Exhibit 10.2


MORTGAGE ORIGINATION AND SERVICING AGREEMENT


          This
Mortgage Origination and Servicing Agreement (“MOSA” or this “Agreement”)
is made as of August 28, 2009, by CreXus Investment Corp., a Maryland
corporation (“Lender”), and Principal Real Estate Investors, LLC, a
limited liability company organized pursuant to the laws of the State of
Delaware (“Principal”). The parties agree as follows:


ARTICLE 1.
BACKGROUND.


          1.01.
Objective. Principal has agreed with Lender, as more particularly set
forth in this Agreement, that Principal shall perform or cause certain of its
affiliates to perform certain services associated with loans secured by real
property and commercial improvements thereon and loans secured by interests in
the owners of real property, including but not limited to originating,
sourcing, closing and servicing such loans. Lender may acquire from time to
time interests in certain commercial loans (as defined herein) secured by
mortgages, deeds of trust or documents of similar effect creating security
interests in real property (each a “mortgage” or sometimes herein “Mortgage”
and collectively the “mortgages” or “Mortgages”) encumbering
certain real property and commercial improvements thereon (each a “Property”
and collectively the “Properties”), and Lender may also acquire
from time to time interests in certain real estate related subordinate loans,
including, but not limited to, mezzanine loans, “B” notes and bridge loans
(collectively “Sub Debt”), each originated pursuant to this Agreement for
Lender. Lender and Principal also desire that Principal perform certain
services for the benefit of Lender in connection with such commercial loans,
mortgages, Properties and Sub Debt acquired by Lender pursuant to this
Agreement. These services are more fully described in service level agreements
relating to underwriting loans (the “Underwriting Service Level Agreement”),
closing loans (the “Closing Service Level Agreement”),
servicing loans (the “Loan Servicing Service Level Agreement”)
and reporting (the “Accounting and Reporting Service Level Agreement”).
These Service Level Agreements (collectively, the “SLAs”) are attached to this
Agreement as Attachments 1 through 4 and are hereby fully incorporated into
this Agreement. In order to further these objectives, Lender and Principal have
executed this Agreement.


ARTICLE 2.
GENERAL PROVISIONS.


          2.01.
Engagement. As used herein, “commercial loan” means a loan secured by
the lien of a mortgage on commercial, development or multi-family real estate (i.e.,
a loan not for personal, family or household purposes and secured by a facility
with six or more dwelling units). Collectively, commercial loans and Sub Debt
covered by this Agreement, may be referred to as an “Investment” or “Investments”.
Lender hereby engages Principal as an independent contractor (except as
expressly set forth herein with respect to certain servicing activities) to
provide for the sourcing, acquisition, origination, and closing and servicing
of commercial loans and Sub Debt on behalf of Lender as further set forth in
this Agreement and the SLAs. Following the acquisition or origination, closing,
and funding by Lender of an Investment, Principal shall provide for the
servicing of and collection, remittance and reporting for each Investment as
provided in the SLAs. Principal hereby accepts its appointment and


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agrees to
perform its covenants and obligations pursuant to the applicable terms of this
Agreement and in accordance with the Standard of Care (as defined in Section 2.02).


          2.02.
Standard of Care. Subject to the limitations on Principal’s authority
set forth herein and the other terms and conditions of this Agreement,
Principal represents that it and any affiliate performing services with respect
to any Investment shall act and shall perform its responsibilities hereunder
subject to and in accordance with (i) the same care, skill, prudence, and
diligence under the circumstances then prevailing that is exercised by an
active and sophisticated lender in the commercial real estate lending industry,
but not less than Principal’s own standards for its own investments,
(ii) applicable laws, and (iii) the terms and provisions hereof. With
respect to its servicing obligations under this Agreement, in addition to the foregoing,
Principal shall service and administer the Investments subject to this
Agreement on behalf of Lender and in the best interests of and for the sole
benefit of Lender, further as follows: (w) in accordance with the provisions of
each note evidencing an Investment, the related mortgage and other loan
documents executed and delivered in connection therewith (collectively, the “Loan
Documents”) and applicable law; (x) with not less than the same
care, skill and diligence as an active and sophisticated servicer would apply
in its general mortgage servicing and property management activities on behalf
of third parties, with respect to Investments that are comparable to those for
which it is responsible hereunder and for which comparable services have been
contracted; (y) with a view to the timely collection of all scheduled
payments of principal and interest under the Investments or, if a Investment
comes into and continues in default and if, in the good faith and reasonable
judgment of Principal, no satisfactory arrangements can be made for the
collection of the delinquent payments, the recovery on such Investment to
Lender; and (z) without regard to (1) any relationship that Principal
or any affiliate thereof may have with the related borrower, (2) the right
of Principal or any affiliate thereof to receive reimbursement of costs, or the
sufficiency of any compensation payable to it, hereunder or with respect to any
particular transaction, and (3) the ownership, servicing or management for
others of any other mortgage loans or property. Principal agrees that it shall
act as Lender’s fiduciary with respect to Lender’s funds or funds held by
Principal on Lender’s behalf. The foregoing collectively shall hereafter be
referred to as the “Standard of Care”.


          2.03.
Power of Attorney. To enable Principal to exercise fully its discretion
and authority as provided by this Agreement with respect to the holding or
servicing of an Investment, Lender hereby authorizes and empowers Principal,
any authorized officer(s) of Principal and any authorized officer of any
affiliate of Principal to take any action and to execute on behalf of Lender
any and all documents and instruments with respect to which actions, documents
and instruments Principal has authority under this Agreement, and which it may
deem appropriate regarding the holding or servicing of any Investment and the
performance of any function undertaken by Principal pursuant to this Agreement
or the SLAs following the acquisition of an Investment by Lender. In no event
shall the foregoing power of attorney extend to activities arising prior to the
closing of an Investment. Lender agrees to provide Principal with any
additional documentation reasonably necessary to evidence the authority
contemplated by this Agreement, including without limitation the delivery to
Principal on or after the date of this Agreement of a Power of Attorney in the
form attached as Exhibit A to this Agreement (the “Power of
Attorney”). Lender and Principal agree that the Power of Attorney is
intended to give Principal apparent authority to carry out the purposes of this
Agreement when dealing with third parties, but that the terms, restrictions and
obligations of this Agreement shall govern


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Principal’s
actual authority to conduct affairs on behalf of Lender, notwithstanding the
provisions of the Power of Attorney. In any conflict between Lender and
Principal regarding Principal’s authority, the terms of this Agreement shall
prevail over any conflicting terms of the Power of Attorney. Principal agrees
that the authorization set forth herein including, without limitation, any
Power of Attorney granted in the form attached hereto as Exhibit A
by Lender shall terminate upon the effective termination date of this Agreement
as set forth in Section 10.01(a). Further, such authority shall be
strictly limited to the purposes described in this Agreement.


          2.04.
Delegation of Rights and Duties. Principal may delegate any of its
duties or obligations under this Agreement to any of its affiliates subject to
providing notice to Lender; provided, however, that Principal shall remain
liable for any failure to perform the duties and obligations of Principal under
this Agreement regardless of whether such duties and responsibilities have been
delegated to an affiliate, and Principal shall not delegate any of the duties
and obligations of Principal that involve discretion in the selection of
Investments without the prior written consent of Lender. Any affiliate to which
Principal has delegated such duties or obligations under this Agreement shall
be obligated to perform the duties and obligations of Principal under this
Agreement as delegated to it, and shall be liable to Lender with respect
thereto to the same extent as Principal, and shall be entitled to exercise all
of the rights and authority, and shall be an agent, of Principal entitled to
the indemnification and exculpation, set forth in this Agreement for Principal.


	
  

 	
  

 
	
 ARTICLE 3.
 LOAN ACQUISITION AND ORIGINATION; LOAN SERVICING AND MANAGEMENT.

 



          3.01.
Investment Criteria.


                    Principal
will provide prospective Investment opportunities as described in the
Underwriting SLA meeting those certain investment criteria set forth on Exhibit B
to this Agreement (the “Investment Criteria”). Lender may, in its
sole and absolute discretion, change the Investment Criteria from time to time
upon written notice to Principal. 


          3.02.
Procedures for Investments.


                    (a)
With respect to each prospective Investment, before the approval of such
prospective Investment for Lender’s account by Principal’s investment
committee, Principal will provide Lender with a summary of the pertinent terms
and features of the prospective Investment and certain features of the Property
in the form of Exhibit G attached hereto and made a part hereof
(the “Fact
Sheet”). Lender shall promptly after receipt of the Fact Sheet
notify Principal in writing (as used herein, “writing” shall include e-mail
unless otherwise specifically noted) of Lender’s preliminary approval or
disapproval of such prospective Investment. In the event Lender elects to
proceed, it shall issue to Principal a Rate Quote Approval in the form of Exhibit H
attached hereto and made a part hereof. Failure by Lender to so notify
Principal within two (2) business days shall be deemed a decision to
reject the prospective Investment.


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                    (b)
Promptly following the prospective borrower’s acceptance of the terms of the
Investment, which terms Principal shall ensure are consistent with the Rate
Quote Approval, Principal shall continue its underwriting of the Investment and
negotiation of the Loan Application/Commitment with the borrower using the
standard form of Loan Application/Commitment (the “App/Comm”) previously
approved by Lender. At such time as Principal believes that the terms are
acceptable to the borrower and to Lender, Principal shall submit to Lender a
blacklined comparison of the App/Comm marked to show all changes to the
App/Comm from the then current, standard form of App/Comm approved by Lender.
Lender will notify Principal in writing of Lender’s approval or disapproval of
the App/Comm within two (2) business days. Failure by Lender to so notify
Principal or alternatively to fail to make comments/request changes required to
make the App/Comm acceptable within said two (2) business days shall be
deemed a decision to reject the prospective Investment. 


                    (c)
After the App/Comm has been signed by the borrower, the borrower has paid all
required deposits, and the transaction has been allocated to Lender (in
accordance with Exhibit F), Principal shall notify Lender in
writing of such allocation and continue its underwriting in accordance with the
Underwriting SLA. Principal shall submit to Lender at the same time the Loan
Documents are sent to the borrower, a set of the proposed Loan Documents. 


                    (d)
Principal shall provide to Lender for its review and approval a loan approval
package (the “Committee Package”) in form, substance and format previously
disclosed to Lender that includes a full description of the prospective
Investment and a summary of the underwriting due diligence with respect to such
prospective Investment including, without limitation, the items set out in the
Underwriting SLA. Unless previously disclosed to and approved by Lender in
writing, a cover letter to the Committee Package shall specifically identify
any previously undisclosed material variations from the Investment Criteria,
the most recent Fact Sheet, or the Rate Quote Approval form.


                    (e)
Principal will notify Lender in writing of Principal’s Investment Committee
approval, conditional approval, or rejection of the prospective Investment.
Lender shall have two (2) business days after notification of Principal’s
Investment Committee action to notify Principal in writing of Lender’s approval
or disapproval of such prospective Investment.


                    (f)
Subsequent to Lender’s approval of the Committee Package during the loan
closing process, Principal will promptly notify Lender in writing of any
material changes from the information presented in the Committee Package that
may arise with respect to the Investment or the Property upon Principal
becoming aware of the same, and Lender shall have two (2) business days to
notify Principal in writing of Lender’s approval or disapproval of such change.
At a date four (4) business days prior to the desired funding date, Principal
shall submit to Lender a blacklined set of Loan Documents marked to show
changes from the then current, standard forms of Loan Documents, and Lender
shall have two (2) business days to notify Principal in writing of Lender’s
approval or disapproval of such changes, provided, however, if Lender fails to
respond to Principal within said 2 business day period, the Loan Documents will
be deemed approved. No later than two (2) business days prior to the desired
funding date, Principal shall e-mail to Lender, a final notice of closing and
request for funds as prescribed in the Closing SLA, together with a set of the
final Loan Documents.


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                    (g)
Attached hereto as Exhibit I is a flow chart depicting the
Investment origination and closing process, which reflects additional steps not
summarized herein.


          3.03.
Due Diligence and Closing Procedures. All due diligence of prospective
Investments shall be conducted by Principal in accordance with the Underwriting
SLA. The closing of an Investment shall be conducted by Principal in accordance
with the Closing SLA. In conjunction with the making of commercial loans on
behalf of Lender by Principal, Principal will comply with necessary
requirements in each jurisdiction where a commercial loan is made to qualify
Principal Life Insurance Company as a recognized and licensed mortgage lender. 


          3.04.
Post-Closing Procedures; Management of Investments.


                    (a)
From and after the date of the acquisition or origination and closing of an
Investment, Principal shall conduct the servicing of and collection, remittance
and reporting for each Investment in accordance with the Loan Servicing SLA and
the Accounting and Reporting SLA.


                    (b)
Principal shall comply with each covenant and obligation of Lender under any
agreement with respect to the Investments to which Lender is a party.


                    (c)
Principal shall provide necessary information in order for Lender to account
for the Investments in accordance with generally accepted accounting principles
for the industry, uniformly and consistently applied from year to year and
Principal shall furnish such information concerning the Investments to such
persons as Lender may, in writing, reasonably request. Principal shall preserve
all financial and accounting records for not less than seven (7) years
from the earlier of (i) the expiration date of this Agreement or earlier
termination, or (ii) the disposition of the Investment, unless, in
connection with the expiration or termination of this Agreement or the
disposition of the Investment, as the case may be, Principal transfers all such
records to Lender or its replacement. Principal shall maintain, or cause to be
maintained, complete and accurate original documentation of all transactions
related to the Investments, including receipts and all correspondence relating
thereto on such forms as Lender and/or Lender’s auditors may reasonably
require. Principal shall make its accounting personnel available to assist
Lender’s auditors in the preparation of all reports required or desired by
Lender. Principal shall bear the costs associated with the retention of such
records and if Lender shall request copies of such records Principal shall bear
the cost of duplicating and sending such records to Lender. The provisions of
this paragraph shall survive the expiration or termination of this Agreement.


                    (d)
Principal agrees to immediately advise Lender of any Violations of Laws or
Environmental Liabilities (as such terms are hereinafter defined) affecting any
of the Investments or Lender upon obtaining knowledge thereof, provided,
however, that Principal has no duty or obligation to monitor environmental
matters pertaining to each Investment (other than as required under the Loan
Servicing Service Level Agreement but merely the duty to pass on any knowledge
regarding Violation of Laws or Environmental Liabilities as such knowledge
comes into Principal’s possession. “Laws” herein shall mean all federal, state,
county and local


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governmental
or municipal laws, ordinances, regulations, judgments, orders, rules and other
such requirements, decisions by courts in cases where such decisions are
binding precedents in the state in which the property is located, and decisions
of federal courts applying the Laws of such state at the time in question,
including but not limited to all Environmental Laws (as defined below). “Violations
of Laws” herein shall mean all actual and alleged violations of any
Laws. “Environmental
Laws” herein shall mean the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. 9601, et seq.,
Hazardous Materials Transportation Act, 49 U.S.C. 1801, et seq., Resource
Conservation Act of 1976, 42 U.S.C. 6901 et seq., Clean Air Act, 42 U.S.C. 42 7401
et seq., Clean Water Act, 33 U.S.C. 1251, et seq., Safe Drinking Water Act, 14
U.S.C. 300(f), et seq., Toxic Substances Control Act, 15 U.S.C. 2601, et seq.,
Federal Insecticide, Fungicide and Rodenticide Act, 7 U.S.C. 136 et seq.,
Atomic Energy Act of 1954, 42 U.S.C. 2014, et seq., and any similar federal,
state or local Laws, and all regulations, guidelines, directives and other
requirements thereunder, all as may be amended or supplemented from time to
time. “Environmental
Liabilities” herein shall mean conditions that involve the presence
(whether actual or alleged) of any Hazardous Substance, conditions that are
subject to any Environmental Laws, and all claims and liabilities relating
thereto. The term “Hazardous Substance” for purposes hereof
shall mean any flammable, explosive, toxic, radioactive, biological, corrosive
or otherwise hazardous chemical, substance, liquid, gas devise, form of energy,
material or waste or component thereof including, without limitation, all items
now or hereafter listed, defined or regulated as a hazardous or toxic chemical,
substance, liquid, gas, device, form of energy, pathogen, material or waste or
component thereof by any federal, state or local governing body or agency
having jurisdiction and all such items that are regulated under Environmental
Laws.


          3.05.
Counsel. With respect to any acquisition, origination or disposition of
an Investment, Principal shall close such acquisition, origination or
disposition using internal resources or Principal may designate outside legal
counsel, which counsel shall be responsible for performing all legal work,
including the negotiation and preparation of transaction documents for that
particular acquisition, origination or disposition. If Lender desires to have
it’s own counsel review any aspect of the acquisition, origination or
disposition of an Investment, such review counsel shall be designated by Lender
and all costs of Lender’s designated review counsel shall be borne by Lender.


ARTICLE 4.
COMPENSATION.


          4.01.
Fees. In consideration for the services of Principal and its affiliates
under this Agreement and the SLAs, Principal shall receive as part of
Principal’s compensation the following fees: (i) an origination fee (the “Origination
Fee”) in the amount and as provided for in Exhibit C-1 with respect
to each commercial loan or Sub Debt loan originated, underwritten and closed by
Principal under this Agreement which shall be collected in accordance with
Section 4.02, (ii) a servicing fee (the “Servicing Fee”) in the amount
set forth in Exhibit C-2 to this Agreement, which shall be payable
by Lender with respect to those Investments being serviced under this Agreement
in accordance with Sections 2.01 and 2.02 of Attachment 3; and
(iii) if applicable, the Special Servicing Fee, Asset Management Fee
and/or Liquidation Fee in the amount(s) set forth in Exhibit C-2 to
this Agreement payable by the Lender for each Investment so specially serviced,
managed or liquidated.


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          4.02.
Fees Associated with Loan Origination. Lender acknowledges that
Principal or its affiliate(s) may collect and retain for its own account as
part of its compensation hereunder commitment fees, application fees,
origination fees and/or due diligence fees from borrowers under commercial
loans and Sub Debt loans as described in Exhibit C-1 to this Agreement. Any per
diem fee assessed in connection with any commercial loan or Sub Debt loan shall
be remitted to Lender.


          4.03.
Closing Charges. Lender acknowledges that from time to time Principal or
its affiliate(s) may assess any borrower with a fee in accordance with this
Section 4.03 in connection with the performance of Principal’s closing duties
hereunder as described in Exhibit C-1 to this Agreement. In connection with the
performance of any such closing duties, Principal (or such affiliate) shall be
entitled to receive and retain any such fee, as a reasonable estimate of the
costs (including internal administrative costs) and expenses associated with
the service. Principal (or such affiliate) shall also be entitled to
reimbursement from the borrower of the reasonable costs and fees of third party
legal counsel engaged by Principal or such affiliate.


          4.04.
Other Post-Closing Charges. Lender acknowledges that from time to time
Principal or its affiliate(s) may assess any borrower with a fee in accordance
with this Section 4.04 in connection with the performance of Principal’s
servicing duties hereunder; provided, however, no such fees shall be permitted
unless such fees are of the same type and size as similar fees charged in
connection with the servicing of programmatic lending programs of other third
party lenders serviced by Principal. In connection with the performance of any
such servicing duties, Principal (or such affiliate) shall be entitled to
collect from borrowers (i) any such fee, (ii) and reimbursement of
Principal or its affiliates by a borrower of the reasonable costs and fees of
third party legal counsel engaged by Principal or such affiliate and such other
consultants, including without limitation, costs and fees paid to accountants,
appraisers, real estate brokers, contractors, engineers, insurance brokers and
other agents engaged by Principal or such affiliate, (iii) any fee other than
those above paid by a borrower after the loan origination process or
acquisition for loan modifications, loan extensions, rate resets or related to
any change in borrower or sale of any Property, such fees to be split evenly
between Principal and Lender, and Principal shall remit Lender’s portion of
such fee to Lender at the next remittance date; and (iv) all other reasonable
costs and expenses, if any, incurred by Principal connected with the services
provided. All “late fees” collected with respect to any Investment shall be
remitted to Lender. All fees retained by Principal under this Section 4.04
in excess of amounts required to be reimbursed to third parties hereunder shall
be part of Principal’s compensation, but in no case shall any of the fees
provided for above in this Section 4.04 be considered as part of
Principal’s compensation as set out in Exhibit C-1 to this Agreement.


          4.05.
Borrower Deposits. If, with
respect to any Investment, any borrower is required to make a good faith
deposit in addition to a commitment fee, and the loan is not closed for reasons
due to such borrower’s failure to perform its obligations as described in the
loan application, then Principal shall recommend to Lender, based on its
standard of practice as to such deposits, whether such deposit should be
refunded after deduction of any due diligence expenses incurred by Principal or
an affiliate, which recommendation Lender shall approve or disapprove in its
sole discretion in writing within five (5) business days of receiving such
notice.


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If such
deposit is not refunded, such deposit (net of such due diligence deductions)
shall be promptly forwarded to Lender. If such deposit is not refunded to such
borrower and such borrower subsequently commences legal proceedings related to
such deposit, then (a) if Lender has retained such deposit against the
recommendation of Principal, Lender shall pay all costs associated with
defending such legal proceedings, and (b) if Lender has retained such deposit
in accordance with the recommendation of Principal, Lender shall pay all costs
associated with defending such legal proceedings provided that Principal has
provided to Lender all information otherwise required by this Agreement. In the
case of Section 4.05(b), Principal shall be responsible for all such costs in
the event of a failure by Principal to provide all such information.


          4.06.
Expense Reimbursement.


                    (a)
To the extent not otherwise reimbursed by a borrower and retained by Principal
pursuant to Section 4.04 above, and subject to Section 4.06(b),
Lender assumes and promptly shall pay and reimburse Principal for any and all
reasonable, out-of-pocket expenses incurred by Principal on behalf of Lender in
connection with this Agreement or the SLAs, including, by way of illustration
and without limitation thereto: (i) all out-of-pocket fees and expenses paid to
third parties and incurred in pursuit of an acquisition, origination or
disposition of an Investment, including such expenses whether or not the acquisition,
origination or disposition is consummated provided such expenses were incurred
as a result of activities directed to Principal by Lender; and (ii) any other
reasonable out-of-pocket or third party expenses expressly approved by Lender
and incurred with respect to the acquisition, financing, operation, management,
and disposition of the Investments.


                    (b)
Notwithstanding Section 4.06(a), Lender shall have no obligation to pay or
reimburse Principal for any of the costs or expenses incurred by Principal or
its affiliates in connection with their performance of the Investment
origination, servicing, cash management and administrative duties and
obligations under this Agreement including, but not limited to, the following
unless expressly approved by Lender in its sole discretion: (i) any cost
or expense incurred with respect to an act for which Principal had no authority
under this Agreement; (ii) any cost or expense relating to the general
operation of Principal’s business including, but not limited to, travel and
entertainment expenses, administrative expenses including employment expenses,
legal fees, insurance of Principal and its employees, rent, telephone,
utilities and other office or general overhead expenses; (iii) any cost or
expense with respect to a prospective Investment not conforming to the
Investment Criteria that is disapproved by Lender and which Principal knows
such cost or expense falls outside the Investment Criteria; and (vi) any cost
or expense with respect to a prospective Investment conforming to the
Investment Criteria that has not been allocated to Lender’s account.


ARTICLE 5.
AUDITS; FINANCIAL STATEMENTS.


          5.01.
The books and records of Principal and any of its affiliates applicable to the
Investments shall be subject to examination and audit by Lender or its
representatives during Principal’s regular business hours and upon three (3)
business days notice. Principal shall cooperate fully with Lender in connection
with such audit. Principal shall have the right to have


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a
representative present during any such audit. The provisions of this Article 5
shall survive the termination of this Agreement for a period of seven (7)
years.


ARTICLE 6.
GENERAL REPRESENTATIONS AND WARRANTIES.


          6.01.
Principal hereby represents and warrants to Lender as follows, which
representations and warranties shall be deemed to be repeated at all times
throughout the term of this Agreement:


                    (a)
It is and will continue to be at all times during the term of this Agreement:
(i) duly organized, validly existing and in good standing under the laws
of the State of Delaware, (ii) an investment adviser registered under the
Investment Advisers Act of 1940, as amended (the “Advisers Act”), and
(iii) in lawful compliance with the provisions of the Advisers Act.
Principal further covenants and agrees that it shall notify Lender in writing
immediately upon the revocation, restriction, or suspension of such
registration or Principal’s failure to maintain such registration or comply
with any applicable provision of the Advisers Act. Principal has provided
Lender a true and complete copy of Parts I and II of its Form ADV. Principal
shall promptly provide Lender copies of any revised or supplements to Parts I
and II of its Form ADV during the term of this Agreement.


                    (b)
It has the power and authority to
enter into this Agreement and to carry out its obligations hereunder. Its
execution of this Agreement and the performance of its obligations hereunder
have been duly authorized and no other proceedings on its part are necessary to
authorize this Agreement. This Agreement has been executed by a duly authorized
representative of Principal, and this Agreement is a valid, legal and binding
contract of Principal, enforceable against Principal in accordance with its
terms, except as such enforceability may be limited or denied by
(i) applicable laws relating to the rehabilitation, liquidation,
conservation and dissolution of insolvent insurers, as well as other laws
affecting creditors’ rights and (ii) general principles of equity.


                    (c)
Neither the execution of this Agreement nor the acts contemplated hereby nor
compliance by it with any provisions hereof will (i) violate any provision
of its limited liability company agreement or other organizational documents,
(ii) violate any statute, law, judgment, decree, order, regulation or rule
of any court or governmental authority applicable to it, or (iii) be in
conflict with, or constitute a default under, or permit the termination of, or
require the consent of any person under, any agreement to which it may be bound
which violation, conflict, default, termination or absence, in the aggregate,
would have a material adverse effect on its financial condition. Principal is
and will remain in compliance (and Principal will not contract with any
affiliate who performs services pursuant to this Agreement unless such
affiliate is and will remain in compliance), in all material respects, with the
laws, statutes, rulings, rules, regulations and judicial decisions applicable
to Principal or such affiliate to the extent necessary to perform its
obligations under this Agreement (or such subcontract between Principal and its
affiliate).


                    (d)
It has completed, obtained and performed all registrations, filings, approvals,
authorizations, consents or examinations required by any governmental authority
in


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order for it
to satisfy its obligations under this Agreement. Principal, when required, will
comply with, all material regulations, registrations, filings, approvals,
authorizations, consents or examinations required by the United States
Securities and Exchange Commission, United States Department of Labor or any
other regulatory authority. No consent, approval, authorization or order of, or
registration or filing with or notice to, any court or governmental agency or
body is required for the execution, delivery and performance by Principal of,
or compliance by Principal with, this Agreement or the consummation of the
transactions contemplated by this Agreement, except for such consents,
approvals, authorizations, orders, registrations, filings or notices, if any,
that have been obtained or made.


                    (e)
The personnel of Principal responsible for discharging Principal’s duties and
obligations under this Agreement have the necessary qualifications, knowledge,
experience, expertise and integrity to perform their responsibilities.


                    (f)
It is, and at all times will remain, in compliance with all Federal Regulations
and Executive Orders administered by the Office of Foreign Assets Control.
Neither Principal nor any Principal affiliate, is a “Specially Designated National”
or a “Blocked
Person” as those terms are defined in the Office of Foreign Asset
Control Regulations (31 CFR Section 500 et seq.).


                    (g)
It is, and at all times will remain, in compliance with the USA Patriot Act of
2001, as amended.


                    (h)
Principal Life Insurance Company is and shall remain qualified, whether by
registration or applicable exemption from registration, as a recognized and
licensed mortgage lender at the time of closing of any Investment originated by
Principal in each jurisdiction in which the real property associated with such
Investments is located. Principal is and shall remain qualified, whether by
registration or applicable exemption from registration, as a recognized and
licensed mortgage servicer at the time it performs servicing functions under
this Agreement with respect to any Investment in each jurisdiction in which the
real property associated with such Investments is located. The licensing
described in this paragraph by Principal is and shall be sufficient to enable
Principal and its affiliates who perform services under this Agreement to
comply with all registration, licensing and qualification requirements of each
applicable jurisdiction in connection with the origination, closing and
servicing of each Investment.


                    (i)
All of the services that Principal has been engaged to perform pursuant to this
Agreement are services that Principal provides to other third parties in the
ordinary course of its business pursuant to agreements similar to this
Agreement.


                    (j)
Principal further represents and warrants as to the matters listed in Exhibit D
attached hereto and made a part hereof for each Investment when such Investment
is acquired or originated, to the extent such representations and warranties
can be made or Principal discloses any exceptions to Lender.


10





          6.02.
Lender hereby represents and warrants to Principal as follows, which
representations and warranties shall be deemed to be repeated at all times
throughout the term of this Agreement:


                    (a)
It is the owner of all of the funds deposited or to be deposited by Lender, if
any, with Principal pursuant to the Accounting and Reporting Service Level
Agreement.


                    (b)
It has requested and received all information from Principal that Lender
considers relevant to the engagement of Principal contemplated by the
Agreement.


                    (c)
It is duly organized, validly existing and in good standing under the laws of
the State of Maryland.


                    (d)
It has the power and authority to enter into this Agreement, to carry out its
obligations hereunder, and to invest in the types of Investments contemplated
by this Agreement. The execution of this Agreement, the performance of Lender’s
obligations hereunder, and the making of such Investments have been duly
authorized by Lender and no other proceedings on the part of Lender or any
member are necessary to authorize this Agreement or such Investments. This
Agreement has been executed by a duly authorized representative of Lender, and
this Agreement is a valid, legal and binding contract of Lender, enforceable
against Lender in accordance with its terms, except as such enforceability may
be limited or denied by (i) applicable laws relating to the rehabilitation,
liquidation, conservation and dissolution of insolvent companies, as well as
other laws affecting creditor’s rights, and (ii) general principles of equity. 


                    (e)
Neither the execution of this Agreement nor the acts contemplated hereby by
Lender, nor compliance by Lender with any provisions of this Agreement will
(i) violate any provision of its limited liability company agreement or
other organizational documents, (ii) violate any statute, law, judgment,
decree, order, regulation or rule of any court or governmental authority
applicable to it, or (iii) be in conflict with, or constitute a default under,
or permit the termination of, or require the consent of any person under, any
agreement to which it may be bound which violation, conflict, default,
termination or absence, in the aggregate, would have a material adverse effect
on its financial condition. If Principal becomes aware of any licensing
requirements that could be imposed on Lender relating to Investments hereunder,
Principal shall notify Lender as to such information. Lender is and will remain
in compliance in all material respects, with the laws, statutes, ruling, rules,
regulations and judicial decisions applicable to Lender to the extent necessary
to perform its obligations under this Agreement. 


                    (f)
Lender has completed, obtained and performed all registrations, filings,
approvals, authorizations, consents or examinations required by any
governmental authority in order for Lender to enter into this Agreement. Lender
will, when required, comply with all material regulations, filings, approvals,
authorizations, consents or examinations required by the United States
Securities and Exchange Commission, United States Department of Labor or any
other regulatory authority. No consent, approval, authorization or order of, or
registration or filing with or notice to any court or governmental agency or
body is required for the execution, delivery and performance by Lender of, or
compliance by Lender with, this Agreement or the


11





consummation
of the transactions contemplated by this Agreement, except for such consents,
approvals, authorizations, orders, filings, registrations or notices, if any,
that have been obtained or made. 


                    (g)
It is, and at all times will remain, in compliance with all Federal Regulations
and Executive Orders administered by the Office of Foreign Assets Control.
Lender is not a “Specially Designated National” or a “Blocked Person” as those
terms are defined in the Office of Foreign Asset Control Regulations (31 CFR
Section 500 et seq.). 


                    (h)
It is, and at all times will remain, in compliance with the USA Patriot Act of
2001, as amended.


                    (i)
It has received Part II of Principal’s Form ADV at least forty-eight (48) hours
prior to its execution of this Agreement.


ARTICLE 7.
AFFIRMATIVE COVENANTS OF PRINCIPAL.


          7.01.
Confidentiality.


                    (a)
Except as may be agreed to by Principal and Lender, as appropriate, or required
by applicable law, governmental regulations applicable to any such person,
industry regulatory authority (including, without limitation, the National
Association of Insurance Commissioners and the United States Securities and
Exchange Commission), or judicial or administrative process, Principal agrees
to treat all non-public information with respect to all Investments and with
respect to Lender as strictly confidential. Such information shall include all
data, reports, interpretations, forecasts and records containing financial
information or information concerning the Investments, Lender and its
affiliates, together with analysis, compilations and other documents, which
contain such information. Notwithstanding the foregoing, Principal and its
affiliates shall have the right to publicize only to prospective clients its
business relationship with Lender (but not any information regarding any of the
Investments) in “client lists,” but Principal shall have no right to make
public announcements regarding its business relationship with Lender or
regarding any Investment. Except as expressly allowed by this Section 7.01 or
except as relates to the normal course of obtaining new Investments for Lender,
disclosures relating to such publicity shall be subject (i) to the prior
review by Lender of any materials, documents or other communications proposed
to be published, and (ii) the written approval of Lender in its sole
discretion.


                    (b)
In addition, subject to applicable law, Lender agrees to treat all non-public
information concerning Principal and its affiliates as strictly confidential.


                    (c)
The parties’ duty of confidentiality under this Section 7.01 shall extend
to all data, reports, interpretations, forecasts and records containing
financial information or information concerning the other party’s and its
affiliates’ processes or procedures, together with analysis, compilations and
other documents, which contain such information. Each party shall provide that
such information will not be copied, otherwise reproduced, transferred or
displayed to any person by either written or verbal communication without the
disclosing party’s prior


12





written
consent, provided that such information may be made available by a party to its
counsel, accountants, auditors, advisory and audit committees and affiliates to
the extent they need to know the same, or as otherwise may be required (or,
upon the good faith advice of counsel, determined by such party to be required)
by foreign law or the laws of the United States or any other governmental
authority. The duty of confidentiality described herein shall not extend to
information, which (i) was publicly known prior to delivery of such
documents and information, or thereafter becomes publicly known through no
fault or action of a the recipient, or its employees, agents, or
representatives; (ii) is developed independently of, and without use of,
the documents and information provided by the disclosing party; or
(iii) is rightfully obtained from third parties authorized to make such
disclosure without restrictions and without the recipient’s knowledge that such
documents or information constitute confidential information. Each party’s
confidential information shall be and remain the sole property of the
disclosing party. All confidential information in electronic form shall be
erased or destroyed promptly upon written request by the disclosing party. Each
party agrees reasonably to cooperate in seeking reasonable protective arrangements
requested by the disclosing party, and promptly to notify the disclosing party
if the recipient receives any subpoena or other legal process seeking
disclosure of the disclosing party’s confidential information.


          (d)
Each party understands and acknowledges that each party’s confidential
information is unique and valuable and that a breach by the recipient of its
obligations set forth herein may result in irreparable injury to the disclosing
party, for which monetary damages alone would not be an adequate remedy.
Therefore, each party agrees that in the event of a breach of this
Section 7.01, the disclosing party shall be entitled to seek specific
performance and injunctive or other equitable relief as a remedy for any such
breach or anticipated breach. Any such relief shall be in addition to and not
in lieu of any appropriate relief in the way of monetary damages.


          7.02.
Insurance. Principal shall cause insurance to be maintained with the
coverages and in the amounts set forth on Exhibit E attached hereto
and made a part hereof. All insurance carriers shall possess a Standard &
Poor’s Financial Rating of A-, or comparable, or higher. To the extent
Principal has knowledge of a cancellation of the coverage provided by such
policies, Principal shall give prompt notice to Lender of such cancellation. A
certificate of insurance certifying that such policy which provides the
coverage required by Lender has been issued, shall be delivered to Lender
concurrently with the execution hereof, each anniversary thereafter, and at any
other time upon the request of Lender. The cost of the above insurance coverage
shall be the responsibility of Principal and shall not be reimbursable. In lieu
of the coverage required by this Section 7.02, Principal may self-insure
with respect to the liabilities described during any period in which Lender has
approved such self-insurance in writing.


          7.03.
Additional Covenants. Principal shall promptly, and in any case within
ten (10) business days, notify Lender in writing if Principal becomes aware:


                    (a)
That any representation or warranty made by Principal as to itself or any
affiliate in Article 6 was untrue in any material respect as of the date on
which made or deemed made;


13





                    (b)
Of any material change in Principal’s or any affiliate’s business organization
which change might reasonably be expected to have an effect on Principal’s or
such affiliate’s performance under this Agreement;


                    (c)
Of any investigation, examination or other proceeding involving Principal or
any affiliate performing services pursuant to this Agreement commenced by any
regulatory agency which is not conducted in the ordinary course of business;
and


                    (d)
Of any of the following changes in Principal’s financial condition:


	
  

 	
  

 
	
  

 	
                     (i)
 If Principal shall be adjudged bankrupt or insolvent by a court of competent
 jurisdiction, or any order shall be made by a court of competent jurisdiction
 for the appointment of a receiver, liquidator or trustee of Principal or if
 all or substantially all of its property by reason of the foregoing or
 approving any petition filed against Principal for its reorganization and
 such adjudication order or petition has not been stayed or discharged pending
 appeal within sixty (60) days of its entry;

 
	
  

 	
  

 
	
  

 	
                     (ii)
 If Principal shall institute proceedings for voluntary bankruptcy or shall
 file a petition seeking reorganization under the federal bankruptcy laws, or
 for relief under any law for the relief of debtors, or shall consent to the
 appointment of a receiver, or shall make a general assignment for the benefit
 of its creditors, or shall admit in writing its inability to pay its debts
 generally as they become due;

 
	
  

 	
  

 
	
  

 	
                     (iii)
 Except as otherwise provided in Section 6.01 hereof, if any governmental
 authority, court or self-regulatory authority shall withdraw, suspend or
 revoke or declare invalid any license, charter, authorization or registration
 required or necessary for the conduct by Principal of any material portion of
 its business and such action has not been stayed or discharged pending appeal
 within sixty (60) days of its entry; or

 
	
  

 	
  

 
	
  

 	
                     (iv)
 If any event or circumstance shall occur which materially impairs the
 financial condition of Principal or the ability of Principal to perform its
 obligations hereunder.

 



          7.04.
Third Party Litigation.


                    (a)
Principal shall cooperate in any litigation brought by third parties against
Lender, or by Lender against any third party (other than Principal or its
affiliates or any Principal Indemnified Party), involving or related to
Principal’s duties or any acts of Principal pursuant to this Agreement, Lender’s
duties or any acts of Lender pursuant to this Agreement, or concerning any
Investment, which cooperation shall include but not be limited to, providing
documents and information, testifying in depositions or court proceedings, and
seeking insurance coverage for such litigation and/or the claims involved in
such litigation, including coverage for litigation costs and attorneys’ fees.
Except to the extent such matter is the subject of a claim by Lender for
indemnification under Article 9, Lender shall reimburse Principal for all
out-of-pocket costs of Principal reasonably incurred by Principal or any
Principal Indemnified Party in complying with this Section 7.04(a).


14





                    (b)
Lender shall cooperate in any litigation brought by third parties against
Principal, or by Principal against any third party (other than Lender or its
affiliates or any Lender Indemnified Party), involving or related to
Principal’s duties or any acts of Principal pursuant to this Agreement,
Lender’s duties or any acts of Lender pursuant to this Agreement, or concerning
any Investment, which cooperation shall include but not be limited to,
providing documents and information, testifying in depositions or court
proceedings, and seeking insurance coverage for such litigation and/or claims
involved in such litigation, including coverage for litigation costs and
attorney’s fees. Principal shall reimburse Lender for all out-of-pocket costs
of Lender reasonably incurred by Lender or any Lender Indemnified Party in
complying with this Section 7.04(b).


ARTICLE 8.
NEGATIVE COVENANTS OF PRINCIPAL.


          8.01.
No Affiliate Benefits. Without the prior written consent of Lender,
neither Principal nor its affiliates shall directly receive any economic
benefit from any Investment originated pursuant to this Agreement other than as
contemplated by this Agreement. Notwithstanding this or any other provision of
this Agreement, neither Principal nor its affiliates shall be precluded from
engaging with Lender or its affiliates in other transactions or receiving
compensation, fees or reimbursements pursuant to separate contracts for other
services or transactions with Lender or its affiliates as may be agreed to by
Lender or its affiliates. Further, nothing in this Agreement shall prevent
Principal or any of its affiliates from (i) providing similar services to and
on behalf of its own account(s) or to any third party; (ii) owning or investing
in any property or any investment that is similar to Investments desired by
Lender; or (iii) making investments with borrowers for its own account as well
as for third parties which borrowers are the same or related to the borrowers
on Investments desired by Lender. Further, Principal and any affiliate may
service any such investment under a servicing agreement with such other party.
Notwithstanding any provision hereof to the contrary, Principal agrees to fully
disclose to Lender the interest of Principal or any affiliate of Principal in
any Investment presented to Lender for consideration. As used herein, an
“affiliate” of a party shall mean any individual or entity (including without
limitation any corporation, limited liability company, partnership or joint
venture) that, directly or indirectly through one or more intermediaries,
controls or is controlled by or is under common control with such party.


          8.02.
No Conflict of Interest.


                    (a)
Principal’s engagement under this Agreement and the services provided by any
affiliate of Principal pursuant to this Agreement are not exclusive. Further,
this engagement confers no exclusive rights in Principal, and Lender may enter
into similar agreements with other parties. Lender acknowledges and understands
that Principal and its affiliates engage in investments similar to that contemplated
by Article 3 and originate and service investments for its own accounts. In
addition, Lender acknowledges that Principal and its affiliates maintain with
other persons relationships similar to that contemplated by this Agreement.
These facts may create conflicts of interest concerning the allocation of
Investment opportunities associated with Article 3. Principal will act in good
faith in a fair and reasonable manner in allocating opportunities involving
Investments made pursuant to Article 3 of this Agreement among Lender and other
accounts managed by Principal and its affiliates. A


15





description of
the protocol to be used by Principal in allocating Investments by and among
Lender and others is set forth in Exhibit F. Upon Request of
Lender, such request to be made no more than once per calendar quarter,
Principal shall provide to Lender a summary of the allocations for the
preceding calendar quarter; provided, however, Principal shall not be required
to disclose any identifying or other information about any such opportunities
as to which Principal reasonably believes it is bound by confidentiality
restrictions.


                    (b)
In furtherance of this Agreement, Lender hereby agrees that no provision of
this Agreement shall (i) prohibit or limit the right of Principal or any of its
affiliates to (A) arrange and own any Investment for its own account(s) or
for sale to a third party without
an obligation to sell or assign such Investment to Lender, and (B) enter into
similar agreements with any other party, or (ii) be construed to require
Principal or any of its affiliates to (A) grant to Lender any right of first
opportunity or first refusal with respect to any Investment, or
(B) originate on behalf of Lender any Investment. No conflict of interest
shall be deemed to exist by reason of any of the actions or omissions to act of
Principal or any of its affiliates contemplated by this Article 8.


                    (c)
Notwithstanding anything to the contrary herein, with respect to any Investment
held by Lender or any proposed Investment under consideration by Lender,
neither Principal nor any affiliate of Principal shall co-invest with Lender in
such Investment or proposed Investment without the prior written consent of
Lender, given or withheld in its sole discretion. Principal agrees that,
notwithstanding any provision of this Agreement that permits commingling of
funds, neither Principal nor any of its affiliates or delegees shall commingle
the funds of Lender with the funds of any separate account managed by Principal
or any of its affiliates on behalf Lender.


ARTICLE 9.
INDEMNIFICATION.


          9.01.
General.


          (a)
Principal shall indemnify, defend and hold harmless Lender and its affiliates,
and all partners, members, shareholders, directors, officers, agents, advisors
and employees of Lender and its affiliates (each a “Lender Indemnified Party”)
from and against, and be responsible for, any and all claims, losses, costs,
expenses, liabilities, damages or deficiencies, including interest, penalties
and attorney’s fees, arising out of or due to (i) a breach of any
representation or warranty, covenant or agreement of Principal contained in
this Agreement including Principal’s or any of its affiliate’s failure to
comply with the Standard of Care, (ii) acts or omissions constituting bad
faith, willful misfeasance, negligence or reckless disregard of duties in
connection with the performance by each Principal Indemnified Party of its
obligations under this Agreement, or (iii) actions taken by any Principal
Indemnified Party outside the scope of this Agreement or performed with the
approval of any Principal Indemnified Party by persons not authorized to act
under this Agreement. Neither Principal nor any affiliate shall have any
responsibility whatsoever and shall incur no liability to the extent arising
out of (a) the selection of Investment Criteria, (b) any act or omission made
pursuant to the approval or permitted instructions of Lender but only to the
extent such act or omission was directly authorized by such approval or
permitted instructions, and provided further that this clause (b) does not
relieve Principal of its duty to provide to Lender information otherwise
required by this Agreement, (c)


16





investment
losses incurred by Lender due to investment decisions made in accordance with
this Agreement, (d) any act or omission of Lender (other than those acts and
omissions made by Lender in reliance upon or based on the advice or
representations of Principal or any of its affiliates under this Agreement), or
(e) any act or omission of any third-party contractor, other than delegees of
Principal’s duties under this Agreement and other than Principal’s affiliates
and their respective employees, retained by Principal to provide services to
Lender, provided that such contractor has been selected and overseen by
Principal or any affiliate in accordance with the Standard of Care.


          (b)
Except for matters for which Principal provides indemnification under
subsection (a) above, Lender shall indemnify, defend and hold harmless
Principal, its affiliates, members, partners, directors, shareholders,
officers, agents and employees (each a “Principal Indemnified Party”) from and
against, and be responsible for any and all claims, losses, costs, expenses,
liabilities, damages or deficiencies arising from or due to (i) a breach of any
representation, warranty, covenant or agreement of Lender contained in this
Agreement or (ii) acts or omissions constituting bad faith, willful
misfeasance, or negligence in connection with the performance by each Lender
Indemnified Party of its obligations under this Agreement, or (iii) actions
taken by a Lender Indemnified Party outside of the scope of this Agreement or
performed with the approval of any Lender Indemnified Party by persons not
authorized to act under this Agreement. 


          (c)
The provisions of this Article 9 shall survive the termination of this
Agreement.


ARTICLE 10.
TERM AND TERMINATION.


          10.01.
Term. The term of this Agreement shall commence as of the date hereof
and shall be terminable (i) by Lender at any time with or without cause
upon thirty (30) days prior written notice to Principal, and (ii) by
Principal with or without cause upon one-hundred eighty (180) days prior
written notice to Lender, provided, however, Principal shall continue to
service the Investments in accordance with this Agreement under the Servicing
SLA until such time as a successor servicer is appointed by Lender and Lender
shall continue to pay all applicable servicing fees to Principal.


          10.02.
Principal’s Obligations Upon Termination. Upon receipt or transmittal by
it of such a termination notice, Principal shall not thereafter exercise any of
its powers under this Agreement to enter into any contract with respect to any
Investment (except as may be required by applicable law) without Lender’s
written consent. Following termination, Principal shall furnish to Lender,
within a reasonable timeframe, a final report on its activities and the status
of the Investments. From and after the effective date of termination of this
Agreement, neither Principal nor any affiliate shall be entitled to
compensation for further services hereunder except as to servicing under the
Servicing SLA until such time as a successor servicer is appointed by Lender.
Principal shall forthwith upon such termination, but in no event later than
fifteen (15) business days following such termination:


                    (a)
Remit to Lender any funds collected and held for Lender’s account pursuant to
this Agreement or the SLAs together with a full accounting, including a
statement showing all funds collected and of all funds held by Principal or any
of its affiliates during the


17





period
following the date of the last accounting report furnished to Lender pursuant
to this Agreement;


                    (b)
Deliver to Lender or its designee all loan files including, without limitation,
all property and Loan Documents then in Principal’s or any of its affiliates’
custody, together with all information in Principal’s possession or control
regarding the Investments, including the servicing of same, in form readily
accessible by Lender using software that is not proprietary to Principal or its
affiliates and that does not require the payment to Principal or its affiliates
of license fees or royalties to access same (Principal acknowledging that all
such Loan Documents and records are the property of Lender).


          10.03.
Further Assurances on Termination. From and after the effective date of
the termination of this Agreement and during the six-month period thereafter
(such period, the “Transition Period”), Principal and any of
its affiliates providing services pursuant to this Agreement shall cooperate
fully with Lender in order to effect an orderly transition of investment
management responsibilities. The foregoing shall include, without limitation,
attending such post-termination meetings and additional consultations during
the Transition Period as shall be reasonably requested by Lender. Lender shall
pay Principal or Principal’s applicable affiliates a reasonable per diem rate
for the provisions of such services during the Transition Period if Principal
is not otherwise entitled to the Servicing Fees and shall reimburse Principal and
its applicable affiliates for their reasonable expenses incurred in providing
such services during the Transition Period, as shall be mutually agreed upon by
Principal and Lender in good faith. The obligations imposed by this Article 10
shall survive termination of this Agreement.


          10.04.
Survival of Rights. Upon any termination of this Agreement, the rights
and obligations of the parties hereto shall cease as of the date specified in
the notice of termination, with the exception of any rights or obligations
which are specifically referenced herein as surviving termination of this
Agreement, and except that (i) Lender shall perform any outstanding funding
obligations under executed commitment letters with a borrower for Investments
that are committed to close if Principal complies or causes compliance with the
terms and conditions of all applicable commitments and this Agreement, and (ii)
Lender shall promptly remit to Principal any fees or reimbursements then due
and owing.


          10.05.
No Termination Resulting from Liquidation. Unless Lender has given a
notice of termination pursuant to Section 10.01, no exercise by Lender of
its right under Section 11.08 to transfer, assign or otherwise dispose of
any Investment(s) shall terminate this Agreement as to any such Investment but
shall not operate as a termination of this entire Agreement.


          10.06.
Termination Fee. In the event Lender terminates servicing by Principal
on certain individual Investments or individual pools of Investments, such
termination shall not cause a triggering of the termination fee described
herein. If Lender terminates this Agreement in total without cause within four
(4) years from the date of this Agreement, Lender shall pay to Principal on the
termination date a termination fee equal to the then present value of all
scheduled future servicing fees related to the Investments calculated using the
monthly equivalent of a seven percent (7%) annual discount rate.


18





ARTICLE 11.
MISCELLANEOUS.


          11.01.
Notices. Any notice or other communication required, or which may be
given hereunder, shall be in writing and shall be delivered personally or
telecopied by telefacsimile transmission or delivered via electronic mail,
subject to confirmation by telephone by an authorized representative of the
recipient (and provided a duplicate copy is sent by certified mail) or sent by
certified, registered or express mail, postage prepaid, and shall be deemed
given when so delivered personally, or transmitted by telefacsimile or
delivered by electronic mail, or if mailed, five (5) days after the date of
mailing to the following addresses:


	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Principal:

 	
 Principal
 Real Estate Investors, LLC

 
	
  

 	
  

 	
 801 Grand
 Avenue

 
	
  

 	
  

 	
 Des Moines,
 Iowa 50392-2010

 
	
  

 	
  

 	
 Fax:

 	
 (515)
 235-9700

 
	
  

 	
  

 	
 E-mail:

 	
 smith.scott.r@principal.com

 
	
  

 	
  

 	
 Attn:

 	
 Scott R.
 Smith

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 with a copy
 to:

 	
 Principal
 Real Estate Investors, LLC

 
	
  

 	
  

 	
 801 Grand
 Avenue

 
	
  

 	
  

 	
 Des Moines,
 Iowa 50392-2010

 
	
  

 	
  

 	
 Fax:

 	
 (866)
 496-6527

 
	
  

 	
  

 	
 E-mail:

 	
 traynor.steven@principal.com

 
	
  

 	
  

 	
 Attn:

 	
 Steven
 Traynor

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 Lender:

 	
 CreXus
 Investment Corp.

 
	
  

 	
  

 	
 1211 Avenue
 of the Americas, Suite 2902

 
	
  

 	
  

 	
 New York, NY
 10036

 
	
  

 	
  

 	
 Attn:

 	
 Kevin J.
 Riordan

 
	
  

 	
  

 	
 Fax:

 	
 212-696-7809

 
	
  

 	
  

 	
 Email:

 	
 kriordan@fidacadvisors.com

 
	
  

 	
  

 	
  

 	
  

 
	
  

 	
 with a copy
 to:

 	
 Fixed Income
 Discount Advisory Company

 
	
  

 	
  

 	
 1211 Avenue
 of the Americas, Suite 2902

 
	
  

 	
  

 	
 New York, NY
 10036

 
	
  

 	
  

 	
 Fax:

 	
 212 696-9809

 
	
  

 	
  

 	
 Email:

 	
 nsingh@annaly.com

 
	
  

 	
  

 	
 Attn:

 	
 R. Nicholas
 Singh, Esq.

 



                    Any
party hereto may from time to time by notice in writing served upon the other
as aforesaid designate a different mailing address to which all such notices or
demands thereafter are to be addressed.


                    In
order to avoid delay in the provision of the services to be rendered pursuant
to this Agreement, Principal and Lender shall each designate at least one (1)
but not more than two (2) specific representative(s) for purposes of
communications between the parties hereto, other than communications for which
notice is given above. Such representative(s) may be changed upon written notice
to the other party.


19





          11.02.
Entire Agreement. In addition to the terms hereof, this Agreement
consists of (a) the Exhibits, Schedules and Attachments attached hereto,
and (b) any other documents expressly incorporated herein by reference. This
Agreement contains the entire agreement between the parties hereto with respect
to the subject matter hereof and supersedes all prior agreements, written or
oral, with respect thereto.


          11.03.
Waivers and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by Lender and Principal, or,
in the case of a waiver, the party waiving compliance. No delay on the part of
any party in exercising any right, power or privilege hereunder shall operate
as a waiver thereof, nor shall any waiver on the part of any party of any
right, power or privilege hereunder, nor any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or privilege hereunder.


          11.04.
Cumulative Remedies. The rights and remedies herein provided are
cumulative and are not exclusive of any rights or remedies which any party may
otherwise have at law or in equity. The rights and remedies of any party
arising out of or otherwise in
respect of any inaccuracy in or breach of any representation, warranty,
covenant or agreement contained in this Agreement shall in no way be limited by
the fact that the act, omission, occurrence or other state of facts upon which
any claim of any such inaccuracy or breach is based may also be the subject
matter of any other representation, warranty, covenant or agreement contained
in this Agreement (or in any other agreement between the parties) as to which
there is no inaccuracy or breach.


          11.05.
Binding Effect. Subject to Section 11.07, this Agreement and the
rights, covenants, conditions and obligations of the respective parties hereto
and any instrument or agreement executed pursuant hereto shall be binding upon
the parties and be binding upon the successors, assigns and legal
representatives of the respective parties hereto.


          11.06.
Further Assurances. Each of the parties hereto shall execute such
further documents and other papers and perform such further acts as may be
reasonably required or desirable to carry out the provisions hereof.


          11.07.
Assignment. Neither this Agreement nor any rights or obligations
hereunder may be assigned (as the term “assignment” is defined by the
Investment Advisers Act of 1940 and rules promulgated thereunder), contracted
for or otherwise delegated by any party hereto without the prior written
consent of the other party. Notwithstanding the foregoing, Lender may assign
its rights and obligations under this Agreement without Principal’s consent to
a wholly-owned affiliate.


          11.08.
Assignment or Disposition of Investments By Lender. Lender reserves the
right to sell, transfer, assign or otherwise dispose of any or all of the
Investment(s) without the consent of Principal, and if Lender does so, it shall
give notice to Principal of such sale, transfer, assignment or other
disposition (for purposes of this Section 11.08, the “Disposition” to an “Assignee”).
Such notice shall include the name and address of the Assignee. Until Principal


20





receives such
written notice, Principal shall be entitled to treat Lender as the owner of
such Investment. Upon any such Disposition, each of Principal and Lender shall
have the right to terminate this Agreement with respect to such Investment.


          11.09.
Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which shall be deemed an original but all of
which together shall constitute one and the same instrument.


          11.10.
Section Headings. The section headings of this Agreement are for
convenience of reference only and shall not be deemed to alter or affect any provision hereof.


          11.11.
Attorney’s Fees. In the event of any litigation, arbitration or
mediation between the parties hereto, the non-prevailing party shall, following
a final non-appealable or non-appealed judgment, pay the expenses, including
reasonable attorneys’ fees and court costs, of the prevailing party in
connection therewith.


          11.12.
Compliance with Applicable Law. The parties hereto shall carry out their
respective duties and responsibilities hereunder in accordance with, and be
limited in the exercise of their respective rights by, the provisions of all applicable law.


          11.13.
Governing Law, Dispute Resolution. This Agreement shall be administered,
construed and enforced according to the laws of the State of New York (without
regard to any conflicts of law provisions) to the extent such laws have not
been preempted by applicable federal law, and each party hereby consents to
venue in any state court or federal court (to the extent permitted by the laws
of the State of New York) of competent jurisdiction in the State of New York.
The parties hereby waive any claim or defense that such forum is not convenient
or proper. Each party agrees that any such court shall have in personam
jurisdiction over it and consents to service of process in any manner
authorized by law. Each party agrees that in the event it has at any time any
dispute regarding this Agreement or any right, duty, or obligation granted or
arising under this Agreement, it will try in good faith to resolve all such
disputes through negotiation. Nothing contained herein shall be deemed to
prevent a party from obtaining judicial relief to prevent irreparable harm.


          11.14.
Severability. Should one or more provisions of this Agreement be held by
any court to be invalid, void or unenforceable, the remaining provisions shall
nevertheless continue in full force.


          11.15.
Time of Essence. Time is of the essence of this Agreement.


          11.16.
No Agency. Principal and Lender agree that for all purposes, except as
expressly set forth herein, in the performance of this Agreement, Principal and
its affiliates, agents, representatives and employees shall be deemed to be
acting independently and not as an officer, employee or agent of Lender.


          11.17.
Waiver of Jury Trial. LENDER AND PRINCIPAL ACKNOWLEDGE THAT THE RIGHT TO
TRIAL BY JURY IS A CONSTITUTIONAL ONE, BUT THAT IT MAY BE WAIVED. EACH PARTY,
AFTER CONSULTING (OR HAVING HAD THE


21





OPPORTUNITY TO
CONSULT) WITH COUNSEL OF ITS CHOICE, KNOWINGLY AND VOLUNTARILY, AND FOR THEIR
MUTUAL BENEFIT, WAIVES ANY RIGHT TO TRIAL BY JURY IN THE EVENT OF LITIGATION
REGARDING THE PERFORMANCE OR ENFORCEMENT OF, OR IN ANY WAY RELATED TO, THIS
AGREEMENT.


          11.18.
Third-Party Beneficiaries. Nothing in this Agreement, express or
implied, is intended to confer any rights or remedies under or by reason of
this Agreement on any person other than the parties to it, nor is anything in
this Agreement intended to relieve or discharge any obligation of any third
person to any party hereto or give any third person any right of subrogation or
action over against any party to this Agreement.


          11.19.
No Legal Representation or Advice. Lender acknowledges and agrees that
no employee of Principal or any of its affiliates shall furnish, be required to
furnish, or be deemed to be furnishing, tax, accounting or legal advice or
representation to Lender, or to any director, officer, agent, affiliate or
employee of Lender with respect to services provided hereunder or under any of
the SLAs. No attorney-client relationship shall exist between any such persons
as a result of this Agreement or of conduct associated with this Agreement.
Lender shall seek such legal advice and assistance as it deems appropriate from
counsel not affiliated with Principal. Nothing in this Section 11.19,
however, shall reduce in any way Principal’s responsibility for the performance
(consistent with the Standard of Care) of all of the obligations imposed upon
it by this Agreement.


          11.20.
Waiver of Immunity. Both parties hereby confirm that the making and
performance of this Agreement constitutes private and commercial acts that are
not subject to governmental immunity in connection with the enforcement of any
contractual claims, and that no claim of sovereign immunity shall modify the
obligations hereunder or release either party from any of that party’s
obligations under this Agreement or any agreement related hereto, nor shall it
reduce or modify the rights of either party to enforce such obligations at law
or in equity or to recover for breach of this Agreement.


          11.21.
Securitization Services. Services necessary to the pooling, processing,
and securitization of pools of mortgage loans have not been negotiated and are
not part of the scope of services contemplated in this Agreement. Any such
services that may be required in the future will require the negotiation and
completion of an additional scope of services agreement and will be separately
priced from the services currently covered under this Agreement. 


[Remainder of
page intentionally left blank; signatures appear on following pages]


22





          IN
WITNESS WHEREOF, the parties have duly executed this Agreement as of the date
first above written.


	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 LENDER:

 
	
  

 	
  

 
	
  

 	
 CREXUS
 INVESTMENT CORP., a

 Maryland Corporation

 
	
  

 	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
  

 	
 By: 

 	
 /s/ Kevin Riordan

 
	
  

 	
  

 	
  

 	

 


 	
  

 
	
  

 	
  

 	
 Name:

 	
 Kevin Riordan

 
	
  

 	
  

 	
  

 	
  

 	

 


 	
  

 
	
  

 	
  

 	
 Its: 

 	
 President

 
	
  

 	
  

 	
  

 	

 


 	
  

 


23









	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 PRINCIPAL:

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 PRINCIPAL
 REAL ESTATE

 INVESTORS, LLC, a Delaware limited

 liability company

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By: 

 	
 /s/ Steven P. Traynor

 	
  

 
	
  

 	
  

 	

 


 	
  

 
	
  

 	
 Name: 

 	
 Steven P. Traynor

 	
  

 
	
  

 	
  

 	

 


 	
  

 
	
  

 	
 Its: 

 	
 Counsel

 	
  

 
	
  

 	
  

 	

 


 	
  

 
	
  

 	
  

 	
  

 	
  

 	
  

 
	
  

 	
 By: 

 	
 /s/ Scott R. Smith

 	
  

 
	
  

 	
  

 	

 


 	
  

 
	
  

 	
 Name: 

 	
 Scott R. Smith

 	
  

 
	
  

 	
  

 	

 


 	
  

 
	
  

 	
 Its: 

 	
 Portfolio Manager

 	
  

 
	
  

 	
  

 	

 


 	
  

 


24






EXHIBIT B


INVESTMENT CRITERIA


OVERALL PROGRAM CRITERIA 


	
 

	
 

	
 


	
Total Program Size:

	
 

	
$500
 million


	
Minimum Investment Size:

	
 

	
$5
 million


	
Maximum Investment Size:

	
 

	
$20
 million


	
Lender Target Return:

	
 

	
7-9%


	
Investment Period

	
 

	
Beginning from date of IPO


	
Eligible Markets:

	
 

	
Most primary and secondary
 markets


	
Diversification:

	
 

	
TBD


	
Eligible Property Types:

	
 

	
Office, industrial,
 multifamily and retail


	
Asset Quality:

	
 

	
B+ and better


	
Sponsorship:

	
 

	
Satisfactory credit
 history, current financial condition, investment/management experience (No
 TICs)


	
Sponsor Carve-out
 Guarantees:

	
 

	
Sponsor willing to sign
 for normal carveouts


	
Transfers:

	
 

	
As approved by Lender


	
Prepayment:

	
 

	
Minimum of two years or
 two years from securitization


	
Additional Financing
 Allowed:

	
 

	
TBD


	
Future Fundings:

	
 

	
Yes


	
Environmental:

	
 

	
No material environmental
 risks


	
Stabilized Property
 Definition:

	
 

	
(i) Better than 85% leased/occupied and (ii) no more than 15%
 rollover annually in first two years.


	
Transitional Property
 Definition:

	
 

	
TBD





ELIGIBLE MARKETS - [TBD]


See overall program criteria


WHOLE LOAN CRITERIA


	
 

	
 

	
 


	
Percent of Total Program
 Allocated:

	
 

	
Variable


	
Whole Loan Definition:

	
 

	
TBD


	
Stabilized Property
 Definition:

	
 

	
Same
 as overall criteria


	
Maximum LTV:

	
 

	
70%


	
Loan-to-Replacement Cost:

	
 

	
TBD


	
Minimum DSCR:

	
 

	
1.25x


	
Minimum Term

	
 

	
3
 years


	
Maximum Term

	
 

	
10
 years


	
Minimum Projected Net IRR:

	
 

	
TBD





25






SUB DEBT CRITERIA


	
 

	
 

	
 


	
Percent of Total Program
 Allocated:

	
 

	
TBD


	
Core Subordinate Debt
 Definition:

	
 

	
TBD


	
Maximum LTV:

	
 

	
TBD


	
Minimum DSCR:

	
 

	
TBD


	
Minimum Term:

	
 

	
TBD


	
Maximum Term:

	
 

	
TBD


	
Minimum Projected Net IRR:

	
 

	
TBD





[Remainder of page intentionally left blank]


26






EXHIBIT D


INVESTMENT REPRESENTATIONS AND WARRANTIES


FOR PURPOSES
OF THIS EXHIBIT, THE PHRASE “PRINCIPAL’S
KNOWLEDGE” AND OTHER WORDS AND PHRASES OF LIKE IMPORT SHALL MEAN,
EXCEPT WHERE OTHERWISE EXPRESSLY SET FORTH BELOW, THE ACTUAL STATE OF KNOWLEDGE
OF PRINCIPAL REGARDING THE MATTERS REFERRED TO HEREIN. 


UNLESS
OTHERWISE SPECIFIED IN THE EXCEPTIONS TO THE REPRESENTATIONS AND WARRANTIES ATTACHED
HERETO, PRINCIPAL HEREBY REPRESENTS AND WARRANTS THAT, AS OF THE DATE SPECIFIED
BELOW OR, IF NO SUCH DATE IS SPECIFIED, AS OF THE DATE AN INVESTMENT IS CLOSED
AND FUNDED (THE “CLOSING DATE”): 


          1.
Ownership of Investments. Immediately prior to the transfer to Lender of
each Investment, Principal Life Insurance Company had good title to, and was
the sole owner of, each Investment, and has validly and effectively conveyed
(or caused to be conveyed) to Lender or its designee all of Principal Life
Insurance Company’s legal and beneficial interest in and to the Investments
free and clear of any and all pledges, liens, commissions, charges and security
interests. 


          2.
Payment Record. No scheduled payment of principal and interest under any
Investment was 30 days or more past due as of origination of the Investment,
without giving effect to any applicable grace period. There has been and there
exists no material default, breach, violation or event of acceleration (a “Default”) under any note evidencing an
Investment (the “Mortgage Note”),
the related Mortgage and/or the other loan documents executed and delivered in
connection therewith (collectively, the “Loan
Documents”), and no event or condition has occurred which, with the
passage of time or giving of notice, or both, would constitute a Default as of
the Closing Date. Borrower is not entitled to any refund of any amounts paid or
due under the Mortgage Note or other Loan Documents as of the Closing Date. 


          3.
Taxes and Assessments. As of the Closing Date, all taxes and
governmental assessments which previously became due and owing with respect to
each Property have been paid, or an escrow of funds has been established in an
amount sufficient to pay for every such item which remains unpaid and which has
been assessed but is not yet due and payable. 


          4.
Accuracy of Information. The specific data originated by Principal as to
any particular Investment was true, complete and accurate in all material
respects as of the Closing Date; and all information in the Investment File
with respect to a specific Investment has been made available to Lender. 


          5.
Due Diligence and Underwriting Requirements. The specific due diligence
and underwriting requirements established by this Agreement were applied
consistent with the Standard of Care or, after written notice to Lender were
waived by Lender in writing. 


27






          6.
Lien; Valid Assignment. Based on the related lender’s title insurance
policy (or, if not yet issued, a pro forma title policy or a “marked-up”
commitment), the Mortgage related to and delivered in connection with each
Investment constitutes a valid and, subject to the Permitted Encumbrances,
enforceable first priority lien upon the related Property prior to all other
liens and encumbrances, except for (a) the lien for current real estate taxes
and assessments not yet due and payable, (b) covenants, conditions and
restrictions, rights of way, easements and other matters that are of public
record and/or are referred to in the related lender’s title insurance policy,
(c) exceptions and exclusions specifically referred to in such lender’s title
insurance policy, (d) other matters to which like properties are commonly
subject, none of which matters referred to in clauses (b), (c) or (d),
individually or in the aggregate, materially interferes with the security
intended to be provided by such Mortgage, and (e) if such Investment is
cross-collateralized with any other Investment, the lien of the Mortgage for
such other Investment (the foregoing items (a) through (e), the “Permitted Encumbrances”). The related
assignment of such Mortgage executed and delivered in favor of Lender is in
recordable form and constitutes a legal, valid and binding assignment,
sufficient to convey to the assignee named therein all of the assignor’s right,
title and interest in, to and under such Mortgage. 


          7.
Assignment of Leases and Rents. The Mortgage includes an assignment of
leases that establishes and creates a valid and, subject to the Permitted
Encumbrances, enforceable first priority lien and first priority security
interest in the related borrower’s interest in all leases, subleases, licenses
or other agreements pursuant to which any person is entitled to occupy, use or possess
all or any portion of the real property subject to the Mortgage. 


          8.
Condition of Property; Condemnation. Each Property is, to Principal’s
knowledge based on review of third party reports, free and clear of any
material damage (or adequate reserves therefore have been established) that
would materially and adversely affect its value as security for the related
investment. Principal has received no notice of the commencement of any
proceeding for the condemnation of all or any material portion of any Property.
To Principal’s knowledge (based on surveys and/or title insurance obtained in
connection with the origination of the Investments), as of the date of the
origination of each Investment, all of the material improvements on the related
Property that were considered in determining the appraised value of the
Property lay wholly within the boundaries and building restriction lines of
such Property, except for encroachments that are insured against by the
lender’s title insurance policy referred to herein or that do not materially
and adversely affect the value or marketability of such Property, and no
improvements on adjoining properties materially encroached upon such Property
so as to materially and adversely affect the value or marketability of such
Property, except those encroachments that are insured against by the lender’s
title policy referred to herein. 


          9.
Title Insurance. Each Property is covered by an American Land Title
Association (or an equivalent form of) lender’s title insurance policy or a
marked-up title insurance commitment (on which the required premium has been
paid) which evidences such title insurance policy (the “Title Policy”), issued by a nationally
recognized title insurance company, in the original principal amount of the
related Investment after all advances of principal. Each Title Policy insures
that the related Mortgage is a valid first priority lien on such Property,
subject only to Permitted Encumbrances. Each Title Policy (or, if it has yet to
be issued, the coverage to be provided thereby) is in full force and effect.
Immediately following the transfer and assignment of the related Mortgage Loan
to Lender, such Title Policy (or, if it has yet to be 


28






issued, the
coverage to be provided thereby) will inure to the benefit of Lender without
the consent of or notice to the insurer. To Principal’s knowledge as of the
Closing Date, the insurer issuing such Title Policy is qualified to do business
in the jurisdiction in which the related Property is located. 


          10.
Property Insurance. Each Property is insured by (a)(i) customary special
form property insurance covering fire and extended perils including lightning,
windstorm, hail, explosion, riot, riot attending a strike, civil commotion,
aircraft, vehicles and smoke, in an amount not less than the lesser of the
principal balance of the related Mortgage and the replacement cost of the
Property; (ii) insurance against other risks customarily insured for, without
limitation, acts of terrorism if, in the exercise of its reasonable judgment,
Principal believes such coverages are commercially reasonable in terms of
availability, premium, coverage and deductible; (b) to the extent leases of the
Property contain provisions allowing for rental abatement as a result of
casualty damage to the Property, business interruption or rental loss
insurance, in an amount at least equal to six (6) months of operations of the
Property; (c) flood insurance (if any portions of buildings or other structures
on the Property are located in an area identified by the Federal Emergency
Management Agency as having special flood hazards and the Federal Emergency
Management Agency requires flood insurance to be maintained); (d) a commercial
general liability insurance not less than $1 million per occurrence. As
evidenced by the certificate of insurance received at closing of the
Investment, such insurance shall contain a standard mortgagee clause that names
the mortgagee as an additional insured in the case of liability insurance policies
and as a loss payee in the case of property insurance policies and requires
prior notice to the holder of the Mortgage of termination or cancellation. No
such notice has been received, including any notice of nonpayment of premiums,
that has not been cured. Prior to each Closing Date, Principal shall have
received insurance certificates from acceptable insurance companies evidencing
such insurance is in full force and effect. Each Mortgage or Loan Agreement
obligates the related borrower to maintain all such insurance. 


          11.
Mortgage Status; Waivers and Modifications. As of the Closing Date, no
Mortgage, Mortgage Note or other Loan Document has been satisfied, cancelled,
rescinded or subordinated in whole or in part, and the related Property has not
been released from the lien of such Mortgage, in whole or in part, nor has any
borrower been released from its obligations under its Loan Documents, in whole
or in any part, nor has any instrument been executed that would effect any such
satisfaction, cancellation, subordination, rescission or release, in any manner
that, in each case, materially adversely affects the value of the related
Investment. As of the Closing Date, none of the terms of any Mortgage Note,
Mortgage, Assignment of Leases or other Loan Documents has been impaired,
waived, altered or modified in any respect, except by written instruments, all
of which are included in the related Investment File. 


          12.
No Holdbacks. The proceeds of each Investment have been fully disbursed
(except in those cases where the full amount of the Investment has been
disbursed but a portion thereof is being held in escrow or reserve accounts
pending the satisfaction of certain conditions relating to leasing, repairs or
other matters with respect to the related Property), and there is no obligation
for future advances with respect thereto. 


          13.
Mortgage Provisions. The Mortgage Note, Mortgage and the other Loan
Documents for each Investment, together with applicable state law, contain customary
and 


29






enforceable
provisions (subject to the Permitted Encumbrances) such as to render the rights
and remedies of the holder thereof adequate for the practical realization
against the related Property of the principal benefits of the security intended
to be provided thereby. 


          14.
Trustee under Deed of Trust. If any Mortgage is a deed of trust, (a) a
trustee, duly qualified under applicable law to serve as such, is properly
designated and serving under such Mortgage, and (b) no fees or expenses are
payable to such trustee by Principal, Lender or any transferee thereof except
in connection with a trustee’s sale after default by the related borrower or in
connection with any full or partial release of the related Property or related security
for the related Investment. 


          15.
Loan Document Status. As of the Closing Date, each Mortgage Note,
Mortgage and other agreement that evidences or secures such Mortgage Loan was
executed by or on behalf of the related Mortgagor and any guarantor and is the
legal, valid and binding obligation of the maker thereof (subject to any
non-recourse provisions contained in any of the foregoing agreements and any
applicable state anti-deficiency or legislation), enforceable in accordance
with its terms, except as such enforcement may be limited by bankruptcy,
insolvency, reorganization or other similar laws affecting the enforcement of
creditors’ rights generally, and by general principles of equity (regardless of
whether such enforcement is considered in a proceeding in equity or at law) and
to Principal’s knowledge there is no valid defense, counterclaim or right of
offset or rescission available to the related Mortgagor and any guarantor with
respect to such Mortgage Note, Mortgage or other agreement as of the Closing
Date. 


          16.
Compliance with Usury Laws. Based on Principal’s receipt of either a
usury endorsement to the related Title Policy or an attorney’s opinion letter
received in connection with the closing of the Investment, each Mortgage, as of
the date of origination complied with, or was exempt from, applicable state or
federal laws, regulations and other requirements pertaining to usury. 


          17.
Compliance with Laws and Regulations. Based on due diligence considered
reasonable by prudent commercial mortgage lenders in the lending area where the
Property is located, the improvements located on or forming a part of each
Property comply with all applicable zoning laws and ordinances, or constitute a
legal non-conforming use or if any such improvement does not so comply, such
non-compliance does not materially and adversely affect the value of the
related Property, such value as determined by the appraisal performed at
origination of the Investment. 


          18.
Cross Collateralization or Cross-Default with other Investments. The
Investment is not cross-collateralized or cross-defaulted with any other loan
unless such other loan also is owned by Lender. 


          19.
Whole Commercial Loan. Each Investment is a whole loan and not a
participation or partial interest in a loan. 


          20.
No Equity Participation or Contingent Interest. As of the Closing Date,
no Mortgage contains any equity participation by the Lender or provides for
negative amortization or for any contingent or additional interest in the form
of participation in the cash flow of the 


30






related
Property. Principal does not hold a direct equity interest in any Property
underlying any Investment, except ownership via an investment in a
publically-traded company (for example, money invested in a publically-traded
REIT). 


          21.
Escrow Deposits. Any escrow deposits and payments relating to each
Investment that are, as of the date of origination of the Investment, required
to be deposited or paid have been so deposited or paid. 


          22.
LTV Ratio. The gross proceeds of each Mortgage Note to the related
borrower at origination did not exceed the non-contingent principal amount of
the Mortgage Note and was less than eighty-percent (80%) of the value of the
Property based on the appraisal for the Property prepared at time of
origination of the Investment. 


          23.
Environmental Matters. An environmental site assessment, or an update of
a previous such report, in each case meeting the requirements set forth in the
Underwriting SLA, was performed with respect to each Property in connection
with the origination of the related Mortgage Loan, a report of each such
assessment (or the most recent assessment with respect to each Property) (an “Environmental Report”) has been
delivered
to Lender, and Principal has no knowledge of any material and adverse
environmental condition or circumstance affecting any Property that was not
disclosed in such report. Each Mortgage or another Loan Document in the Investment
File requires the related borrower to comply with all applicable federal, state
and local environmental laws and regulations and indemnify Lender with respect
to liabilities arising out of environmental conditions. Where the Environmental
Report disclosed the existence of a material and adverse environmental
condition or circumstance affecting any Property, Principal has disclosed all
material facts regarding such condition or circumstance to Lender in writing
and either (i) a party not related to the borrower was identified in writing by
the applicable governmental authorities as the responsible party for such
condition or circumstance, (ii) environmental insurance covering such condition
was obtained and must be maintained until the condition is remediated, or (iii)
the related borrower was required either to provide additional security which
may have included the escrow of funds that was deemed to be sufficient by
Principal exercising the Standard of Care in light of the circumstances and/or
to establish an operations and maintenance plan. To the extent an environmental
insurance policy has been obtained with respect to the Mortgage Loan: (a) the
environmental insurance policy is in full force and effect, (b) the premiums on
the environmental insurance policy have been paid in full or the Loan Documents
provide for payment of such premium by the borrower as the same shall become
payable, and an escrow has been established therefor, and (c) the term of such
policy extends at least five years beyond the maturity of the Mortgage Loan. 


          24.
Due on Sale. Each Mortgage contains a “due on sale” clause, which
provides for the acceleration of the payment of the unpaid principal balance of
the Mortgage if, without prior written consent of the holder of the Mortgage,
the property subject to the Mortgage or any portion thereof, or a controlling
interest in the related borrower, is transferred, sold or encumbered by a
junior mortgage or deed of trust; provided, however, that certain Mortgages
provide a mechanism for the assumption of the loan by a third party upon the
borrower’s satisfaction of certain conditions precedent, and upon payment of a
transfer fee, if any, or transfer of interests in the borrower or constituent
entities of the borrower to a third party or parties related to the borrower
upon the borrower’s satisfaction of certain conditions precedent. 


31






          25.
Litigation. Based on customary due diligence, as of the Closing Date,
Principal had no knowledge of any pending actions, suits, proceedings or
investigations by or before any court or governmental authority against or
affecting the borrower or the Property that, if determined adversely to such
borrower or Property, would materially and adversely affect the value of the
Property or the ability of the borrower to pay principal, interest or any other
amounts due under the Mortgage. 


          26.
Borrower’s Interest in Property. The borrower’s interest in the Property
is a fee simple interest or a leasehold interest. If the related Mortgage
encumbers the interest of a borrower as a lessee under a ground lease of the
Property: (a) such ground lease or a memorandum thereof has been or will be
duly recorded and (or the related estoppel letter or lender protection
agreement between the seller and related lessor) permits the interest of the
lessee thereunder to be encumbered by the related Mortgage; (b) the lessee’s
interest in such ground lease is not subject to any liens or encumbrances
superior to, or of equal priority with, the related Mortgage, other than
certain permitted encumbrances; (c) the borrower’s interest in such ground
lease is assignable to Lender and its successors and assigns upon notice to,
but (except in the case where such consent cannot be unreasonably withheld) without
the consent of the lessor thereunder (or if it is required it will have been
obtained prior to the closing date); (d) such ground lease is in full force and
effect and the seller has received no notice that an event of default has
occurred thereunder; (e) such ground lease, or an estoppel letter related
thereto, requires the lessor under such ground lease to give notice of any
material default by the lessee to the holder of the Mortgage and further
provides that no notice of termination given under such ground lease is
effective against such holder unless a copy has been delivered to such holder;
(f) the holder of the Mortgage is permitted a reasonable opportunity
(including, where necessary, sufficient time to gain possession of the interest
of the lessee under such ground lease) to cure any default under such ground
lease, which is curable after the receipt of notice of any such default,
before, the lessor thereunder may terminate such ground lease; and (g) such
ground lease has an original term (including any extension options set forth
therein) which extends not less than 10 years beyond the full amortization term
of the related Mortgage Loan. 


          27.
Borrower Bankruptcy. To Principal’s knowledge, neither Borrower nor any
guarantor of the Mortgage is currently a party to any bankruptcy,
reorganization, insolvency or comparable proceeding or in any proceeding
seeking the appointment of a receiver, conservator, liquidating agent or
similar person as of the Closing Date. 


          28.
Advancement of Funds by Principal. As of the Closing Date, no holder of
a Mortgage has advanced funds or induced, solicited or knowingly received any
advance of funds from a party other than the owner of the related Property for
the payment of any amount required by such Mortgage. 


          29.
Releases of Mortgaged Property. As of the Closing Date, no Mortgage Note
or Mortgage requires the mortgagee to release all or any portion of the related
Property that was included in the appraisal for such Property, and/or generates
income from the lien of the related Mortgage except upon payment in full of all
amounts due under the related Mortgage or in connection with the defeasance
provisions of the related Note and Mortgage, unless specifically noted to
Lender. 


32






          30.
Single Purpose Entity. If required in the Loan Documents for a
particular Investment, each borrower’s organizational documents provide that
the borrower: (a) is formed or organized solely for the purpose of owning and
operating the related Property, (b) may not engage in any business unrelated to
the ownership and operation of the Property, (c) does not have any material
assets other than those related to its interest in and operation of the
Property, (d) may not incur indebtedness other than as permitted by the
Mortgage or other Loan Documents, (e) has its own books and records separate
and apart from any other person or entity, (f) holds itself out as a legal
entity, separate and apart from any other person or entity, and (g) such other
separateness covenants as may be contained in the Loan Documents. 


          31.
Inspections. Principal has inspected or caused to be inspected each
Property in connection with the origination of the related Mortgage in
accordance with the Standard of Care. 


          32.
UCC Financing Statements. UCC Financing Statements have been filed
and/or recorded (or, if not filed and/or recorded, have been submitted in
proper form for filing and recording), in all public places necessary at the
time of the origination of the Investment to perfect a security interest in all
items of personal property reasonably necessary to operate the Property owned
by a borrower and located on the related Property (other than any personal
property subject to a purchase money security interest or a sale and leaseback
financing arrangement permitted under the terms of such Investment or any other
personal property leases applicable to such personal property) to the extent
perfection may be effected pursuant to applicable law by recording or filing.
An assignment of each such UCC Financing Statement relating to the Investment
has been completed and filed or will be prepared and filed promptly following
the Closing Date in each office in which such Financing Statement was filed. 


          33.
Public Access. Each Property securing a Mortgage has at the minimum
access to a satisfactory easement if not direct access to a public road. 


          34.
Junior Liens. As of the Closing Date, none of the Mortgages permits the
related Property to be encumbered by any lien junior to or of equal priority
with the lien of the related Mortgage without the prior written consent of the
holder thereof or the satisfaction of debt service coverage or similar criteria
specified therein as specifically noted in the Loan Documents. 


          35.
Defeasance and Assumption Costs. If the related Mortgage Loan Documents
allow for defeasance, the related borrower is responsible for the payment of
all costs and expenses of Lender incurred in connection with the defeasance of
such Mortgage Loan and the release of the related Mortgaged Property, and the
borrower is required to pay all costs and expenses of Lender associated with
the approval of an assumption of such Mortgage Loan. 


          36.
Appraisals. In connection with the origination of each Investment,
Principal obtained and delivered to Lender an appraisal of each Property
conforming to USPAP and FIRREA requirements and prepared in accordance with the
Code of Professional Ethics and Standards of Professional Practice of the
Appraisal Institute by a Member of the Appraisal Institute licensed in the
state in which the Property is located and otherwise meeting the requirements
of the Underwriting SLA. 


33






          37.
Prepayment Premiums. As of the Closing Date of each such Mortgage, any
prepayment premiums and yield maintenance charges payable under the terms of
the Mortgage, in respect of voluntary prepayments, constituted customary
prepayment premiums and yield maintenance charges for commercial mortgage loans.



          38.
Commercial Leases. If a Mortgage is secured by a Property that is leased
to non-residential tenants, based on customary due diligence as performed by
Principal in accordance with Section 2.01(a) of the Closing SLA, as of the
Closing Date, such Property was not subject to any leases other than the leases
described in the rent roll contained in the related Investment File (the “Leases”). If further information regarding
leases is needed for purposes of securitization, Principal will provide Lender
any information Principal has in its possession regarding such leases.
Principal will notify Lender if Principal uses a third party to perform the due
diligence as to the Leases. 


34






EXHIBIT E


INSURANCE REQUIREMENTS


	
 

	
 

	
 


	
Type of Insurance Coverage

	
 

	
Policy Limits per Occurrence


	


	
 

	



	
Fidelity*

	
 

	
$10,000,000.00


	
Errors and
 Omissions*

	
 

	
$10,000,000.00


	
*In
 each case covering all officers and employees of Principal and of such
 affiliates who perform services pursuant to this Agreement. Lender shall be
 named as “Loss Payee, As Its Interest May Appear” with respect to such
 fidelity bond.

	
 

	
 





35






EXHIBIT F


Principal Real Estate Investors, LLC’s 

Allocation Policies and Procedures

for 

Private
Commercial Real Estate Debt Investments

as of

November 19, 2008


In its normal
course of business Principal Real Estate Investors, LLC (“PrinREI”) originates whole private
commercial real estate debt investments that include but may not be limited to
senior mortgages, construction and construction/perm loans, bridge loans,
junior mortgages, mezzanine loans and preferred equity investments. PrinREI
advises various clients regarding investment in these products, including both
clients that are affiliated with PrinREI and clients that are not affiliated
with PrinREI. In some instances conflicts may occur when a particular
investment meets the stated investment parameters of more than one client and
each of those clients desires the entire investment for itself. This document
describes PrinREI’s policies and procedures for allocating such investments
among clients. 


Allocation Policies 


It is
PrinREI’s policy to allocate private commercial real estate debt investments it
produces as follows: 


	
 

	
 

	
 


	
1)

	
Fairness
 & equitability. The allocation process for
 non-participated investments shall be fair and equitable to all clients to
 the fullest extent possible. In particular, no client shall receive
 preferential treatment in the process due to its status as an affiliate or
 non-affiliate of PrinREI. 


	
 

	
 


	
2)

	
Familiarity
 with client needs & determination of eligibility.
 Client eligibility for any specific allocation shall be determined by the
 portfolio manager assigned responsibility for said client’s account and by
 the investment allocator (a designated member of the portfolio management
 team), taking into consideration (i) the specific investment criteria
 established by said client, (ii) the return requirements established most
 recently by said client, and (iii) whether said client has remaining
 investment need at least equal to the investment size. Each portfolio manager
 will serve as an advocate for his or her client(s) in the allocation process,
 except that the allocator shall serve a client-neutral role specifically
 regarding his or her duties as allocator. 


	
 

	
 


	
3)

	
Rotational
 queuing system. 


	
 

	
 


	
 

	
a)

	
For each
 instance in which only one PrinREI client is eligible to receive the allocation
 of a specific investment in its entirety, that client shall be allocated said
 investment. 





36







	
 

	
 

	
 


	
 

	
b)

	
For each
 instance in which multiple PrinREI clients are eligible to receive the
 allocation of a specific investment in its entirety, said investment shall be
 allocated to one client based on the status of a rotational queue as
 described in the attached exhibit. 


	
 

	
 

	
 


	
 

	
c)

	
For each
 instance in which no PrinREI clients are eligible to receive the allocation
 of a specific investment in its entirety, PrinREI may allocate said
 investment in parts to more than one client provided each of those clients
 expresses a willingness to share in said investment with the other(s). Due to
 the complexities of such transactions and differing relationships among
 clients PrinREI may make such allocations without regard to any client’s
 then-current status in a rotational queue for whole investments. 


	
 

	
 

	
 


	
 

	
When a
 client first enters the rotational queue their entry into the queue will be
 treated as a “win” against all other clients currently in the queue for
 purposes of the match-ups described in the exhibit, effectively starting that
 client at the bottom of queue.


	
 

	
 

	
 


	
4)

	
Special
 cases / exceptions. 


	
 

	
 

	
 


	
 

	
a)

	
Clients who
 do not provide PrinREI discretion to select specific investments on their
 behalf may receive allocations outside the rotational queuing system,
 provided such allocations do not directly impair the ability of PrinREI to
 fulfill prior investment mandates for clients in the queue. 


	
 

	
 

	
 


	
 

	
b)

	
Investments
 that represent additional debt for a property in which another PrinREI client
 has already invested will be offered only to that client unless that client
 has specifically approved investment by another client. 


	
 

	
 

	
 


	
 

	
c)

	
Extensions
 in the term of financing already held by a PrinREI client will be offered
 first to that client. 


	
 

	
 

	
 


	
 

	
d)

	
Financing
 secured by a property owned or controlled by PrinREI and/or its affiliates
 may be placed with a lender outside the scope of this policy. 


	
 

	
 

	
 


	
 

	
e)

	
Investments
 formally referred to PrinREI by a client will be offered first to that
 client. 


	
 

	
 

	
 


	
5)

	
Record
 keeping & access to records. PrinREI shall
 maintain detailed records regarding the allocation of each new commercial
 real estate debt investment and the client(s) to which each investment was
 allocated. At the conclusion of each client’s fiscal year, if a client has
 requested commercial real estate debt investments from PrinREI during that
 fiscal year and requests a review of PrinREI’s allocations made to them during
 that fiscal year, PrinREI shall provide said client a summary of allocations
 received and lost. Such summary shall include only those investments for
 which said client was eligible, and shall not include the specific identity
 of the client(s) that received the actual allocations. However, such summary
 shall be presented in a way that illustrates how the queue mechanism was
 implemented for the client. 





37







	
 

	
 


	
6)

	
Notice of
 changes. PrinREI will provide notice of any material
 modification to these policies and procedures to any client who has requested
 that such notices be provided. 


	
 

	
 


	
7)

	
Interpretation
 & implementation. PrinREI retains full authority
 to interpret and implement these policies and procedures in its sole and
 absolute discretion. 


	
 

	
 


	
8)

	
Limitations.
 Nothing contained herein shall serve to create a legal claim by any client to
 any investment generated by PrinREI, nor shall it bind PrinREI from making or
 entering into any other agreement with any party for any purpose. PrinREI
 reserves the right to amend these policies and procedures at any time. 


	
 

	
 


	
Allocation Procedures


	
 

	
 


	
1)

	
Prior to the
 allocation of each new investment notice shall be provided to all the
 portfolio managers whose clients have investment management agreements with
 PrinREI requesting investments of the given product type. Said notice may be
 provided by electronic mail automatically generated by PrinREI’s investment
 pipeline application. 


	
 

	
 


	
2)

	
Allocation
 of an investment shall typically occur upon PrinREI’s receipt of a signed
 application or similar agreement along with any required fees and deposits
 for a specific transaction. However, allocation may occur sooner
 (pre-allocation) upon determination by PrinREI that such pre-allocation is
 necessary or desirable to effect the transaction (such as when loan
 application language must be differentiated for one client versus another, or
 when specific pre-approval of an investment by a client is required). 


	
 

	
 


	
3)

	
The
 allocator shall make allocations (or pre-allocations as contemplated above)
 in accordance with the policies stated above after consulting as needed with
 the affected portfolio managers. Said allocations shall be entered into
 PrinREI’s allocation history, impacting the queue for future allocations. 


	
 

	
 


	
4)

	
Notice of
 the allocation shall be delivered to the impacted portfolio manager(s), with
 the portfolio manager then notifying his or her client of any investment they
 have been allocated. 


	
 

	
 


	
5)

	
The
 allocator may make corrections to allocations that were completed in error,
 provided such changes were made in a timely manner and have not yet impacted
 the allocation of any other investments. Other changes impacting the
 allocation queue shall not be made, however, including any adjustment based
 on the failure of a client to accept an allocation meeting its most recent
 written investment guidelines (in which case the investment may be
 reallocated) or the failure of an investment to close. 





38






EXHIBIT TO EXHIBIT F


Summary of Queue Logic for Allocation System


	
 

	
 

	
 


	
1.

	
The
 allocator and portfolio managers examine a transaction’s attributes to
 determine its eligibility for various clients’ lending programs. 


	
 

	
 

	
 


	
2.

	
In the
 allocation system the allocator selects all clients for which the transaction
 meets investment guidelines. 


	
 

	
 

	
 


	
3.

	
The system
 awards points to eligible clients as follows: 


	
 

	
 

	
 


	
 

	
a.

	
The number
 of points to be awarded equals (n-1)!, where n equals the number of clients
 eligible to be allocated the loan. For example, if three clients are eligible
 to receive a specific allocation, the number of points to be awarded equals 2
 + 1, or 3. If four clients are eligible to receive the allocation, the number
 of points to be awarded equals 3 + 2 + 1, or 6. If five clients are eligible
 to receive the allocation, the number of points to be awarded equals 4 + 3 +
 2 + 1, or 10. 


	
 

	
 

	
 


	
 

	
b.

	
Each point
 is awarded to a client based on the most recent prior allocation competition
 in which one client competed with a second client and either of those clients
 was awarded the allocation. A point equates to a credit for having lost that
 past allocation competition. For example, if clients A and B compete today
 for a new loan allocation, and during their most recent competition for
 another loan client A received the allocation instead of client B, then for
 the new allocation competition client B receives one point. 


	
 

	
 

	
 


	
 

	
c.

	
The system
 examines each combination of “match-ups” between pairs of eligible clients to
 determine which client will receive the point for that competition. For
 example, if clients A, B and C are each eligible to receive a new allocation,
 the system will award one point based on the last competition between A and
 B, another point for the last competition between B and C, and another point
 for the last competition between C and A. Only competitions in which one of
 the two competing clients won the allocation in question are considered. 


	
 

	
 

	
 


	
4.

	
The new
 allocation is awarded to the client that receives the most points. In
 instances when two or more clients tie for the most points, the loan is
 awarded to the client among them that received its most recent allocation
 longest ago. 





39






ATTACHMENT 1


UNDERWRITING SERVICE LEVEL AGREEMENT


ARTICLE 1.
BACKGROUND. 


          1.01.
Objective. Lender and Principal have entered into an Mortgage Origination and
Servicing Agreement of even date herewith (“MOSA”
or the “Agreement”), pursuant to
which Principal has agreed to perform certain services relating to the
origination, closing and servicing of commercial loans and Sub Debt loans
(collectively referenced herein as “Investment”
or “Investments”). This
Underwriting SLA provides a detailed description of the services to be provided
by Principal relating to the origination and underwriting of Investments to be
originated pursuant to the terms of the Agreement. As used herein, the term
“origination” shall also include the purchase of Investments from secondary
markets. Terms used but not defined herein shall have the meaning ascribed to
such terms in the Agreement.  


ARTICLE 2.
DUTIES OF PRINCIPAL AS UNDERWRITER. 


          2.01.
Duties. With respect to each Investment, Principal shall do or shall
cause to be done the following: 


	
 

	
 

	
 

	
 

	
 


	
 

	
a.

	
Assure that
 each Investment allocated to Lender has been approved by Lender in accordance
 with the provisions of Article 3 of the Agreement or that appropriate written
 or e-mail waivers have been received from Lender. 


	
 

	
 

	
 

	
 

	
 


	
 

	
b.

	
Conduct
 comprehensive commercially reasonable analysis and due diligence with respect
 each Investment. Such analysis and due diligence is to include, without
 limitation, review of: 


	
 

	
 

	
 


	
 

	
 

	
 

	
•

	
Sponsor/Borrower/Guarantor
 information – entity type, ownership structure, twenty percent (20%) or more
 equity holders, experience, reputation, financials, portfolio composition, background
 and credit profile. 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
•

	
Investment
 Structure – term, pay rate, accrual rate, fees, loan amount, debt and equity
 capital structure, extensions, maturity, amortization, debt service payment
 amount, debt service coverage ratios, exit strategies, collateral type (lien
 or pledge), closing date, prepayment terms, future fundings, transfers,
 substitution of collateral, releases, additional financings, credit
 enhancements (e.g. recourse, replacement reserves, or other escrows), etc. 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
•

	
Sources and
 uses of the Investment proceeds. 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
•

	
Property
 information – location, address, property type, age, condition,
 functionality, pertinent history, square footage/acreage/units, etc.





40







	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
•

	
Property
 valuation and replacement cost analysis, discounted cashflow valuations,
 loan-to-cost, loan-to-value, etc. Principal also shall engage an MAI
 appraisal on each newly originated Investment from one of Principal’s
 preferred providers as additional support to Principal’s opinion of value.
 Such MAI appraisal cost will be borne by the Sponsor/Borrower in connection
 with the new origination of an Investment. 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
•

	
Property
 revenue, expenses, management and leasing cost, and capital expenditures as
 well as debt service coverage ratio(s). 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
•

	
Pertinent
 tenant information and leases. 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
•

	
The market
 and submarket in which the Property is located and the Property’s position
 within the market and submarket. 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
•

	
Overall
 strengths, risks, and risk mitigants of the Investment. 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
•

	
Competition
 from other lenders with respect to the Investment, as available. 


	
 

	
 

	
 

	
 

	
 


	
 

	
 

	
 

	
•

	
An
 environmental report, property condition report and seismic report on the
 Property. 


	
 

	
 

	
 

	
 

	
 


	
 

	
c.

	
Prepare
 written analysis of the Investment for presentation through Principal’s
 committee approval process and Article 3 of the Agreement. 


	
 

	
 

	
 


	
 

	
 

	
 

	
 

	
 


	
 

	
d.

	
Provide
 consultation and analysis as needed during the closing process. 





41






ATTACHMENT 2


CLOSING SERVICE LEVEL AGREEMENT


ARTICLE 1.
BACKGROUND. 


          1.02.
Objective. Lender and Principal have entered into a Mortgage Origination
and Servicing Agreement of even date herewith (“MOSA” or the “Agreement”),
pursuant to which Principal has agreed to perform certain services relating to
the origination, closing and servicing of commercial loans and Sub Debt loans
(collectively referenced herein as an “Investment”
or “Investments”). This Closing
SLA provides a detailed description of the services to be provided by Principal
relating to the closing of the Investments to be closed pursuant to the terms
of the Agreement. As used herein, the term “origination”
shall also include the purchase of Investments from secondary markets. Terms
used but not defined herein shall have the meaning ascribed to such terms in
the Agreement. 


ARTICLE 2.
LOAN CLOSING. 


          2.01.
Loan Closing Procedure. The following procedures shall apply in
connection with the closing of Investments: 


	
 

	
 


	
 

	
          (a)
 Loan Closing. Principal shall proceed with the customary documentation
 and commercially reasonable due diligence necessary for the closing of each
 Investment. The due diligence process will include, but shall not limited to,
 obtaining third party reports as are customary for the given property type
 and location which will include, without limitation, engineering studies,
 Phase I Environmental Reports, appraisals and background and credit checks.
 Principal shall conduct all due diligence including lease review and analysis
 and complete all loan documentation consistent with the Standard of Care.
 Principal shall notify Lender in writing (“writing” to include e-mails unless
 otherwise noted) in the event that the information obtained and reviewed by
 Principal in the course of such investigations and procedures fails to
 confirm, in Principal’s reasonable judgment, that the Investment conforms to
 the deal terms outlined in the approved Committee Package. 


	
 

	
 


	
 

	
          (b)
 Material Adverse Information. If, at any time during the closing of
 the Investment, in Principal’s judgment as a fiduciary, any customary due
 diligence is not provided by the borrower or if Principal obtains information
 which, in Principal’s judgment as a fiduciary means the Investment no longer
 conforms to the deal terms in the approved Committee Package, Principal shall
 promptly notify Lender in writing. Upon Principal furnishing to Lender
 sufficient additional information for Lender to make a decision regarding
 such Investment, Lender shall have five (5) business days after receipt of
 such additional information to notify Principal in writing of Lender’s
 decision, otherwise Lender shall be deemed to have rejected the Investment. 





42







	
 

	
 


	
 

	
          (c)
Closing Deliverables. Principal shall provide the final notice of
closing and request for funds attached as Exhibit A to this Closing SLA to
Lender as verification that the transaction is ready to close and all
requirements of the App/Comm are satisfied, together with a set of the final
drafts of Loan Documents.  


	
 

	
 


	
 

	
          (d)
Funding Process. No later than the end of business two (2) business
days prior to funding Principal shall e-mail to Lender a final notice of
closing and request for funds in the form attached as Exhibit A. Lender shall
wire funds to a segregated account held in the name of Principal as agent for
Lender and to be received by Principal no later than 12:00 noon CST/CDT on
the day immediately preceding the specified funding date.  


	
 

	
 


	
 

	
          (e)
 Closing. Principal shall close the Investments in accordance with
 industry custom and the Standard of Care, the name of Principal Life
 Insurance Company as the named lender, and immediately assign the Investments
 to Lender. With respect to commercial loans, Lender will receive constructive
 possession of the secured promissory note and be assigned the Mortgage and
 all other recorded Loan Documents and will be a successor in interest under
 an ALTA or TLTA equivalent title insurance policy (where appropriate). All
 items specifically required by this paragraph and all other documents
 obtained or required as part of the closing process shall be maintained by
 Principal in accordance with the Servicing Service Level Agreement. 





43







	
 

	
 


	


	
EXHIBIT A


	
 

	
 


	
 

	
 


	
FUNDING

	
 


	
PLEASE
 E-MAIL FED REFERENCE & TIME OF WIRE TO:


	
 

	
 


	
 

	
Name: _____________________________


	
 

	
Phone:
 _____________________________


	
 

	
Fax:
 _______________________________


	
 

	
E-mail:
 _____________________________


	
 

	
 


	
TRADE
 SUPPORT AND ACCOUNTING

	
 


	
 

	
 


	
__________________________________[CLIENT
 NAME]


	
ACCOUNT:
 ___________________________

	
 


	
ACCOUNT
 NAME: ___________________________


	
 

	
 


	
Current
 Date: ____________________

	
 


	
Cash
 Movement Date: __________________[Funding Date]


	
Private
 Funding of:_______________________[Borrower name and loan number]








	
 

	
 

	
 

	
 

	
 

	
 


	
Wire funds
 to:

	
 

	
Bank:

	
 

	
______________

	
 


	
 

	
 

	
ABA No:

	
 

	
______________

	
 


	
 

	
 

	
Account No:

	
 

	
______________

	
 


	
 

	
 

	
Account:

	
 

	
______________

	
 


	
 

	
 

	
Attention:

	
 

	
Jean Hixson

	
 


	
 

	
 

	
Reference:

	
 

	
___________________[Loan
 Number]


	
 

	
 

	
 

	
 

	
 

	
 


	
Amount

	
 

	
______________________Dollars
 ($______________)





By the
execution of this Funding Notice, Principal confirms the compliance of the
Investment with the Committee Package approved for this Investment and as
referenced as set out in the Mortgage Origination and Servicing Agreement
between CreXus Investment Corp. and Principal Real Estate Investors, LLC dated
August 28, 2009. 


	
 

	
 

	
 


	
 

	
By:
 _________________________

	
 


	
 

	
(Attach e-signature)          

	
 





44







ATTACHMENT 3


SERVICING SERVICE LEVEL AGREEMENT


ARTICLE 1.
BACKGROUND.


          1.01
Objective. Lender and Principal have entered into a Mortgage Origination
and Servicing Agreement of even date herewith (the “Agreement” or “MOSA”
), pursuant to which Principal has agreed to perform certain services relating
to the origination, closing and servicing of commercial mortgage loans and Sub
Debt loans (collectively referenced herein as “Investment” or “Investments”).
This Servicing SLA provides a detailed description of the services to be
provided by Principal relating to the servicing of the Investments pursuant to
the terms of the Agreement. Terms used but not defined herein shall have the
meaning ascribed to such terms in the Agreement.


ARTICLE 2.
DUTIES OF PRINCIPAL AS SERVICER.


          2.01.
Duties. With respect to each Investment as to which Principal is
expressly engaged by Lender in writing to provide servicing functions under
this Attachment 3, Principal shall do or shall cause to be done the
following in accordance with the Standard of Care:


	
 

	
 


	
 

	
          (a)
 Maintain separate files (collectively, the “Investment Files”) for each
 Investment, each of which shall be imaged for retrieval. Principal will use
 commercially reasonable efforts to complete each such Investment File.
 Principal shall maintain the original of each Loan Document, including the
 secured promissory note, in the Investment File unless Lender elects the
 option to have originals retained by a custodian. At the sole option of
 Lender, the secured promissory note and any other instruments in the
 Investment File may be delivered to a custodian as directed by Lender, such
 custodian retained by such Lender at its expense. Principal shall promptly
 provide a copy of any Loan Document to Lender upon request.


	
 

	
 


	
 

	
          
 (b) Proceed diligently to collect all amounts due on each Investment until
 such Investment has been paid in full, and remit all collected funds to
 Lender in accordance with this Agreement; provided, however, that Principal
 shall not be liable for the collection of the proceeds of any check presented
 for payment on account of an Investment. In the event any item deposited on
 behalf of Lender is returned for insufficient or uncollected funds including,
 without limitation, by any “stop payment order” having been applied to such
 item, Principal shall use commercially reasonable efforts to collect such
 funds from the payor, and further provided that if any such funds have been
 remitted to Lender, then Lender will remit such funds back to Principal by
 wire transfer within two (2) business days after written notice from
 Principal.


	
 

	
 


	
 

	
          
 (c) Calculate prepayment premiums as applicable.


	
 

	
 


	
 

	
          
 (d) Verify that all required insurance coverage is being properly maintained.





45







	
 

	
 


	
 

	
          (e)
 Verify that all required real property taxes and assessments are being
 properly and timely paid.


	
 

	
 


	
 

	
          (f)
 Reply to informational requests from any borrower or its representative.


	
 

	
 


	
 

	
          (g)
 Process lease non-disturbance and attornment agreements.


	
 

	
 


	
 

	
          (h)
 Process UCC continuations and amendments.


	
 

	
 


	
 

	
          (i)
 Monitor, maintain and disburse escrow accounts in accordance with their
 terms.


	
 

	
 


	
 

	
          (j)
 Approve the exercise of rights set forth in the Loan Documents and exercise
 such rights on behalf of Lender. If discretion allowed in Loan Documents,
 then Principal will provide notice to Lender and seek Lender’s guidance and
 approval. 


	
 

	
 


	
 

	
          (k)
 Collect payments, remittances and fees related to escrow and servicing
 matters.


	
 

	
 


	
 

	
          (l)
 Administer letters of credit, renewals and releases of same.


	
 

	
 


	
 

	
          (m)
 Subject to the provisions of the Agreement, prepare and execute releases or
 assignments in recordable form.


	
 

	
 


	
 

	
          (n)
 Proceed diligently to collect all amounts payable under any title, hazard or
 other insurance policy covering any such Investments.


	
 

	
 


	
 

	
          (o)
 Inspect or cause to be inspected annually (or as otherwise agreed to between
 Principal and Lender) each Property and complete an inspection report in the
 standard MBA/CMSA format.


	
 

	
 


	
 

	
          (p)
 Verify receipt of and review periodic property operating statements submitted
 quarterly by borrowers, certified rent rolls, and periodic financial
 statements for borrowers as required in the Loan Documents for each
 Investment. 


	
 

	
 


	
 

	
          (q)
 Based on quarterly operating statements, provide a CMSA type operating
 statement analysis.


	
 

	
 


	
 

	
          (r)
 Impose, adjust or waive escrow payments for insurance, real estate taxes,
 other required reserves and special assessments.


	
 

	
 


	
 

	
          (s)
 Subject to Section 2.02 below, grant consents, approvals, modifications,
 waivers, releases and other requests with respect to an Investment.





46







	
 

	
 


	
 

	
          (t)
 Maintain a watchlist per CMSA guidelines to be used by Principal and Lender
 to track possible problem Investments that may become Specially Serviced
 Investments (as hereinafter defined).





Subject to the
Agreement, Principal may retain or cause to be retained counsel on behalf of
Lender in the event of actual or threatened litigation or other proceedings
potentially affecting any Investment. Such counsel shall be subject to the
prior written consent of Lender in its sole discretion, and Lender shall
approve the budget and fees with respect to any such litigation or proceeding.
In the event that Principal reasonably believes that an attorney must be
retained immediately in order to protect the interests of Lender, Principal
will notify Lender. In the event Lender’s written approval is not obtained
within 24 hours in any case where Principal reasonably believes that an
attorney must be retained immediately, Principal may retain an attorney
immediately and promptly seek such approvals.


          2.02.
Administration of Investments; Extent of Principal’s Authority.


	
 

	
 


	
 

	
          (a)
 Administration of Investments and Foreclosure Properties. Principal
 and any of its affiliates providing services pursuant to the Agreement shall
 have the right to represent Lender in all communications with any Borrower
 and any others in connection with the administration, servicing and
 enforcement of any Investment or foreclosure property, provided that
 Principal shall have no right or authority, express or implied, to commit or
 otherwise obligate Lender or to encumber Lender’s interest in the Investments
 in any manner whatsoever.


	
 

	
 


	
 

	
          (b)
 Extent of Authority. 








	
 

	
 


	
 

	
 


	
 

	
          (1)
 Principal shall administer the Investments in a manner consistent with the
 terms of the Loan Documents and in accordance with the Standard of Care and
 common industry practice. Lender and Principal each acknowledge that in
 connection with the performance of its responsibilities under this Agreement,
 Principal will receive requests normally incident to the lender - borrower
 relationship, which may include without limitation requests for changes in
 Investment terms, refinancing, partial releases of security, subordination of
 the Lender’s security interests to easements or to other mortgages or chattel
 financing, leasing changes and other matters (each a “Service Request” and
 collectively the “Service Requests”). Principal will review
 each Service Request to determine whether the Service Request is material or
 immaterial. Any Service Request deemed material by Principal will be
 forwarded to Lender with Principal’s recommendation as to appropriate action
 an Lender shall have ten (10) days to respond with its approval or
 disapproval of Principal’s recommendation and if no response is received by
 Principal with in said 10 day limit, then Principal’s recommendation will be
 deemed approved. If Principal determines the Service Request is immaterial,
 Principal will process the Service Request and provide notice to Lender of
 Principal’s action. The following actions shall be considered immaterial:





47







	
 

	
 


	
 

	
          (a)
 permit customary escrow releases permitted in the Loan Documents;


	
 

	
 


	
 

	
          (b)
 permit reasonable extensions of time and variations in compliance (including
 without limitation the waiver of any otherwise applicable “late fee” in
 situations in which Principal determines the delinquency to have been outside
 a borrower’s control) which cannot reasonably be expected to have a material
 adverse effect on the Investment, provided that Principal shall not permit
 more than one such extension in any twelve (12) month period without
 Lender’s prior written approval; 


	
 

	
 


	
 

	
          (c)
 agree to any assignment, termination, modification or amendment of any Leases
 affecting the related Property, provided no such Lease (i) is an anchor
 lease, (ii) covers ten percent (10%) or more of the rentable square
 footage of the Property, or (iii) accounts for ten percent (10%) or
 more of the net income from the Property;


	
 

	
 


	
 

	
          (d)
 approve leases below the threshold set out in the Loan Documents; and 


	
 

	
 


	
 

	
          (e)
 in its commercially reasonable discretion, permit a reasonable extension of
 time for delivery of any financial statements required under the Loan
 Documents.








	
 

	
 


	
 

	
          (2)
 Principal shall consult with Lender and shall provide Lender with Principal’s
 written summary and analysis of Principal’s recommendations with respect to
 any Service Requests deemed material and other than those described in
 clauses (a) through (d) in subparagraph (1) above.


	
 

	
 


	
 

	
          (3)
 Principal shall be free to address those Service Requests described in
 clauses (a) through (e) in subparagraph (1) above as well as any other
 non-material Service Requests without consulting with and without the
 direction of the Lender and may execute on behalf of Lender all documents
 associated with such requests, provided such Service Request does not
 materially and adversely affect the Investment. Principal, exercising
 judgment consistent with the Standard of Care, shall determine the
 materiality of any Service Request.


	
 

	
 


	
 

	
          (4)
 Principal shall provide Lender reasonably prompt notice upon acquiring
 knowledge of any of the following events: (a) any damage to or destruction of
 a material portion of any Property; (b) the occurrence of an environmental
 condition at any Property having material adverse effect on the value of such
 Property; (c) a material default either by the borrower or a tenant under a
 lease; (d) the filing of an action by or against Borrower in which any one or
 more of Lender, Principal or their affiliates are named a party defendant;
 (e) the filing of a material action related to Borrower or any Property by
 Borrower or





48







	
 

	
 


	
 

	
any tenant;
 (f) the occurrence of an Event of Default, as defined in the applicable
 transaction documents, with respect to any Investment; (g) any material
 condemnation or taking by power of eminent domain or any similar proceeding
 with respect to any part of any Property that would materially and adversely
 affect the Property; (h) the occurrence of any material adverse
 financial change in any tenant at any Property; or (i) the occurrence of
 any other event or condition that could reasonably be expected to have a
 material and adverse effect on any Investment or Property.





          2.03.
Duties of Principal as Special Servicer. Principal shall perform, or
cause to be performed, the following activities in accordance with the Standard
of Care with respect to Specially Serviced Investments (as hereinafter
defined). As used herein, “Specially Serviced Investments” shall mean
an Investment that is delinquent more than thirty (30) days or that Principal
has identified as being at risk of imminent default and/or a non-monetary
default, and in either case that Lender has approved to be considered a
Specially Serviced Investment. A Specially Serviced Investment will remain a
Specially Serviced Investment until the Investment has no outstanding default
with no new defaults and has been a performing Investment for three (3)
consecutive months. Principal shall specially service any designated Specially
Serviced Investment in accordance with the approved Special Servicing Plan and
Special Servicing Budget as described below, and Principal shall be compensated
for such Special Servicing as set out in Exhibit C-2 to the MOSA. Lender shall
approve or disapprove such Special Servicing Plan within five (5) business days
following submittal of the Special Servicing Plan to Lender, provided that a
failure of Lender to respond to the submitted Special Servicing Plan within
said five day time period shall be deemed approval of the Special Servicing
Plan. With respect to any approval, Principal shall have the right to rely on
the previously approved Special Servicing Plan and Budget, provided that Lender
shall have the right to require changes to such Special Servicing Budget at any
time thereafter. 


	
 

	
 


	
 

	
As
 Special Servicer, Principal shall: 


	
 

	
 


	
 

	
          (a)
 maintain appropriate delinquency controls including issuing default notices
 to the borrower;


	
 

	
 


	
 

	
          (b)
 coordinate with Lender’s counsel, in-house and local counsel when working on
 Specially Serviced Investments;


	
 

	
 


	
 

	
          (d)
 communicate with the borrower or its representative regarding all defaults,
 as appropriate;


	
 

	
 


	
 

	
          (e)
 develop appropriate work-out proposals, foreclosure strategies, deed-in-lieu
 options, note sales, discounted pay-offs and bankruptcy strategies for
 Lender’s consideration to be incorporated into the Special Servicing Plan and
 Budget and, upon Lender’s written approval thereof, pursue implementation of
 the same;


	
 

	
 


	
 

	
          (f)
 coordinate documentation and implementation of any Specially Serviced
 Investment work-out and negotiate any and all contracts necessary or
 desirable and/or appropriate for the workout and management of the Property;
 provided, however, without





49







	
 

	
 


	
 

	
prior
 written notice to Lender, Principal shall not (x) accelerate the
 Investment (i.e., declare due the entire outstanding indebtedness
 under the Investment) or (y) initiate any action or proceeding to
 foreclose or otherwise obtain title to the Property unless Special Servicing
 Plan and Budget have been previously approved by Lender; 


	
 

	
 


	
 

	
          (g)
 coordinate any Specially Serviced Investment foreclosure or deed-in-lieu of foreclosure
 in accordance with the Special Servicing Plan;


	
 

	
 


	
 

	
          (h)
 inspect and monitor the Property including notices of violations and the
 filing of liens or claims, and monitor all tenant bankruptcies;


	
 

	
 


	
 

	
          (i)
 coordinate the management of any of the Investments that are leased by a
 tenant in bankruptcy;


	
 

	
 


	
 

	
          (j)
 coordinate legal strategies with Lender, in-house counsel, local counsel,
 expert witnesses, etc. in litigation involving Specially Serviced
 Investments; and


	
 

	
 


	
 

	
          (k)
 coordinate transition of any Specially Serviced Investment to Principal’s
 designated asset management team upon acquisition of the property securing an
 Investment (via foreclosure, deed-in-lieu, etc.) unless Principal and Lender
 mutually agree to handle otherwise.





          2.04.
Management of Foreclosures. 


                    (a)
In the event of a proposed foreclosure of any Property associated with any
Investment, Principal shall submit to Lender or a designated entity holding
title to such Investment the Special Servicing Plan, (i) describing the
Investment and the Property securing the Investment, (ii) explaining
Principal’s basis for recommending foreclosure, and (iii) containing a proposed
operating plan which shall include a proposed budget detailing all estimated
costs to be incurred with respect to the foreclosure and during the period of
holding such Property following such foreclosure (a “Special Servicing Budget”).
Principal shall execute any such foreclosure only in accordance with the
approved Special Servicing Plan.


                    (b)
With respect to any approved foreclosure, Principal, on behalf of Lender, may
engage at the expense of Lender (but only in accordance with the approved
Special Servicing Plan) and shall supervise any affiliated or unaffiliated
third parties that Principal engages to perform services necessary or
appropriate for the management, operation, leasing and disposition of such
Investment, including the services of investment principals, leasing agents, construction
principals, contractors, custodians, transfer agents, independent real estate
appraisers, accountants, attorneys, engineers, environmental consultants and
other consultants and service providers of whatever nature to assist Principal
as it shall reasonably see fit in the performance of its duties and obligations
under this Agreement.


          2.05.
Dispositions. 


                    (a)
From time to time, depending upon market conditions, economic forecasts, and
other relevant factors and consistent with the Investment Criteria, Principal
may


50






recommend the
disposition of one or more Investments (or portions of any such Investment). If
Principal determines that a disposition is desirable, Principal will submit to
Lender for consideration by it a proposal for the sale of such Investment,
including, without limitation, a summary of the proposed terms of such
disposition and the basis for Principal’s recommendation of such disposition in
the Special Servicing Plan. Lender’s prior written approval of the Special
Servicing Plan shall be required for Principal to move forward with the
disposition of any Investment or portion thereof. Principal shall also seek to
dispose of an Investment (or portion thereof) upon the request of Lender
holding title to such Investment in accordance with the terms and conditions
required by Lender. Principal shall have no authority to dispose of any portion
of any Investment without the prior written approval of a Special Servicing
Plan or such request of Lender.


                    (b)
Principal shall be authorized to take all action reasonably necessary to
complete any permitted or requested disposition of an Investment within the
parameters of the approved Special Servicing Plan, including (directly or
indirectly through licensed brokers or other independent contractors)
(i) conducting a search for and identifying a potential buyer or buyers,
(ii) structuring the disposition and (iii) preparing and negotiating
a purchase and sale agreement and such other documents, instruments and
certificates for the conveyance and transfer of title as may be customary or
otherwise required. In addition, Principal shall certify to Lender that to
Principal’s knowledge any representation or warranty to be made by Lender in a
purchase and sale agreement with respect to the condition of, or title to, any
Investment being disposed of is true and correct in all material respects.


                    (c)
The proceeds of any disposition of an Investment shall be forwarded immediately
to Lender’s designated account.


          2.06.
Other Servicing Activities. Principal shall perform or shall cause its
affiliate(s) to perform such other customary duties, furnish such reports and
prepare other documents in connection with its duties as servicer under the
Agreement.


          2.07.
Advances. Principal shall notify Lender if funds are needed to advance
for items including, but not limited to, real estate taxes, insurance premiums,
and protective advances. Lender shall make its own determination whether to
advance funds. Under no circumstances shall Principal make or have any
obligation to make any advances for any Investment. 


51






ATTACHMENT 4


ACCOUNTING AND REPORTING SERVICE LEVEL
AGREEMENT


ARTICLE 1.
BACKGROUND.


          1.04.
Objective. Lender and Principal have entered into a Mortgage Origination
and Servicing Agreement of even date (the “Agreement” or “MOSA”), pursuant to which
Principal has agreed to perform certain services relating to the origination,
closing and servicing of commercial mortgage loans and Sub Debt loans
(collectively referenced herein as “Investment” or “Investments”). This
Accounting and Reporting SLA provides a detailed description of the accounting
and reporting services to be provided by Principal relating to the servicing of
the Investments pursuant to the terms of the Servicing Service Level Agreement.
Terms used by not defined herein shall have the meaning ascribed to such terms
in the Agreement.


ARTICLE 2.
ACCOUNTS.


          2.01.
Segregation and Deposit of Funds.


	
 

	
 


	
 

	
          (a)
 Interest/Principal Payments. Principal shall instruct all borrowers
 with respect to all Investments to make all payments of principal and
 interest and any other payments related to the Investments to an account
 established by Principal for the benefit of Lender (the “Collection Account”).
 Lender can request a change of financial institutions where the Collection
 Account is held but Lender and Principal must mutually agree on any such
 change. Principal shall be entitled to all interest earned on funds in the
 Collection Account. Notwithstanding anything in this Section 2.01 or
 elsewhere in this Agreement, Principal or any affiliate shall not
 intentionally commingle with its proprietary account any payments and funds
 received with respect to Investments serviced pursuant to this Agreement as
 to any funds that any borrower submits directly to Principal or payable to
 Principal’s order, and in such event Principal shall not allow such funds to
 be commingled for a period not to exceed two (2) business days.


	
 

	
 


	
 

	
          (b)
 Escrow Accounts. Principal shall cause all payments and funds received
 pursuant to any Investment on account of real estate tax escrows, insurance
 premiums, assessments or similar escrowed amounts to be segregated and held
 in one or more impound accounts separate from any of its own funds and from
 those of other investors, and shall keep a complete account of all such
 funds. Lender can request a change of financial institution where such
 impound accounts are held but Lender and Principal must mutually agree on any
 such change. With respect to any Loan Document which provides for
 disbursement by Lender of escrowed funds to pay real property taxes,
 assessments, any obligation secured by a lien, insurance premiums or other
 charges or which provides for other disbursements from any escrow, Principal
 shall cause the proper party to be paid from the funds deposited, funds
 necessary to satisfy such obligations when due. Any interest or other income
 generated by such funds and not payable to a borrower pursuant





52







	
 

	
 


	
 

	
to the Loan
 Documents shall be retained by Principal. Notwithstanding anything in this
 Section 2.01 or elsewhere in this Agreement, Principal or any affiliate
 shall not intentionally commingle with its proprietary account any payments
 and funds received with respect to Investments serviced pursuant to this
 Agreement as to any funds that any borrower submits directly to Principal or
 payable to Principal’s order, and in such event Principal shall not allow
 such funds to be commingled for a period not to exceed two (2) business days.
 Principal will initially segregate tax and other escrow funds as
 received from borrowers but once Principal has granted approval to a third
 party vendor for payment of the real estate taxes, the funds can be remitted
 to a commingled clearing account that will allow payment to be paid by such
 third party vendor. 





          2.02.
Remittance of Cash. Funds from
Investment payments from or on behalf of borrowers shall be remitted to Lender
on the fifteenth (15th) day of each month or the next business day
if the 15th day of the month is not a business day. Principal will
provide details regarding the funds to be sent Lender on the day on which the
funds are remitted to Lender. Applicable servicing fees shall be handled as set
forth in Exhibit C to the Agreement. Should any funds remitted by Principal to
Lender become NSF, Lender shall return such funds to Principal within two (2)
business days after Principal provides notice to Lender of such NSF funds.


          2.03.
Bank Statements. Principal shall require the applicable depository
institution at which the Collection Account and the impound account are
maintained to provide to Lender regular bank statements concerning any account
maintained with respect to any Investment.


          
2.04. Amortization. Principal will provide an amortization schedule to
Lender for each Investment originated pursuant to the Agreement with the first
remittance of funds to Lender.


ARTICLE 3.
REPORTING REQUIREMENTS.


          3.01.
Monthly Reporting.


	
 

	
 


	
 

	
          (a)
 Principal shall cause complete, accurate and separate records to be kept,
 indicating all amounts due and all payments made with respect to each
 Investment and all income and expenses with respect to each Property that may
 be in foreclosure. 


	
 

	
 


	
 

	
          (b)
 Within ten (10) business days following the end of each month, Principal
 shall deliver to Lender a report containing the following information
 concerning the status of the Investments during the preceding month (such
 information to be compiled both with respect to each Investment and on a
 collective basis with respect to all Investments as of the end of the
 immediately preceding month):








	
 

	
 


	
 

	
          (1)
 A Remittance Report, Holdings Report and List of Payments Due Report,
 including the following information:


	
 

	
 


	
 

	
                    (a)
 The amount of each remittance allocable to principal (including a separate
 breakdown of any principal prepayments);





53







	
 

	
 


	
 

	
                    (b)
 The amount of any prepayment premiums;


	
 

	
 


	
 

	
                    (c)
 The amount of each remittance allocable to interest (including default
 interest);


	
 

	
 


	
 

	
                    (d)
 The sum of all other amounts received;


	
 

	
 


	
 

	
                    (e)
 The unpaid principal balance after application of any payment received in
 that particular month that was allocable to principal; and


	
 

	
 


	
 

	
                    (f)
 The amount of accrued but unpaid interest (if any).


	
 

	
 


	
 

	
          (2)
 The amount of the Servicing Fee and other compensation received by Principal
 during the period covered by such report, together with an explanation of the
 method of calculating such fees if it is a net remittance; 


	
 

	
 


	
 

	
          (3)
 To the extent such information is available to Principal or any affiliate,
 the status and expenses incurred and income received with respect to each
 Property encumbered by an Investment that is in default;


	
 

	
 


	
 

	
          (4)
 An Exception Report detailing delinquencies and prepayments and Investments
 paid in full on an Investment by Investment basis; and


	
 

	
 


	
 

	
          (5)
 A Servicing Activity Report detailing significant servicing issues on an
 Investment by Investment basis, including information on any non-monetary
 defaults which are material or significant.





          3.02.
Annual Reporting. Principal shall deliver to Lender annually within
ten (10) business days of year-end: 


	
 

	
 


	
 

	
          (a)
 A consolidated report detailing receipts, disbursements and amount of all
 funds held by Principal or by any affiliate pursuant to this Agreement;


	
 

	
 


	
 

	
          (b)
 A certificate stating that to the best of Principal’s knowledge but in
 accordance with the terms and provisions of the Agreement, all payments
 required to be made by Principal have been made to the appropriate parties (identifying
 all exceptions, if any), and, upon request by Lender, a report as to the
 status of any specific Investment which report may include information
 concerning the payment of ground rents, taxes, insurance and assessments
 covering such Investment with copies of receipted bills, if so requested and
 available to Principal.





          3.03.
Principal’s Reports. Principal also shall furnish to Lender audited
annual financial statements of Principal prepared in accordance with generally
accepted accounting principles within one hundred and eighty (180) days of
the end of each of its fiscal years.


54






          3.04.
Additional Reports. Lender shall be entitled to request reasonable
changes to the format or contents of each report referred to in this Article 3. Principal shall consider
such requests, and subject to Principal’s ability and desire make such changes
and receipt of a mutually agreed upon fee, shall comply with such request
within a reasonable period of time. Lender may from time to time request
additional information with respect to any Investment from Principal and
Principal agrees to timely provide all such information reasonably requested by
Lender and may charge a reasonable fee for doing so, such information to
include, but not be limited to: statistical data, e.g., the proportions
of the types of collateral in each geographic area, yield received on types of
Investments and the frequency of prepayment or default for types of
Investments. Principal also shall deliver to Lender, promptly upon written
request by Lender in connection with any disposition of an Investment
(including a securitization thereof), an estoppel from Principal confirming, to
Principal’s knowledge, that: (i) no default (or event but for the passage
of time or giving of notice would constitute a default) currently exists (or,
if a default exists, the nature and status of the same); (ii) the
outstanding principal balance and accrued interest; and (iii) the balance
of any impound accounts.


          3.05.
Principal’s books and records shall be maintained in accordance with Section
3.04(c) of the MOSA which shall include, but not be limited to: name and
address of the obligor(s); location of related real estate; original amount of
money invested by Lender; current amount of money invested; scheduled amounts
and dates of the payments due and actual payments made; amount, description of
coverage and expiration date of insurance policies covering the Investments;
and dates of inspections of the real estate.


55