Document:

exhibit106-091509.htm

EXHIBIT 10.6

 

 

 

TRUST INDENTURE

 

 

between

 

 

PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY,

as Issuer

 

 

and

 

 

MANUFACTURERS AND TRADERS TRUST COMPANY,

as Trustee

 

 

Dated as of October 1, 2008

 

 

 

$15,000,000

PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY

Exempt Facilities Revenue Bonds

Series 2008B

(The York Water Company Project)

 

  

  

  

TABLE OF CONTENTS

 

 

ARTICLE I DEFINITIONS 

SECTION 1.1. Definitions. 

SECTION 1.2. Certain Rules of Interpretation. 

 

ARTICLE II THE BONDS 

SECTION 2.1. Authorized Amount and Issuance of Bonds; Disposition of Bond Proceeds. 

SECTION 2.2. Terms of the Bonds.

SECTION 2.3. Reserved. 

SECTION 2.4. Reserved.

SECTION 2.5. Form of Bonds; Execution; Bonds Equally and Ratably Secured; Limited Obligation of the Issuer.

SECTION 2.6. Authentication.

SECTION 2.7. Registration, Transfer and Exchange.

SECTION 2.8. Mutilated, Destroyed, Lost or Stolen Bonds.

SECTION 2.9. Payments of Principal, Redemption Price and Interest; Persons Entitled Thereto.

SECTION 2.10. Temporary Bonds. 

SECTION 2.11. Cancellation of Surrendered Bonds. 

SECTION 2.12. Acts of Registered Owners; Evidence of Ownership. 

SECTION 2.13. Book Entry System.

SECTION 2.14. Payments to Cede & Co.; Payments to Beneficial Owners. 

 

ARTICLE III DEBT SERVICE FUND AND CONSTRUCTION FUND 

SECTION 3.1. Establishment of Funds and Accounts. 

SECTION 3.2. Debt Service Fund. 

SECTION 3.3. Return of Monies from Non-Presentment of Bonds. 

SECTION 3.4. Construction Fund. 

SECTION 3.5. Debt Service Fund Monies to be Held for All Registered Owners, With Certain Exceptions.

SECTION 3.6. Additional Accounts and Subaccounts.

 

ARTICLE IV INVESTMENTS, TAX COVENANTS

SECTION 4.1. Investment of Funds.

SECTION 4.2. Arbitrage Bond Covenant. 

SECTION 4.3. Covenants Regarding Tax Exemption.

ARTICLE V REDEMPTION OF BONDS

SECTION 5.1. Bonds Subject to Redemption. 

SECTION 5.2. Selection of Bonds for Redemption. 

SECTION 5.3. Notice of Redemption.

SECTION 5.4. Effect of Redemption. 

SECTION 5.5. Redemption by the Company in the Event of Death of a Beneficial Owner.

SECTION 5.6. Purchase in Lieu of Redemption.

ARTICLE VI REPRESENTATIONS AND COVENANTS OF THE ISSUER 

SECTION 6.1. General Limitation; Issuer’s Representation.

SECTION 6.2. Payment of Bonds and Performance of Covenants. 

SECTION 6.3. Enforcement of the Loan Agreement.

SECTION 6.4. No Personal Liability.

SECTION 6.5. Exemption from Federal Income Taxation. 

SECTION 6.6. Corporate Existence; Compliance with Laws.

SECTION 6.7. Filings. 

SECTION 6.8. Further Assurances.

SECTION 6.9. Inspection of Books. 

ARTICLE VII EVENTS OF DEFAULT AND REMEDIES 

SECTION 7.1. Events of Default Defined. 

SECTION 7.2. Acceleration and Annulment Thereof.

SECTION 7.3. Legal Proceedings by Trustee.

SECTION 7.4. Discontinuance of Proceedings by Trustee. 

SECTION 7.5. Registered Owners May Direct Proceedings. 

SECTION 7.6. Limitations on Actions by Registered Owners.

SECTION 7.7. Trustee May Enforce Rights Without Possession of Bonds. 

SECTION 7.8. Remedies Not Exclusive. 

SECTION 7.9. Delays and Omissions Not to Impair Rights.

SECTION 7.10. Application of Monies. 

SECTION 7.11. Trustee’s Right to Receiver. 

SECTION 7.12. Trustee and Registered Owners Entitled to All Remedies. 

SECTION 7.13. Waiver of Past Defaults. 

ARTICLE VIII THE TRUSTEE 

SECTION 8.1. Certain Duties and Responsibilities of Trustee.

SECTION 8.2. Notice if Event of Default Occurs or Notice if Taxability Occurs.

SECTION 8.3. Certain Rights of Trustee. 

SECTION 8.4. Not Responsible for Recitals or Issuance of Bonds. 

SECTION 8.5. May Hold Bonds. 

SECTION 8.6. Money Held in Trust. 

SECTION 8.7. Corporate Trustee Required; Eligibility. 

SECTION 8.8. Resignation and Removal of Trustee; Appointment of Successor. 

SECTION 8.9. Acceptance of Appointment by Successor Trustee. 

SECTION 8.10. Merger, Conversion, Consolidation or Succession to Business. 

SECTION 8.11. Fees, Charges and Expenses of Trustee. 

ARTICLE IX AMENDMENTS AND SUPPLEMENTS 

SECTION 9.1. Amendments and Supplements Without Registered Owners’ Consent. 

SECTION 9.2. Amendments With Company and Registered Owners’ Consent. 

SECTION 9.3. Amendments to Loan Agreement. 

SECTION 9.4. Right to Payment. 

ARTICLE X DEFEASANCE

SECTION 10.1. Defeasance. 

SECTION 10.2. Effect of Defeasance. 

ARTICLE XI MISCELLANEOUS PROVISIONS 

SECTION 11.1. Limitations on Recourse; Immunity of Certain Persons.

SECTION 11.2. No Rights Conferred on Others. 

SECTION 11.3. Illegal, Etc. Provisions Disregarded. 

SECTION 11.4. Substitute Publication of Notice. 

SECTION 11.5. Mailed Notice. 

SECTION 11.6. Governing Law.

SECTION 11.7. Successors and Assigns. 

SECTION 11.8. Action by Company. 

SECTION 11.9. Headings and Subheadings for Convenience Only. 

SECTION 11.10. Counterparts. 

SECTION 11.11. Additional Notices to Rating Agencies. 

Exhibit  A—Form of Bond

Exhibit  B—Letter of Representations to DTC

Exhibit  C—Form of Requisition

Exhibit  D—Form of Redemption Request

 

  

  

  

 

This Trust Indenture, dated as of October 1, 2008 (the "Indenture") between the PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY, (the "Issuer"), a public instrumentality of the Commonwealth of Pennsylvania (the "Commonwealth") and a public body corporate and politic organized and existing
under the Pennsylvania Economic Development Financing Law, as amended (as defined herein, the "Act") and MANUFACTURERS AND TRADERS TRUST COMPANY, a New York state chartered bank with trust powers duly organized and existing under the laws of the State of New York with a corporate trust office in Harrisburg, Pennsylvania, as Trustee (the "Trustee"),

W I T N E S S E T H :

 

WHEREAS, the Act declares that there is a critical need for the production of water suitable for public use and consumption, that in order to insure continuing supplies of water resources at reasonable rates, it is necessary to provide additional means of financing projects directed to such
production, and that to protect the health, safety and general welfare of the people of the Commonwealth and to further encourage economic development and efficiency within the Commonwealth by providing basic services and facilities, it is necessary to provide additional or alternative means of financing facilities for the furnishing of water; and

WHEREAS, the Issuer is authorized to enter into agreements providing for the loan financing of "projects" within the meaning of the Act that promote any of the public purposes set forth in the Act; and

WHEREAS, the Issuer has determined to issue $15,000,000 aggregate principal amount of its Exempt Facilities Revenue Bonds, Series 2008B (The York Water Company Project) (the "Bonds") to provide funds to loan to The York Water Company (the "Company") for the financing of (i) a portion
of the Company’s 2008 Capital Budget, including, but not limited to the design, acquisition, construction, improvement, extension, renovation, equipping and installation of (a) various structures, including distribution buildings, booster stations, pumping stations, and various plant and ancillary buildings, (b) spillway upgrades, standpipes, transmission and distribution mains, service lines, meters, fire hydrants, water treatment, pumping and purification equipment, and (c) various other
capital improvements, replacements and equipment for the Company’s water system located throughout York County and Adams County, Pennsylvania, and (ii) the payment of all or a portion of the costs of issuance of the Bonds (the "Project"); and

WHEREAS, the Issuer has entered into a Loan Agreement dated as of October 1, 2008 (including any supplements and amendments thereto, the "Loan Agreement") with the Company providing for the loan by the Issuer to the Company of the proceeds of the Bonds for such purpose and the repayment
of such loan by the Company; and

WHEREAS, the Bonds and the interest thereon are and shall be payable from and secured by a lien on and pledge of the Installment Loan Payments (as hereinafter defined) to be made by the Company pursuant to the Loan Agreement in amounts sufficient to pay at maturity or redemption the principal
of, premium, if any, and interest on the Bonds when due; and

WHEREAS, all things necessary to make the Bonds, when issued, executed and delivered by the Issuer and authenticated by the Trustee pursuant to this Indenture, the valid, legal and binding special obligations of the Issuer, and to constitute this Indenture a valid pledge of certain income
and hereinafter defined Revenues of the Issuer for the payment of the principal of, premium, if any, and interest on the Bonds authenticated and delivered under this Indenture, have been performed and the creation, execution and delivery of this Indenture, and the creation, execution and issuance of the Bonds, subject to the terms hereof, have in all respects been duly authorized;

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

That the Issuer in consideration of the premises, of the acceptance by the Trustee of the trusts hereby created, of the mutual covenants herein contained and of the purchase and acceptance of the Bonds by the Owners thereof, and for other valuable consideration, the receipt of which is hereby
acknowledged, and in order to secure the payment of the principal of, premium, if any, and interest on the Bonds according to their tenor and effect, and the performance and observance by the Issuer of all the covenants and conditions herein and therein contained (a) has executed and delivered this Indenture and (b) has agreed to sell, assign, transfer, set over and pledge, and by these presents does hereby sell, assign, transfer, set over and pledge unto Manufacturers and Traders Trust Company, Harrisburg,
Pennsylvania, as Trustee, and to its successors in trust and its assigns forever, to the extent provided in this Indenture, all of the right, title and interest of the Issuer in and to the Loan Agreement (except for the Unassigned Issuer’s Rights as defined in the Loan Agreement), and all the Revenues of the Issuer, and amounts on deposit in the Construction Fund and Debt Service Fund as hereinafter in this Indenture provided (collectively, the "Trust Estate"); provided, however, that nothing in the Bonds
or in this Indenture shall be construed as pledging the faith or credit or taxing power of the Commonwealth, or any other political subdivision of the Commonwealth, nor shall this Indenture or the Bonds constitute a general obligation of the Issuer, or a debt of the Commonwealth, or any political subdivision thereof;

TO HAVE AND TO HOLD the same unto the Trustee and its successors in trust forever;

IN TRUST NEVERTHELESS, upon the terms and trusts herein set forth for the benefit and security of those who shall hold or own the Bonds issued hereunder, or any of them, without preference of any of said Bonds over any others thereof by reason of priority in the time of the issue or negotiation
thereof or by reason of the date or maturity thereof, or for any other reason whatsoever, except as otherwise provided herein;

IT IS HEREBY COVENANTED, declared and agreed by and between the parties hereto, that all such Bonds are to be issued, authenticated as required by this Indenture, and delivered and that all property subject or to become subject hereto, including the Revenues, is to be held and applied upon
and subject to the further covenants, conditions, uses and trusts hereinafter set forth; and the Issuer, for itself and its successors, does hereby covenant and agree to and with the Trustee and its successors in trust, for the benefit of those who shall hold all of the Bonds, or any of them, as follows:

ARTICLE I                                

 

DEFINITIONS

 

SECTION 1.1. Definitions.

 

Terms used in this Indenture with the initial letter capitalized shall have the meanings specified in this Section 1.1 or if not defined in this Section 1.1, shall have the meanings specified in the recitals or other provisions of the Indenture as applicable.  All words
and terms used in this Indenture and not defined herein shall, if defined in the Loan Agreement, have the meaning set forth therein.  The words "hereof," "herein," "hereto," "hereby," and "hereunder" (except in the Form of Bond) refer to the entire Indenture.  All words and terms importing the singular number shall, where the context requires, import the plural number and vice versa.

"Act" means the Pennsylvania Economic Development Financing Law (Act of August 23, 1967 P. L. 251, No. 102), as amended.  The Act is codified at 73 P.S. § 371 et seq.

"Act of Bankruptcy" means any of the following events:

(i) The Company (or any Person obligated, as guarantor or otherwise, to make payments under the Loan Agreement) shall (a) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee,
liquidator or the like of the Company (or any such other Person obligated, as a guarantor or otherwise, to make payments under the Loan Agreement) or of all or any substantial part of its property, (b) commence a voluntary case under the United States Bankruptcy Code, as now or hereafter in effect and including any amendments thereto, or (c) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts;
or

 

(ii) A proceeding or case shall be commenced in any court of competent jurisdiction, seeking (a) the liquidation, reorganization, dissolution, winding-up, or composition or adjustment of debts, of the Company (or any Person obligated,
as guarantor or otherwise, to make payments under the Loan Agreement), (b) the appointment of a trustee, receiver, custodian, liquidator or the like of the Company (or any Person obligated, as a guarantor or otherwise, to make payments under the Loan Agreement) or of all or any substantial part of its property, or (c) similar relief in respect of the Company (or any such other Person obligated, as a guarantor or otherwise, to make payments under the Loan Agreement) under any law relating to bankruptcy,
insolvency, reorganization, winding-up or composition or adjustment of debts.

 

"Administrative Expenses" means fees and expenses of the Trustee and the Issuer including, without limitation, the reasonable fees and expenses of their counsel and other professional advisors.

"Authorized Representative" means (i) in the case of the Issuer, each person at the time designated to act on behalf of the Issuer by the most recent written certificate furnished to the Company and the Trustee containing the specimen signature of such person and signed on behalf of the Issuer
by its Secretary or Assistant Secretary; and (ii) with respect to each person at the time designated to act on behalf of any other Person (e.g., the Company or the Trustee), by written certificate furnished to the Trustee containing the specimen signature of such other person and signed on behalf of such person, in case of a partnership by each of its general partners (or any other person authorized to sign on behalf of such Partnership) and in the case of a corporation by a person authorized by such corporation
to deliver such certificates.

"Authorized Denominations" means, $5,000 and any whole multiple thereof.

"Beneficial Owners" means the owners of beneficial interests in the Bonds while Bonds are held by a Securities Depository.

"Bond Counsel" means any firm of nationally recognized bond counsel selected by the Issuer and not unsatisfactory to the Trustee or the Company.

"Bond Documents" means the Financing Documents and all other agreements, certificates, documents and instruments delivered in connection with any of the Financing Documents.

"Bond Obligations" means the Debt Service due and payable and to become due and payable, and any other amounts which may be owed by the Company to, or on behalf of, the Issuer or the Trustee under the Bond Documents.

"Bond Resolution" means the resolution of the governing body of the Issuer adopted on September 10, 2008, authorizing the issuance of the Bonds.

"Bonds" means the Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Bonds, Series 2008B (The York Water Company Project) authorized hereunder.

"Business Day" means any day which is not (a) a Saturday, a Sunday or in the City of New York, New York, or the city in which the corporate trust operations office of the Trustee or any duly appointed Paying Agent or the office of the Trustee at which this Indenture is being administered
is located, a day on which banks are authorized or required by law or executive order to be closed, or (b) a day on which the New York Stock Exchange is closed.

"Code" means the Internal Revenue Code of 1986, as amended.

"Construction Fund" means the fund of that name created pursuant to Section 3.1 hereof.

"Dated Date" means the date of delivery of the Bonds.

"Debt Service" means the principal of, premium, if any, and interest on the Bonds.

"Debt Service Fund" means the special fund of that name created pursuant to Section 3.1 hereof.

"Department" means the Department of Community and Economic Development of the Commonwealth.

"Determination of Taxability" means a Final Determination by the Internal Revenue Service or by a court of competent jurisdiction in the United States that, as a result of failure by the Company to observe or perform any covenant, condition or agreement on its part to be observed or performed
under the Loan Agreement or as a result of the inaccuracy of any representation or agreement made by the Company under the Loan Agreement, the interest payable on any Bond is includable in the gross income of the Registered Owner or Beneficial Owner of such Bond (other than a Registered Owner or Beneficial Owner who is a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code).

"Disqualified Contractor" means a Person which has been suspended or debarred by the Commonwealth under its Contractor Responsibility Program, Management Directive 215.9, as amended or replaced by a successive directive rule, regulation or statute from time to time or has been convicted by
a court of competent jurisdiction of a crime for which a term of imprisonment of one year or more could have been imposed, and any Person controlled by a Person which has been so suspended, debarred or convicted.

"DTC" means The Depository Trust Company, acting as Securities Depository, as set forth in Section 2.13 hereof.

"DTC Participant" shall have the meaning assigned from time to time by DTC when used by DTC in reference to a "DTC Participant."

"Event of Default" means any of the events described in Section 7.1 hereof.

"Favorable Opinion of Bond Counsel" means an opinion of Bond Counsel addressed to the Issuer and the Trustee to the effect that the action proposed to be taken is authorized or permitted by the laws of the Commonwealth and this Indenture and will not, in and of itself, adversely affect any
exclusion of interest on the Bonds from gross income of the owners thereof for federal income tax purposes.

"Final Determination" means, with respect to a private letter ruling or a technical advice memorandum of the Internal Revenue Service, written notice thereof in a proceeding in which the Company had an opportunity to participate and, otherwise, means written notice of a determination from
which no further right of appeal exists or from which no appeal is timely filed with the next level of administrative or judicial review in a proceeding to which the Company was a party or in which the Company had the opportunity to participate.

"Financing Documents" means this Indenture, the Loan Agreement, the Tax Documents and the Bonds.

"Government Obligations" means any one or more of the following:

(i) Securities that are direct obligations of the United States of America or securities the timely payment of whose principal and interest is unconditionally guaranteed by the full faith and credit of the United States of America, trust
receipts or other evidence of a direct claim upon the instruments described above, including but not limited to CATS (Certificates of Accrual on Treasury Securities), TIGRS (Treasury Investment Growth Receipts) and Government Trust Certificates; or

 

(ii) To the extent permitted by law for the particular investment contemplated, pre-refunded municipal obligations meeting the conditions set forth in (a) through (e) below:

 

(a) the municipal obligations are (i) not subject to redemption prior to maturity or (ii) the trustee for such municipal obligations has been given irrevocable instructions concerning their calling and redemption and the issuer
of such municipal obligations has covenanted not to redeem such bonds other than as set forth in such instructions; and

 

(b) the municipal obligations are secured by cash or non-callable United States Government Obligations that may be applied only to interest, principal and premium payments of such municipal obligations; and

 

(c) the principal of and interest on such United States Government Obligations (plus any cash in an escrow fund) are sufficient to meet all of the liabilities of the municipal obligations; and

 

(d) the cash and/or United States Government Obligations serving as security for the municipal obligations are held by an escrow agent or trustee; and

 

(e) the United States Government Obligations are not available to satisfy any other claims, including those against the trustee or escrow agent.

 

"Indenture" means this Trust Indenture dated as of October 1, 2008, as hereafter amended and supplemented by any Supplemental Indenture.

"Interest Payment Date" means, with respect to the Bonds, May 1 and November 1 of each year, commencing May 1, 2009.

"Investment Securities" means and includes any of the following securities on which neither the Company nor any of its subsidiaries is the obligor:  (a) Government Obligations or obligations of any United States Government Related Entity or obligations guaranteed or insured
as to principal and interest by the United States of America or any United States Government Related Entity; "United States Government-Related Entity" shall mean the Export-Import Bank of the United States, Farmers Home Administration, Federal Housing Administration, General Services Administration, Government National Mortgage Association, Federal National Mortgage Association, each Federal Home Loan Bank, Federal Home Loan Mortgage Corporation, each Federal Land Bank, each Federal Intermediate Credit Bank,
Banks for Cooperatives and the Farm Credit System and The Student Loan Marketing Association; (b) obligations of a state, a territory, or a possession of the United States, or any political subdivision of any of the foregoing or of the District of Columbia as described in Section 103 of the Code, and rated not less than "A2" by Moody’s or "A" by another Nationally Recognized Statistical Rating Organization ("NRSRO"); split rated investments where one of the ratings falls below the minimum rating
set forth above are not permitted; (c) domestic and eurodollar time deposits, overnight deposits, certificates of deposit and banker’s acceptances (i) maintained at or issued by any office or branch of any bank or trust company organized or licensed under the laws of the United States of America or any state thereof which bank or trust company has capital, surplus and undivided profits of at least $500,000,000, or (ii) maintained at or issued by any bank organized under the laws of a jurisdiction
outside of the United States of America provided that the long term securities of such bank or trust company are rated A or higher (A2 in the case of Moody’s) by at least one NRSRO, in each case maturing not more than 360 days from the date of acquisition thereof; split rated investments where one of the ratings falls below the minimum rating set forth above are not permitted; (d) commercial paper and other instruments that are rated, or that are issued or guaranteed by an issuer that is rated, in
the highest, short term category by at least two NRSROs (A-1 shall be deemed to be the highest short term rating for Standard and Poor’s) and maturing not more than 270 days from the date of acquisition thereof; (e) corporate notes and bonds rated "A" or higher (A2 in the case of Moody’s) by two or more NRSROs maturing not more than 364 days from the date of acquisition thereof; split ratings where one of the ratings falls below the minimum rating set forth above are not permitted; (f) repurchase
and reverse repurchase agreements with any bank (or a broker-dealer subsidiary of affiliate of such bank), provided such bank has combined capital, surplus and undivided profits of at least $500,000,000, or any primary dealer of United States government securities provided that the collateral is limited to the investments described in (a) above; (g) shares of any money market mutual fund registered with the Securities and Exchange Commission as an investment company under the Investment Advisors Act
of 1940, as amended, including any such fund which is managed by the Trustee or one of its affiliates or subsidiaries, including, without limitation, any mutual fund for which the Trustee or an affiliate of the Trustee serves as investment manager, administrator, shareholder servicing agent, and/or custodian or subcustodian, notwithstanding that (i) the Trustee or an affiliate of the Trustee receives fees from such funds for services rendered, (ii) the Trustee charges and collects fees for services
rendered pursuant to this Indenture, which fees are separate from the fees received from such funds, and (iii) services performed for such funds and pursuant to this Indenture may at times duplicate those provided to such funds by the Trustee or its affiliates; and (h) as otherwise permitted by Commonwealth law for such funds.

"Issue Date" means the date on which the Bonds are first authenticated and delivered to the initial purchasers against payment therefor.

"Loan Agreement" means the Loan Agreement dated as of October 1, 2008 between the Issuer and the Company, as hereafter amended and supplemented by any Supplemental Loan Agreement.

"Moody’s" means Moody’s Investors Service, Inc., a corporation organized and existing under the laws of the State of Delaware, its successors and their assigns, and, if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating
agency, "Moody’s" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Company by written notice to the Trustee and the Issuer.

"Outstanding" when used with reference to Bonds means all Bonds authenticated and delivered under this Indenture as of the time in question, except:

(a) All Bonds theretofore canceled or required to be canceled under Section 2.11 hereof;

 

(b) Bonds for the payment or redemption of which provision has been made in accordance with Article X hereof; provided that, if such Bonds are being redeemed, the required notice of redemption shall have been given or provision
satisfactory to the Trustee shall have been made therefor; and

 

(c) Bonds in substitution for which other Bonds have been authenticated and delivered pursuant to Article II hereof.

 

In determining whether the Registered Owners of a requisite aggregate principal amount of Bonds Outstanding have concurred in any request, demand, authorization, direction, notice, consent or waiver under the provisions hereof, Bonds which are owned of record by the Company or any affiliate
thereof shall be disregarded and deemed not to be Outstanding hereunder for the purpose of any such determination (except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Bonds which the Trustee knows to be so owned or held shall be disregarded) unless all Bonds are owned by the Company or any affiliate thereof, in which case such Bonds shall be considered outstanding for the purpose of such determination.  For
the purpose of this definition, an "affiliate" of any specified Person means any other Person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified Person and "control," when used with respect to any specified Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative
to the foregoing.

"Paying Agent" means, initially, the Trustee and any successor.

"Person" means an individual, a corporation, a partnership, an association, a joint stock company, a trust, any unincorporated organization, a governmental body or a political subdivision, a municipal corporation, public corporation or any other group or organization of individuals.

"Rating Agency" means Moody’s or S&P.

"Rebate Fund" means the separate fund, if any, created pursuant to the Tax Documents at the request of the Company and held by the Trustee but not as part of the Trust Estate under this Indenture.

"Register" means the registration books of the Issuer described in Section 2.7(a) hereof.

"Registered Owner" or "Bondholder" or "Owner" means the Person in whose name any Bond is registered pursuant to Section 2.7(a) hereof.

"Regular Record Date" means, with respect to the Bonds, the close of business on the fifteenth day of the month immediately preceding the Interest Payment Date.

"Regulations" means the applicable proposed, temporary or final Income Tax Regulations promulgated under the Code, as such regulations may be amended or supplemented from time to time.

"Revenues of the Issuer" or "Revenues"  means and includes all payments by or on behalf of the Company, including specifically the Installment Loan Payments, under the Loan Agreement to be paid into the Debt Service Fund and all receipts of the Trustee credited against such payments,
but not including payments with respect to the indemnification or reimbursement of certain expenses of the Trustee under Section 6.5 of the Loan Agreement and of the Issuer under Sections 6.6, 7.1 and 8.3 of the Loan Agreement or under any other guaranty or indemnification agreement.

"S&P" means Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc., a corporation organized and existing under the laws of the State of New York, its successors and their assigns, and, if such corporation shall be dissolved or liquidated or shall no
longer perform the functions of a securities rating agency, "S&P" shall be deemed to refer to any other nationally recognized securities rating agency designated by the Company, by notice to the Issuer and the Trustee.

"Securities Depository" means any "clearing agency" registered under Section 17A of the Securities Exchange Act of 1934, as amended.

"Special Mandatory Redemption" means any redemption of Bonds made pursuant to Section 5.1(b) hereof.

"Special Record Date" means the Special Record Date established by the Trustee pursuant to Section 2.9(b)(iii) hereof with respect to payment of overdue interest.

"Supplemental Indenture" means any supplement to this Indenture delivered pursuant to Article IX hereof.

"Supplemental Loan Agreement" means any supplement to the Loan Agreement entered into pursuant to Section 9.3 hereof.

"Tax Documents" means the Tax Certificate as to Arbitrage and Instructions as to Compliance with Provisions of Section 103(a) of the Internal Revenue Code of 1986, as amended, of the Company and the Issuer, dated as of the issuance date of the Bonds, and such other documents as Bond
Counsel may require to be executed and delivered in connection with the issuance of the Bonds relating to their tax status under the Code.

"Trust Estate" means the trust estate as defined in the granting clauses in this Indenture.

"Underwriting Agreement" means, with respect to the Bonds, the Bond Purchase Agreement dated October __, 2008 among the Issuer, the Company and Edward D. Jones and Co., LP, as underwriter, providing for the purchase and sale of the Bonds.

"United States Government Obligations" means direct obligations of, or obligations the full and timely payment of which are unconditionally guaranteed by, the United States of America.

SECTION 1.2. Certain Rules of Interpretation.

 

(a) The definitions set forth in Article I and in the Loan Agreement shall be equally applicable to both the singular and plural forms of the terms therein defined and shall cover all genders.

 

(b) "Herein," "hereby," "hereunder," "hereof," "hereinbefore," "hereinafter" and other equivalent words refer to this Indenture and not solely to the particular Article, Section or Subdivision hereof in which such word is used.

 

(c) Reference herein to an article number (e.g., Article IV) or a section number (e.g., Section 6.2)
shall be construed to be a reference to the designated article number or section number hereof unless the context or use clearly indicates another or different meaning or intent.

 

(d) Words of the masculine gender shall mean and include correlative words of the feminine and neuter genders and words importing the singular number shall mean and include the plural number and vice versa.

 

(e) Words importing persons shall include firms, associations, partnerships (including limited partnerships), trusts, corporations and other legal entities, including public bodies, as well as natural persons.

 

(f) Any headings preceding the text of the several Articles and Sections of this Indenture, and any table of contents appended to copies hereof, shall be solely for convenience of reference and shall not constitute a part of this Indenture,
nor shall they affect its meaning, construction or effect.

 

(g) References to statutes or regulations are to be construed as including all statutory or regulatory provisions consolidating, amending or replacing the statute or regulation referred to; and references to agreements and other contractual
instruments shall be deemed to include any exhibits and appendices attached thereto and all amendments, supplements and other modifications to such instruments, but only to the extent such amendments, supplements and other modifications are not prohibited by the terms of this Indenture.

 

(h) Whenever in this Indenture, the Issuer, the Company or the Trustee is named or referred to, it shall include, and shall be deemed to include, its respective successors and assigns whether so expressed or not.  All of the
covenants, stipulations, obligations and agreements by or on behalf of, and other provisions for the benefit of, the Issuer, the Company and the Trustee contained in this Indenture shall inure to the benefit of such respective successors and assigns, bind and shall, inure to the benefit of any officer, board, commission, authority, agency or instrumentality to whom or to which there shall be transferred by or in accordance with law any right, power or duty of the Issuer or of its successors or assigns, the possession
of which is necessary or appropriate in order to comply with any such covenants, stipulations, obligations, agreements or other provisions of this Indenture.

 

(i) Every "request," "order," "demand," "application," "appointment," "notice," "statement," "certificate," "consent," "direction" or similar action hereunder by persons referred to herein shall, unless the form thereof is specifically
provided, be in writing and signed by an Authorized Representative of the person giving it.

 

ARTICLE II                                

 

THE BONDS

 

SECTION 2.1. Authorized Amount and Issuance of Bonds; Disposition of Bond Proceeds.

 

Upon the execution and delivery of this Indenture, the Issuer shall execute the Bonds and deliver them to the Trustee for authentication.  At the written direction of the Issuer, the Trustee shall authenticate the Bonds, and deliver them to the purchasers thereof upon receipt by
the Trustee of the amount due the Issuer for the initial delivery of the Bonds pursuant to the terms of the Underwriting Agreement by wire transfer of immediately available funds.  The proceeds of the Bonds shall be deposited by the Trustee in a settlement account and disbursed or transferred as follows:  (a) transfer to the Debt Service Fund, established pursuant to Section 3.1 hereof, a sum equal to the accrued interest, if any, paid by the initial purchasers of the Bonds; (b) disburse
amounts set forth in a Closing Statement executed by the Issuer and the Company to pay Costs of Issuance of the Bonds; and (c) transfer to the Construction Fund, established pursuant to Section 3.1 hereof, the balance of the proceeds received from the initial purchasers of the Bonds.  The total principal amount of the Bonds that may be issued hereunder is hereby expressly limited to $15,000,000, except as provided in Section 2.8 hereof.

SECTION 2.2. Terms of the Bonds.

 

The Bonds shall be designated "Pennsylvania Economic Development Financing Authority Exempt Facilities Revenue Bonds, Series 2008B (The York Water Company Project)" and shall be issuable only as fully registered Bonds without coupons in Authorized Denominations.  Unless the
Issuer shall otherwise direct, the Bonds shall be numbered separately from 1 upward.  The Bonds shall be dated as of the Dated Date and shall mature, subject to prior redemption upon the terms and conditions hereinafter set forth, on November 1, 2038.  The Bonds shall bear interest at the rate of 6.00% per annum, from and including the date thereof until payment of the principal or redemption price thereof shall have been made or provided for in accordance with the provisions hereof,
whether at maturity, upon redemption or otherwise.  Each Bond shall bear interest on overdue principal and premium, if any, and, to the extent permitted by law, on overdue interest at the rate of interest borne by the Bonds.

Optional Redemption. The Bonds shall be subject to redemption by the Issuer, at the direction of the Company, on or after November 1, 2013, in whole or in part at any time, in Authorized Denominations, at a redemption price
of 100% of the principal amount redeemed plus accrued interest, if any, to the redemption date.

Special Mandatory Redemption.  The Bonds are also subject to Special Mandatory Redemption as set forth in Section 5.1(b) hereof.

Redemption by the Company in the Event of Death of a Beneficial Owner.  The Bonds are subject to Redemption by the Company in the Event of Death of a Beneficial Owner as set forth in Section 5.5 hereof.

SECTION 2.3. Reserved.

 

SECTION 2.4. Reserved.

 

SECTION 2.5. Form of Bonds; Execution; Bonds Equally and Ratably Secured; Limited Obligation of the Issuer.

 

(a) The Bonds shall be substantially in the form of Exhibit A attached to this Indenture and made a part hereof, with appropriate insertions, deletions and modifications to reflect the terms of the Bonds. The Bonds shall be executed
on behalf of the Issuer with the manual or facsimile signature of its Chairman, Executive Director, or the Deputy Secretary for Business Assistance, Pennsylvania Department of Community and Economic Development (the "Deputy Secretary") and attested by the manual or facsimile signature of its Assistant Secretary, and shall have impressed or imprinted thereon the official seal of the Issuer or a facsimile thereof.  All authorized facsimile signatures shall have the same force and effect as if manually
signed.  In case any official whose signature or a facsimile of whose signature shall appear on the Bonds shall cease to be such official before the delivery of such Bonds, such signature or such facsimile shall nevertheless be valid and sufficient for all purposes, the same as if such official had remained in office until delivery.

 

(b) The Bonds shall be equally and ratably secured under the Indenture, except as otherwise expressly provided herein.  The Bonds, together with premium, if any, and interest thereon, shall be special, limited obligations of
the Issuer secured by the Trust Estate and payable solely from the Revenues (except to the extent paid out of monies attributable to the Bond proceeds or the income from the temporary investment thereof) and shall be a valid claim of the respective owners thereof only against the Debt Service Fund and the Construction Fund and the Revenues, which Revenues shall be used for no other purpose than to pay the principal of, and premium, if any, and interest on, the Bonds, except as may be otherwise expressly authorized
in this Indenture.  The Bonds are limited obligations of the Issuer and are payable solely from amounts payable by the Company under the Loan Agreement and any funds held under the Indenture and available for such payment.  Neither the Commonwealth of Pennsylvania, nor any political subdivision thereof is or shall be obligated to pay the principal of or premium, if any, or interest on the Bonds, and the Bonds shall not be deemed an obligation
of the Commonwealth of Pennsylvania, or any political subdivision thereof.  Neither the faith and credit nor the taxing power of the Commonwealth of Pennsylvania, or any political subdivision thereof is pledged to the payment of the principal of or premium, if any, or the interest on the Bonds.  The Issuer has no taxing power.

 

(c) All covenants, promises, agreements, duties and obligations of the Issuer set forth in the Financing Documents shall be solely the covenants, promises, agreements, duties and obligations of the Issuer and shall not be deemed to be,
or be, the covenants, promises, agreements, duties or obligations of any member, officer, employee or agent of the Issuer or the Commonwealth in his or her individual capacity, and no recourse shall be had for the payment of the principal of, or interest on the Bonds or any other amount payable hereunder or in connection herewith, or for any claim based hereon or on the Bonds or the Loan Agreement, against any such member, officer, employee or agent in his or her individual capacity.

 

SECTION 2.6. Authentication.

 

No Bonds shall be valid for any purpose hereunder until the  certificate of authentication printed thereon is duly executed by the manual signature of an authorized signatory of the Trustee, acting as authenticating agent.  Such authentication or registration shall be
proof that the Registered Owner is entitled to the benefit of the trusts hereby created.  The certificate of the Trustee may be executed by any person authorized by the Trustee, and it shall not be necessary that the same authorized person sign the certificates of authentication of all Bonds.

SECTION 2.7. Registration, Transfer and Exchange.

 

(a) The ownership of each Bond shall be recorded in the registration books of the Issuer, which books shall be kept by the Trustee, acting as bond registrar, at its designated corporate trust operations office and shall contain such information
as is necessary for the proper discharge of the duties of the Trustee hereunder.

 

(b) Bonds may be transferred or exchanged as follows:  Any Bond may be transferred if endorsed for such transfer by the Registered Owner thereof and surrendered by such Registered Owner or his duly appointed attorney to the
Trustee at its designated corporate trust operations office, whereupon the Trustee shall authenticate and deliver to the transferee a new Bond or Bonds in the same denominations as the Bond surrendered for transfer or in different Authorized Denominations equal in the aggregate to the principal amount of the surrendered Bond.

 

(i) Any Bond or Bonds may be exchanged for one or more Bonds and in the same principal amount, but in a different Authorized Denomination or Authorized Denominations.  Each Bond so to be exchanged shall be surrendered by the
Registered Owner thereof or his duly appointed attorney to the Trustee at its designated corporate trust operations office, whereupon a new Bond or Bonds shall be authenticated and delivered to the Registered Owner.

 

(ii) In the case of any Bond properly surrendered for partial redemption, the Trustee shall authenticate and deliver a new Bond in exchange therefor, such new Bond to be in an Authorized Denomination equal to the unredeemed principal
amount of the surrendered Bond without cost to the Owner; provided that, at its option, the Trustee may certify the amount and date of partial redemption  upon the partial redemption certificate, if any, printed on the surrendered Bond and return such surrendered Bond to the Registered Owner in lieu of an exchange.

 

(iii) No additional resolutions need be adopted by the governing body of the Issuer or any other body or person so as to accomplish the foregoing conversion and exchange or replacement of any Bond or portion thereof, and the Trustee shall
provide for the completion, authentication, and delivery of the substitute Bonds in the manner prescribed herein.

 

Except as provided in subparagraph (iii) above, the Trustee shall not be required to effect any transfer or exchange during the fifteen (15) days immediately preceding the date of mailing of any notice of redemption or at any time following the mailing of any such notice in the
case of Bonds selected for such redemption.  No charge shall be imposed upon Registered Owners in connection with any transfer or exchange, except for taxes or governmental charges related thereto.  No transfers or exchanges shall be valid for any purposes hereunder except as provided above.

SECTION 2.8. Mutilated, Destroyed, Lost or Stolen Bonds.

 

(a) If any Bond is mutilated, lost, stolen or destroyed, the Registered Owner thereof shall be entitled to the issuance of a substitute Bond provided that:

 

(i) in all cases, the Registered Owner must provide indemnity to the Issuer, the Company and the Trustee satisfactory to each such party to be indemnified against any and all claims arising out of or otherwise related to the issuance
of substitute Bonds pursuant to this Section;

 

(ii) in the case of a mutilated Bond the Registered Owner shall surrender the Bond to the Trustee for cancellation; and

 

(iii) in the case of a lost, stolen or destroyed Bond, the Registered Owner shall provide evidence, satisfactory to the Trustee, of the ownership and the loss, theft or destruction of the affected Bond.

 

Upon compliance with the foregoing, a new Bond of like tenor and denomination, executed by the Issuer, shall be authenticated by the Trustee and delivered to the Registered Owner, all at the expense of the Registered Owner to whom the substitute Bond is delivered.  Notwithstanding
the foregoing, the Trustee shall not be required to authenticate and deliver any substitute for a Bond which has been called for redemption or which has matured or is about to mature and, in any such case, the principal or redemption price then due or becoming due shall be paid by the Trustee in accordance with the terms of the mutilated, lost, stolen or destroyed Bond without substitution therefor.

(b) Every Bond issued pursuant to this Section 2.8 shall constitute an additional contractual obligation of the Issuer, whether or not the Bond alleged to have been destroyed, lost or stolen shall be at any time enforceable by anyone,
and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Bonds duly issued hereunder.

 

(c) All Bonds shall be held and owned upon the express condition that the foregoing provisions are exclusive with respect to the replacement or payment of mutilated, destroyed, lost or stolen Bonds, and shall preclude any and all other
rights or remedies, unless expressly inconsistent with any law or statute existing or hereafter enacted with respect to the replacement or payment of negotiable instruments, investments or other securities without their surrender.

 

SECTION 2.9. Payments of Principal, Redemption Price and Interest; Persons Entitled Thereto.

 

(a) The principal or redemption price of each Bond shall be payable in lawful money of the United States of America upon surrender of such Bond to the designated corporate trust operations office of the Trustee, initially in Harrisburg,
Pennsylvania.  Such payments shall be made to the Registered Owner of the Bond so surrendered, as shown on the registration books maintained by the Trustee on the date of payment.

 

(b) Each Bond shall bear interest and be payable in lawful money of the United States of America as to interest as follows:

 

(i) Each Bond shall bear interest (A) from the date of authentication, if authenticated on an Interest Payment Date to which interest has been paid or duly provided for, or (B) from the last preceding Interest Payment Date to
which interest has been paid or duly provided for (or the Dated Date if no interest thereon has been paid) in all other cases.

 

(ii) Subject to the provisions of subparagraph (iii) below, the interest due on any Bond on any Interest Payment Date shall be paid to the Registered Owner of such Bond as shown on the registration books kept by the Trustee as of
the Regular Record Date.  The amount of interest payable on any Interest Payment Date shall be computed on the basis of a 360-day year of twelve (12) 30-day months.

 

(iii) If the funds available under this Indenture are insufficient on any Interest Payment Date to pay the interest then due, the Regular Record Date shall no longer be applicable with respect to the Bonds.  If sufficient funds
for the payment of such overdue interest thereafter become available, the Trustee shall immediately establish a special interest payment date for the payment of the overdue interest and a Special Record Date (which shall be a Business Day) for determining the Registered Owners entitled to payments.  Notice of such date so established shall be mailed by the Trustee to each Owner at least ten (10) days prior to the Special Record Date, but not more than thirty (30) days prior to the special interest payment
date.  The overdue interest shall be paid on the special interest payment date to the Registered Owners, as shown on the registration books kept by the Trustee as of the close of business on the Special Record Date.

 

(c) Interest due at the maturity or redemption of the Bonds shall be paid only upon presentation and surrender of Bonds at the corporate trust operations office of the Trustee in Harrisburg, Pennsylvania or such other office as may be
designated by the Trustee in writing to the Issuer, the Company and the Owners of the Bonds.

 

(d) All Bonds issued hereunder are and are to be, to the extent provided in this Indenture, equally and ratably secured by this Indenture without preference, priority or distinction on account of the actual time or times of the authentication,
delivery or maturity of the Bonds so that, subject as aforesaid, all Bonds at any time Outstanding hereunder shall have the same right, lien and preference under and by virtue of this Indenture and shall all be equally and ratably secured hereby with like effect as if they had all been executed, authenticated and delivered simultaneously on the date hereof, whether the same, or any of them, shall actually be disposed of at such date, or whether they, or any of them, shall be disposed of at some future date.

 

SECTION 2.10. Temporary Bonds.

 

Pending preparation of definitive Bonds, the Issuer may issue, in lieu of definitive Bonds, one or more temporary printed or typewritten Bonds in Authorized Denominations, of substantially the tenor recited above.  At the written request of the Issuer, the Trustee shall authenticate
definitive Bonds in exchange for and upon surrender of an equal principal amount of temporary  Bonds.  Until so exchanged, temporary  Bonds shall have the same rights, remedies and security hereunder as definitive Bonds.  Temporary Bonds shall be numbered consecutively upward from TR-1.

SECTION 2.11. Cancellation of Surrendered Bonds.

 

The Trustee shall cancel (a) all Bonds surrendered for transfer or exchange, for payment at maturity or for redemption (unless the surrendered Bond is to be partially redeemed and the Trustee elects to return the Bond, certified as to the partial redemption, to the Registered Owner thereof
pursuant to Section 2.7(b)(ii)), and (b) all Bonds purchased at the direction of the Company and surrendered to the Trustee for cancellation.  The Trustee shall deliver to the Issuer a certificate of cancellation in respect of all Bonds canceled in accordance with this Section.

SECTION 2.12. Acts of Registered Owners; Evidence of Ownership.

 

Any action to be taken by Registered Owners may be evidenced by one or more concurrent written instruments of similar tenor signed or executed by such Registered Owners in person or by an agent appointed in writing.  The fact and date of the execution by any Person of any such instrument
may be proved by acknowledgment before a notary public or other officer empowered to take acknowledgments or by an affidavit of a witness to such execution.  Any action by the Registered Owner of any Bond shall bind all future Registered Owners of the same Bond in respect of anything done or suffered by the Issuer or the Trustee in pursuance thereof.

SECTION 2.13. Book Entry System.

 

(a) DTC will act as Securities Depository for the Bonds.  The Bonds shall be initially issued in the form of a single fully registered Bond registered in the name of Cede & Co. (DTC’s partnership nominee).  So
long as Cede & Co. is the Registered Owner of the Bonds, as nominee of DTC, references herein to Registered Owners, Bondholders or holders or Owners of the Bonds shall mean Cede & Co. and shall not mean the beneficial owners of the Bonds.

 

(b) The ownership interest of each of the Beneficial Owners of the Bonds will be recorded through the records of a DTC Participant.  Transfers of beneficial ownership interests in the Bonds which are registered in the name of
Cede & Co. will be accompanied by book entries made by DTC and, in turn, by the DTC Participants who act on behalf of the Beneficial Owners of the Bonds.

 

(c) With respect to Bonds registered in the name of Cede & Co., as DTC’s nominee, the Issuer and the Trustee shall have no responsibility or obligation to any DTC Participant or to any person on behalf of whom such a DTC Participant
holds an interest in the Bonds, except as provided in this Indenture.  Without limiting the immediately preceding sentence, the Issuer and the Trustee shall have no responsibility or obligation with respect to (i) the accuracy of the records of DTC, Cede & Co. or any DTC Participant with respect to any ownership interest in the Bonds, (ii) the delivery to any DTC Participant or any other person, other than a Bondholder, as shown on the registration books, of any notice with respect to
the Bonds, including any notice of redemption, or (iii) the payment to any DTC Participant or any other person, other than a Registered Owner, as shown in the registration books of any amount with respect to principal of, premium, if any, or interest on, the Bonds.

 

(d) Notwithstanding any other provisions of this Indenture to the contrary, the Issuer and the Trustee shall be entitled to treat and consider the person in whose name each Bond is registered in the registration books as the absolute
owner of such Bond for the purpose of payment of principal, premium, if any, and interest with respect to such Bond, for the purpose of giving notices of redemption and other matters with respect to such Bond, for the purpose of registering transfers with respect to such Bond, and for all other purposes whatsoever.  The Trustee shall pay all principal of, premium, if any, and interest on the Bonds only to or upon the order of the respective owners, as shown in the registration books as provided in this
Indenture, or their respective attorneys duly authorized in writing, and all such payments shall be valid and effective to fully satisfy and discharge the Issuer’s obligations with respect to payment of principal of, premium, if any, and interest on, the Bonds to the extent of the sum or sums so paid.

 

(e) No person other than a Registered Owner, as shown in the registration books, shall receive a Bond certificate evidencing the obligation of the Issuer to make payments of principal, premium, if any, and interest, pursuant to this Indenture.

 

(f) Any provision of this Indenture permitting or requiring the delivery of Bonds shall, while the book-entry system is in effect, be satisfied by the notation on the books of DTC or a DTC Participant, if applicable, of the transfer of
the Beneficial Owner’s interest in such Bond.

 

(g) So long as the book-entry system is in effect, the Trustee and the Issuer shall comply with the terms of the Letter of Representations, a copy of which is attached hereto as Exhibit B and made a part hereof, or an alternate Letter
of Representations as required by DTC.

 

(h) DTC may determine to discontinue providing its service with respect to the Bonds at any time by giving reasonable written notice and all relevant information on the Beneficial Owners of the Bonds to the Issuer or the Trustee and discharging
its responsibilities with respect thereto under applicable law.  If there is no successor Securities Depository appointed by the Issuer, the Trustee shall authenticate and deliver Bonds to the Beneficial Owners thereof in accordance with the information respecting the Beneficial Owners provided to the Trustee by DTC, but without any liability on the part of the Issuer or the Trustee for the accuracy of such information.  The Issuer, at the direction of the Company, may determine not to continue
participation in the system of book entry transfers through DTC (or a successor Securities Depository) at any time by giving reasonable written notice to DTC (or a successor Securities Depository) and the Trustee.  In such event, the Issuer shall execute and deliver to the Trustee, and the Trustee shall authenticate and deliver the Bonds to the Beneficial Owners thereof in accordance with the information respecting the Beneficial Owners provided to the Trustee by DTC, but without any liability on the
part of the Issuer or the Trustee for the accuracy of such information.

 

The Chairman, Executive Director or Deputy Secretary of the Issuer is hereby authorized to execute any additional Letter of Representations or similar document necessary from time to time to continue or provide for the DTC book-entry system.

SECTION 2.14. Payments to Cede & Co.; Payments to Beneficial Owners.

 

(a) Notwithstanding any other provision of this Indenture to the contrary, so long as any Bond is registered in the name of Cede & Co., as nominee of DTC, all payments with respect to principal of, premium, if any, and interest on,
such Bond and all notices with respect to such Bond shall be made and given, respectively, pursuant to DTC’s rules and procedures.

 

(b) Payments by the DTC Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is now the case with municipal securities held for the accounts of customers in bearer form or registered
in "street name," and will be the responsibility of such DTC Participant and not of DTC, the Trustee or the Issuer, subject to any statutory and regulatory requirements as may be in effect from time to time.

 

ARTICLE III                                

 

DEBT SERVICE FUND AND CONSTRUCTION FUND

 

SECTION 3.1. Establishment of Funds and Accounts.

 

The Issuer hereby establishes with the Trustee trust funds designated the Debt Service Fund and the Construction Fund.

SECTION 3.2. Debt Service Fund.

 

Monies in the Debt Service Fund shall be held in trust for the Bondholders and, except as otherwise expressly provided herein, shall be used solely for the payment of the interest on the Bonds and for the payment of principal of or premium, if any, on the Bonds upon maturity, whether stated
or accelerated, or upon redemption thereof pursuant to Article V hereof.  The Issuer hereby authorizes and directs the Trustee, and the Trustee hereby agrees, to withdraw and make available at its designated office sufficient funds (to the extent available) from the Debt Service Fund to pay the principal of, premium, if any, and interest on the Bonds as the same become due and payable, which authorization and direction the Trustee hereby accepts.

SECTION 3.3. Return of Monies from Non-Presentment of Bonds.

 

In the event any Bond shall not be presented for payment when the principal thereof becomes due, either at maturity, at the date fixed for redemption thereof, or otherwise, and is not thereafter presented for payment, any funds which shall be held for the payment of such principal or redemption
price and which remain unclaimed by the Owner of the Bond not presented for payment for a period of two (2) years after such due date thereof, shall, upon request in writing by the Company to the Trustee, and subject to applicable unclaimed property or similar law of the Commonwealth, be paid by the Trustee to the Company.  The owners of the Bonds for which the related deposit was made shall thereafter be limited to a claim against the Company for such monies without interest thereon and only to the
extent the related deposit was repaid to the Company.

SECTION 3.4. Construction Fund.

 

The net proceeds of the sale of the Bonds, after deposit of any accrued interest thereon in the Debt Service Fund and payment of Costs of Issuance pursuant to Section 2.1 hereof, shall be deposited by the Trustee in the Construction Fund and shall be used to pay Project Costs as provided
in Section 3.2 of the Loan Agreement.  The Trustee shall disburse monies from the Construction Fund upon receipt of requisitions signed by the Company substantially in the form attached to this Indenture as Exhibit C.  Any amounts remaining after delivery of the certificate of completion pursuant to Section 3.3 of the Loan Agreement shall be used by the Trustee as provided in Section 3.3 of the Loan Agreement.

SECTION 3.5. Debt Service Fund Monies to be Held for All Registered Owners, With Certain Exceptions.

 

Until applied as herein provided, monies and investments held in the Debt Service Fund shall be held in trust for the benefit of the Registered Owners of all Outstanding Bonds, except that on and after the date on which the interest on or principal or redemption price of any particular Bond
or Bonds is due and payable from the Debt Service Fund, the unexpended balance of the amount deposited or reserved in such fund for the making of such payments shall, to the extent necessary therefor, be held for the benefit of the Registered Owner or Registered Owners entitled thereto.

SECTION 3.6. Additional Accounts and Subaccounts.

 

At the written request of the Company, the Trustee shall establish and maintain additional accounts or subaccounts within the Debt Service Fund or Construction Fund as the Company may reasonably request; provided that (a) in each  case, the written request of the Company shall set
forth in reasonable detail the sources of deposits into and disbursements from the account or subaccount to be established, and (b) in each case, the sources of deposits into and disbursements from the account or subaccount to be established shall be limited to the sources of deposits permitted or required to be made into and the disbursements permitted or required to be made from the fund or account within which it is to be established.

ARTICLE IV                                

 

INVESTMENTS, TAX COVENANTS

 

SECTION 4.1. Investment of Funds.

 

Pending disbursement of the amounts on deposit in the Debt Service Fund (other than any monies held by the Trustee to pay the principal of, premium, if any, or interest which has previously become payable with respect to the Bonds which shall only be invested as provided below in the next
succeeding paragraph) and the Construction Fund as provided herein, the Trustee is hereby directed to invest and reinvest such amounts in Investment Securities promptly upon receipt of, and, subject to the limitations set forth in this Article, in accordance with the written instructions of the Company.  In the event no such instructions are received by the Trustee, such amounts shall be invested in Investment Securities described in clause (g) of the definition thereof, pending receipt of such investment
instructions.  All such investments, as well as the investments described in the next succeeding paragraph, shall be credited to the fund (and account and subaccount therein) from which the money used to acquire such investments shall have come, and all income and profits on such investments shall be credited to, and all losses thereon shall be charged against, such fund (and account and subaccount therein).  As amounts invested are needed for disbursement from the Debt Service Fund or the
Construction Fund, the Trustee shall cause a sufficient amount of the investments credited to that fund to be redeemed or sold and converted into cash to the credit of that fund (and account and subaccount therein).  The Trustee shall not be liable or responsible for any loss resulting from any such investment or reinvestment or redemption or sale as herein authorized; except that the Trustee shall be liable for any loss resulting from its willful or grossly negligent failure, within a reasonable time
after  receiving the direction from the Company to make any investment or reinvestment in the manner provided for herein at the Company’s direction.  If the Trustee is unable, after reasonable effort and within a reasonable time, to make any such investment or reinvestment, it shall so notify the Company in writing and thereafter the Trustee shall be relieved of all responsibility with respect thereto.  The Trustee may make any and all such investments through its own investment
department or that of its affiliates or subsidiaries.

Notwithstanding anything to the contrary contained herein, any monies held by the Trustee to pay the principal of, premium, if any, or interest which has previously become payable with respect to the Bonds shall only be invested by the Trustee overnight in United States Government Obligations
or other Investment Securities rated AAA or Aaa by each Rating Agency then rating the Bonds as directed in writing by the Company.

The Company by its execution of the Loan Agreement covenants to restrict the investment of money in the funds created under this Indenture in such manner and to such extent, if any, as may be necessary, after taking into account reasonable expectations at the time the Bonds are delivered
to their original purchaser, so that the Bonds will not constitute arbitrage bonds under Section 148 of the Code and the Regulations, and the Trustee hereby agrees to comply with the Company’s written instructions with respect to the investment of money in the funds created under this Indenture so long as such instructions conform to the requirements of the Indenture.

Notwithstanding the foregoing, the Company will not direct the Trustee to make investments under this Indenture that conflict with or exceed the limitations set forth in the Tax Documents.  The Trustee shall have no responsibility with respect to the compliance by the Company or
the Issuer with respect to any covenant herein regarding investments made in accordance with this Article, other than to use its best reasonable efforts to comply with instructions from the Company regarding such investments.  Since the investments permitted by this Section have been included at the request of the Company and the making of such investments will be subject to the Company’s written direction, the Issuer and the Trustee specifically disclaim and shall not have any obligation to the
Company for any loss arising from, or tax consequences of, investments pursuant to the provisions of this Section.  Confirmations are not required from the Trustee for permitted investments included in a monthly statement rendered by the Trustee, and no statement need be rendered by the Trustee for any fund or account if no investment or income accrual activity occurred in such fund or account during such month.

SECTION 4.2. Arbitrage Bond Covenant.

 

With respect to the authority to invest funds granted in this Indenture, the Issuer hereby covenants with the Bondholders that, subject to the Company’s direction of the investment of funds, it will make no use of the proceeds of the Bonds, or any other funds which may be deemed to
be proceeds of the Bonds pursuant to Section 148 of the Code, which would cause the Bonds to be "arbitrage bonds" within the meaning of such Section.

The Trustee shall provide such information as the Company may reasonably request in writing to enable the Company to calculate the amount of earnings on the monies held under this Indenture.

SECTION 4.3. Covenants Regarding Tax Exemption.

 

The Issuer covenants to refrain from any action which would adversely affect, or to take such action as is reasonable and available and within its control to assure, the treatment of the Bonds as obligations described in Section 103(a) of the Code, the interest on which is not included
in the "gross income" of the holder (other than the income of a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code) for purposes of federal income taxation.

ARTICLE V                                

 

REDEMPTION OF BONDS

 

SECTION 5.1.   Bonds Subject to Redemption.

 

(a) Optional Redemption.  The Bonds are subject to optional redemption as set forth in Section 2.2 hereof.

 

(b) Special Mandatory Redemption of the Bonds.  The Bonds are subject to Special Mandatory Redemption prior to maturity not later than 180 days after the
Company has notice or actual knowledge of the occurrence of a Determination of Taxability at a redemption price equal to 100% of the principal amount thereof, plus accrued interest, if any, to the redemption date.  Any such Special Mandatory Redemption shall be in whole unless the Company delivers to the Trustee an opinion of Bond Counsel that redemption of a portion of the Bonds Outstanding would have the result that interest payable on the Bonds remaining Outstanding after such redemption would not
be includable for federal income tax purposes in the gross income of any Owner or Beneficial Owner of a Bond (other than an Owner or Beneficial Owner who is a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code and the applicable regulations thereunder), and in such event the Bonds or portions thereof (in Authorized Denominations) shall be redeemed at such times and in such amounts as Bond Counsel shall so direct in such opinion.

 

If the Trustee receives written notice from any Owner stating that (i) the Owner has been notified in writing by the Internal Revenue Service that it proposes to include the interest on any Bond in the gross income of such Owner for the reasons stated in the definition of "Determination
of Taxability" set forth herein or any other proceeding has been instituted against such Owner which may lead to a Final Determination, and (ii) such Owner will afford the Company the opportunity to contest the same, either directly or in the name of the Owner, and until a conclusion of any appellate review, if sought, then the Trustee shall promptly give notice thereof to the Company and the Issuer and to the Owners of Bonds then Outstanding.  If the Trustee thereafter receives written notice
of a Final Determination, the Trustee shall make demand for prepayment of the unpaid Installment Loan Payments under the Loan Agreement or necessary portions thereof from the Company and give notice of the Special Mandatory Redemption of the appropriate amount of Bonds on the earliest practicable date within the required period of 180 days.  In taking any action or making any determination under this Section 5.1(b), the Trustee may rely on an opinion of counsel.

SECTION 5.2. Selection of Bonds for Redemption.

 

In the event that fewer than all Bonds subject to redemption are to be redeemed, Bonds shall be selected by the Trustee for redemption by lot.  In the case of Bonds of varying Authorized Denominations, each Bond shall be treated as representing that number of Bonds which is obtained
by dividing the face amount thereof by the minimum Authorized Denomination applicable to such Bond.  In no event shall there remain outstanding in the name of any Owner, a Bond in an amount less than the minimum Authorized Denomination.

SECTION 5.3. Notice of Redemption.

 

The Company must deliver written notice by facsimile or first class mail to the Issuer and the Trustee of its intention to prepay the amounts due under the Loan Agreement and its request that the Bonds be called for redemption at least forty-five (45) days prior to the proposed redemption
date (or such lesser period as is acceptable to the Trustee).  Unless previously delivered to the Trustee and the Issuer, any such notice from the Company relating to Special Mandatory Redemption shall be accompanied by a certificate as to the occurrence of the event or events on which any Special Mandatory Redemption is based.  The Trustee shall cause notice of any redemption of Bonds hereunder to be given to the Registered Owners of all Bonds to be redeemed at the registered addresses appearing
in the registration books kept for such purpose pursuant to Article II hereof.  Each such notice shall (i) be given by facsimile or by first class mail at least thirty (30) days prior to the redemption date, (ii) identify the Bonds to be redeemed (specifying the CUSIP numbers, if any, assigned to the Bonds), (iii) specify the redemption date and the redemption price, and (iv) state that on the redemption date the Bonds called for redemption will be payable at the designated
corporate trust operations office of the Trustee, that from that date interest will cease to accrue, and that no representation is made as to the accuracy or correctness of the CUSIP numbers printed therein or on the Bonds.  No defect affecting any Bond, whether in the notice of redemption or mailing thereof (including any failure to mail such notice), shall affect the validity of the redemption proceedings for any other Bonds.  The Trustee shall also send a notice of prepayment or redemption
by first class mail to the Registered Owner of any Bond who has not sent such Bond in for redemption sixty (60) days after the redemption date.

In addition, the Trustee shall give notice of redemption of Bonds by facsimile or by mail, first class postage prepaid, at least thirty (30) days prior to a redemption date to each registered Securities Depository and to any national information service that disseminates redemption notices.  Any
notice sent to registered securities depositories or such national information services shall be sent so that they are received at least two (2) days prior to the general mailing or publication date of such notice.  The Trustee may give such other notice or notices as may be recommended in releases, letters, pronouncements or other writings of the Securities and Exchange Commission and the Municipal Securities Rulemaking Board.  No defect in or delay or failure in giving any recommended notice
described in this paragraph shall in any manner affect the notice of redemption described in the preceding paragraph of this Section 5.3 and any notice mailed as provided in the preceding paragraph of this Section 5.3 shall be conclusively presumed to have been duly given, whether or not the Registered Owner receives the notice.

With respect to any notice of optional redemption of Bonds, unless upon the giving of such notice such Bonds shall be deemed to have been paid within the meaning of Article X hereof, such notice shall state that such redemption shall be conditional upon the receipt by the Trustee on
or prior to the date fixed for such redemption of monies sufficient to pay the principal of, and premium, if any, and interest on, such Bonds to be redeemed, and that if such monies shall not have been so received said notice shall be of no force and effect and the Issuer shall not be required to redeem such Bonds.  In the event that such notice of redemption contains such a condition and such monies are not so received, the redemption shall not be made and the Trustee shall within a reasonable time
thereafter give notice to all Owners of Outstanding Bonds, in the manner in which the notice of redemption was given, that such monies were not so received.

SECTION 5.4. Effect of Redemption.

 

If the redemption price of the Bonds has been paid to the Trustee in immediately available funds on or before the redemption date, then interest thereon will cease to accrue, and the Registered Owners will have no rights with respect to such Bonds nor will they be entitled to the benefits
of the Indenture except to receive payment of the redemption price thereof and unpaid interest accrued to the date fixed for redemption.

SECTION 5.5. Redemption by the Company in the Event of Death of a Beneficial Owner.

 

Unless the Bonds have been declared due and payable prior to their maturity by reason of an Event of Default, the Representative (as hereinafter defined) of a deceased Beneficial Owner (as hereinafter defined) who has owned (or whose estate has owned) the Bonds at least six months prior to
any request for redemption, has the right after November 1, 2010 to request redemption prior to stated maturity of all or part of his interest in the Bonds, and the Company will redeem (or will cause the Issuer to redeem) the same subject to the limitations that the Company will not be obligated to redeem (or cause to be redeemed), during the period from November 1, 2010 through and including November 1, 2011 (the "Initial Period"), and during any twelve-month period which ends on and includes each November 1
thereafter (each such twelve-month period being hereinafter referred to as a "Subsequent Period"), (i) on behalf of a deceased Beneficial Owner any interest in the Bonds which exceeds $25,000 principal amount (the "Individual Limitation") or (ii) interests in the Bonds exceeding $300,000 in aggregate principal amount (the "Annual Limitation").  A request for redemption may be initiated by the Representative of a deceased Beneficial Owner at any time and in any principal amount.

The Company may, at its option, redeem (or cause to be redeemed) interests of any deceased Beneficial Owner in the Bonds in the Initial Period or any Subsequent Period in excess of the Individual Limitation.  Any such redemption, to the extent that it exceeds the Individual Limitation
for any deceased Beneficial Owner, shall not be included in the computation of the Annual Limitation for such Initial Period or such Subsequent Period, as the case may be, or for any succeeding Subsequent Period.  The Company may, at its option, redeem (or cause to be redeemed) interests of deceased Beneficial Owners in the Bonds, in the Initial Period or any Subsequent Period in an aggregate principal amount exceeding the Annual Limitation.  Any such redemption, to the extent it exceeds the
Annual Limitation shall not reduce the Annual Limitation for any Subsequent Period.  On any determination by the Company to redeem (or cause to be redeemed) Bonds in excess of the Individual Limitation or the Annual Limitation, Bonds so redeemed shall be redeemed in the order of the receipt of Redemption Requests (as hereinafter defined) by the Trustee.

A request for redemption of an interest in the Bonds may be initiated by the personal representative or other person authorized to represent the estate of the deceased Beneficial Owner or by a surviving joint tenant(s) or tenant(s) by the entirety or the trustee of a trust (each, a "Representative").  The
Representative shall deliver a request to the DTC Participant through whom the deceased Beneficial Owner owned such interest, in form satisfactory to the DTC Participant, together with evidence of the death of the Beneficial Owner, evidence of the authority of the Representative satisfactory to the DTC Participant, such waivers, notices or certificates as may be required under applicable state or federal law and such other evidence of the right to such redemption as the DTC Participant shall require.  The
request shall specify the principal amount of the interest in the Bonds to be redeemed.  The DTC Participant shall thereupon deliver to DTC a request for redemption substantially in the form attached as Exhibit D hereto (a "Redemption Request").  DTC will, on receipt thereof, forward the same to the Trustee.  The Trustee shall maintain records with respect to Redemption Requests received by it including date of receipt,
the name of the DTC Participant filing the Redemption Request and the status of each such Redemption Request with respect to the Individual Limitation or the Annual Limitation.  The Trustee will immediately file each Redemption Request it receives, together with the information regarding the eligibility thereof with respect to the Individual Limitation or the Annual Limitation with the Company.  DTC, the Issuer and the Trustee may conclusively assume, without independent investigation, that
the statements contained in each Redemption Request are true and correct and shall have no responsibility for reviewing any documents submitted to the DTC Participant by the Representative or for determining whether the applicable decedent is in fact the Beneficial Owner of the interest in the Bonds to be redeemed or is in fact deceased and whether the Representative is duly authorized to request redemption on behalf of the applicable Beneficial Owner.

Subject to the Individual Limitation and the Annual Limitation, the Company will, after the death of any Beneficial Owner, redeem (or cause to be redeemed) the interest of such Beneficial Owner in the Bonds on the next Interest Payment Date occurring not less than 30 days following receipt
by the Company of the Redemption Request from the Trustee.  If Redemption Requests exceed the aggregate principal amount of interests in Bonds required to be redeemed during the Initial Period or during any Subsequent Period, then such excess Redemption Requests will be applied in the order received by the Trustee to successive Subsequent Periods, regardless of the number of Subsequent Periods required to redeem such interests.  The Company may, at any time notify the Trustee that it will
redeem (or cause to be redeemed), on the next Interest Payment Date occurring not less than 30 days thereafter, all or any such lesser amount of Bonds for which Redemption Requests have been received but which are not then eligible for redemption by reason of the Individual Limitation and the Annual Limitation.  Any Bonds so redeemed shall be redeemed in the order of receipt of Redemption Requests by the Trustee.

The price to be paid by the Company for the Bonds to be redeemed pursuant to a Redemption Request is 100% of the principal amount thereof plus accrued but unpaid interest to the date of payment.  Subject to arrangements with DTC, payment for interests in the Bonds which are to be
redeemed shall be made to DTC upon presentation of Bonds to the Trustee for redemption in the aggregate principal amount specified in the Redemption Requests submitted to the Trustee by DTC which are to be fulfilled in connection with such payment.  The principal amount of any Bonds acquired or redeemed by or at the direction of the Company other than by redemption at the option of any Representative of a deceased Beneficial Owner pursuant to this section shall not be included in the computation of
either the Individual Limitation or the Annual Limitation for the Initial Period or for any Subsequent Period.

For purposes of this section, a "Beneficial Owner" means the Person who has the right to sell, transfer or otherwise dispose of an interest in a Bond and the right to receive the proceeds therefrom, as well as the interest and principal payable to the holder thereof.  In general,
a determination of beneficial ownership in the Bonds will be subject to the rules, regulations and procedures governing  DTC and DTC Participants.

For purposes of this section, an interest in a Bond held in tenancy by the entirety, joint tenancy or by tenants in common will be deemed to be held by a single Beneficial Owner and the death of a tenant by the entirety, joint tenant or tenant in common will be deemed the death of a Beneficial
Owner.  The death of a person who, during his lifetime, was entitled to substantially all of the rights of a Beneficial Owner of an interest in the Bonds will be deemed the death of the Beneficial Owner, regardless of the recordation of such interest on the records of the DTC Participant, if such rights can be established to the satisfaction of the DTC Participant.  Such interests shall be deemed to exist in typical cases of nominee ownership, ownership under the Uniform Gifts to Minors Act
or the Uniform Transfers to Minors Act, community property or other similar joint ownership arrangements, including individual retirement accounts or Keogh H.R. 10 plans maintained solely by or for the decedent or by or for the decedent and any spouse, and trust and certain other arrangements where the decedent has the right to receive all or a portion of the income and such person has substantially all of the rights of a Beneficial Owner during such person's lifetime.

In the case of a Redemption Request which is presented on behalf of a deceased Beneficial Owner and which has not been fulfilled at the time the Company gives notice of its election to redeem the Bonds, the Bonds which are the subject of such pending Redemption Request shall be redeemed prior
to any other Bonds.

Any Redemption Request may be withdrawn by the person(s) presenting the same upon delivery of a written request for such withdrawal given by the DTC Participant on behalf of such person to the DTC and by the DTC to the Trustee not less than 60 days prior to the Interest Payment Date on which
such Bonds are eligible for redemption.

The Company may, at its option, purchase any Bonds for which Redemption Requests have been received in lieu of redeeming (or causing the redemption of) such Bonds.  Any Bonds so purchased by the Company shall either be reoffered for sale and sold within 180 days after the date of
purchase or presented to the Trustee for redemption and cancellation.

During such time or times as the Bonds are not represented by a Global Security and are issued in definitive form, all references in this Section to DTC Participants and the DTC, including the DTC's governing rules, regulations and procedures shall be deemed deleted, all determinations which
under this section the DTC Participants are required to make shall be made by the Company (including, without limitation, determining whether the applicable decedent is in fact the Beneficial Owner of the interest in the Bonds to be redeemed or is in fact deceased and whether the Representative is duly authorized to request redemption on behalf of the applicable Beneficial Owner), all Redemption Requests, to be effective, shall be delivered by the Representative to the Trustee, with a copy to the Company, and
shall be in the form of a Redemption Request (with appropriate changes to reflect the fact that such Redemption Request is being executed by a Representative) and, in addition to all documents that are otherwise required to accompany a Redemption Request, shall be accompanied by the Bond that is the subject of such request.

SECTION 5.6. Purchase in Lieu of Redemption.

 

Notwithstanding anything to the contrary contained herein, the Company may elect to purchase from the Owners any Bonds that have been called for redemption under Section 5.1 hereof on the redemption date by giving the Trustee and the Issuer written notice at least two (2) Business Days
prior to the date the Bonds are to be redeemed, and such Bonds so purchased shall be retired.  The principal amount of Bonds to be redeemed on the applicable redemption date shall be reduced by the amount of Bonds so purchased.

ARTICLE VI                                

 

REPRESENTATIONS AND COVENANTS OF THE ISSUER

 

SECTION 6.1. General Limitation; Issuer’s Representation.

 

The representations and covenants of the Issuer herein and in any proceeding, document or certification incidental to issuance of the Bonds shall not create a pecuniary liability of the Issuer, except to the extent of the Trust Estate.  The Issuer represents and covenants that it
has made no pledge, assignment or other conveyance of its rights, title and interest in the Trust Estate except to the Trustee as provided herein.

SECTION 6.2. Payment of Bonds and Performance of Covenants.

 

The Issuer shall, but only out of the Revenues, promptly pay the principal of, premium, if any, and interest on the Bonds at the place, on the dates and in the manner provided in the Bonds.  The Issuer shall promptly perform and observe all of its other covenants, undertakings and
obligations set forth in the Financing Documents.

SECTION 6.3. Enforcement of the Loan Agreement.

 

The Loan Agreement, a duly executed counterpart of which has been filed with the Trustee, sets forth the covenants and obligations of the Company, including provisions that the Loan Agreement may only be amended with the written consent of the Trustee, and reference is hereby made to the
Loan Agreement for a statement of such covenants and obligations of the Company.  Subject to Section 6.4 hereof and the enforcement of Unassigned Issuer’s Rights by the Issuer, the Trustee may enforce against the Company or any Person any rights of the Issuer or obligations of the Company under or arising from the Bonds or the Loan Agreement, whether or not the Issuer is in default hereunder or under the Bonds, but the Trustee shall not be deemed to have thereby assumed the obligations of
the Issuer under the Loan Agreement.  The Issuer shall fully cooperate with the Trustee in the enforcement by the Trustee of any such rights.

SECTION 6.4. No Personal Liability.

 

No member, officer or employee of the Issuer, including any person executing this Indenture or the Bonds and no individual employee or agent of the Company shall be liable personally on the Bonds or be subject to any personal liability for any reason relating to the issuance of the Bonds.

SECTION 6.5. Exemption from Federal Income Taxation.

 

The Issuer will not knowingly take any action, or omit to take any action, which action or omission will adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds, and in the event of such action or omission will promptly, upon receiving knowledge
thereof, take all lawful actions, based on advice of counsel and at the expense of the Company, as may rescind or otherwise negate such action or omission.

SECTION 6.6. Corporate Existence; Compliance with Laws.

 

           The Issuer shall maintain its corporate existence; shall use its best efforts to maintain and renew all its rights, powers, privileges and franchises; and shall comply with all valid and applicable laws, rules, regulations, orders, requirements and directions of any legislative,
executive, administrative or judicial body relating to the Issuer’s participation in the financing of the Project, the issuance of the Bonds or its execution, delivery and performance of this Indenture and the Loan Agreement.

SECTION 6.7. Filings.

 

           The Issuer shall cause this Indenture or financing statements relating hereto to be filed, in such manner and at such places as may be required by law fully to protect the security of the Registered Owners and the right, title and interest of the Trustee in and to the Trust
Estate or any part thereof.  From time to time, the Trustee may, but shall not be required to, obtain an opinion of counsel setting forth what, if any, actions by the Issuer or Trustee should be taken to preserve such security.  The Issuer shall execute or cause to be executed any and all further instruments as shall reasonably be requested by the Trustee for such protection of the interests of the Registered Owners and shall furnish satisfactory evidence to the Trustee of filing and refiling
of such instruments and of every additional instrument which shall be necessary to preserve the lien of the Indenture upon the Trust Estate or any part thereof until the principal or redemption price of, and interest on the Bonds issued hereunder shall have been paid in full.  The Issuer shall cause to be prepared, and the Trustee shall execute or join in the execution of, any such further or additional instrument and file or join in the filing thereof at such time or times and in such place or places
as it may be advised by an opinion of counsel to preserve the lien of this Indenture upon the Trust Estate or any part thereof until the aforesaid principal or redemption price and interest shall have been paid.

SECTION 6.8. Further Assurances.

 

           Except to the extent otherwise provided in this Indenture, the Issuer shall not enter into any contract or take any action by which the rights of the Trustee or the Registered Owners may be impaired and shall, from time to time, execute and deliver such further instruments
and take such further action as may be required to carry out the purposes of this Indenture.

SECTION 6.9. Inspection of Books.

 

           All books and records, if any, in the Issuer’s possession relating to the Project and the amounts derived from the Project shall, upon written request and at all reasonable times, be open to inspection by such accountants or other agents as the Trustee may from time
to time designate.

ARTICLE VII                                           

 

EVENTS OF DEFAULT AND REMEDIES

 

SECTION 7.1. Events of Default Defined.

 

(a) Each of the following shall be an Event of Default hereunder:

 

(i) Payment of any installment of interest, principal, or premium, if any, on the Bonds is not made when due and payable; or

 

(ii) An Act of Bankruptcy shall occur; or

 

(iii) Failure by the Issuer to observe or perform any covenant, condition or agreement on its part to be observed or performed under this Indenture, other than as referred to in (i) above, for a period of 30 days after written notice
is given to the Issuer, specifying such failure and requesting that it be remedied, by the Trustee; provided, however, that if the failure stated in the notice is such that it can be remedied but not within such 30-day period, it shall not constitute an Event of Default if the default, in the judgment of the Trustee in reliance upon advice of counsel, is correctable without material adverse effect on the Bondholders and if corrective action is instituted by the Issuer within such period and is diligently pursued
until the default is remedied; or

 

(iv) The occurrence of an Event of Default under the Loan Agreement; or

 

(v) Failure by the Issuer to comply with the Act;

 

(b) The Trustee shall promptly notify the Issuer and the Company in writing of the occurrence of any Event of Default after it receives written notice or has actual knowledge of such occurrence.

 

(c) Force Majeure.  The provisions of Section 7.1(a)(iii) hereof and Section 8.1(b)(vi) of the Loan Agreement are subject to the following
limitations:  if by reason of acts of God; strikes, lockouts or other industrial disturbances; acts of public enemies; orders of any kind of the Government of the United States or of the Commonwealth or any department, agency, political subdivision, court or official of any of them, or any civil or military authority; insurrections; riots; epidemics; landslides; lightning; earthquakes; volcanoes; fires; hurricanes; tornadoes; storms; blue northers; floods; washouts; droughts; restraint of government
and people; civil disturbances; explosions; breakage or accident to machinery; partial or entire failure of utilities; or any cause or event not reasonably within the control of either the Company or the Issuer, the Company is unable in whole or in part to carry out any one or more of its agreements or obligations contained in the Loan Agreement (other than its obligations under Sections 6.4 through 6.6, 6.10, 7.1, 7.2 and 8.3 thereof) or the Issuer is unable in whole or in part to carry out any one or more
of its agreements or obligations contained in this Indenture (other than its obligations to pay the principal of, and premium, if any, and interest on the Bonds as herein provided), neither the Company nor the Issuer shall be deemed in default by reason of not carrying out said agreement or agreements or performing said obligation or obligations during the continuance of such inability.  Both the Company and the Issuer shall make reasonable efforts to remedy with all reasonable dispatch the cause or
causes preventing them from carrying out their respective agreements; provided, that the settlement of strikes, lockouts and other industrial disturbances shall be entirely within the discretion of the Company, and the Company shall not be required to make settlement of strikes, lockouts and other disturbances by acceding to the demands of the opposing party or parties when such course is in the judgment of the Company unfavorable to the Company.

 

SECTION 7.2. Acceleration and Annulment Thereof.

 

(a) Upon the occurrence of an Event of Default described in Section 7.1(a)(ii) hereof, the principal of all Bonds then Outstanding, together with accrued interest thereon, shall automatically become due and payable immediately without
any declaration of acceleration by the Trustee, anything in this Indenture to the contrary notwithstanding.   Upon the occurrence of any other Event of Default hereunder the Trustee may, and upon the written direction of the Registered Owners of 25% or more in principal amount of the Bonds then Outstanding and (subject to the provisions of Section 8.1(b) hereof) receipt of indemnity to its sole satisfaction shall, by notice in writing to the Issuer and the Company declare the principal of
all Bonds then Outstanding to be immediately due and payable, and upon such declaration, the said principal, together with interest accrued thereon, shall become due and payable immediately, anything in this Indenture or in the Bonds to the contrary notwithstanding; provided, however, that no such declaration shall be made if the Company cures such Event of Default prior to the date of the declaration.  Upon any acceleration hereunder (whether automatic or by declaration), all payments due under the
Loan Agreement shall automatically become immediately due and payable and the Trustee shall promptly exercise such rights as it may have under the Loan Agreement.

 

Promptly following any declaration of acceleration (or promptly after the Trustee has knowledge of an automatic acceleration), the Trustee shall cause to be mailed notice of such acceleration by first class mail to each Owner of a Bond at his last address appearing on the registration books
of the Trustee.  Any defect in or failure to give such notice of such acceleration shall not affect the validity of such acceleration.

 

(b) If after the principal then due on the Bonds has been declared to be due and payable, and the redemption price then due and all arrears of interest upon the Bonds are caused to be paid by the Issuer, and the Issuer also causes to
be performed all other things in respect to which it may have been in default hereunder and causes to be paid by the Company or otherwise the reasonable charges of the Trustee and the Registered Owners, plus reasonable attorney’s fees, or any such default is waived as provided in Section 7.13 hereof, then, and in every such case, the Trustee may or, upon the direction in writing of the Registered Owners of a majority in principal amount of the Bonds then Outstanding, shall annul such declaration and
its consequences and such annulment shall be binding upon the Trustee, the Issuer and upon all Registered Owners of Bonds issued hereunder.  No such annulment shall extend to or affect any subsequent default or impair any right or remedy consequent thereon.

 

SECTION 7.3. Legal Proceedings by Trustee.

 

If any Event of Default has occurred and is continuing, the Trustee in its discretion may, and upon the written request of the Registered Owners of 25% or more in principal amount of the Bonds then Outstanding and receipt of indemnity to its sole satisfaction shall, in its own name;

(a) By mandamus, or other suit, action or proceeding at law or in equity, enforce all rights of the Registered Owners, including the right to require the Issuer or the Company to carry out any other agreements with, or for the benefit
of, the Registered Owners;

 

(b) Bring suit upon the Bonds;

 

(c) By action or suit in equity require the Issuer to account as if it were the trustee of an express trust for the Registered Owners; and

 

(d) By action or suit in equity enjoin any acts or things which may be unlawful or in violation of the rights of the Registered Owners.

 

SECTION 7.4. Discontinuance of Proceedings by Trustee.

 

If any proceeding taken by the Trustee on account of any default is discontinued or is determined adversely to the Trustee, then the Issuer, the Trustee, the Company and the Registered Owners shall be restored to their former positions and rights hereunder as though no such proceeding had
been taken.

SECTION 7.5. Registered Owners May Direct Proceedings.

 

The Registered Owners of a majority in principal amount of the Bonds then Outstanding hereunder shall have the right to direct the method and place of conducting all remedial proceedings by the Trustee hereunder; provided that the Trustee shall have the right to decline to follow any such
direction if the Trustee, upon advice of counsel, determines that the action so directed may not be lawfully taken or if the Trustee in good faith determines that the action so directed might involve the Trustee in personal liability or might unduly prejudice the interests of the Registered Owners not parties to such direction, it being understood that the Trustee has no duty to ascertain whether or not such actions so directed are unduly prejudicial to such Registered Owners.

SECTION 7.6. Limitations on Actions by Registered Owners.

 

No Registered Owner shall have any right to pursue any remedy hereunder unless (a) the Trustee shall have been given written notice of an Event of Default or the Trustee is deemed to have notice as provided in Section 8.3(h), (b) the Registered Owners of at least 25% in principal
amount of the Bonds then Outstanding shall have requested the Trustee, in writing, to exercise the powers hereinabove granted or to pursue such remedy in its or their name or names, (c) the Trustee shall have been offered indemnity satisfactory to it against costs, expenses and liabilities, and (d) the Trustee shall have failed to comply with such request within a reasonable time; it being understood and intended that no one or more Registered Owners shall have any right in any manner whatsoever to
affect, disturb or prejudice the lien of this Indenture by its, his or their action or to enforce any right hereunder except in the manner herein provided, and that all proceedings at law or in equity shall be instituted, had and maintained in the manner herein provided and for the equal and ratable benefit of the owners of all Bonds then Outstanding.  Nothing contained in this Indenture, however, shall affect or impair the right of any Registered Owner to enforce the payment of the principal of, premium,
if any, and interest on any Bond at and after the maturity thereof, or the obligation of the Issuer to cause the payment of the principal of, premium, if any, and interest on each of the Bonds issued hereunder to the respective owners thereof on the date, at the place, from the source and in the manner in the Bonds expressed.

SECTION 7.7. Trustee May Enforce Rights Without Possession of Bonds.

 

All rights under this Indenture and the Bonds may be enforced by the Trustee without the possession of any Bonds or the production thereof at the trial or other proceedings relative thereto, and any proceeding instituted by the Trustee shall be brought in its name for the ratable benefit
of the Registered Owners of the Bonds.

SECTION 7.8. Remedies Not Exclusive.

 

Except as limited under Section 11.1 of this Indenture, no remedy herein conferred is intended to be exclusive of any other remedy or remedies, and each remedy is in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute.

SECTION 7.9. Delays and Omissions Not to Impair Rights.

 

No delay or omission in respect of exercising any right or power accruing upon any default shall impair such right or power or be a waiver of such default, and every remedy given by this Article may be exercised from time to time and as often as may be deemed expedient.

SECTION 7.10. Application of Monies.

 

All monies received by the Trustee pursuant to any right given or action taken under the provisions of this Article shall, after payment of costs, expenses, liabilities and advances paid, incurred or made or anticipated by the Trustee in the collection of such monies and of the expenses,
liabilities and advances incurred or made by the Trustee, be deposited in the Debt Service Fund; and all monies in the Debt Service Fund (other than monies held for the payment of a particular Bond) shall be applied, as follows:

(a) Unless the principal of all of the Bonds shall have become or shall have been declared due and payable, all such monies shall be applied:

 

First - to the payment to the persons entitled thereto of all interest then due on the Bonds or if the amount available shall not be sufficient for such purpose, then to the payment ratably, to the persons entitled thereto without any discrimination or privilege; and

 

Second - to the payment to the persons entitled thereto of the unpaid principal of any of the Bonds which shall have become due (other than Bonds matured, or called for redemption for the payment of which monies and/or Government Obligations are held pursuant to this Indenture), in the order of their due dates, with interest on such Bonds
from the respective dates upon which they become due and, if the amount available shall not be sufficient to pay in full Bonds due on any particular date, together with such interest, then to the payment ratably, according to the amount of principal due on such date, to the persons entitled thereto without any discrimination or privilege.

 

(b) If the principal of all the Bonds shall have become due or shall have been declared due and payable, all such monies shall be applied to the payment of the principal and the interest then due and unpaid upon the Bonds (other than
installments of interest, and amounts of principal of Bonds matured or called for redemption, for the payment of which monies and/or Government Obligations are held pursuant to this Indenture) without preference or priority of principal over interest or of interest over principal, or of any installment of interest over any other installment of interest, or of any Bond over any other Bond, ratably, according to the amounts due respectively for principal and interest, to the persons entitled thereto without any
discrimination or privilege.

 

(c) If the principal of all the Bonds shall have been declared due and payable, and if such declaration shall thereafter have been rescinded and annulled under the provisions of this Article, then, subject to the provisions of paragraph (b)
of this Section in the event that the principal of all the Bonds shall later become due or be declared due and payable, the monies shall be applied in accordance with the provisions of paragraph (a) of this Section.

 

Whenever monies are to be applied pursuant to the provisions of this Section, such monies shall be applied as soon as practicable as the Trustee shall in good faith determine having due regard to the amount of such monies available for application and the likelihood of additional monies becoming
available for such application in the future.  Whenever the Trustee shall apply such funds, it shall fix the date (which shall be the date of acceleration of the Bonds or if there shall not have been an acceleration, such date as shall be determined by the Trustee) upon which such application is to be made and upon such date interest on the amounts of principal to be paid on such dates shall cease to accrue.  The Trustee shall give such notice as it may deem appropriate of the deposit with
it of any such monies and of the fixing of any such date, and shall not be required to make payment to the holder of any Bond until such Bond shall be presented to the Trustee.

SECTION 7.11. Trustee’s Right to Receiver.

 

The Trustee shall be entitled as of right to the appointment of a receiver; and the Trustee, the Registered Owners and any receiver so appointed shall have such rights and powers and be subject to such limitations and restrictions as are permitted by law.

SECTION 7.12. Trustee and Registered Owners Entitled to All Remedies.

 

It is the purpose of this Article to make available to the Trustee and the Registered Owners all lawful remedies; but should any remedy herein granted be held unlawful, the Trustee and the Registered Owners shall nevertheless be entitled to every other remedy provided by law.  It
is further intended that, insofar as lawfully possible, the provisions of this Article shall apply to and be binding upon any trustee or receiver who may be appointed hereunder.

SECTION 7.13. Waiver of Past Defaults.

 

The Registered Owners of not less than a majority in principal amount of the Outstanding Bonds may on behalf of the Registered Owners of all the Bonds (by written notice thereof to the Issuer and the Trustee) waive any past default hereunder and its consequences, except a default (1) in
the payment of the principal of, redemption premium, if any, or interest on, any Bond unless prior to such waiver or rescission, all arrears of principal or interest, or both, as the case may be, and all expenses of the Trustee, in connection with such default shall have been paid or provided for; or (2) in respect of a covenant or provision hereof which under Article IX cannot be modified or amended without the consent of the Registered Owner of each Outstanding Bond.  Upon any such waiver,
such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

ARTICLE VIII                                           

 

THE TRUSTEE

 

SECTION 8.1. Certain Duties and Responsibilities of Trustee.

 

(a) The Trustee accepts the trusts hereby created and agrees to perform the duties herein required of it upon the terms and conditions hereof.  The Trustee shall have the right, power and authority, at all times, to do all things
not inconsistent with the express provisions of this Indenture which it may deem necessary or advisable in order to:  (i) enforce the provisions of this Indenture, (ii) take any action with respect to any Event of Default, (iii) institute, appear in or defend any suit or other proceeding with respect to an Event of Default, or (iv) protect the interests of the Owners of any Outstanding Bonds.  The Trustee shall be responsible only for performing those duties of the Trustee
specifically provided for herein and no implied duties or liabilities shall be read into this Indenture against the Trustee.

 

(b) The permissive rights of the Trustee to do things enumerated in this Indenture shall not be construed as a duty and, except as provided in the next succeeding sentence in respect of the period during the continuance of an Event of
Default, the Trustee shall not be liable for any action reasonably taken or omitted to be taken by it in good faith and reasonably believed by it to be within the discretion or power conferred upon it hereby, or be responsible other than for its own gross negligence or willful misconduct.  In case an Event of Default has occurred and is continuing of which the Trustee has been notified as provided in Section 8.3(h) or of which it is deemed to have notice pursuant to such Section, the Trustee shall
exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise under the circumstances in the conduct of his own affairs.

 

(c) The Trustee shall not be required to give any bond or surety in respect of the execution of its rights and duties under this Indenture.

 

(d) No provision of this Indenture shall be construed to relieve the Trustee from liability for its own grossly negligent action, its own grossly negligent failure to act or its own willful misconduct, except that

 

(i) this subsection shall not be construed to limit the effect of subsection (a) of this Section;

 

(ii) the Trustee shall not be liable for any error of judgment made in good faith by its officers, unless it shall be proved that the Trustee was grossly negligent in ascertaining the pertinent facts;

 

(iii) the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with any direction of the Registered Owners of at least 25% or not less than a majority in aggregate principal
amount of the Outstanding Bonds permitted to be given by them under this Indenture except as otherwise provided herein; and

 

(iv) no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers,
if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity, satisfactory to the Trustee in its sole discretion, against such risk or liability is not assured to it.

 

(e) Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section.

 

(f) Except as otherwise expressly provided by the provisions of this Indenture, the Trustee shall not be obligated and may not be required to give or furnish any notice, demand, report, request, reply, statement, advice or opinion to
any Holder or any other Person, and the Trustee shall not incur any liability for its failure or refusal to give or furnish the same unless obligated or required to do so by the express provisions hereof.

 

(g) In acting or omitting to act pursuant to the provisions of the Loan Agreement, the Trustee shall be entitled to all of the rights and immunities accorded to it under this Indenture, including but not limited to those set out in this
Article VIII.

 

(h) Notwithstanding any provisions of this Indenture to the contrary, the Trustee shall not be liable or responsible for the accuracy of any calculation or determination which may be required in connection with or for the purpose of complying
with Section 148 of the Code, including, without limitation, the calculation of amounts required to be paid to the United States under the provisions of Section 148 of the Code, the maximum amount which may be invested in "nonpurpose obligations" as defined in the Code and the fair market value of any investments made hereunder, and the sole obligation of the Trustee with respect to the investments of funds hereunder shall be to invest the monies received by the Trustee as provided herein pursuant
to the written instructions of the Company.

 

(i) The Trustee will report to the Bondholders and to the Internal Revenue Service for each calendar year the amount of any "reportable payments" during such year with respect to payments on the Bonds.

 

SECTION 8.2. Notice if Event of Default Occurs or Notice if Taxability Occurs.

 

The Trustee shall give written notice as soon as possible (and in any event within three (3) Business Days) to the Registered Owners (with copies to the parties to the Financing Documents) of the occurrence of any Event of Default hereunder after the Trustee acquires actual knowledge
thereof, unless such default shall have been cured or waived; provided, however, that, in the case of an Event of Default of the character described in Section 7.1(a)(iii), the Trustee shall be protected in withholding such notice if and so long as the Trustee in good faith determines that the withholding of such notice is in the interest of the Registered Owners.  The Trustee shall also give to the parties to the Financing Documents and the Registered Owners written notice within five (5) Business
Days of receipt by it of any notification from the Internal Revenue Service that the interest on the Bonds is, or may be, subject to federal income taxation.

SECTION 8.3. Certain Rights of Trustee.

 

Except as otherwise provided in Section 8.1:

(a) the Trustee may conclusively rely upon, and shall be protected in acting or refraining from acting upon, any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture
or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties and any action taken by the Trustee pursuant to this Indenture upon the request, authority or consent of any Registered Owner (determined at the time of such request, authority or consent) shall be conclusive and binding upon all future owners of the same Bond and any Bonds issued in exchange therefor;

 

(b) any request or direction of the Issuer or the Company mentioned herein shall be sufficiently evidenced by a writing signed by an Authorized Representative and any resolution of the Issuer may be sufficiently evidenced by a copy of
such resolution certified by an Authorized Representative;

 

(c) whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part, rely upon a certificate of an Authorized Representative;

 

(d) before the Trustee acts or refrains from acting, it may consult with counsel, engineers or other experts as may be appropriate, and the written advice of such counsel, engineers or other experts as may be appropriate shall be full
and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;

 

(e) the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Registered Owners pursuant to this Indenture, unless such Registered Owners
shall have offered to the Trustee security or indemnity acceptable to the Trustee in its sole discretion against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction and such action may be lawfully taken;

 

(f) the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture or other
paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled, upon reasonable notice and during regular business hours, and subject, further to the Company’s safety and confidentiality requirements to examine the books, records and premises of the Company and the books and records of the Issuer concerning the Bonds
personally or by agent or attorney;

 

(g) the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or indirectly or by or through agents or attorneys provided that the Trustee shall not be responsible for any misconduct
or negligence on the part of any agent or attorney reasonably appointed by it hereunder in good faith; and

 

(h) the Trustee shall not be required to take notice or be deemed to have notice of any default hereunder unless the Trustee shall be specifically notified of such default in writing by the Issuer, the Company or the Owners of a majority
in principal amount of the Outstanding Bonds, and in the absence of such notice the Trustee may conclusively assume there is no default; provided, however, that the Trustee shall be required to take and be deemed to have notice of its failure to receive the monies necessary to make payments when due of the Bond Obligations.

 

SECTION 8.4. Not Responsible for Recitals or Issuance of Bonds.

 

Except for the Trustee's certificate of authentication signed on the Bonds, the Trustee assumes no responsibility for correctness of the terms set forth herein or in the Bonds.  The Trustee makes no representations as to the validity or sufficiency of this Indenture, except that
the Trustee represents that said Indenture has been duly authorized, executed and delivered by the Trustee and constitutes a legal, valid and binding obligation of the Trustee in accordance with the terms hereof, except as its enforceability may be subject to (i) the exercise of judicial discretion in accordance with general equitable principles; and (ii) applicable bankruptcy, insolvency, reorganization, moratorium and other laws for the relief of debtors heretofore or hereafter enacted to the extent
that the same may be constitutionally applied.  Further, the Trustee makes no representations as to the validity or sufficiency of the Bonds.  The Trustee shall not be accountable for the use or application by the Issuer or the Company of Bonds or the proceeds thereof.  The Trustee shall not be bound to ascertain or inquire as to the performance or observance of any covenant, condition or agreement on the part of the Issuer or the Company under the Loan Agreement (except as provided
in Section 8.3(h) hereof), but the Trustee may require of the Issuer or the Company full information and advice as to the performance on such covenants, conditions and agreements.

SECTION 8.5. May Hold Bonds.

 

The Trustee or any other agent of the Issuer or the Company, in its individual or any other capacity, may become the owner of Bonds and may otherwise deal with the Issuer or the Company with the same rights it would have if it were not Trustee or such other agent.  The Trustee may
in good faith buy, sell, own, hold and deal in any of the Bonds and may join in any action which any Registered Owners may be entitled to take with like effect. The Trustee may also engage in or be interested in financial or other transactions with the Company and the Issuer; provided that such transactions are not in conflict with its duties under this Indenture.

SECTION 8.6. Money Held in Trust.

 

All money deposited from time to time in the Debt Service Fund and the Construction Fund shall be held in trust for the benefit of the Owners but, except as provided in Article X of this Indenture, need not be segregated from other funds held in trust under this Indenture by the Trustee,
but shall be segregated at all times from all funds of the Issuer or the Trustee not held by the Trustee under this Indenture.  The Trustee shall be under no liability for interest on any money received by it hereunder except as otherwise provided in this Indenture.

SECTION 8.7. Corporate Trustee Required; Eligibility.

 

There shall at all times be a Trustee hereunder which shall be a corporation or association organized and doing business under the laws of the United States of America or of any state that is either a trust company or a bank in good standing in the Commonwealth, authorized under such laws
to exercise trust powers and authorized under the Act to act as Trustee hereunder, having a combined capital, surplus and undivided profits of at least $100,000,000, subject to supervision or examination by federal or state authority and shall not be a Disqualified Contractor.  If such corporation publishes reports of condition at least annually, pursuant to law or to the requirements of the aforesaid supervising or examining authority, then for the purpose of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.  If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.

SECTION 8.8. Resignation and Removal of Trustee; Appointment of Successor.

 

(a) No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 8.9 of this Indenture.

 

(b) The Trustee may resign at any time by giving written notice thereof to the other parties to the Financing Documents.  If an instrument of acceptance by a successor Trustee shall not have been delivered to the resigning Trustee
within thirty (30) days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.

 

(c) The Trustee may be removed at any time by the Owners of a majority in aggregate principal amount of the Outstanding Bonds, or so long as no Event of Default or no event which with the passage of time or the giving of notice or both
would constitute an Event of Default is then in existence, by the Company, in either case by an instrument in writing delivered to the parties to the Financing Documents not less than fifteen (15) days prior to the intended effective date of the removal.

 

(d) If at any time:  (i) the Trustee shall cease to be eligible under Section 8.7 of this Indenture or under applicable law and shall fail to resign after written request therefor as a result thereof by any party to
a Financing Document or by a Registered Owner who has been a bona fide Owner for at least six (6) months, or (ii) the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (x) the Company or the Issuer may remove the Trustee,
or (y) any Registered Owner who has been a bona fide Owner for at least six (6) months may, on behalf of himself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

 

(e) If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Issuer, with the prior consent of the Company, if any, shall promptly appoint a successor
Trustee.  If, within sixty (60) days after such resignation, removal or incapability, or the occurrence of such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by the Owners of a majority in aggregate principal amount of the Outstanding Bonds and notice of acceptance of such appointment is delivered to the parties to the Financing Documents, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become
the successor Trustee and supersede the successor Trustee appointed by the Issuer.  The Trustee shall assign all its interests hereunder to the successor Trustee.  If no successor Trustee shall have been so appointed by the Issuer or the Registered Owners and accepted appointment in the manner hereinafter provided, any Registered Owner who has been a bona fide Registered Owner for at least six (6) months may, on behalf of himself and all other Owners similarly situated, petition any court
of competent jurisdiction for the appointment of a successor Trustee.

 

(f) The Issuer, at the expense of the Company, shall give prompt notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee by mailing written notice of such event to the Registered Owners and
to the parties to the Financing Documents.  Each notice shall include the name of the successor Trustee and the address of its corporate trust operations office.

 

SECTION 8.9. Acceptance of Appointment by Successor Trustee.

 

Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the parties to the Financing Documents, including the retiring Trustee, an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and
such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Issuer or the successor Trustee, such retiring Trustee shall, upon payment of its charges and expenses by the Company, execute and deliver an instrument prepared by the successor Trustee transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee, and shall duly assign, transfer and deliver to
such successor Trustee all property and money held by such retiring Trustee hereunder.  Upon request of any such successor Trustee, the Issuer shall execute any and all instruments for more fully and certainly vesting in and confirming to such successor Trustee all such rights, powers and trusts.  No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article.

SECTION 8.10. Merger, Conversion, Consolidation or Succession to Business.

 

Any corporation or association into which the Trustee may be merged or converted or with which it may be consolidated, or any corporation or association resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation or association succeeding
to all or substantially all of the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided such corporation shall be otherwise qualified and eligible under this Article, to the extent operative, without the execution or filing of any paper or any further act on the part of any of the parties hereto.

SECTION 8.11. Fees, Charges and Expenses of Trustee.

 

Pursuant to the provisions of Section 6.5 and 8.3 of the Loan Agreement, the Trustee shall be entitled to be paid by the Company reasonable compensation for its services rendered hereunder and to reimbursement for its actual out-of-pocket expenses (including reasonable counsel fees)
necessarily incurred in connection therewith.  The Company may, without creating a default hereunder, contest in good faith the necessity for and the reasonableness of any such services and expenses after making payment therefor.  The Company, the Issuer and the Bondholders agree that the Trustee shall have a lien for the foregoing compensation, expenses and fees upon the Trust Estate (other than monies held for the payment of particular Bonds whether or not such payment is then due and owing)
and, upon an Event of Default hereunder, the Trustee shall have a right of payment prior to payment to the Bondholders on account of principal of, premium, if any, and interest on any Bond as provided in Section 7.10 hereof.

The Issuer shall require the Company, pursuant to the Loan Agreement, to indemnify and hold harmless the Trustee against any liabilities which the Trustee may incur in the exercise and performance of its powers and duties hereunder, under the Loan Agreement and any other agreement referred
to herein which are not due to the Trustee’s gross negligence or willful misconduct, and for any fees and expenses of the Trustee to the extent funds are not available under this Indenture as provided in the preceding paragraph for the payment thereof.  The rights of the Trustee under this Section shall survive the payment in full of the Bonds and the discharge of this Indenture.  The Trustee acknowledges that the requirement set forth in this paragraph has been satisfied by the Issuer
and agrees that in the event the Company fails to perform its obligations under the Loan Agreement relating to such undertaking, the Trustee will make no claim against the Issuer with respect thereto.

When the Trustee incurs expenses or renders services after an Event of Default as a result of an Act of Bankruptcy of the Company, the expenses and the compensation for services (including the fees and expenses of its agents and counsel) are intended to constitute expenses of administration
of the bankruptcy estate under applicable bankruptcy law.

ARTICLE IX                                

 

AMENDMENTS AND SUPPLEMENTS

 

SECTION 9.1. Amendments and Supplements Without Registered Owners’ Consent.

 

This Indenture may be amended or supplemented from time to time, without the consent of the Registered Owners by a Supplemental Indenture authorized by a certified resolution of the Issuer filed with the Trustee, for one or more of the following purposes:

(a) to add additional covenants of the Issuer or to surrender any right or power herein conferred upon the Issuer; or

 

(b) to cure any ambiguity or to cure, correct or supplement any defective (whether because of any inconsistency with any other provision hereof or otherwise) provision of this Indenture in such manner as shall not be inconsistent with
this Indenture and shall not impair the security hereof or adversely affect the Registered Owners; or

 

(c) to provide procedures permitting Registered Owners to utilize an uncertificated system of registration for Bonds or for the issuance of Bonds pursuant to a book entry system with a Securities Depository or other entity; or

 

(d) to modify, alter, amend, supplement or restate this Indenture in any and all respects necessary, desirable or appropriate in order to satisfy the requirements of any Rating Agency which may from time to time provide a rating on the
Bonds, or in order to obtain or retain such rating on the Bonds as is deemed necessary by the Company; or

 

(e) to make any change which, in the judgment of the Trustee, does not adversely affect the rights or security of the Registered Owners.

 

In determining compliance with this Section, the Trustee may request such certificates and opinions of counsel as it deems necessary and may rely conclusively on such certificates and opinions in the absence of negligence or willful misconduct.

SECTION 9.2. Amendments With Company and Registered Owners’ Consent.

 

(a) Consent of Majority.  With the written consent of the Company, the parties to this Indenture may enter into Indentures supplemental to this Indenture or amendments
to this Indenture modifying, adding to or eliminating any of the provisions hereof but, if such supplement or amendment is not of the character described in Section 9.1, only with the consent of the Registered Owners of not less than a majority of the aggregate principal amount of the Outstanding Bonds, but subject to the limitations of Section 9.2(b).

 

(b) Consent of All Bondholders.  Notwithstanding the foregoing, no supplement or amendment to this Indenture shall, without the consent of the Registered Owner
of each Outstanding Bond so affected, (i) extend the maturity date of any Bond, or reduce the rate or extend the time of payment of interest thereon, or reduce the principal amount thereof, or reduce any premium payable upon the redemption thereof, or extend or reduce the amount of any mandatory redemption requirement, (ii) deprive such Registered Owner of the lien hereof on the Revenues pledged hereunder and on the Trust Estate, (iii) decrease the amounts payable by the Company under Section 6.4
of the Loan Agreement, (iv) reduce the aggregate principal amount of Bonds the Registered Owners of which are required to approve any such supplement or amendment to this Indenture, (v) increase the percentage of the aggregate principal amount of Bonds the Registered Owners of which are required to direct the Trustee to accelerate the maturity of the Bonds, or (vi) provide a privilege or priority of any Bond over any other Bond.

 

(c) Effective Date of Amendment.  The Trustee shall establish a record date for purposes of approval of any such amendment or supplement described in subsections (a)
and (b) of this Section 9.2, and shall cause notice of such record date and such proposed amendment to be given to the Owners in the same manner as notices of redemption are given by the Trustee.  Such notice shall briefly set forth the nature of the proposed amendment and shall state that copies thereof are on file at the designated office of the Trustee for inspection by all Registered Owners.  If, within sixty (60) days (or such longer period as shall be prescribed by the Company
in a written notice to the Trustee and the Issuer) following the mailing of such notice, the Registered Owners of the requisite aggregate principal amount of the Bonds Outstanding at the time of the record date established for such purpose shall have consented to and approved such amendment, no Registered Owner of any Bond shall have any right to object to any of the terms and provisions contained therein, or the operation thereof, or in any manner to question the propriety of the execution thereof, or to enjoin
or restrain the parties to such amendment from adopting the same or from taking any action pursuant to the provisions thereof.  Upon receipt of the consent of the Registered Owners of the requisite aggregate principal amount of the Bonds Outstanding, the Issuer and the Trustee may execute such amendment.

 

The consent of a Registered Owner shall be evidenced by an instrument executed by such Registered Owner, delivered to the Trustee, which instrument shall refer to the proposed amendment described in said notice and shall specifically consent to and approve such amendment.  Any consent
given by a Registered Owner as of such record date shall be irrevocable for a period of six (6) months from the date such consent is given, and shall be conclusive and binding upon all future Registered Owners of the same Bond during such period.  Such consent may be revoked at any time after six (6) months from the date such consent was given by such Registered Owner or by a successor in title, by filing written notice thereof with the Issuer, the Company and the Trustee, but such revocation
shall not be effective if the Registered Owners of the requisite aggregate principal amount of the Bonds Outstanding have, prior to the attempted revocation, consented to and approved such amendment.

Notwithstanding any provision herein to the contrary, no amendment to this Indenture which affects the rights or obligations of the Trustee shall be effective against the Trustee without its written consent.

SECTION 9.3. Amendments to Loan Agreement.

 

The Loan Agreement may be amended by written agreement of the Issuer and the Company and with the written consent of the Trustee, provided that no amendment may be made which would adversely affect the rights of some but less than all Outstanding Bonds without the consent of (a) the
Registered Owners of not less than a majority in aggregate principal amount of the Bonds then Outstanding and (b) the Registered Owners of not less than a majority in aggregate principal amount of the Bonds so affected; and no amendment may be made which would (i) decrease the amounts payable under the Loan Agreement as Installment Loan Payments; (ii) change any date of payment or prepayment provisions under the Loan Agreement; or (iii) change the amendment provisions of the Loan Agreement
without the consent of all of the Registered Owners of the Bonds adversely affected thereby, and provided further that the Loan Agreement may be amended by written agreement of the Issuer and the Company and with the written consent of the Trustee, but not the Owners, in order to make conforming changes with respect to amendments made to this Indenture pursuant to Section 9.1(d) or (e).

SECTION 9.4. Right to Payment.

 

Notwithstanding any other provisions in this Indenture to the contrary, the right of the Owner of any Bond to receive payment of the principal of, and the premium, if any, and interest on, such Bond, on or after the respective due dates expressed herein, or to institute suit for the enforcement
of any such payment on or after such respective dates, will not be impaired or affected without the consent of such Owner.

ARTICLE X                                

 

DEFEASANCE

 

SECTION 10.1. Defeasance.

 

If the Issuer or Company shall pay or cause to be paid, or there shall be otherwise paid or provision for payment made to or for the Owners from time to time of the Bonds, the principal of, premium, if any, and interest due or to become due thereon on the dates and in the manner stipulated
therein, and shall pay or cause to be paid to the Trustee all sums of money due or to become due according to the provisions hereof and if all other liabilities of the Company under the Loan Agreement shall have been satisfied, then these presents and the estate and rights hereby granted shall cease, determine and be void, whereupon the lien of this Indenture shall be canceled and discharged (except with respect to monies held by the Trustee hereunder for the payment of Bonds as aforesaid, and the rights and
immunities of the Issuer and the Trustee hereunder), and upon written request of the Issuer or the Company, the Trustee shall execute and deliver to the Issuer such instruments in writing as shall be required by the Issuer or the Company to cancel and discharge the lien hereof and thereof, and reconvey, release, assign and deliver unto the Issuer and the Company, respectively, the estate, right, title and interest in and to any and all property conveyed, assigned or pledged to the Trustee or otherwise subject
to the lien of this Indenture.

Any Bond shall be deemed to be paid within the meaning of this Section 10.1 when payment of the principal of and premium, if any, on such Bond, plus interest thereon to the due date thereof (whether such due date be by reason of maturity or upon redemption prior to maturity as provided
in this Indenture or otherwise), either (i) shall have been made or caused to be made in accordance with the terms thereof, or (ii) shall have been provided by irrevocably depositing with the Trustee, in trust for the benefit of and subject to a security interest in favor of the owner of such Bond, and irrevocably setting aside exclusively for such payment on such due date, (1) monies sufficient to make such payment, or (2) Government Obligations (provided that in the opinion of Bond Counsel delivered
to the Trustee and the Issuer such deposit of Government Obligations will not adversely affect the exclusion from gross income for federal income tax purposes of interest on the Bonds or cause any of the Bonds to be classified as "arbitrage bonds" within the meaning of Section 148 of the Code) maturing as to principal and interest in such amounts and on such dates as will (together with any monies held under clause (1)), in the written opinion to the Trustee from a firm of certified public accountants not
unsatisfactory to the Trustee, provide sufficient monies without reinvestment to make such payment, and if all necessary and proper fees, compensation and expenses of the Trustee pertaining to the Bonds with respect to which such deposit is made and all other liabilities of the Company under the Loan Agreement shall have been paid or the payment thereof provided for to the satisfaction of the Trustee.  At such time as a Bond shall be deemed to be paid hereunder, as aforesaid, it shall no longer be secured
by or entitled to the benefits of this Indenture, except for the purposes set forth in Sections 2.7 and 2.8 hereof and any such payment from such monies or Government Obligations on the date or dates specified at the time of such deposit.

Notwithstanding the foregoing, in the case of Bonds which are to be redeemed prior to the maturity date, no deposit under clause (ii) of the immediately preceding paragraph shall be deemed a payment of such Bonds as aforesaid until proper notice of redemption of such Bonds shall have
been previously given in accordance with Article V hereof, or until the Company, on behalf of the Issuer, shall have given the Trustee, in form satisfactory to the Trustee, irrevocable written instructions:

(a) stating the redemption date when the principal (and premium, if any) of each such Bond is to be paid (which may be any redemption date permitted by this Indenture); and

 

(b) to call for redemption pursuant to this Indenture any Bonds to be redeemed prior to the maturity date pursuant to (a) hereof.

 

In the case of Bonds which are not to be redeemed within the next succeeding sixty (60) days, the Trustee shall mail, as soon as practicable, in the manner prescribed by Article V hereof, a notice to the Owners of such Bonds that the deposit required by (ii) above has been made
with the Trustee and that said Bonds are deemed to have been paid in accordance with this Section 10.1 and stating the redemption or maturity date upon which monies are to be available for the payment of the redemption price on or principal of said Bonds.

Any monies so deposited with the Trustee as provided in this Section 10.1 may at the written direction of the Company also be invested and reinvested in Government Obligations, maturing in the written opinion of a firm of certified public accountants delivered and not unsatisfactory
to the Trustee in the amounts and on the dates as hereinbefore set forth, and all income from all Government Obligations in the hands of the Trustee pursuant to this Section 10.1 which, in the written opinion to the Trustee from a firm of certified public accountants not unsatisfactory to the Trustee, is not required for the payment of the Bonds and interest and premium, if any, thereon with respect to which such monies are deposited, shall be deposited in the Debt Service Fund as and when collected for
use and application as are other monies deposited in that fund.

Anything in Article IX hereof to the contrary notwithstanding, if monies or Government Obligations have been deposited or set aside with the Trustee pursuant to this Section 10.1 for the payment of the principal of, premium, if any, and interest on the Bonds and the principal of,
premium, if any, and interest on such Bonds shall not have in fact been actually paid in full, no amendment to the provisions of this Section 10.1 shall be made without the consent of the Owner of each of the Bonds affected thereby.

If an agreement with a Securities Depository as described in Section 2.13 hereof is then in effect and such agreement provides for the Company to obtain a CUSIP number in the event of a partial refunding or redemption of the Bonds and the authentication of a new Bond for the refunded
or redeemed Bonds, then the Company shall comply with the provisions of such agreement.

SECTION 10.2. Effect of Defeasance.

 

Notwithstanding anything stated to the contrary in this Article, no defeasance hereunder shall relieve the Trustee of any duty with respect to, or discharge or terminate the provisions hereof with respect to, the payment, transfer, purchase, exchange, registration or redemption of Bonds.

ARTICLE XI                                

 

MISCELLANEOUS PROVISIONS

 

SECTION 11.1. Limitations on Recourse; Immunity of Certain Persons.

 

No recourse shall be had for any claim based on this Indenture or the Bonds against any past, present or future member, officer, official or employee of the Issuer, either directly or through the Issuer or any such successor body, under any constitutional provision, statute or rule of law
or by the enforcement of any assessment or penalty or otherwise, all such liability and all such claims being hereby expressly waived and released as a condition of, and as consideration for, the execution of this Indenture and the issuance of the Bonds.  The Bonds are payable solely from the Revenues pledged hereunder and other monies held by the Trustee hereunder for such purpose.  The Issuer shall be conclusively deemed to have complied with all of its covenants and other obligations hereunder,
including but not limited to those set forth in Articles III and VI hereof, upon requiring the Company in the Loan Agreement to agree to perform such Issuer covenants and other obligations (excepting only any approvals or consents permitted or required to be given by the Issuer hereunder, and any exceptions to the performance by the Company of the Issuer’s covenants and other obligations hereunder, as may be contained in the Loan Agreement).  However, nothing contained in any such agreement
in the Loan Agreement shall prevent the Issuer from time to time, in its discretion, from performing any such covenants or other obligations.  The Issuer shall have no liability for any failure to fulfill, or breach by the Company of, the Company’s obligations under the Bonds, this Indenture, the Loan Agreement, or otherwise, including without limitation the Company’s obligation to fulfill the Issuer’s covenants and other obligations under this Indenture.

SECTION 11.2. No Rights Conferred on Others.

 

Nothing herein contained shall confer any right upon any Person other than the parties hereto, the Company and the Registered Owners of the Bonds.

SECTION 11.3. Illegal, Etc. Provisions Disregarded.

 

If any term or provision of this Indenture or the Bonds or the application thereof for any reason or circumstances shall to any extent be held invalid or unenforceable, the remaining provisions or the application of such term or provision to persons and situations other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each term and provision hereof and thereof shall be valid and enforced to the fullest extent permitted by law.

SECTION 11.4. Substitute Publication of Notice.

 

If for any reason it shall be impossible to make publication of any notice required hereby in a newspaper or newspapers, then such publication in lieu thereof as shall be made with the approval of the Trustee shall constitute a sufficient publication of such notice.

SECTION 11.5. Mailed Notice.

 

All notices required or authorized to be given to the Company, the Issuer and the Trustee pursuant to this Indenture shall be in writing and shall be given as provided herein or delivered by hand or overnight courier service or mailed by first class, registered or certified mail, return receipt
requested, postage prepaid, or sent by telecopy with evidence of receipt confirmed to the sender, to the following address:

(a) to the Company, to:

 

The York Water Company

130 East Market Street

Box 15089

York, PA   17405-7089

Attention:  President and CEO

Telecopy No.:  (717) 852-0058

(b) to the Issuer, to:

 

Department of Community and Economic Development

Pennsylvania Economic Development Financing Authority

Center for Private Financing

Commonwealth Keystone Building

400 North Street – 4th Floor

Harrisburg, PA   17120-0225

Telecopy No.:  (717) 772-3103

(c) to the Trustee, to:

 

Manufacturers and Traders Trust Company

213 Market Street

Harrisburg, PA   17101

Attention:  Corporate Trust Department

Telecopy No.:  (717) 231-2615

or to such other addresses as may from time to time be furnished to the parties, effective upon the receipt of notice thereof given as set forth above.

SECTION 11.6. Governing Law.

 

This Indenture shall be governed, in all respects including validity, interpretation and effect by, and shall be enforceable in accordance with, the laws of the United States of America and of the Commonwealth.

SECTION 11.7. Successors and Assigns.

 

All the covenants, promises and agreements in this Indenture contained by or on behalf of the Issuer or by or on behalf of the Trustee shall bind and inure to the benefit of their respective successors and assigns, whether so expressed or not.

SECTION 11.8. Action by Company.

 

Any requirement imposed by this Indenture or the Loan Agreement on the Issuer may, if not performed by the Issuer, be performed by the Company and such performance by the Company shall constitute compliance with the requirements of this Indenture or the Loan Agreement as if performed by the
Issuer.

SECTION 11.9. Headings and Subheadings for Convenience Only.

 

The table of contents and descriptive headings and subheadings in this Indenture are inserted for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof.

SECTION 11.10. Counterparts.

 

This Indenture may be executed in any number of counterparts, each of which when so executed and delivered shall be an original; but such counterparts shall together constitute but one and the same instrument.

SECTION 11.11. Additional Notices to Rating Agencies.

 

The Trustee hereby agrees that if at any time (a) there is a change in the Trustee (b) there are any amendments to the Indenture or the Loan Agreement or (c) all or any part of the principal of the Bonds is paid, the Trustee shall use its best efforts to promptly give notice
as provided in Section 11.5 hereof of any such event to each Rating Agency then maintaining a rating on the Bonds, which notice in the case of an event described in clause (b) above shall include a copy of any such amendment.  The agreement contained in this paragraph is made as a matter of courtesy and accommodation only and the Trustee shall have no liability to any person for any failure to comply therewith.

 

 

  

  

  

 

IN WITNESS WHEREOF, the Issuer and Trustee have caused this Indenture of Trust to be executed in their respective corporate names and caused their respective corporate seals to be hereunto affixed and attested by their respective duly authorized officers or representatives, as of the day
first above written.

 

 

	 	

PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY

	 
	Attest:	 	 	 
	
By:/s/Craig S. Petrasic
	
By: 
	/s/Stephen M. Drizos	 
	Craig S. Petrasic	 	Stephen M. Drizos	 
	Assistant Secretary	 	Executive Director	 
	 	 	 	 

 

 

	 	
MANUFACTURERS AND TRADERS TRUST

COMPANY, as Trustee
	 
	Attest:	 	 	 
	
By:/s/Alphonse C. Miller
	
By: 
	/s/Adnan Ahmad 	 
	Alphonse C. Miller 	 	Adnan Ahmad 	 
	Assistant Vice President  	 	Assistant Vice President 	 
	 	 	 	 

 

 

  

  

  

Exhibit A

 

(FORM OF BOND)

 

[The following legend shall appear so long as the Book Entry System described in Section 2.13 of the Indenture has not been discontinued.]

 

This Bond is subject to a Book Entry System of Registration under which, except as specifically provided otherwise in the Indenture (hereinafter defined), Cede & Co., as nominee of The Depository Trust Company, a New York corporation ("DTC"), will be the Registered Owner and will
hold this Bond on behalf of the Beneficial Owner hereof.  By acceptance of a confirmation of purchase, delivery or transfer, the Beneficial Owner of this Bond shall be deemed to have agreed to such arrangement.  Cede & Co., as Registered Owner of this Bond, shall be treated as the Owner of this Bond for all purposes.

 

Unless this Bond is presented by an Authorized Representative of DTC to the Trustee for registration of transfer, exchange, or payment, and any Bond issued is registered in the name of Cede & Co. or in such other name as is requested by an Authorized Representative of DTC (and any payment
is made to Cede & Co. or to such other entity as is requested by an Authorized Representative of DTC), any transfer, pledge, or other use hereof for value or otherwise by or to any person is wrongful inasmuch as the Registered Owner hereof, Cede & Co., has an interest herein.

 

UNITED STATES OF AMERICA

 

PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY

 

Exempt Facilities Revenue Bond

Series 2008B

(The York Water Company Project)

 

No. R-1                                                                                                                     $15,000,000

 

Interest Rate                                  Dated
Date                                      Maturity Date                                             CUSIP

6.00%                            October 15, 2008                                       November
1, 2038                                           708686 CG3

Registered Owner:  CEDE & CO.

Principal Amount:  FIFTEEN MILLION DOLLARS

PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY (the "Issuer"), a public instrumentality of the Commonwealth of Pennsylvania and a body corporate and politic organized and existing under the Pennsylvania Economic Development Financing Law, as amended (the "Act"), for value received,
hereby  promises to pay, but solely from the sources hereinafter set forth, to the Registered Owner named above or registered assigns, on the Maturity Date specified above (unless this Bond shall have been previously called for redemption in whole or in part and payment of the redemption price shall have been duly made or provided for) the Principal Amount shown above upon surrender of this Bond at the designated corporate trust office of the Trustee (hereinafter defined) and to pay interest thereon,
but solely from such sources, at the Interest Rate per annum shown above on May 1 and November 1 of each year, commencing May 1, 2009 (each an "Interest Payment Date").  This Bond shall bear interest from the date of authentication if authenticated on an Interest Payment Date to which interest has been paid or duly provided for, otherwise from the last preceding Interest Payment Date to which interest has been paid or duly provided for or from the Dated Date if no interest hereon has
been paid.  The principal or redemption price of this Bond (or of a portion of this Bond in the case of a partial redemption) is payable to the Registered Owner hereof at the corporate trust office of Manufacturers and Traders Trust Company, Harrisburg, Pennsylvania, or the designated office of its successor as trustee (the "Trustee").  Interest shall be paid to the Registered Owner hereof whose name appears on the registration books kept by the Trustee as of the Regular Record Date by check
drawn on the Trustee and mailed on the applicable interest payment date to such Registered Owner, or at the option of any Registered Owner, by wire transfer of immediately available funds to such wire transfer address of a bank in the United States as such Registered Owner shall specify in writing to the Trustee no later than the Record Date for such payment.  The Regular Record Date for any Interest Payment Date shall be the close of business on the fifteenth day of the month immediately preceding
the Interest Payment Date.  Any interest which is not timely paid or duly provided for shall cease to be payable to the Holder as of the Regular Record Date, and shall be payable to the Holder in whose name this Bond is registered at the close of business on a Special Record Date to be fixed by the Trustee for the payment of such overdue interest.  Notice of the Special Record Date shall be mailed to Holders not less than ten (10) days prior thereto.

This Bond is one of the Issuer's duly authorized Exempt Facilities Revenue Bonds, Series 2008B (The York Water Company Project) aggregating $15,000,000 original principal amount (the "Bonds"), issued under and pursuant to the Act and laws of the Commonwealth, and the Trust Indenture dated
as of October 1, 2008 (together with any supplements or amendments thereto, the "Indenture"), between the Issuer and the Trustee.  The Bonds are issued for the purpose of loaning the proceeds thereof to The York Water Company (the "Company") for the financing of (i) a portion of the Company’s 2008 Capital Budget, including, but not limited to the design, acquisition, construction, improvement, extension, renovation, equipping and installation of (a) various structures, including
distribution buildings, booster stations, pumping stations, and various plant and ancillary buildings, (b) spillway upgrades, standpipes, transmission and distribution mains, service lines, meters, fire hydrants, water treatment, pumping and purification equipment, and (c) various other capital improvements, replacements and equipment for the Company’s water system located throughout York County and Adams County, Pennsylvania, and (ii) the payment of all or a portion of the costs of issuance
of the Bonds.  Pursuant to a Loan Agreement dated as of October 1, 2008 (together with any supplements or amendments thereto, the "Loan Agreement") between the Issuer and the Company, the Company has agreed to make payments to the Trustee, on behalf of the Issuer, in amounts and at the time sufficient to pay the principal of, redemption premium, if any, and interest on the Bonds as and when due.

 

Capitalized terms used in this Bond which are not defined herein but which are defined in the Indenture or the Loan Agreement shall have the respective meanings set forth in the Indenture or the Loan Agreement.

 

Reference is made to the Indenture for provisions concerning the rights of the Registered Owners and the rights and obligations of the Issuer, the Company and the Trustee.  The acceptance of the terms and conditions of the foregoing documents, including amplifications and qualifications
of the provisions hereof and thereof, each of which is on file at the corporate trust office of the Trustee in Harrisburg, Pennsylvania, is an explicit and material part of the consideration of the Issuer's issuance hereof and each Registered Owner hereof by acceptance of this Bond accepts and assents to all such terms and conditions as if fully set forth herein.

 

REDEMPTION

 

Optional Redemption.  The Bonds shall be subject to redemption by the Issuer, at the direction of the Company, on or after November 1, 2013, in whole or in part at any time, in Authorized Denominations, at a redemption
price of 100% of the principal amount redeemed plus accrued interest, if any, to the redemption date.

 

Special Mandatory Redemption.  The Bonds are subject to Special Mandatory Redemption prior to maturity not later than one hundred eighty (180) days after the Company has notice or actual knowledge of the occurrence
of a Determination of Taxability, as defined in the Indenture, at a redemption price equal to 100% of the principal amount thereof, plus accrued interest, if any, to the redemption date.  Any such Special Mandatory Redemption shall be in whole unless the Company delivers to the Trustee an opinion of Bond Counsel that redemption of a portion of the Bonds Outstanding would have the result that interest payable on the Bonds remaining Outstanding after such redemption would not be includable for federal
income tax purposes in the gross income of any Owner or Beneficial Owner of a Bond (other than an owner or Beneficial Owner who is a "substantial user" of the Project or a "related person" within the meaning of Section 147(a) of the Code and the applicable regulations thereunder), and in such event the Bonds or portions thereof (in Authorized Denominations) shall be redeemed at such times and in such amounts as Bond Counsel shall so direct in such opinion.

If the Trustee receives written notice from any Owner stating that (i) the Owner has been notified in writing by the Internal Revenue Service that it proposes to include the interest on any Bond in the gross income of such Owner for the reasons stated in the definition of "Determination
of Taxability" set forth in the Indenture or any other proceeding has been instituted against such Owner which may lead to a Final Determination, and (ii) such Owner will afford the Company the opportunity to contest the same, either directly or in the name of the Owner, and until a conclusion of any appellate review, if sought, then the Trustee shall promptly give notice thereof to the Company and the Issuer and to the Owners of Bonds then Outstanding.  If the Trustee thereafter receives written
notice of a Final Determination, the Trustee shall make demand for prepayment of the unpaid Installment Loan Payments under the Loan Agreement or necessary portions thereof from the Company and give notice of the Special Mandatory Redemption of the appropriate amount of Bonds on the earliest practicable date within the required period of 180 days.  In taking any such action or making any such determination, the Trustee may rely on an opinion of counsel.

Notice of Redemption.  The Trustee shall cause notice of any redemption of Bonds hereunder to be given to the Registered Owners of all Bonds to be redeemed at the registered addresses appearing in the registration
books kept for such purpose pursuant to the Indenture.  Each such notice shall (i) be given by facsimile or by first class mail at least thirty (30) days prior to the redemption date, (ii) identify the Bonds to be redeemed (specifying the CUSIP numbers, if any, assigned to the Bonds), (iii) specify the redemption date and the redemption price, and (iv) state that on the redemption date the Bonds called for redemption will be payable at the designated corporate trust operations office
of the Trustee, that from that date interest will cease to accrue, and that no representation is made as to the accuracy or correctness of the CUSIP numbers printed therein or on the Bonds.  No defect affecting any Bond, whether in the notice of redemption or mailing thereof (including any failure to mail such notice), shall affect the validity of the redemption proceedings for any other Bonds.  The Trustee shall also send a notice of prepayment or redemption by first class mail to the Registered
Owner of any Bond who has not sent such Bond in for redemption sixty (60) days after the redemption date.

With respect to any notice of optional redemption of Bonds, unless upon the giving of such notice such Bonds shall be deemed to have been paid within the meaning of Article X of the Indenture, such notice shall state that such redemption shall be conditional upon the receipt by the Trustee
on or prior to the date fixed for such redemption of monies sufficient to pay the principal of, and premium, if any, and interest on, such Bonds to be redeemed, and that if such monies shall not have been so received said notice shall be of no force and effect and the Issuer shall not be required to redeem such Bonds.  In the event that such notice of redemption contains such a condition and such monies are not so received, the redemption shall not be made and the Trustee shall within a reasonable time
thereafter give notice to all Owners of Outstanding Bonds, in the manner in which the notice of redemption was given, that such monies were not so received.

Redemption By The Company In The Event Of Death Of A Beneficial Owner.  Unless the Bonds have been declared due and payable prior to their maturity by reason of an Event of Default, the Representative (as hereinafter
defined) of a deceased Beneficial Owner (as hereinafter defined) who has owned (or whose estate has owned) the Bonds at least six months prior to any request for redemption, has the right after November 1, 2010, to request redemption prior to stated maturity of all or part of his interest in the Bonds, and the Company will redeem (or will cause the Issuer to redeem) the same subject to the limitations that the Company will not be obligated to redeem (or cause to be redeemed), during the period from November 1,
2010 through and including November 1, 2011 (the "Initial Period"), and during any twelve-month period which ends on and includes each November 1 thereafter (each such twelve-month period being hereinafter referred to as a "Subsequent Period"), (i) on behalf of a deceased Beneficial Owner any interest in the Bonds which exceeds $25,000 principal amount (the "Individual Limitation") or (ii) interests in the Bonds exceeding $300,000 in aggregate principal amount (the "Annual Limitation").  A request for
redemption may be initiated by the Representative of a deceased Beneficial Owner at any time and in any principal amount.

The Company may, at its option, redeem (or cause to be redeemed) interests of any deceased Beneficial Owner in the Bonds in the Initial Period or any Subsequent Period in excess of the Individual Limitation.  Any such redemption, to the extent that it exceeds the Individual Limitation
for any deceased Beneficial Owner, shall not be included in the computation of the Annual Limitation for such Initial Period or such Subsequent Period, as the case may be, or for any succeeding Subsequent Period.  The Company may, at its option, redeem (or cause to be redeemed) interests of deceased Beneficial Owners in the Bonds, in the Initial Period or any Subsequent Period in an aggregate principal amount exceeding the Annual Limitation.  Any such redemption, to the extent it exceeds the
Annual Limitation shall not reduce the Annual Limitation for any Subsequent Period.  On any determination by the Company to redeem (or cause to be redeemed) Bonds in excess of the Individual Limitation or the Annual Limitation, Bonds so redeemed shall be redeemed in the order of the receipt of Redemption Requests (as hereinafter defined) by the Trustee.

A request for redemption of an interest in the Bonds may be initiated by the personal representative or other person authorized to represent the estate of the deceased Beneficial Owner or by a surviving joint tenant(s) or tenant(s) by the entirety or the trustee of a trust (each, a "Representative").  The
Representative shall deliver a request to the DTC Participant through whom the deceased Beneficial Owner owned such interest, in form satisfactory to the DTC Participant, together with evidence of the death of the Beneficial Owner, evidence of the authority of the Representative satisfactory to the DTC Participant, such waivers, notices or certificates as may be required under applicable state or federal law and such other evidence of the right to such redemption as the DTC Participant shall require.  The
request shall specify the principal amount of the interest in the Bonds to be redeemed.  The DTC Participant shall thereupon deliver to DTC a request for redemption substantially in the form attached as Exhibit D to the Indenture (a "Redemption Request").  DTC will, on receipt thereof, forward the same to the Trustee.  The Trustee shall maintain records with respect to Redemption Requests received by it including date of
receipt, the name of the DTC Participant filing the Redemption Request and the status of each such Redemption Request with respect to the Individual Limitation or the Annual Limitation.  The Trustee will immediately file each Redemption Request it receives, together with the information regarding the eligibility thereof with respect to the Individual Limitation or the Annual Limitation with the Company.  DTC, the Issuer and the Trustee may conclusively assume, without independent investigation,
that the statements contained in each Redemption Request are true and correct and shall have no responsibility for reviewing any documents submitted to the DTC Participant by the Representative or for determining whether the applicable decedent is in fact the Beneficial Owner of the interest in the Bonds to be redeemed or is in fact deceased and whether the Representative is duly authorized to request redemption on behalf of the applicable Beneficial Owner.

Subject to the Individual Limitation and the Annual Limitation, the Company will, after the death of any Beneficial Owner, redeem (or cause to be redeemed) the interest of such Beneficial Owner in the Bonds on the next Interest Payment Date occurring not less than 30 days following receipt
by the Company of the Redemption Request from the Trustee.  If Redemption Requests exceed the aggregate principal amount of interests in Bonds required to be redeemed during the Initial Period or during any Subsequent Period, then such excess Redemption Requests will be applied in the order received by the Trustee to successive Subsequent Periods, regardless of the number of Subsequent Periods required to redeem such interests.  The Company may, at any time notify the Trustee that it will
redeem (or cause to be redeemed), on the next Interest Payment Date occurring not less than 30 days thereafter, all or any such lesser amount of Bonds for which Redemption Requests have been received but which are not then eligible for redemption by reason of the Individual Limitation and the Annual Limitation.  Any Bonds so redeemed shall be redeemed in the order of receipt of Redemption Requests by the Trustee.

The price to be paid by the Company for the Bonds to be redeemed pursuant to a Redemption Request is 100% of the principal amount thereof plus accrued but unpaid interest to the date of payment.  Subject to arrangements with DTC, payment for interests in the Bonds which are to be
redeemed shall be made to DTC upon presentation of Bonds to the Trustee for redemption in the aggregate principal amount specified in the Redemption Requests submitted to the Trustee by DTC which are to be fulfilled in connection with such payment.  The principal amount of any Bonds acquired or redeemed by or at the direction of the Company other than by redemption at the option of any Representative of a deceased Beneficial Owner pursuant to this section shall not be included in the computation of
either the Individual Limitation or the Annual Limitation for the Initial Period or for any Subsequent Period.

For purposes of this section, a "Beneficial Owner" means the Person who has the right to sell, transfer or otherwise dispose of an interest in a Bond and the right to receive the proceeds therefrom, as well as the interest and principal payable to the holder thereof.  In general,
a determination of beneficial ownership in the Bonds will be subject to the rules, regulations and procedures governing  DTC and DTC Participants.

For purposes of this section, an interest in a Bond held in tenancy by the entirety, joint tenancy or by tenants in common will be deemed to be held by a single Beneficial Owner and the death of a tenant by the entirety, joint tenant or tenant in common will be deemed the death of a Beneficial
Owner.  The death of a person who, during his lifetime, was entitled to substantially all of the rights of a Beneficial Owner of an interest in the Bonds will be deemed the death of the Beneficial Owner, regardless of the recordation of such interest on the records of the DTC Participant, if such rights can be established to the satisfaction of the DTC Participant.  Such interests shall be deemed to exist in typical cases of nominee ownership, ownership under the Uniform Gifts to Minors Act
or the Uniform Transfers to Minors Act, community property or other similar joint ownership arrangements, including individual retirement accounts or Keogh [H.R. 10] plans maintained solely by or for the decedent or by or for the decedent and any spouse, and trust and certain other arrangements where the decedent has the right to receive all or a portion of the income and such person has substantially all of the rights of a Beneficial Owner during such person's lifetime.

In the case of a Redemption Request which is presented on behalf of a deceased Beneficial Owner and which has not been fulfilled at the time the Company gives notice of its election to redeem the Bonds, the Bonds which are the subject of such pending Redemption Request shall be redeemed prior
to any other Bonds.

Any Redemption Request may be withdrawn by the person(s) presenting the same upon delivery of a written request for such withdrawal given by the DTC Participant on behalf of such person to the DTC and by the DTC to the Trustee not less than 60 days prior to the Interest Payment Date on which
such Bonds are eligible for redemption.

The Company may, at its option, purchase any Bonds for which Redemption Requests have been received in lieu of redeeming (or causing the redemption of) such Bonds.  Any Bonds so purchased by the Company shall either be reoffered for sale and sold within 180 days after the date of
purchase or presented to the Trustee for redemption and cancellation.

During such time or times as the Bonds are not represented by a Global Security and are issued in definitive form, all references in this Section to DTC Participants and the DTC, including the DTC's governing rules, regulations and procedures shall be deemed deleted, all determinations which
under this section the DTC Participants are required to make shall be made by the Company (including, without limitation, determining whether the applicable decedent is in fact the Beneficial Owner of the interest in the Bonds to be redeemed or is in fact deceased and whether the Representative is duly authorized to request redemption on behalf of the applicable Beneficial Owner), all Redemption Requests, to be effective, shall be delivered by the Representative to the Trustee, with a copy to the Company, and
shall be in the form of a Redemption Request (with appropriate changes to reflect the fact that such Redemption Request is being executed by a Representative) and, in addition to all documents that are otherwise required to accompany a Redemption Request, shall be accompanied by the Bond that is the subject of such request.

Purchase in Lieu of Redemption.  In the manner and subject to the conditions provided in the Indenture, the Company may elect to purchase any Bonds that have been called for redemption hereof on the redemption date
by giving the Trustee and the Issuer written notice at least two (2) Business Days prior to the date the Bonds are to be redeemed, provided that Bonds so purchased shall be retired.  The principal amount of Bonds to be redeemed on the applicable redemption date shall be reduced by the amount of Bonds so purchased.

DEFAULT

 

In case an Event of Default as defined in the Indenture shall have occurred, the principal of all Bonds then Outstanding under the Indenture may become due and payable prior to their scheduled maturity date.

 

GENERAL PROVISIONS

 

The Bonds are and will be equally and ratably secured, to the extent provided in the Indenture, by the Installment Loan Payments to be received by the Trustee from the Company under the Loan Agreement and other amounts payable by the Company under the Loan Agreement.  The Issuer
has pledged and assigned to the Trustee as security for the payment of the Bonds all other rights, title and interest of the Issuer in (a) the Loan Agreement (except for the indemnification rights and expense reimbursement rights contained therein), and (b) all amounts on deposit from time to time in the various funds created in, and subject to the conditions set forth, in the Indenture.

 

No Registered Owner shall have any right to pursue any remedy under the Indenture unless (a) the Trustee shall have been given written notice of an Event of Default; (b) the Registered Owners of at least 25% in principal amount of the Bonds then Outstanding shall have requested
the Trustee, in writing, to exercise the powers granted in the Indenture or to pursue such remedy in its or their name or names; (c) the Trustee shall have been offered indemnity satisfactory to it against costs, expenses and liabilities; and (d) the Trustee shall have failed to comply with such request within a reasonable time.

 

The Bonds are being issued by means of a book entry system, with actual bond certificates evidencing ownership of the Bonds immobilized at The Depository Trust Company, New York, New York (the "Securities Depository"), or its successor as Securities Depository.  Transfers of beneficial
ownership of the Bonds shall be effected on the records of the Securities Depository and its participants pursuant to the rules and procedures established by the Securities Depository.  So long as the Bonds are issued in book-entry form, actual bond certificates are not available for distribution to the beneficial owners and the principal, redemption premium (if any), purchase price and interest on the Bonds are payable to Cede & Co., as nominee of the Securities Depository.  Transfer
of principal, redemption premium (if any) and interest payments to participants of the Securities Depository is the responsibility of the Securities Depository; transfers of principal, redemption premium (if any) and interest to beneficial owners of the Bonds by participants of the Securities Depository will be the responsibility of such participants and other nominees of beneficial owners.  The Issuer and the Trustee are not responsible or liable for maintaining, supervising or reviewing the records
maintained by the Securities Depository, its participants or persons acting through such participants.  If the Bonds are no longer registered to a Securities Depository or its nominee:  (a) this Bond may be registered as transferred only upon the registration books kept for that purpose at the designated corporate trust office of the Trustee by the registered owner hereof in person, or by his or her attorney duly authorized in writing, upon presentation and surrender to the Trustee of
this Bond duly endorsed for registration of transfer or accompanied by an assignment duly executed by the registered owner or his or her attorney duly authorized in writing, and thereupon a new registered certificate, in the same aggregate principal amount and of the same maturity shall be issued to the transferee in exchange therefor; and (b) this Bond may be exchanged by the registered owner hereof or his or her duly authorized attorney upon presentation at the designated corporate trust office of the
Trustee for an equal aggregate principal amount of Bonds of the same maturity and in any Authorized Denomination in the manner, subject to the conditions and upon payment of charges, if any, provided in the Indenture.

 

Except in the case of a partial redemption and in connection with the remarketing of Bonds purchased by the Company, the Trustee shall not be obligated to effect any such exchange or transfer of Bonds during the fifteen (15) days immediately preceding the date of mailing of any notice of
redemption or at any time following the mailing of any such notice in the case of Bonds selected for such redemption.

 

The Indenture and the Loan Agreement may be modified or amended only with the consent, with certain exceptions as described in the Indenture, of the Registered Owners of not less than a majority, or in certain instances 100%, in aggregate principal amount of all Bonds Outstanding under the
Indenture.

 

Reference is hereby made to the Indenture and the Loan Agreement, copies of which are on file with the Trustee, for the provisions, among others, with respect to the nature and extent of the rights, duties and obligations of the Issuer, the Company, the Trustee and the Registered Owners of
the Bonds.  The Registered Owner of this Bond, by the acceptance hereof, is deemed to have agreed and consented to the terms and provisions of the Indenture and the Loan Agreement.

 

The Issuer and the Trustee shall be entitled to treat and consider the Person in whose name this Bond is registered in the registration books the absolute owner of this Bond for the purpose of payment of principal, premium, if any, and interest with respect to this Bond, for the purpose of
giving notices of redemption and other matters with respect to this Bond, for the purpose of registering transfers with respect to this Bond, and for all other purposes whatsoever.

 

No recourse shall be had for the payment of the principal of or interest on this Bond, or for any claim based hereon, against any member, officer or employee, past, present or future, of the Issuer or of any successor body, as such, either directly or through the Issuer or through any such
successor body, under any constitutional provision, statute or rule of law, or by the enforcement of any assessment or by any legal or equitable proceeding or otherwise, and all such liability of such members, officers or employees is released as a condition of and as consideration for the execution and issuance of this Bond.

Whenever the due date for payment of interest on or principal of this Bond shall be a Saturday, Sunday or a day on which banking institutions in the Commonwealth of Pennsylvania are authorized by law to close (a "Holiday"), then the payment of such interest or principal need not be made on
such date, but may be made on the succeeding day which is not a Holiday, with the same force and effect as if made on the due date for payment of principal or interest.

This Bond shall not be entitled to any right or benefit under the Indenture, or be valid or become obligatory for any purpose, until this Bond shall have been authenticated by execution by the Trustee, acting as authenticating agent, of the certificate of authentication inscribed hereon.

 

 

  

  

  

IN WITNESS WHEREOF, the Pennsylvania Economic Development Financing Authority has caused this Bond to be executed in its name by the manual or facsimile signature of its Executive Director as of the Dated Date set forth above.

 

PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY

By:                                                                           

Executive Director

[Seal]

Attest:

(Assistant) Secretary

 

  

  

  

CERTIFICATE OF AUTHENTICATION

 

This Bond is one of the Bonds described in the within-mentioned Indenture.

Date of Authentication:                                                                           MANUFACTURERS
AND TRADERS TRUST

COMPANY, as Trustee

By:                                                                           

Authorized Signatory

 

  

  

  

ASSIGNMENT

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto

 

Please insert Social Security or

 

Taxpayer Identification Number of Transferee

 

 

/                                                      \

 

 

(Please print or typewrite name and address, including zip code of Transferee)

 

 

the within Bond and all rights thereunder, and hereby irrevocably constitutes and

 

,

 

appoints attorney to register the transfer of the within Bond on the books kept for

 

registration thereof, with full power of substitution in the premises.

 

 

Dated:                                                                

 

Signature Guaranteed:

 

 

	
_______________________________
	  	
_________________________________

	
 

Notice:  Signature (s) must be guaranteed by an eligible guarantor institution participating in a securities transfer association recognized signature guarantee program.

 
	  	
 

Notice:  The Signature above must correspond with the name of the Registered Owner as it appears upon the front of this Bond in every particular, without alteration or enlargement or any change whatsoever

 

  

  

  

EXHIBIT B

 

DTC LETTER OF REPRESENTATION

 

Blanket Issuer Letter of Representations

[To be Completed by Issuer]

Pennsylvania Economic Development Financing Authority

[Name of Issuer]

                       , 1996

            [Date]

Attention Underwriting Department - Eligibility

The Depository Trust Company

55 Water Street, 50th Floor

New York, NY  10041-0099

Ladies and Gentlemen:

This letter sets forth our understanding with respect to all issues (the “Securities”) that Issuer shall request be made eligible for deposit by The Depository Trust Company (“DTC”).

To induce DTC to accept the Securities as eligible for deposit at DTC, and to act in accordance with DTC’s Rules with respect to the Securities, Issuer represents to DTC that Issuer will comply with the requirements stated in DTC’s Operational Arrangements, as they may be amended from time to time.

	
Note:

Schedule A contains statements that the DTC believes accurately describes DTC, the method of effecting book-entry transfers of securities distributed through DTC, and certain related matters
	  	
Very truly yours,

 

Pennsylvania Economic Development

Financing Authority

	  	  	
(Issuer)

	  	  	
By:
	
/s/ Kim Kaufman

	
Received and Accepted:
	  	
(Authorized Officer’s Signature)

 

 Kim Kaufman, Executive Director

	
THE DEPOSITORY TRUST COMPANY
	  	
(Typewritten Name and Title)

Department of Commerce, Bonds Office/PEI

466 Forum Building

	  	  	
[Street Address]

 

	
By:
	
/s/  The Depository Trust Company
	  	
Harrisburg
	
PA
	
17120

	  	  	
(City)
	
(State)
	
(Zip)

	  	  	
 

717-783-6112

	  	  	
(Phone Number)

 

 

 

 

SCHEDULE A

SAMPLE OFFERING DOCUMENT LANGUAGE

DESCRIBING BOOK-ENTRY-ONLY ISSUANCE

(Prepared by DTC-bracketed material may be applicable only to certain issues)

1. The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (the ”Securities”).  The Securities will be issued as fully-registered securities registered
in the name of Cede & Co. (DTC’s partnership nominee).  One fully-registered Security certificate will be issued for [each issue of] the Securities, [each] in the aggregate principal amount of such issue, and will be deposited with DTC.  [If, however, the aggregate principal amount of [any] issue exceeds $200 million, one certificate will be issued with respect to each $200 million of principal amount and an additional certificate will be issued with respect to any remaining principal
amount of such issue.]

2. DTC is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation”
within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934.  DTC holds securities that its participants (“Participants”) deposit with DTC.  DTC also facilitates the settlement among Participants of securities transactions, such as transfers and pledges, in deposited securities through electronic computerized book-entry changes in Participants’ accounts,
thereby eliminating the need for physical movement of securities certificates.  Direct Participants include organizations.  DTC is owned by a number of its Direct Participants and by the New York Stock Exchange, Inc., the American Stock Exchange, LLC, and the National Association of Securities Dealers, Inc.  Access to the DTC system is also available to others such as securities brokers and dealers, banks, and trust companies that clear through or maintain a custodial relationship
with a Direct Participant, either directly or indirectly (“Indirect Participants”).  The Rules applicable to DTC and its Participants are on file with the Securities and Exchange Commission.

3. Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records.  The ownership interest of each actual purchaser of each
Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records.  Beneficial Owners will not receive written confirmation from DTC of their purchase, but Beneficial Owners are expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction.  Transfers of ownership
interests in the Securities are to be accomplished by entries made on the books of Participants acting on behalf of Beneficial Owners.  Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.

4. To facilitate subsequent transfers, all Securities deposited by Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co.  The deposit of Securities with DTC and their registration
in the name of Cede & Co. effect no change in beneficial ownership.  DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners.  The Participants will remain responsible for keeping account of their holdings on behalf of their customers.

5. Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements as may be in effect from time to time.

6. [Redemption notices shall be sent to Cede & Co.  If less than all of the Securities within an issue are being redeemed, DTC’s practice is to determine by lot the amount of the interest of each Direct Participant
in such issue to be redeemed].

7. Neither DTC nor Cede & Co. will consent or vote with respect to the Securities.  Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date.  The omnibus Proxy
assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts the Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

8. Principal and interest payments on the Securities will be made to DTC.  DTC’s practice is to credit Direct Participants’ accounts on payable date in accordance with their respective holdings shown on DTC’s
records unless DTC has reason to believe that it will not receive payment on payable date.  Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, Agent, or the Issuer, subject to any statutory or regulatory requirements as may be in effect from time to
time.  Payment of principal and interest to DTC is the responsibility of the Issuer or the Agent, disbursement of such payments Direct Participants shall be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners shall be the responsibility of Direct and Indirect Participants.

9. A Beneficial Owner shall give notice to elect to have its Securities purchased or tendered, through its Participant, to [tender/Remarketing] Agent, and shall effect delivery of such Securities by causing the Direct Participant to transfer
the Participant’s interest in the Securities, on DTC’s records, to [Tender/Remarketing] Agent.  The requirement for physical delivery of Securities in connection with a demand for purchase or a mandatory purchase will be deemed satisfied when the ownership rights in the Securities are transferred by Direct Participants on DTC’s records.]

10. DTC may discontinue providing its services as securities depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent.  Under such circumstances, in the event that a successor securities
depository is not obtained, Security certificates are required to be printed and delivered.

11. The Issuer may decide to discontinue use of the system of book-entry transfers through DTC (or a successor securities depository).  In that event, Security certificates will be printed and delivered.

12. The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that Issuer believes to be reliable, but Issuer takes no responsibility for the accuracy thereof.

 

  

  

  

EXHIBIT C

FORM OF REQUISITION

PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY

EXEMPT FACILITIES REVENUE BONDS, SERIES 2008B

(THE YORK WATER COMPANY PROJECT)

FORM OF REQUISITION

Requisition No. _____________________

Date:  _____________________________

Manufacturers and Traders Trust Company,

as Trustee

213 Market Street

Harrisburg, PA   17101

Ladies and Gentlemen:

All capitalized terms used herein shall have the meanings set forth in the Trust Indenture dated as of October 1, 2008 (the "Indenture") between the Pennsylvania Economic Development Financing Authority and Manufacturers and Traders Trust Company, as trustee.

You are hereby directed, pursuant to Section 3.4 of the Indenture, to make the following advances from the Construction Fund under the Indenture:

	
Name and Address of Payee
	
Amount to be Paid
	
Purpose of Payment

	  	  	  
	  	  	  
	  	  	  
	  	  	  

The undersigned Authorized Company Representative(s) hereby certifies that each of these obligations has been properly incurred, is for Project Costs, is a proper charge against the Construction Fund in accordance with the provisions of the Loan Agreement, the Tax Documents and the Indenture
and each amount requisitioned is due and unpaid and has not been the basis of any previous requisition.  To the extent the ultimate payee is not The York Water Company (the "Company"), the amount requisitioned will be transferred to such third party immediately upon receipt.  The undersigned further certifies that there is no Event of Default now existing and he/she has no knowledge of any vendors’, mechanics’ or other liens, conditional sales contracts, chattel mortgages, leases
of personalty, title retention agreements or security interests which should be satisfied or discharged before the payments as requisitioned herein are made or which will not be discharged by such payment.

THE YORK WATER COMPANY

By:                                                                           

Authorized Company Representative

 

  

  

  

EXHIBIT D

FORM OF REDEMPTION REQUEST

PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY

EXEMPT FACILITIES REVENUE BONDS

SERIES 2008B

(The York Water Company Project)

due November 1, 2038

(the "Bonds")

CUSIP NO. __________

The undersigned, ____________________ (the "Participant"), does hereby certify, pursuant to the provisions of that certain Trust Indenture dated as of October 1, 2008 (the "Indenture") between the Pennsylvania Economic Development Financing Authority (the "Issuer") and Manufacturers and Traders
Trust Company as Trustee (the "Trustee"), to the Depository Trust Company (the "DTC"), York Water Company (the "Company"), the Issuer and the Trustee that:

1.           [Name of deceased Beneficial Owner] is deceased.

2.           [Name of deceased Beneficial Owner] had a $__________ interest in the above referenced Bonds.

3.           [Name of Representative] is [Beneficial Owner's personal representative/other person authorized to represent the estate of the Beneficial Owner/surviving joint tenant/surviving tenant by the entirety/trustee of a trust] of
[Name of deceased Beneficial Owner] and has delivered to the undersigned a request for redemption in form satisfactory to the undersigned, requesting that $__________ principal amount of said Bonds be redeemed pursuant to said Indenture.  The documents accompanying such request, all of which are in proper form, are in all respects satisfactory to the undersigned and the [Name of Representative] is entitled to have the Bonds to which this Request relates redeemed.

4.           The Participant holds the interest in the Bonds with respect to which this Request for Redemption is being made on behalf of [Name of deceased Beneficial Owner].

5.           The Participant hereby certifies that it will indemnify and hold harmless DTC, the Trustee, the Issuer and the Company (including their respective officers, directors, agents, attorneys and employees), against all damages,
loss, cost, expense (including reasonable attorneys' and accountants' fees), obligations, claims or liability (collectively, the "Damages") incurred by the indemnified party or parties as a result of or in connection with the redemption of Bonds to which this Request relates.  The Participant will, at the request of the Company, forward to the Company, a copy of the documents submitted by [Name of Representative] in support of the request for redemption.

IN WITNESS WHEREOF, the undersigned has executed this Redemption Request as of _________________.

[PARTICIPANT NAME]

By:                                                                

Name:

Title: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 

 

-- 1 --

 

 

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 

 

-- 2 --

 

 

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.

 

 

-- 3 --

 

 

 

 (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.

 

-- 4 --

 

 

 

 (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 

 

-- 5 --

 

 

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.

 

 

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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 

 

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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;

 

 

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(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).

 

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 (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 

 

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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) 

 

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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.

 

 

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      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.

 

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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 A

 

POWER OF ATTORNEY

 

WHEREAS, Principal Real Estate Investors, LLC, a Delaware limited liability company (together with its permitted successors, assigns, and affiliates performing servicing pursuant to the Agreement (defined below) “Principal”), is the principal for lending and debt-related investments for CreXus Investment Corp., a Maryland corporation (“Lender”), pursuant to that certain Mortgage Origination and Servicing Agreement between Principal and Lender dated as of August 28, 2009 (the “Agreement”) and the Service Level Agreements referenced therein; and

 

Know all persons by these presents that Lender, by its undersigned duly authorized representative(s), does hereby make, constitute, and appoint Principal Real Estate Investors, LLC, a Delaware limited liability company, its true and lawful attorney in fact for it and in its name, place, and stead, and on its behalf, and for its use and benefit, to exercise and perform any act, power, duty, right and obligation with respect to the servicing and disposing of commercial loans secured by an interest in real property.  The power of attorney granted hereunder is personal to Principal and may not be assigned or delegated further.

 

Lender hereby grants to Principal full power and authority to perform all and every act whatsoever requisite, proper, or necessary in the exercise of any of the rights and powers granted hereby, by the Agreement, or by other agreement of Lender and Principal, as fully as Lender might itself do, with full power of substitution or revocation, hereby ratifying and confirming all that Principal shall lawfully do or cause to be done by virtue of this power of attorney and the rights and powers granted.

 

The rights, powers, and authority of said attorney in fact herein granted shall commence and be in full force and effect as of ___________, 2009 and such rights, powers, and authority shall remain in full force and effect thereafter until terminated in accordance with the Agreement.  Any third party shall have the right to rely on this Power of Attorney as evidence of Principal’s authority until such time as such third party receives actual notice of its revocation or termination by Lender.

 

LENDER:

 

CREXUS INVESTMENT CORP., a Maryland corporation

 

By:                                            
                    

Name:                                          
              

Its:                                          
                    

 

Dated as of _______________, 2009.

 

[insert notarial acknowledgment]

 

-- - 25 - --

 

 

 

 

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
 

 

 

 

-- - 26 - --

 

 

 

 

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]

 

-- - 27 - --

 

 

 

 

EXHIBIT C-1

 

Origination Fee

 

In the normal course of loan production activities for Lender, the Origination Fee due Principal will be payable from “borrower-paid fees” (see below) collected in connection with new mortgage loan originations.  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”, “loan origination fees” and/or “due diligence fees” paid from borrowers in connection with commercial loans and Sub Debt loans as described in Section 4.01.  Such fees shall be credited against the Origination Fee due, if any, with respect to each Investment, and any excess collected by Principal in any such fees above the Origination Fee for any Investment may be retained by Principal.  Lender will have no obligation to reimburse Principal or any of its
affiliates for any “borrower-paid fees” not actually paid to Principal by borrower.  All “borrower-paid fees” shall be disclosed by Principal to Lender.

 

Lender and Principal have agreed in principle that in certain cases, Lender is willing to consider allowing Principal to roll some of its Origination Fee into the rate of the new mortgage loan.  In these cases, Lender would pay Principal a “premium” price for the loan, the premium going to compensate Principal for the lack of “borrower-paid fees” on the transaction.  Neither party is under any obligation to consummate these transactions, but have agreed that on a case-by-case basis, they will be considered.

 

Commitment Fee

 

It is Principal’s intent to collect “market-accepted” Commitment Fees from borrowers in connection with commercial loans and Sub Debt loans.  The current estimate of these fees is as follows:

		
            Core 1st Mortgage Loan Fee: 50 basis points – 100 basis points
 	
            
 
	 	Sub Debt Loan Fee: 75 basis points – 150
      basis points	 

 

 

Closing Fee

 

It is Principal’s intent to collect “market-accepted” Closing Fees from borrowers in connection with commercial loans, where Principal is providing an “in-house” closing of the transaction.  These fees vary based upon many factors including the size and complexity of the transaction along with the time required to close the transaction.  The current estimate of the minimum fee to be charged is as follows:

 

	
       
 	
      Core 1st Mortgage Loan Fee: $10,000
 

 

 

-- - 28 - --

 

 

 

 

EXHIBIT C-2

Servicing Fee, Commercial Loans

 

Lender shall pay to Principal a Servicing Fee for each commercial loan acquired and serviced on behalf of Lender by Principal pursuant to this Agreement, which fee will equal the product of (i) the principal balance of such commercial loan as of the previous month end, and (ii) eight (8) basis points per annum payable on a monthly basis, based on a 360 day year comprised of twelve (12) thirty (30) day months. 

 

The fee shall be calculated monthly and shall be deducted from remittances made to Lender each month.  Any commercial loan acquired by Lender during a calendar month shall have the service fee calculated on a pro rata basis for the actual number of days during which Principal serviced the commercial loan. 

 

Servicing Fee, Sub Debt

 

Lender shall pay to Principal a Servicing Fee for each Sub Debt loan acquired and serviced on behalf of Lender by Principal pursuant to this Agreement.  During all time periods that Principal, on behalf of Lender, services Sub Debt that is secured by or is directly related to Property that does not secure any commercial loan held by Lender other than debt secured by an interest in a first mortgage and serviced by Principal, the fee will equal the product of (i) the principal balance of such Sub Debt loan as of the previous month end, and (ii) twenty five (25) basis points per annum payable on a monthly basis, based on a 360 day year comprised of twelve (12) thirty (30) day months.  During all time periods that Principal, on behalf of Lender, services Sub Debt that is secured by or is directly related to Property that also secures a commercial loan held by Lender and serviced by
Principal, the fee will equal the product of (x) the principal balance of such Sub Debt loan as of the previous month end, and (y) fifteen (15) basis points per annum payable on a monthly basis, based on a 360 day year comprised of twelve (12) thirty (30) day months.  Such Servicing Fees shall be paid to Principal on a net remit basis as set out above.

 

 

 

Special Servicing Fee

 

Upon any Investment being considered a Specially Serviced Investment as defined by the Servicing Service Level Agreement (Attachment 3), as to which Principal provides services under Section 2.03 of Attachment 3, Lender will pay Principal in lieu of the Servicing Fee, a special servicing fee (the “Special Servicing Fee”) equal to thirty (30) basis points per annum, payable on a monthly basis based on a 360 day year comprised of twelve (12) thirty (30) day months, times the then outstanding principal balance of the Investment.

 

 

-- - 29 - --

 

 

 

 

Asset Management Fee

 

With respect to Properties owned after a foreclosure or deed in lieu of foreclosure Lender will pay to Principal an asset management fee (the “Asset Management Fee”) of seventy-five (75) basis points per annum, payable on a monthly basis, based on a 360 day year comprised of twelve (12) thirty (30) day months, multiplied by the fair market value of each such Property, as mutually agreed upon by Principal and Lender on a quarterly basis until such each Property is disposed of by Principal on behalf of Lender.  The Asset Management Fee shall be payable in lieu of each of the Servicing Fee and the Special Servicing Fee.

 

Liquidation Fee

 

Principal shall receive a liquidation fee (the “Liquidation Fee”) equal to one hundred (100) basis points of the net sale proceeds of any foreclosed Properties or from the sale of a defaulted loan.

 

 

 

-- - 30 - --

 

 

 

 

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. 

 

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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, sub-leases, 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 

 

-- 32 --

 

 

 

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 

 

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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 

 

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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.

 

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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. 

 

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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.

 

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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.

 

 

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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.
 	
             
 

 

 

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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.
 

 

 

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            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.
 

 

 

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            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.
 

 

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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.
 

 

 

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EXHIBIT G

 

SBAF Fact Sheet: Deal Name

> UW 

> Date

 

	
            Complies with all Investment Criteria (as outlined in Exhibit A)?  
 	
            Yes / No
 
	
            The investment opportunity has been discussed with RD?
 	
            Yes / No
 

 

	
            Investment Type:
 	
     

     
 
	
                       
 	
            First Loss:  
 	
            Yes / No
 
	
            Loan Stats:
 	
            Loan Amount
 	
             
 	
      Loan Coupon
 	
             
 
	
            PSF/Unit
 	
             
 	
            Fees
 	
             
 
	
            Property Value
 	
             
 	
            Term / Amort
 	
             
 
	
            PSF/Unit
 	
             
 	
            Last $ Debt Yield
 	
             
 
	
            Loan-to-Value
 	
             
 	
            Contract DSCR
 	
             
 
	
            Loan-to-Cost
 	
             
 	
            Economic DSCR
 	
             
 
	
            Reproduction Cost PSF
 	
             
 	
             
 	
             
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Property:
 	
            Property Type
 	
             
 
	
            NRA / # of Units
 	
             
 	
            Year Built
 	
             
 
	
             
 
	
            Year Built, Construction, Size, Functionality, Condition, etc.

 
 
	
            Location / Mkt:

 
 	
            MSA
 	
             
 	
            Submarket
 	
             
 
	
            Address
 	
             
 
	
             
 
	
            Address, Description

 

 

 

 
 
	
            Sponsorship:

 
 	
            Name
 	
             
 
	
            Entity Type
 	
             
 
	
             
 
	
            Experience, Background, Financials

 

 

 

 
 
	
            Business Plan:
 	
            What, How, Timeframe, Why, etc. 
 
	
            Tenancy:

 
 	
            % Occupied
 	
             
 	
            % Leased
 	
             
 	
            # of Tenants
 	
             
 
	
            Rollover
 
	
            Yr 1
 	
             
 	
            Yr 2
 	
             
 	
            Yr 3
 	
             
 	
            Yr 4 & Beyond
 	
             
 
	
             
 
	
            Major Tenants, Rollover Comments, etc.

 

 

 

 
 
																					

 

 

-- - 44 - --

 

 

 

 

 

	
            UW Assumptions: 

 

 
 	
            Going-in Cap
 	
            Terminal Cap
 	
            Discount Rate
 	
            Mkt Cap
 	
            Mkt 

Vacancy
 	
            Peak-to-Current Mkt Rent
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 
	
            Mkt Rent
 	
            Rent Growth
 	
            Downtime
 	
            Renewal %
 	
            TI’s
 	
            LC’s
 
	
             
 	
             
 	
             
 	
             
 	
             
 	
             
 

 

	
            UW Comments:
 	
             

 

 

 

 

 
 
	
            Strengths:
 	
            •                                     

 
 
	
            Weaknesses:
 	
            •                                     
 
	
            Environmental:
 	
            No Known Issues
 

 

 

PICTURE OF SUBJECT PROPERTY

 

 

 

 

 

  	 

 

 

 

 

 

MAP OF SUBJECT PROPERTY

 

  	 

 

 

 

 

 

-- - 45 - --

 

 

 

 

 

 

 

Exhibit A

INVESTMENT CRITERIA – CORE MTG

 

	
            Eligible Markets
 	
            Is the investment located in one of the following eligible markets? 

(...)
 	
            Yes / No
 
	
            Investment Size:

 
 	
            Is the investment between $3M and $50M?
 	
            Yes / No
 
	
            Stabilized
 	
            Is the property (i) better than 85% leased/occupied and (ii) no more than 20% rollover annually in first 2 years?
 	
            Yes / No
 
	
            Loan-to-Value
 	
            Is the property less than 80% loan-to-value?
 	
            Yes / No
 
	
            Loan-to-Replacement Cost
 	
            Is the property less than 100% loan-to-replacement cost?
 	
            Yes / No
 
	
            Minimum DSCR
 	
            Is the loan better than 1.15x DSCR (based on Contract NOI & a 30-yr amort)?
 	
            Yes / No
 
	
            Term
 	
            Is the investment within the eligible 2 – 10 year loan term?
 	
            Yes / No
 
	
            Additional Financing
 	
            Will the loan be fully funded at closing?
 	
            Yes / No
 
	
            Property Type
 	
            Is the investment one of the following property types?

(Office, Retail, Industrial, Apartment, Hotel)
 	
            Yes / No
 
	
            Asset Quality
 	
            Is the property “B+” or better?
 	
            Yes / No
 
	
            Sponsorship
 	
            Satisfactory credit history, current financial condition, invest/mgmt experience? (No TIC or DE Stat Trust)
 	
            Yes / No
 
	
            Carve-out Guarantee
 	
            Is the sponsor willing to sign limited recourse including: fraud, misrepresentation, waste, and environmental?
 	
            Yes / No
 
	
            Environmental
 	
            Is the property clear of any material environmental risk?
 	
            Yes / No
 

 

 

If the answer to any of the above criteria is “No”, please explain and provide supporting rationale for continuing to pursue investment.

 

 
 

 

-- 46 --

 

 

 

 

CAPITAL STACK 

(Sub-Debt deals Only)

 

 

 

-- 47 --

 

 

 

 

EXHIBIT H

 

CreXus Investment Corp. 

RATE QUOTE APPROVAL/DISAPPROVAL 

EXHIBIT B

 

Date: _________________________________________________________

Transaction Name: ______________________________________________

Underwriter: ___________________________________________________

 

Loan Amount: ________________________

Rate Quote: __________________________

Term: _______________________________

 

Approved
for quoting:   YES____      NO
_____ 

 

Approved for quoting with the following adjustment (s):

 

 

 

 

Transaction declined for the following reason (s):

 

 

 

 

By: ______________________________________

 

 

 

*Subject to Committee Package and Committee Approval

 

 

-- 48 --

 

 

 

 

EXHIBIT I

 

 

 

-- 49 --

 

 

 

 

 

 

-- 50 --

 

 

 

 

 

 

-- 51 --

 

 

 

 

 

 

-- 52 --

 

 

 

 

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.
 

 

-- 53 --

 

 

 

 

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

	
             
 	
            •
 	
            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.

 

 

 

-- 54 --

 

 

 

 

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.

 

 

-- 55 --

 

 

 

 

(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.

 

 

 

-- 56 --

 

 

 

 

  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)

 

 

 

 

-- 57 --

 

 

 

 

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.

 

 

 

-- 58 --

 

 

 

 

(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.

 

 

-- 59 --

 

 

 

 

(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:

 

 

-- 60 --

 

 

 

 

(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 

 

-- 61 --

 

 

 

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 

 

-- 62 --

 

 

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 

 

-- 63 --

 

 

 

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.  

 

 

-- 64 --

 

 

 

 

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 

 

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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);

 

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(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.

 

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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.

 

 

 

 

 

 

 

 

 

 

 

 

 

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