Exhibit 10.5


COLLATERAL MANAGEMENT AGREEMENT


This Collateral
Management Agreement, dated as of August 24, 2006 (this “Agreement”), is
entered into by and between GRAMERCY REAL ESTATE CDO 2006-1, Ltd., an exempted
company incorporated with limited liability under the laws of the Cayman
Islands (together with successors and assigns permitted hereunder, the “Issuer”), and GKK
MANAGER LLC, a limited liability company organized under the laws of the State
of Delaware (together with its successors and assigns, the “Collateral Manager”).  Capitalized terms used herein but not
otherwise defined herein shall have the respective meanings ascribed thereto in
the indenture, dated as of August 24, 2006 (the “Indenture”), by and among the Issuer, Gramercy
Real Estate CDO 2006-1 LLC, as co-issuer (the “Co-Issuer”), Wells Fargo Bank, National
Association, as trustee (in such capacity, the “Trustee”), paying agent, calculation agent,
transfer agent, custodial securities intermediary, backup advancing agent and
notes registrar, and GKK Liquidity LLC, as advancing agent.


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


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


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


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


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


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


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









 



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


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


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


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


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



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(j)            monitoring all Hedge Agreements and determining whether
and when the Issuer should exercise any rights available under any Hedge
Agreement, and causing the Issuer to enter into additional or replacement Hedge
Agreements or terminating (in part or in whole) existing Hedge Agreements, in
each case, in accordance with the Indenture and the terms of such Hedge
Agreements;


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


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


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


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


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


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


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


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


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


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



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(u)           in order to render the Securities eligible for resale
pursuant to Rule 144A under the Securities Act, while any of such Securities
remain outstanding, making available, upon request, to any Holder or
prospective purchaser of such Securities, additional information regarding the
Issuer and the Assets if such information is reasonably available to the
Collateral Manager and constitutes Rule 144A Information required to be
furnished by the Issuer pursuant to Section 7.13 of the Indenture, unless the
Issuer furnishes information to the United States Securities and Exchange
Commission (the “Commission”)
pursuant to Section 13 or Section 15(d) of the Exchange Act;


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


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


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


The Collateral Manager
does not hereby guarantee that sufficient funds will be available on each
Payment Date to satisfy any such payment obligations.  The Collateral Manager shall perform its
obligations hereunder and under the Indenture with reasonable care and in good
faith, using a degree of skill and attention no less than that which it
(a) exercises with respect to comparable assets that it manages for itself
and (b) exercises with respect to comparable assets that it manages for
others, and in a manner consistent with the practices and procedures then in
effect followed by reasonable and prudent institutional managers of national
standing relating to assets of the nature and character of the Assets, except
as expressly provided



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in this Agreement or in the Indenture.  In addition, the Collateral Manager shall use
commercially reasonable efforts to ensure that directions to the Trustee with
respect to the purchase of Eligible Investments are made by the Collateral
Manager only if, in the Collateral Manager’s commercially reasonable judgment
at the time of such direction, payment at settlement in respect of any such
purchase could be made without any breach or violation of, or default under,
the terms of the Indenture or this Agreement. 
The Collateral Manager shall comply with and perform all the duties and
functions that have been specifically delegated to the Collateral Manager under
the Indenture.  The Collateral Manager
shall be bound to follow any amendment, supplement or modification to the
Indenture of which it has received written notice at least ten (10) Business
Days prior to the execution and delivery thereof by the parties thereto; provided,
however, that, with respect to any amendment, supplement, modification
or waiver to the Indenture which may affect the Collateral Manager, the
Collateral Manager shall not be bound thereby (and the Issuer agrees that it
will not permit any such amendment, supplement, modification or waiver to
become effective) unless the Collateral Manager has been given prior written
notice thereof and gives its written consent thereto (which consent shall not
be unreasonably withheld) to the Trustee and the Issuer prior to the effectiveness
thereof.


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


Notwithstanding anything
contained herein to the contrary, (i) any cash advance the Collateral Manager
makes with respect to cure payments and actions taken in connection therewith
and (ii) any voting, consent, consultation or control rights exercised by the
Collateral Manager with respect to a Collateral Debt Security that is a B Note,
Participation or junior interest in a Mezzanine Loan, in each case, shall be
subject to the applicable provisions of the Asset Servicing Agreement.


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


3.             Purchase and Sale Transactions;
Brokerage.


(a)           The Collateral Manager shall seek to obtain the best
overall terms for all orders placed with respect to the Assets, considering all
reasonable circumstances, including, if applicable, the conditions or terms of
early redemption of the Securities, it being understood that the Collateral
Manager has no obligation to obtain the lowest prices available.  Subject to the foregoing objective, the
Collateral Manager may take into consideration all factors the Collateral
Manager reasonably determines to be relevant, including, without limitation,
timing, general relevant trends and research and other brokerage services and support
equipment and services related thereto furnished to the Collateral Manager or
its Affiliates by brokers and dealers in



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compliance with Section 28(e) of the
Exchange Act or, if Section 28(e) of the Exchange Act is not applicable, in
accordance with the provisions set forth herein.  Such services may be used in connection with
the other advisory activities or investment operations of the Collateral
Manager and/or its Affiliates.  In
addition, the Collateral Manager may take into account available prices, rates
of brokerage commissions and size and difficulty of the order, in addition to
other relevant factors (such as, without limitation, execution capabilities,
reliability (based on total trading rather than individual trading), integrity,
financial condition in general, execution and operational capabilities of
competing brokers and/or dealers, and the value of the ongoing relationship
with such brokers and/or dealers), without having to demonstrate that such
factors are of a direct benefit to the Issuer in any specific transaction.  The Issuer acknowledges and agrees that (i)
the determination by the Collateral Manager of any benefit to the Issuer is
subjective and represents the Collateral Manager’s evaluation at the time that
the Issuer will be benefited by relatively better purchase or sales prices,
lower brokerage commissions and beneficial timing of transactions or a
combination of any of these and/or other factors and (ii) the Collateral
Manager shall be fully protected with respect to any such determination to the
extent the Collateral Manager acts in good faith, and in accordance with the
Collateral Manager Servicing Standard and in accordance with the standard of
care set forth in Section 1 hereof, and without gross negligence, willful misconduct
or reckless disregard of the obligations of the Issuer hereunder or under the
terms of the Indenture.


The Collateral Manager
may aggregate sales and purchase orders of securities placed with respect to
the Assets with similar orders being made simultaneously for other accounts
managed by the Collateral Manager or with accounts of the Affiliates of the
Collateral Manager if, in the Collateral Manager’s sole judgment, exercised in
good faith, such aggregation will not have an adverse effect on the Issuer.  When any such aggregate sales or purchase
orders occur, the objective of the Collateral Manager (and any of its
Affiliates involved in such transactions) shall be to allocate the executions
among the accounts in a manner fair and equitable to all such accounts and
generally to seek to allocate securities available for investment to all such
accounts pro rata in proportion to the optimum
amount sought by the Collateral Manager for each respective account.  In connection with the foregoing, the
objective of the Collateral Manager shall be to allocate investment
opportunities and the purchases or sales of instruments in a manner believed by
the Collateral Manager, in good faith, taking into account the Collateral
Manager’s Servicing Standard and in accordance with the standard of care set
forth in Section 1 hereof, to be fair and equitable.


In connection with any
purchase of a portfolio of assets other than securities, the objective of the
Collateral Manager shall be to allocate such assets (and the aggregate purchase
price paid for such assets) among the Collateral Manager’s clients (including
the Issuer) in a manner believed by the Collateral Manager to be fair and
equitable.  The Issuer acknowledges and
agrees that the Collateral Manager shall be fully protected with respect to any
such allocation to the extent the Collateral Manager acts in good faith, taking
into account the Collateral Manager’s Servicing Standard and in accordance with
the standard of care set forth in Section 1 hereof, and without gross negligence,
willful misconduct or reckless disregard of the obligations of the Issuer
hereunder or under the terms of the Indenture.


All purchases and sales
of Eligible Investments and Collateral Debt Securities by the Collateral
Manager on behalf of the Issuer shall be conducted in compliance with all



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applicable laws (including, without limitation,
Section 206(3) of the Advisers Act) and the terms of the Indenture.  After (and excluding) the Closing Date, the
Collateral Manager shall cause any purchase or sale of any Collateral Debt
Security or Eligible Investment to be conducted on an arm’s-length basis or, if
applicable, in compliance with Section 3(b) hereof.  The parties hereto acknowledge and agree that
all purchases (including, without limitation, purchases from Affiliates of the
Collateral Manager) of Eligible Investments and Collateral Debt Securities by
the Collateral Manager on behalf of the Issuer on the Closing Date (including,
without limitation, all such purchases from Affiliates of the Collateral
Manager) in a manner contemplated by the final Offering Memorandum, dated
August 23, 2006 (the “Offering Memorandum”), related to the Classes of
Notes offered thereby (or any supplement thereto) are hereby approved.


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



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


(a)           the Issuer (i) has been duly incorporated and
registered as an exempted company and is validly existing under the laws of the
Cayman Islands, (ii) has full power and authority to own the Issuer’s
assets and the securities proposed to be owned by the Issuer and included among
the Assets and to transact the business for which the Issuer was organized, and
(iii) is duly qualified under the laws of each jurisdiction where the
Issuer’s ownership or lease of property or the conduct of the Issuer’s business
requires or the performance of the Issuer’s obligations under this Agreement
and the Indenture would require such qualification, except for failures to be
so qualified that would not in the aggregate have a material adverse effect on
the business, operations, assets or financial condition of the Issuer or the
ability of the Issuer to perform its obligations under, or on the validity or
enforceability of, this Agreement and the Indenture; the Issuer has full power
and authority to execute, deliver and perform the Issuer’s obligations
hereunder and thereunder; this Agreement and the Indenture have been duly
authorized, executed and delivered by the Issuer and constitute legal, valid
and binding agreements enforceable against the Issuer in accordance with their
terms except that the enforceability thereof may be subject to
(a) bankruptcy, insolvency, reorganization, moratorium, receivership,
conservatorship or other similar laws now or hereafter in effect relating to
creditors’ rights and (b) general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law);


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


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


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


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



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


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


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


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


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



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Manager or the ability of the Collateral
Manager to perform its obligations under this Agreement or the Indenture;


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


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


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


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


7.             Fees.  As compensation for the performance of its obligations
as Collateral Manager hereunder and under the Indenture, the Collateral Manager
will be entitled to receive (i) a fee, payable quarterly in arrears on
each Payment Date in accordance with the Priority of Payments, equal to 0.15% per annum of the Net Outstanding Portfolio
Balance (the “Senior Collateral
Management Fee”) and (ii) an additional fee, payable
quarterly in arrears on each Payment Date in accordance with the Priority of
Payments, equal to 0.25% per annum
of the Net Outstanding Portfolio Balance (the “Subordinate Collateral Management Fee” and,
together with the Senior Collateral Management Fee, the “Collateral Management Fee”).  Each Collateral Management Fee will be
calculated for each Interest Accrual Period assuming a 360-day year



 10
 






 



with twelve (12)
thirty-day months.  The Collateral
Management Fee will be calculated based on the Net Outstanding Portfolio
Balance as of the first day of the applicable Interest Accrual Period.  If on any Payment Date there are insufficient
funds to pay such fees (and/or any other amounts due and payable to the
Collateral Manager) in full, in accordance with the Priority of Payments, the
amount not so paid shall be deferred and such amounts shall be payable on such
later Payment Date on which funds are available therefor as provided in the
Priority of Payments set forth in the Indenture.  Any accrued and unpaid Senior Collateral
Management Fee that is deferred due to the operation of the Priority of
Payments shall accrue interest at a per
annum rate equal to LIBOR in effect for the applicable Interest
Accrual Period computed on an actual 360-day basis.  Any accrued and unpaid Subordinate Collateral
Management Fee that is deferred due to the operation of the Priority of Payments
shall accrue interest at a per annum
rate equal to LIBOR in effect for the applicable Interest Accrual Period on an
actual 360-day basis.  Notwithstanding
any other provision hereof, the aggregate amount of all accrued but unpaid
Subordinate Collateral Management Fee payable on the final Payment Date or, if
earlier, following the winding up of the Issuer shall be equal to the lesser of
(a) the nominal amount thereof and (b) the amount available for payment under
the Priority of Payments. The Collateral Manager hereby agrees not to cause the
filing of a petition in bankruptcy against the Issuer for the nonpayment to the
Collateral Manager of any amounts due it hereunder except in accordance with
Section 18 hereof and, subject to the provisions of Section 12, to
continue to serve as Collateral Manager. 
If this Agreement is terminated pursuant to Section 12 hereof or
otherwise, the accrued fees payable to the Collateral Manager shall be prorated
for any partial periods between the Payment Dates during which this Agreement
was in effect and shall be due and payable on the first Payment Date following
the date of such termination, together with all expenses payable to the
Collateral Manager in accordance with Section 6 hereof, and subject to the
provisions of the Indenture and the Priority of Payments.


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


9.             Conflicts of Interest.


(a)           After (but excluding) the Closing Date and the sales by
Affiliates of the Collateral Manager of Collateral Debt Securities to the
Issuer on the Closing Date (and except in the case of Credit Risk/Defaulted
Security Cash Purchases, sales of property or securities in accordance with the
Origination Agreement and sales of Assets pursuant to an auction in connection
with an Auction Call Redemption or in connection with a redemption of the Notes
pursuant to Article 9 of the Indenture), the Collateral Manager will not cause
the Issuer to enter into any transaction with the Collateral Manager or any of
its Affiliates as principal, unless the applicable terms and conditions set
forth in Section 1 and Section 3(b) are complied with.



 11
 






 



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


(c)           Nothing herein shall prevent the
Collateral Manager or any of its Affiliates or officers and directors of the
Collateral Manager from engaging in other businesses (including financing,
purchasing, owning, holding, originating or disposing of any assets or
investments), or from rendering services of any kind to the Issuer and its
Affiliates, the Trustee, the Holders or any other Person or entity, whether or
not any of the foregoing may be competitive with the business of the Issuer or
the Co-Issuer so long as the Collateral Manager complies with the standard of
care set forth in Section 1 hereof. 
Without prejudice to the generality of the foregoing, directors,
officers, members, partners, employees and agents of the Collateral Manager,
Affiliates of the Collateral Manager, and the Collateral Manager may so long as
the Collateral Manager complies with the standard of care set forth in Section
1 hereof, subject to the terms and conditions of the Indenture, among other
things:


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


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


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



 12
 






 



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


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


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


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


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


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


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



 13
 






 



commercial mortgage loans underlying or constituting
the Collateral Debt Securities or the Eligible Investments.  The Collateral Manager and its Affiliates may
cause or advise their respective clients to invest in instruments that are
senior to, or have interests different from or adverse to, the instruments that
are pledged to secure the Notes.


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


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


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


10.           Records; Confidentiality.  The Collateral Manager shall maintain
appropriate books of account and records relating to services performed
hereunder, and such books of account and records shall be accessible for
inspection by an authorized representative of the Issuer, the Trustee and the
Independent accountants appointed by the Issuer pursuant to the Indenture at a
mutually agreed-upon time during normal business hours and upon reasonable
prior notice; provided that the Collateral Manager shall not be
obligated to provide access to any non-public information if the Collateral
Manager in good faith determines that the disclosure of such information would
violate any applicable law, regulation or contractual arrangement.  The Collateral Manager shall follow its
customary procedures to keep confidential all information obtained in connection
with the services rendered hereunder and shall not disclose any such
information except (i) with the prior written consent of the Issuer (which
consent shall not be unreasonably withheld), (ii) such information as the
Rating Agencies shall reasonably request in connection with their rating or
evaluation of the Notes and/or the Collateral Manager, as applicable,
(iii) as required by law, regulation, court order or the rules,
regulations, or request of any regulatory or self-regulating organization, body
or official (including any securities exchange on which the Notes may be listed
from time to time) having jurisdiction over the



 14
 






 



Collateral Manager or as
otherwise required by law or judicial process, (iv) such information as
shall have been publicly disclosed other than in violation of this Agreement,
(v) to its members, officers, directors, and employees, and to its
attorneys, accountants and other professional advisers in conjunction with the
transactions described herein, (vi) such information as may be necessary
or desirable in order for the Collateral Manager to prepare, publish and
distribute to any Person any information relating to the investment performance
of the Assets, (vii) in connection with the enforcement of the Collateral
Manager’s rights hereunder or in any dispute or proceeding related hereto,
(viii) to the Trustee, (ix) to the extent required pursuant to any
Hedge Agreement of the Issuer and (x) to Holders and potential purchasers
of any of the Securities.


Subject to compliance
with the requirements of any law, rule or regulation applicable to the
Collateral Manager, nothing contained herein shall prevent the Collateral
Manager from discussing its activities hereunder in a general way in the normal
course of its business, including, without limitation, general discussions with
other Persons regarding its ability to act as a collateral manager and its past
performance in such capacity.  In
addition, subject to compliance with the requirements of any law, rule or
regulation applicable to the Collateral Manager, with respect to information
that the Collateral Manager obtains or develops regarding the Collateral Debt
Securities or Eligible Investments (including, without limitation, information
regarding ratings, yield, creditworthiness, financial condition and prospects
of any issuer thereof) in connection with the performance of its services
hereunder, nothing in this Section 10 shall prevent the Collateral Manager or
its Affiliates, in the conduct of their respective businesses, from using such
information or disclosing such information to others so long as such other use
does not, in its reasonable judgment, disadvantage the Issuer.  Notwithstanding anything to the contrary
contained in this Agreement, all Persons may disclose to any and all Persons,
without limitation of any kind, the U.S. federal, state and local tax treatment
of the Securities and the Co-Issuers, any fact that may be relevant to
understanding the U.S. federal, state and local tax treatment of the Securities
and the Issuers, and all materials of any kind (including opinions or other tax
analyses) relating to such U.S. federal, state and local tax treatment and that
may be relevant to understanding such tax treatment.


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


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



 15
 






 



the Trustee, on behalf of
the Issuer, to the Holders of each Class of Notes, the Holders of the Preferred
Shares, each Rating Agency and each Hedge Counterparty.


(b)           This Agreement may be terminated, and the Collateral
Manager may be removed, by the Issuer or the Trustee for cause, upon thirty
(30) days prior written notice by the Issuer, at the direction of (A) so long
as the Class A-1 Notes are the Controlling Class, the Holders of at least a
majority of the outstanding principal amount of the Class A-1 Notes and (B) at
any other time (i) the Holders of at least a majority by Aggregate Outstanding
Amount of each Class of Notes (excluding any Notes owned by the Collateral
Manager or any of its Affiliates or any fund managed or controlled by the
Collateral Manager or any Affiliate thereof, each voting as a separate Class)
and (ii) the Holders of at least a Majority of the Preferred Shares (excluding
any Preferred Shares owned by the Collateral Manager or any of its Affiliates
or any fund managed or controlled by the Collateral Manager or any Affiliate
thereof); provided, however, upon the occurrence of an event
described in clause (iii) of this Section 12(b), termination of the Collateral
Manager will be automatic and without advance notice required from the Issuer,
the Trustee or any other Person.  Notice
of any such removal for cause shall be delivered by the Trustee, on behalf of
the Issuer, to each Rating Agency, each Hedge Counterparty and the Holders of
the Notes and the Preferred Shares.  In
no event will the Trustee be required to determine whether or not cause exists
for the removal of the Collateral Manager. 
As used in this Section 12, “cause” means any of the following events:


(i)            the Collateral
Manager (A) willfully breaches, or takes any action that it knows violates, any
provision of this Agreement or any term of the Indenture applicable to the
Collateral Manager (not including a willful breach or knowing violation that
results from a good faith dispute regarding alternative courses of action or
interpretation of instructions), which breach or action has (or could reasonably
be expected to have) a material adverse effect on the Noteholders and (B) fails
to cure such breach within thirty (30) days after the first to occur of
(1) notice of such failure is given to the Collateral Manager or
(2) the Collateral Manager having actual knowledge of such breach or
violation;


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


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



 16
 






 



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


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


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


(vii)         so long as the Class
A-1 Notes are the Controlling Class, the Class A/B Par Value is less than
101.87% on any Measurement Date; or


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


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


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



 17
 






 



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


(e)           Upon any resignation or removal of the Collateral Manager
while any of the Notes are Outstanding, (A) so long as the Class A-1 Notes are
the Controlling Class, the Holders of at least a majority of the outstanding
principal amount of the Class A-1 Notes and (B) at any other time, the Holders
of at least a Majority of the Preferred Shares shall have the right to instruct
the Issuer to appoint an institution identified by such Holders as Replacement
Manager; provided that (i) the Issuer provides to the Noteholders notice
of such appointment and a majority by Aggregate Outstanding Amount of each
Class of Notes (excluding any Notes owned by the Collateral Manager or any of
its Affiliates or any fund managed or controlled by the Collateral Manager or
any Affiliate thereof, each voting as a separate Class) does not object to such
appointment within thirty (30) days, (ii) the Rating Agency Condition has been
satisfied with respect to such appointment and (iii) the requirements set forth
in Section 12(d)(i) through (v) above have been satisfied.  If the Holders of the Class A-1 Notes or the
Preferred Shares, as the case may be, identify two (2) institutions for
appointment as described in Section 12(d)(i) or Section 12(d)(ii) above and
both are objected to as described in this clause (B)(i) above, a majority of
the outstanding principal amount or notional amount, as the case may be, of
such Holders shall have the right to appoint any institution not previously
identified by such holders as Replacement Manager (subject to compliance with
the conditions described in Section 12(d)(i) and Section 12(d)(ii) above).


(f)            In the event that the Collateral Manager resigns pursuant
to Section 12(c) or is terminated pursuant to Sections 12(a) or (b)
hereof and the Issuer has not appointed a successor prior to the day following
the termination (or resignation) date specified in such notice, the Collateral
Manager will be entitled to propose a successor and will so appoint such
proposed entity as successor thirty (30) days thereafter, unless a majority of
any Class of Notes objects to such appointment with such thirty (30) day period
in which case the Controlling Class of Notes (excluding any Notes owned by the
Collateral Manager or any of its Affiliates or any fund managed or controlled
by the Collateral Manager or any Affiliate thereof, each voting as a separate
Class) will be entitled to propose a successor and will appoint such proposed
entity as successor thirty (30) days thereafter unless a majority by Aggregate
Outstanding Amount of any other Class of Notes (excluding any Notes owned by
the Collateral Manager or any of its Affiliates or any fund managed or
controlled by the Collateral Manager or any Affiliate thereof, each voting as a
separate Class) objects to such appointment within such thirty (30) day period,



 18
 






 



in each case subject to the requirements set
forth in Section 12(d) above. 
In the event a proposed successor Collateral Manager is not appointed
pursuant to the foregoing procedures, the resigning or removed Collateral
Manager may petition any court of competent jurisdiction for the appointment of
a successor collateral manager, which appointment will not require the consent
of, or be subject to the disapproval of, the Issuer, any Noteholder or any
Holder of the Preferred Shares.


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


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


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


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


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



 19
 






 



made by it in Section 5 hereof or from any
failure of the Collateral Manager to comply with the provisions of this
Section 12(g).


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


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


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


13.           Liability of Collateral Manager.  (a)  The Collateral Manager assumes
no responsibility under this Agreement other than to render the services called
for from the Collateral Manager hereunder and under the Indenture in the manner
prescribed herein and therein.  The
Collateral Manager and its Affiliates, and each of their respective partners,
shareholders, members, managers, officers, directors, employees, agents,
accountants and attorneys shall have no liability to the Noteholders, the
Holders of the Preferred Shares, the Trustee, the Issuer, the Co-Issuer, any
Hedge Counterparty, the Initial Purchaser, or any of their respective
Affiliates, partners, shareholders, officers, directors, employees, agents,
accountants and attorneys, or any other Person, for any error of judgment,
mistake of law, or for any claim, loss, liability, damage, settlement, costs,
or other expenses (including reasonable attorneys’ fees and court costs) of any
nature whatsoever (collectively “Liabilities”)
that arise out of or in connection with any act or omissions of the Collateral
Manager in the performance of its duties under this Agreement or the Indenture
or for any decrease in the value of the Collateral Debt Securities or Eligible
Investments, except (i) by reason of acts or omissions constituting bad faith,
willful misconduct or gross negligence in the performance of, or reckless
disregard of, the duties of the Collateral Manager hereunder and under the
terms of the Indenture and (ii) with respect to the information concerning the
Collateral Manager under the headings “Summary—The Collateral Manager” and “The
Collateral Manager” in the Offering Memorandum containing any untrue statement
of material fact or omitting to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.  The Issuer
agrees that the Collateral Manager shall not be liable for any consequential,
special, exemplary or punitive damages hereunder.  The acts, failure to act or



 20
 






 



breaches described in
this clause (a) are collectively referred to for purposes of this
Section 13 as “Collateral Manager Breaches.”


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


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


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


(i)            give written notice
to the indemnifying party of such claim within ten (10) Business Days after
such Indemnified Party’s receipt of actual notice that such claim is made or
threatened, which notice to the indemnifying party shall specify in reasonable
detail the nature of the claim and the amount (or an estimate of the amount) of
the claim; provided, however, that the failure of any Indemnified
Party to provide such notice to the indemnifying party shall not relieve the
indemnifying party of its obligations under this Section 13 unless the
rights or defenses available to the Indemnified Party are materially prejudiced
or otherwise forfeited by reason of such failure;


(ii)           at the indemnifying
party’s expense, provide the indemnifying party such information and
cooperation with respect to such claim as the indemnifying party may



 21
 






 



reasonably
require, including making appropriate personnel available to the indemnifying
party at such reasonable times as the indemnifying party may request;


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


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


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


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


(e)           In the event that any Indemnified Party waives its right
to indemnification hereunder, the indemnifying party shall not be entitled to
appoint counsel to represent such



 22
 






 



Indemnified Party nor shall the indemnifying
party reimburse such Indemnified Party for any costs of counsel to such
Indemnified Party.


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


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


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


(c)           Notwithstanding
anything to the contrary herein, but subject to the standard set forth in
Section 1 hereof, the Collateral Manager or any of its Affiliates may take



 23
 






 



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


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


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


Gramercy Real Estate CDO
2006-1, Ltd.

c/o Maples Finance Limited

P.O. Box 1093GT

Queensgate House

South Church Street

George Town

Grand Cayman, Cayman Islands

Attention:  The Directors

Fax:  +1 345 945 7099

Telephone:  +1 345 945 7100


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


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


GKK Manager LLC

c/o SL Green Realty Corp.

420 Lexington Avenue

19th Floor

New York, New York 10170

Telephone:  212-594-2700

Fax:  212-216-1785

Attention:  Marc Holliday

Attention:  Andrew Levine


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



 24
 






 



that the Issuer may
collaterally assign its interest in this Agreement to the Trustee under the
Indenture.


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


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


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


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



 25
 






 



extinguished.  The Issuer hereby acknowledges and agrees
that the Collateral Manager’s obligations hereunder shall be solely the limited
liability company obligations of the Collateral Manager, and the Issuer shall
not have any recourse to any of the members, managers, directors, officers,
employees, shareholders or Affiliates of the Collateral Manager with respect to
any claims, losses, damages, liabilities, indemnities or other obligations in
connection with any transactions contemplated hereby.  The provisions of this Section 18 shall
survive the termination of this Agreement for any reason whatsoever.


19.           Miscellaneous.  (a)  This Agreement shall be
governed by and construed in accordance with the internal laws of the State of
New York without regard to the conflict of laws principles thereof other than
Sections 5-1401 and 5-1402 of the General Obligations Law of the State of New York.  With respect to any suit, action or
proceedings relating to this Agreement (“Proceedings”), each party irrevocably
(i) submits to the nonexclusive jurisdiction of the courts of the State of
New York and the United States District Court located in the Borough of
Manhattan in New York City and (ii) waives any objection that such party
may have at any time to the laying of venue of any Proceedings brought in any
such court, waives any claim that such Proceedings have been brought in an
inconvenient forum and further waives the right to object, with respect to such
Proceedings, that such court does not have any jurisdiction over such
party.  Nothing in this Agreement
precludes either party from bringing Proceedings in any other jurisdiction, nor
shall the bringing of Proceedings in any one or more jurisdictions preclude the
bringing of Proceedings in any other jurisdiction.  The Collateral Manager irrevocably consents
to the service of any and all process in any action or proceeding by the
mailing or delivery of copies of such process to the Collateral Manager at the
office of the Collateral Manager, c/o SL Green Realty Corp., 420 Lexington
Avenue, 19th Floor, New York, New York 10170, Attention:  Andrew Levine, or such other address as the
Collateral Manager may advise the Issuer in writing.  The Issuer irrevocably consents to the
service of any and all process in any action or proceeding by the mailing or
delivery of copies of such process to CT Corporation System, 111 8th Avenue, 13th Floor, New York,
New York 10011 (and any successor entity), as its authorized agent to receive
and forward on its behalf service of any and all process which may be served in
any such suit, action or proceeding in any such court and agrees that service
of process upon CT Corporation System shall be deemed in every respect
effective service of process upon it in any such suit, action or proceeding and
shall be taken and held to be valid personal service upon it.  Each party hereto agrees that a final
judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law.


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


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



 26
 






 



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


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


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


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


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


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


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


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


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



 27
 






 



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



 28
 






 



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


 


	
  

  	
  Executed as a Deed

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GRAMERCY REAL
  ESTATE CDO 2006-1,

  LTD., as Issuer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Witness:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  GKK MANAGER LLC,

  as Collateral Manager

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 



 29