with respect toany claims, losses, damages, liabilities, indemnities or other obligations inconnection with any transactions contemplated hereby.

#  

# 19.                                 Miscellaneous.  (a)  This Agreement shall begoverned by and construed in accordance with the internal laws of the State ofNew York without regard to the conflict of laws principles thereof.  With respect to any suit, action or proceedingsrelating to this Agreement (“Proceedings”),each party irrevocably (i) submits to the nonexclusive jurisdiction of thecourts of the State of New York and the United States District Court located inthe Borough of Manhattan in New York City and (ii) waives any objectionthat such party may have at any time to the laying of venue of any Proceedingsbrought in any such court, waives any claim that such Proceedings have beenbrought in an inconvenient forum and further waives the right to object, with respectto such Proceedings, that such court does not have any jurisdiction over suchparty.  Nothing in this Agreementprecludes either party from bringing Proceedings in any other jurisdiction, norshall the bringing of Proceedings in any one or more jurisdictions preclude thebringing of Proceedings in any other jurisdiction.  The Collateral Manager irrevocably consentsto the service of any and all process in any action or proceeding by themailing or delivery of copies of such process to the Collateral Manager at theoffice of the Collateral Manager, c/o SL Green Realty Corp., 420 LexingtonAvenue, 19th Floor, New York, New York 10170, Attention:  Andrew Levine, or such other address as theCollateral Manager may advise the Issuer in writing.  The Issuer irrevocably consents to theservice of any and all process in any action or proceeding by the mailing ordelivery of copies of such process to CT Corporation System at 111 8thAvenue, New York, New York 10011 (and any successor entity), as its authorized agentto receive and forward on its behalf service of any and all process which maybe served in any such suit, action or proceeding in any such court and agreesthat service of process upon CT Corporation System shall be deemed in everyrespect effective service of process upon it in any such suit, action orproceeding and shall be taken and held to be valid personal service upon it.  Each party hereto agrees that a finaljudgment in any such action or proceeding shall be conclusive and may beenforced in other jurisdictions by suit on the judgment or in any other mannerprovided by law.

#  

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

 

## (b)                                 Thecaptions in this Agreement are included for convenience only and in no waydefine or limit any of the provisions hereof or otherwise affect theirconstruction or effect.

 

25

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## (c)                                  Inthe event any provision of this Agreement shall be held invalid orunenforceable by any court of competent jurisdiction, such holding shall notinvalidate or render unenforceable any other provision hereof.

##  

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

##  

## (e)                                  ThisAgreement constitutes the entire understanding and agreement between theparties hereto and supersedes all other prior and contemporaneousunderstandings and agreements, whether written or oral, between the partieshereto concerning this subject matter (other than the Indenture).

##  

## (f)                                    Inthe event the Issuer acquires the Mayacama Loan after the Closing Date, the CollateralManager agrees to use commercially reasonable efforts, on behalf of the Issuer,to appoint GMACCMC as the primary servicer for the Mayacama Loan to the extentit has discretion to do so in accordance with the related UnderlyingInstruments.

##  

## (g)                                 TheCollateral Manager hereby agrees and consents to the terms of Section 15.1(f) ofthe Indenture applicable to the Collateral Manager and shall perform anyprovisions of the Indenture made applicable to the Collateral Manager by theIndenture as required by Section 15.1(f) of the Indenture.

##  

## (h)                                 ThisAgreement may be executed in any number of counterparts, each of which soexecuted shall be deemed an original, but all such counterparts shall togetherconstitute one and the same instrument.

##  

## (i)                                     Thewords “include,” “includes” and “including” shall be deemed to be followed bythe phrase “but not limited to.”

##  

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

##  

## (k)                                  Nofailure or delay on the part of any party hereto to exercise any right orremedy under this Agreement shall operate as a waiver thereof, and no waivershall be effective unless it is in writing and signed by the party grantingsuch waiver.

 

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##  

## (l)                                     ThisAgreement is made solely for the benefit of the Issuer, the Collateral Managerand the Trustee, on behalf of the Noteholders, the Holders of Preferred Sharesand each Hedge Counterparty, their successors and assigns, and no other personshall have any right, benefit or interest under or because of this Agreement.

##  

## (m)                               TheCollateral Manager hereby irrevocably waives any rights it may have to set offagainst the Assets.

 

27

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IN WITNESS WHEREOF, the parties hereto have causedthis Agreement to be executed (as a deed in the case of the Issuer) by theirrespective authorized representatives as of the day and year first abovewritten.

 

 
|   | 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 CommitteeGuidelines

 

1.                                       General.

 

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

 

2.                                       Composition of the Advisory Committee.

 

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

 

TheAdvisory Committee also may have one or more members appointed by theCollateral Manager and employed by the Collateral Manager or an Affiliatethereof (each such person, an “Affiliated Member”).

 

3.                                       Requisite Experience.

 

Eachmember of the Advisory Committee must at the time of appointment and at allrelevant times thereafter have Requisite Experience.

 

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

 

“RequisiteExperience” means experience as a sophisticated investor, including,without limitation, in fixed income investing (directly and/or throughinvestment vehicles) and/or substantial experience and knowledge in and of thecommercial real estate loan market and related investment arenas, such that therelevant Advisory Committee member believes that it is capable of determining whetheror not to participate in Advisory Committee decisions on the basis of theprovisions described herein.  Such personneed not be a professional loan investor or loan originator.

 

A-1

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4.                                       Appointment of Initial Members of theAdvisory Committee.

 

Theinitial members of the Advisory Committee will be appointed by the CollateralManager.  Thereafter the CollateralManager will have the right to appoint a member to replace any member thatresigns.  Notwithstanding the foregoing, inthe event of a resignation of the Independent Member, a replacement IndependentMember may be appointed by the Issuer if the Collateral Manager does not promptlyappoint a replacement Independent Member.

 

5.                                       Term.

 

Eachmember of the Advisory Committee will serve until it resigns, dies or isremoved.

 

6.                                       Approval Process.

 

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

 

•                  an investment memorandum; and

 

•                  an underwriting analysis.

 

Theinvestment memorandum will (a) be a reasonably detailed (anticipated to beapproximately two pages) description of the proposed investment, the issuerthereof and related information and (b) include information about theidentity of any Affiliated Person involved in the proposed investment and thecapacity in which it will be acting and a narrative about why, in the judgmentof the Collateral Manager, the investment is appropriate to be purchased orsold by the Issuer, as the case may be. The notice will contain the Collateral Manager’s offer to provideadditional information as requested to the Advisory Committee.

 

7.                                       Unanimous Written Consent.

 

Regardlessof the composition of the Advisory Committee, each Restricted Transaction mustbe approved in writing by each member of the Advisory Committee.

 

Themembers of the Advisory Committee are under no obligation to consent to aRestricted Transaction.

 

•                  If all of the members of the AdvisoryCommittee approve a Restricted Transaction in writing, the Issuer will effectit at the option of the Collateral Manager (subject to the others terms of thisAgreement and the Indenture).

 

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

 

A-2

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Ifat any time the Advisory Committee does not have at least one IndependentMember or any member does not have Requisite Experience, the Collateral Managerwill not be permitted to use the Advisory Committee to approve any RestrictedTransaction.

 

8.                                       Compensation.

 

EachIndependent Member shall receive arm’s length compensation by the Issuer forserving on the Advisory Committee as agreed between such member and the Issuer.

 

A-3

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EXHIBIT B-1

 

Additional AdvisoryCommittee Guidelines

 

Independent Member

 

1.                                       Independent Member Duties.

 

Asan Independent Member of the Advisory Committee, the Member shall:

 

(a)                                  serve on the Advisory Committee and attendmeetings of the Advisory Committee at such times and places (and/ortelephonically or by correspondence or otherwise) as shall be reasonablyrequested by the Issuer and the Collateral Manager;

 

(b)                                 promptly consider certain actions to be takenwith respect to certain Restricted Transactions presented by the CollateralManager (as further described in the Advisory Committee Guidelines);

 

(c)                                  in connection with considering RestrictedTransactions, promptly review and consider investment memoranda, underwritinganalyses and other information presented to the Member on behalf of the Issuerto the Advisory Committee in connection with the foregoing; and

 

(d)                                 take such other actions as may be reasonablynecessary 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 theCollateral Manager and shall recuse himself from any consideration of suchRestricted Transaction (in each case unless the Collateral Manager and eachother member of the Advisory Committee (assuming that at least one such memberof the Advisory Committee is an Independent Member and is not affiliated withthe Restricted Transaction at issue) shall determine that such interest doesnot create a disabling conflict) and (ii) if the Member believes that,because of an actual or potential conflict of interest relating to a RestrictedTransaction, it would be inappropriate or inadvisable for the Member to receiveany Confidential Information (as defined in Paragraph 8 of this Exhibit B-1),the Member shall recuse himself from any consideration of such RestrictedTransaction.

 

2.                                       Representations and Warranties.

 

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

 

(a)                                  the Member is Independent of the CollateralManager (including, for this purpose, an employee, partner, member or directorthereof); and

 

B-1-1

----

 

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

 

Ifthe representations and warranties set forth in this Paragraph 2 shall at anytime fail to be true and correct, the Member shall promptly notify the Issuerand the Collateral Manager of that fact and shall immediately resign from theAdvisory Committee.

 

3.                                       Compensation.

 

Duringthe Term (as defined in Paragraph 7 of this Exhibit B-1), the Issuer shallpay the Member a per annum fee (the “Fee”) at a rate to be establishedbetween the Collateral Manager and the Member, payable on each Payment Date (asdefined in the Indenture), subject to the Priority of Payments (as defined inthe Indenture).  The Fee payable on anyspecified Payment Date (as defined in the Indenture) shall accrue during eachperiod from and including the preceding Payment Date (or, with respect to thefirst payment, from and including the date hereof) to but excluding suchspecified Payment Date (or, if earlier, to but excluding the last day of theTerm), calculated on the basis of the actual number of days elapsed over a yearof 365 or 366 days, as the case may be. If any Fee is not paid when due as a result of lack of available fundsunder the Priority of Payments, such Fee shall be deferred and shall be payableon subsequent Payment Dates in accordance with the Priority of Payments.

 

TheIssuer shall reimburse the Member, promptly after demand therefor accompaniedby reasonable supporting documentation, for any reasonable authorized expensesincurred in connection with any meetings of or actions by the AdvisoryCommittee.

 

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, anyholder of ordinary shares of the Issuer or the Collateral Manager (i) forany losses incurred as a result of the actions taken or omitted to be taken bythe Member pursuant to the provisions of this Exhibit B-1 or the AdvisoryCommittee Guidelines, except that the Member may be so liable to the extentsuch losses are the result of acts or omissions constituting willfulmisconduct, fraud or gross negligence by the Member in the performance of itsobligations hereunder or under the Advisory Committee Guidelines or (ii) forthe 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 (includingwithout limitation reasonable attorneys’ fees and expenses) incurred arisingout of or in connection with the Member’s service as a member of the AdvisoryCommittee, including the costs and expenses of defense against any claim orliability in connection with the exercise or performance of any of its powersor duties hereunder (collectively, “Losses”); provided, however,that the Issuer shall not indemnify the Member for any Losses incurred as aresult of acts or omissions constituting willful misconduct, fraud or grossnegligence by the Member in the performance of its obligations hereunder orunder the Advisory Committee Guidelines.

 

B-1-2

----

 

(c)                                  If any action shall be instituted involvingthe Member for which indemnification hereunder may be applicable, such Membershall promptly notify the Issuer and the Collateral Manager in writing and theIssuer shall have the right to retain counsel reasonably satisfactory to theIssuer and the Collateral Manager to represent the Member and any others theIssuer may designate in such proceeding and shall pay the reasonable fees anddisbursements of such counsel related to such proceeding.  In any such proceeding, the Member shall havethe right to retain individual counsel, but the fees and expenses of suchcounsel shall be at the expense of the Member unless (i) the Issuer andthe Member shall have agreed to the retention of such counsel or (ii) thenamed parties to any such proceeding (including any impleaded parties) includethe Member and the Issuer and representation of all such parties by the samecounsel would be inappropriate due to actual or potential differing interestsbetween them.  It is understood that theIssuer shall not, in connection with any proceeding or related proceedings inthe same jurisdiction, be liable for the fees and expenses of more than oneseparate firm (in addition to any local counsel) for the Member and any othermembers of the Advisory Committee, and that all such reasonable fees and expensesshall be reimbursed as they are incurred. The Issuer shall not be liable for any settlement of any proceedingeffected without its written consent, but if settled with such consent or ifthere be a final judgment for the plaintiff, the Issuer agrees, subject to thelimitations noted herein, to indemnify the Member from and against any loss orliability by reason of such settlement or judgment.  The Issuer shall not, without the priorwritten consent of the Member, effect any settlement of any pending orthreatened proceeding in respect of which the Member is or is likely to havebeen a party, unless such settlement includes an unconditional release of theMember from all liability on claims that are the subject matter of suchproceeding.  Notwithstanding theforegoing, if any person shall pay the Member any amount of indemnificationpursuant to this Paragraph 4, such person shall succeed to the rights of theIssuer, 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 theMember in any related proceeding and to effect any settlement of any relatedpending or threatened proceeding).

 

5.                                       Notices.

 

Allnotices, requests, consents, approvals and other communications required orpermitted to be given or delivered hereunder shall be in writing (which shallinclude notice by telecopy or like transmission) and shall be deemed to havebeen given when delivered personally against receipt, upon receipt of atransmitted confirmation if sent by telecopy or like transmission, or on thenext business day when sent by overnight courier or similar service, ifaddressed to the respective parties as follows:

 

Ifto the Issuer, to:

 

GramercyReal 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

 

B-1-3

----

 

Fax:  +1 (345)945-7099

Attention: The Directors

 

witha 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

 

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

 

orto such other address or telephone number as either party shall have specifiedby notice in writing to the other party; provided, however, thatany such notice of change of address or facsimile number shall be effectiveonly upon receipt.

 

6.                                       Monthly Reports.

 

TheIssuer shall provide or cause to be provided to the Member a copy of eachMonthly Report (as defined in the Indenture), substantially andcontemporaneously with its delivery to the Rating Agencies (as defined in theIndenture) under the Indenture.

 

7.                                       Term; Termination.

 

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

 

(b)                                 The Member shall have the right to resign asa member of the Advisory Committee at any time upon 10 days’ prior writtennotice to the Issuer, except that any resignation pursuant to Paragraph 2 shallbe effective immediately.  The CollateralManager shall have the right to appoint an Independent Member to replace anyIndependent Member that resigns.

 

(c)                                  The holders of 66 2/3%, by outstandingprincipal amount, of each Class of Notes voting as a separate Class (excludingany 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 materialprovisions hereof and its failure to cure such breach within ninety (90) daysafter the first to occur of (x) notice of such failure is given to the Memberand (y) the Member has actual knowledge of such breach; (ii) an act by theMember that constitutes fraud or criminal activity in the performance of itsobligations hereunder or the Member is

 

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indictedof a felony offense or other crime involving an investment orinvestment-related business, fraud, false statements or omissions, wrongfultaking of property, bribery, forgery, counterfeiting or extortion, in a courtof competent jurisdiction (including the entry of a guilty or nolo contendereplea) or (iii) the Member becomes affiliated with the Collateral Manageror any affiliate of the Collateral Manager.

 

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

 

Ifthe Member’s Term is terminated pursuant to this Paragraph 7, such terminationshall 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 4shall survive the termination of such Member.

 

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

 

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

 

(b)                                 The Member agrees that all ConfidentialMaterial shall be kept confidential by the Member and, except with the specificprior written consent of the Issuer and the Collateral Manager or as expresslyotherwise permitted by the terms hereof, will not be disclosed by the Member toany person, other than any of the Member’s Representatives that need to knowsuch information solely for the purpose of the Member’s service on the AdvisoryCommittee (it being understood that, before disclosing the ConfidentialMaterial or any portion thereof to such Representatives, the Member shallinform such Representatives of the confidential nature of the ConfidentialMaterial and the restrictions related thereto). The Member agrees to be responsible

 

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forany breach of this Paragraph 10 by the Member’s Representatives. The Memberfurther agrees that the Member shall not use Confidential Material for anyreason or purpose other than in connection with its service on the AdvisoryCommittee.  In addition, without theprior written consent of the Issuer and the Collateral Manager, the Memberagrees not to disclose to any person, other than the Member’s Representativesthat need to know such information in connection with the Member’s service onthe Advisory Committee, the fact that Confidential Material has been madeavailable to the Member or that the Member is considering any investmentpresented to it by the Collateral Manager on behalf of the Issuer.

 

(c)                                  If the Member is requested or required, byoral questions, interrogatories, requests for information or documents,subpoena, civil investigative demand or similar process, to discloseConfidential Material, the Member shall provide the Issuer and the CollateralManager with prompt notice of such event so that the Issuer and/or theCollateral Manager may seek a protective order or other appropriate remedy orwaive compliance with the applicable provisions of this Paragraph 10 by theMember.  If the Issuer or the CollateralManager determines to seek such protective order or other remedy, the Membershall cooperate with the Issuer or the Collateral Manager in seeking suchprotective order or other remedy. If neither the Issuer nor the CollateralManager is able to seek such protective order or other remedy, the Member shallseek it as directed by the Issuer or the Collateral Manager.  If such protective order or other remedy isnot obtained and disclosure of Confidential Material is required, or the Issuergrants a waiver hereunder, the Member (i) may furnish that portion (andonly that portion) of the Confidential Material which the Member is legallyrequired to disclose and (ii) will exercise reasonable best efforts tohave confidential treatment afforded any Confidential Material so furnished.

 

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

 

9.                                       Limited Recourse.

 

Notwithstandingany other provision hereof, the Member acknowledges and agrees that he shallhave recourse only to the Assets in respect of any claim, action, demand orright arising in respect of, or against, the Issuer and following realizationof the Assets, any claims of the Member against the Issuer shall be extinguishedand shall not thereafter revive. Notwithstanding any other provision hereof or in the Indenture, nomember of the Advisory Committee or any Affiliate thereof shall be personallyliable to the Member for any amounts payable, or performance due, by the Issuerhereunder.  This provision shall survivetermination of the Term.

 

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10.                                 Non-Petition.

 

TheMember agrees that, before the date that is one year and one day after thepayment in full of all Notes, or if longer, the expiration of the thenapplicable preference period plus one day, the Member shall not acquiesce,petition, join any other Person in any petition or otherwise invoke or causeany other Person to invoke the process of any governmental authority for thepurpose of commencing or sustaining a case against the Issuer under any federalor state bankruptcy, insolvency or similar law of any jurisdiction orappointing a receiver, liquidator, assignee, trustee, custodian, sequestratoror other similar official of the Issuer or any substantial part of its propertyor ordering the winding-up or liquidation of the affairs of the Issuer.  This provision shall survive termination ofthe Term.

 

11.                                 Amendments.

 

Theprovisions of this Exhibit B-1 may be amended only by an instrument inwriting signed by the Issuer and the Member and consented to by the CollateralManager.

 

12.                                 Third Parties.

 

Nothingherein, expressed or implied, shall give to any person, other than the Issuer,the Member and the Collateral Manager, any benefit or any legal or equitableright, remedy or claim hereunder.

 

13.                                 Third Party Beneficiary.

 

Eachof the Issuer and the Member agrees that the Collateral Manager is, and that itis intended that the Collateral Manager be afforded all the benefits of, anexpress third-party beneficiary in respect of the provisions hereof.

 

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EXHIBIT B-2

 

Additional AdvisoryCommittee Guidelines

 

Affiliated Member

 

1.                                       Affiliated Member Duties.

 

Asan Affiliated Member of the Advisory Committee, the Member shall:

 

(a)                                  serve on the Advisory Committee and attendmeetings of the Advisory Committee at such times and places (and/ortelephonically or by correspondence or otherwise) as shall be reasonably requestedby the Issuer and the Collateral Manager;

 

(b)                                 promptly consider certain actions to be takenwith respect to certain Restricted Transactions presented by the CollateralManager (as further described in the Advisory Committee Guidelines);

 

(c)                                  in connection with considering RestrictedTransactions, promptly review and consider investment memoranda, underwritinganalyses and other information presented to the Member on behalf of the Issuerto the Advisory Committee in connection with the foregoing; and

 

(d)                                 take such other actions as may be reasonablynecessary 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 theCollateral Manager and shall recuse himself from any consideration of suchRestricted Transaction (in each case unless the Collateral Manager and eachother member of the Advisory Committee (assuming that at least one such memberof the Advisory Committee is an Independent Member and is not affiliated withthe Restricted Transaction at issue) shall determine that such interest doesnot create a disabling conflict) and (ii) if the Member believes that,because of an actual or potential conflict of interest relating to a RestrictedTransaction, it would be inappropriate or inadvisable for the Member to receiveany confidential information related to such Restricted Transaction, the Membershall recuse himself from any consideration of such Restricted Transaction.

 

2.                                       Representations and Warranties.

 

TheMember, by its execution of an Advisory Committee Member Acknowledgement andAgreement (the “Acknowledgment and Agreement”), will be deemed torepresent and warrant that the Member has the Requisite Experience (as setforth in the Advisory Committee Guidelines).

 

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Ifthe representations and warranties set forth in this Paragraph 2 shall at anytime fail to be true and correct, the Member shall promptly notify the Issuerand the Collateral Manager of that fact and shall immediately resign from theAdvisory 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, anyholder of ordinary shares of the Issuer or the Collateral Manager (i) forany losses incurred as a result of the actions taken or omitted to be taken bythe Member pursuant to the provisions of this Exhibit B-2 or the AdvisoryCommittee Guidelines, except that the Member may be so liable to the extentsuch losses are the result of acts or omissions constituting willfulmisconduct, fraud or gross negligence by the Member in the performance of itsobligations hereunder or under the Advisory Committee Guidelines or (ii) forthe 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 (includingwithout limitation reasonable attorneys’ fees and expenses) incurred arisingout of or in connection with the Member’s service as a member of the AdvisoryCommittee, including the costs and expenses of defense against any claim orliability in connection with the exercise or performance of any of its powersor duties hereunder (collectively, “Losses”); provided, however,that the Issuer shall not indemnify the Member for any Losses incurred as aresult of acts or omissions constituting willful misconduct, fraud or grossnegligence by the Member in the performance of its obligations hereunder orunder the Advisory Committee Guidelines.

 

(c)                                  If any action shall be instituted involvingthe Member for which indemnification hereunder may be applicable, such Membershall promptly notify the Issuer and the Collateral Manager in writing and theIssuer shall have the right to retain counsel reasonably satisfactory to theIssuer and the Collateral Manager to represent the Member and any others theIssuer may designate in such proceeding and shall pay the reasonable fees anddisbursements of such counsel related to such proceeding.  In any such proceeding, the Member shall havethe right to retain individual counsel, but the fees and expenses of suchcounsel shall be at the expense of the Member unless (i) the Issuer andthe Member shall have agreed to the retention of such counsel or (ii) thenamed parties to any such proceeding (including any impleaded parties) includethe Member and the Issuer and representation of all such parties by the samecounsel would be inappropriate due to actual or potential differing interestsbetween them.  It is understood that theIssuer shall not, in connection with any proceeding or related proceedings inthe same jurisdiction, be liable for the fees and expenses of more than oneseparate firm (in addition to any local counsel) for the Member and any othermembers of the Advisory Committee, and that all such reasonable fees andexpenses shall be reimbursed as they are incurred.  The Issuer shall not be liable for anysettlement of any proceeding effected without its written consent, but if settledwith such consent or if there be a final judgment for the plaintiff, the Issueragrees, subject to the limitations noted herein, to indemnify the Member fromand against any loss or liability by reason of such settlement or judgment.  The Issuer shall not, without the priorwritten consent of the Member, effect any settlement of any pending orthreatened proceeding in respect of which the Member is or is likely to havebeen a party, unless such settlement includes an unconditional release of theMember from all liability on claims that are the subject matter of suchproceeding.

 

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Notwithstandingthe foregoing, if any person shall pay the Member any amount of indemnificationpursuant to this Paragraph 3, such person shall succeed to the rights of theIssuer, 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 theMember in any related proceeding and to effect any settlement of any relatedpending or threatened proceeding).

 

4.                                       Notices.

 

Allnotices, requests, consents, approvals and other communications required orpermitted to be given or delivered hereunder shall be in writing (which shallinclude notice by telecopy or like transmission) and shall be deemed to havebeen given when delivered personally against receipt, upon receipt of atransmitted confirmation if sent by telecopy or like transmission, or on thenext business day when sent by overnight courier or similar service, ifaddressed to the respective parties as follows:

 

Ifto the Issuer, to:

 

GramercyReal 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

 

witha 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

 

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

 

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

 

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5.                                       Monthly Reports.

 

TheIssuer shall provide or cause to be provided to the Member a copy of eachMonthly Report (as defined in the Indenture), substantially andcontemporaneously with its delivery to the Rating Agencies (as defined in theIndenture) under the Indenture.

 

6.                                       Term; Termination.

 

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

 

(b)                                 The Member shall have the right to resign asa member of the Advisory Committee at any time upon 10 days’ prior writtennotice to the Issuer, except that any resignation pursuant to Paragraph 2 shallbe effective immediately.  The CollateralManager shall have the right to appoint a Member to replace any Member thatresigns.

 

(c)                                  The holders of 66 2/3%, by outstandingprincipal amount, of each Class of Notes voting as a separate Class (excludingany 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 materialprovisions hereof and its failure to cure such breach within ninety (90) daysafter the first to occur of (x) notice of such failure is given to the Memberand (y) the Member has actual knowledge of such breach; or (ii) an act bythe Member that constitutes fraud or criminal activity in the performance ofits obligations hereunder or the Member is convicted of a felony offense orother 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 (includingthe entry of a guilty or nolo contendere plea). Any replacement Affiliated Member shall be appointed by the CollateralManager.

 

(d)                                 The Collateral Manager will have the right toremove any Affiliated Member at any time in its sole discretion (with orwithout cause), and such removal will not be subject to the appointment of anysuccessor Affiliated Member.

 

Ifthe Member’s Term is terminated pursuant to this Paragraph 6, such terminationshall be without any further liability or obligation of either party to theother, except that any liability or obligation of either party under Paragraph3 shall survive the termination of such Member.

 

7.                                       Limited Recourse.

 

Notwithstandingany other provision hereof, the Member acknowledges and agrees that he shallhave recourse only to the Assets in respect of any claim, action, demand orright arising in respect of, or against, the Issuer and following realizationof the Assets, any claims of the Member against the Issuer shall beextinguished and shall not thereafter revive. Notwithstanding

 

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

 

8.                                       Non-Petition.

 

TheMember agrees that, before the date that is one year and one day after thepayment in full of all Notes, or if longer, the expiration of the thenapplicable preference period plus one day, the Member shall not acquiesce,petition, join any other Person in any petition or otherwise invoke or causeany other Person to invoke the process of any governmental authority for thepurpose of commencing or sustaining a case against the Issuer under any federalor state bankruptcy, insolvency or similar law of any jurisdiction orappointing a receiver, liquidator, assignee, trustee, custodian, sequestratoror other similar official of the Issuer or any substantial part of its propertyor ordering the winding-up or liquidation of the affairs of the Issuer.  This provision shall survive termination ofthe Term.

 

9.                                       Amendments.

 

Theprovisions of this Exhibit B-2 may be amended only by an instrument inwriting signed by the Issuer and the Member and consented to by the CollateralManager.

 

10.                                 Third Parties.

 

Nothingherein, expressed or implied, shall give to any person, other than the Issuer,the Member and the Collateral Manager, any benefit or any legal or equitableright, remedy or claim hereunder.

 

11.                                 ThirdParty Beneficiary.

 

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

 

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