Exhibit 10.3


 




 





MANAGEMENT AGREEMENT


 


by and among


 


PENNYMAC MORTGAGE
INVESTMENT TRUST,


 


PENNYMAC OPERATING
PARTNERSHIP, L.P.


 


and


 


PNMAC CAPITAL MANAGEMENT,
LLC


 


Dated as of August 4,
2009




 





 

















 


MANAGEMENT AGREEMENT, dated as of August 4,
2009, by and among PennyMac Mortgage Investment Trust, a Maryland real estate
investment trust (the “Trust”),
PennyMac Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”), and PNMAC Capital Management, LLC,
a Delaware limited liability company (the “Manager”).


 


W I T N E S S E T H:


 


WHEREAS, the Trust is a newly-formed Maryland
real estate investment trust which intends to invest primarily in residential
mortgage loans and mortgage-related assets and intends to qualify as a real
estate investment trust for federal income tax purposes and will elect to
receive the tax benefits accorded by Sections 856 through 860 of the Internal
Revenue Code of 1986, as amended (the “Code”);


 


WHEREAS, the Trust conducts substantially all
of its operations, and makes substantially all of its investments, through the
Operating Partnership, which is a Subsidiary of the Trust; and


 


WHEREAS, the Trust and the Operating
Partnership desire to retain the Manager to manage the business and investment
affairs of the Trust and the Subsidiaries (as defined below) and to perform
services for the Trust and the Subsidiaries in the manner and on the terms set
forth herein and the Manager wishes to be retained to provide such services.


 


NOW THEREFORE, in consideration of the
premises and agreements hereinafter set forth, the parties hereto hereby agree
as follows:


 


Section 1. 
Definitions.  (a)  The
following terms shall have the meanings set forth in this Section 1(a):


 


“Affiliate”
means (1) any Person directly or indirectly controlling, controlled by or
under common control with such other Person, (2) any executive officer or
general partner of such other Person and (3) any legal entity for which
such Person acts as an executive officer or general partner.


 


“Agreement”
means this Management Agreement, as amended, supplemented or otherwise modified
from time to time.


 


“Allocation Policy”
means the allocation policy for the Trust and the Manager, a copy of which is
attached hereto as Exhibit A, as the same may be amended, restated,
modified, supplemented or waived by the Board of Trustees as specified therein.


 


“Automatic
Renewal Term” has the meaning set forth in Section 11(b) hereof.


 


“Bankruptcy”
means, with respect to any Person, (a) the filing by such Person of a
voluntary petition seeking liquidation, reorganization, arrangement or
readjustment, in any form, of its debts under Title 11 of the United States
Code or any other federal, state or foreign insolvency law, or such Person’s
filing an answer consenting to or acquiescing in any such petition, (b) the
making by such Person of any assignment for the benefit of its creditors, (c) the
expiration of 60 days after the filing of an involuntary petition under Title
11 of the Unites States 


 


1

















 


Code, an application for the
appointment of a receiver for a material portion of the assets of such Person,
or an involuntary petition seeking liquidation, reorganization, arrangement or
readjustment of its debts under any other federal, state or foreign insolvency
law, provided, that the same
shall not have been vacated, set aside or stayed within such 60-day period or (d) the
entry against it of a final and non-appealable order for relief under any
bankruptcy, insolvency or similar law now or hereinafter in effect.


 


“Base Management Fee”
means the base management fee, calculated and payable (in cash) quarterly in
arrears, in an amount equal to 1.50% per annum of the Trust’s Shareholders’
Equity.  For purposes of
calculating the Base Management Fee, outstanding limited partnership interests
in the Operating Partnership (other than limited partnership interests held by
the Trust) shall be treated as outstanding Common Shares.


 


“Board of Trustees”
means the board of trustees of the Trust.


 


“Business Day”
means any day except a Saturday, a Sunday or a day on which banking
institutions in New York, New York are not required to be open.


 


“Change in Control of the
Manager” means the occurrence of any of the following: (1) the
sale, lease or transfer, in one or a series of related transactions, of all or
substantially all of the assets of the Manager, taken as a whole, to any Person
other than one or more Affiliates of the Manager, the Trust or a Subsidiary; or
(2) the acquisition by any Person or group (within the meaning of Section 13(d)(3) or
Section 14(d)(2) of the Exchange Act, or any successor provision),
including any group acting for the purpose of acquiring, holding or disposing
of securities (within the meaning of Rule 13d-5(b)(1) under the
Exchange Act), other than one or more Affiliates of the Manager, the Trust or a
Subsidiary, in a single transaction or in a related series of transactions, by
way of merger, consolidation or other business combination or purchase of
beneficial ownership (within the meaning of Rule 13d-3 under the Exchange
Act, or any successor provision) of 50% or more of the total voting power
of the voting securities of the Manager.


 


“Claim” has the
meaning set forth in Section 9(c) hereof.


 


“Closing Date”
means the date of closing of the Initial Public Offering.


 


“Code” has the
meaning set forth in the Recitals.


 


“Common Shares”
means the common shares of beneficial interest, par value $0.01, of the Trust.


 


“Conditional
Payments” means the Manager Conditional Payment and the
Underwriter Conditional Payment.


 


“Conduct
Policies” has the meaning set forth in Section 2(t) hereof.


 


“Confidential Information”
has the meaning set forth in Section 6(a) hereof.


 


“Core Earnings”
means:


 


2

















 


(A) GAAP net income (loss) excluding
non-cash equity compensation expense;


 


(B) excluding any unrealized gains,
losses or other non-cash items recorded in the period, regardless of whether
such items are included in other comprehensive income or loss, or in net
income; and


 


(C) adjusted to exclude one-time events
pursuant to changes in GAAP and certain other non-cash charges after
discussions between the Manager and the Independent Trustees and after approval
by a majority of the Independent Trustees.


 


For the initial four fiscal quarters following the
Initial Public Offering, Core Earnings will be calculated on the basis of each
of the previously completed fiscal quarters on an annualized basis.  Core Earnings for the initial fiscal quarter
following the Initial Public Offering will be calculated from the Closing Date
on an annualized basis.


 


In the event the Conditional Payments are made
pursuant to the terms of the Underwriting Fee Reimbursement Agreement and the
Underwriting Agreement, respectively, such Conditional Payments shall be
excluded from the calculation of Core Earnings.


 


“Core
Earnings Offset” means any portion of a Core Loss from a period
prior to the Rolling Four Quarters Period that has not been taken into account
in reducing the amount of Core Earnings (but not below zero) from a period
subsequent to the period in which such Core Loss occurred in connection with
the calculation of the Incentive Fee for any period.


 


“Core Loss”
means a loss with regard to any period as calculated in accordance with the
definition of Core Earnings.


 


“Effective Termination Date”
has the meaning set forth in Section 11(c) hereof.


 


“Excess Funds”
has the meaning set forth in Section 2(u) hereof.


 


“Exchange Act”
means the Securities Exchange Act of 1934, as amended.


 


“GAAP” means
generally accepted accounting principles in effect in the United States on the
date such principles are applied.


 


“Governing Instruments”
means, with regard to any entity, the trust instrument in the case of a trust,
the articles of incorporation or certificate of incorporation and bylaws in the
case of a corporation, the certificate of limited partnership (if applicable)
and the partnership agreement in the case of a general or limited partnership,
the certificate of formation and operating agreement in the case of a limited
liability company, or similar governing documents, in each case as amended.


 


“Incentive Fee”
means an incentive management fee calculated and payable (in cash) each fiscal
quarter in arrears in an amount equal to 20% of the dollar amount by which the
Trust’s Core Earnings, for the Rolling Four Quarters Period, plus the amount of
the Incentive Fee, if any, during any of the fiscal quarters in such Rolling
Four Quarters Period and less the amount of any Core Earnings Offset, exceeds
the product of:


 


3

















 


(1) the
weighted average of the issue price per Common Share of all of the Trust’s
public offerings of Common Shares (including the Initial Public Offering)
multiplied by the weighted average number of Common Shares outstanding
(including, for the avoidance of doubt, restricted share units granted under
one or more of the Trust’s equity incentive plans) in the four-quarter period;
and


 


(2) 8.0%.


 


For purposes of calculating
the Incentive Fee, outstanding limited partnership interests in the Operating
Partnership (other than limited partnership interests held by the Trust) shall
be treated as outstanding Common Shares.


 


“Indemnified Party”
has the meaning set forth in Section 9(b) hereof.


 


“Independent Trustee”
means a member of the Board of Trustees who is not an officer or employee of
the Manager or any Affiliate thereof and who otherwise is “independent” in
accordance with the rules of the NYSE or such other securities exchange on
which the Common Shares may be listed.


 


“Initial Public Offering”
means the sale by the Trust of 14,706,327 Common Shares in the initial public
offering of the Trust registered with the SEC.


 


“Initial Term”
has the meaning set forth in Section 11(a) hereof.


 


“Investment Company Act”
means the Investment Company Act of 1940, as amended.


 


“Investment Policies”
means the Trust’s investment policies, a copy of which is attached hereto as Exhibit B,
as the same may be amended, restated, modified, supplemented or waived by the
Board of Trustees as specified therein.


 


“Losses” has the
meaning set forth in Section 9(a) hereof.


 


“Manager
Conditional Payment” means the conditional obligation of the Trust
and the Manager pursuant to the terms of the Underwriting Fee Reimbursement
Agreement to reimburse the Manager an amount equal to the Manager Offering
Payments (as such term is defined in the Underwriting Agreement) if the
conditions set forth in the Underwriting Fee Reimbursement Agreement are met
during the Conditional Payment Period (as defined in the Underwriting Fee
Reimbursement Agreement).


 


“Manager Indemnified Party”
has the meaning set forth in Section 9(a) hereof.


 


“Manager Permitted
Disclosure Parties” has the meaning set forth in Section 6(a) hereof.


 


“Nonrenewal Termination”
has the meaning set forth in Section 11(c) hereof.


 


“Notice of Proposal to
Negotiate” has the meaning set forth in Section 11(c) hereof.


 


“NYSE” means the
New York Stock Exchange, Inc.


 


4

















 


“PennyMac
Brand” has the meaning set forth in Section 17(a) hereof.


 


“Person” means
any natural person, corporation, partnership, association, limited liability
company, estate, trust, joint venture, unincorporated association, any federal,
state, county or municipal government or any bureau, department or agency
thereof or any other legal entity and any fiduciary acting in such capacity on
behalf of the foregoing.


 


“Portfolio Management
Services” has the meaning set forth in Section 2(b) hereof.


 


“REIT” means a “real
estate investment trust” as defined under the Code.


 


“Rolling
Four Quarters Period” means the most recently completed fiscal
quarterly period and the three fiscal quarters immediately preceding the most
recently completed fiscal quarter.


 


“SEC” means the
United States Securities and Exchange Commission.


 


“Securities Act”
means the Securities Act of 1933, as amended.


 


“Shareholder”
means a shareholder of the Trust.


 


“Shareholders’ Equity”
means:


 


(A) the sum of the net proceeds from any
issuances of the Trust’s equity securities since inception (allocated on a pro
rata daily basis for such issuances during the fiscal quarter of any such
issuance); plus


 


(B) the Trust’s retained earnings at the
end of such quarter (without taking into account any non-cash equity
compensation expense incurred in current or prior periods); less


 


(C) any amount that the Trust pays for
repurchases of its Common Shares; excluding


 


(D) any unrealized gains, losses or
other non-cash items that have impacted the Trust’s shareholders’ equity as
reported in the Trust’s financial statements prepared in accordance with GAAP,
regardless of whether such items are included in other comprehensive income or
loss, or in net income; and excluding


 


(E) one-time events pursuant to changes
in GAAP and certain other non-cash charges after discussions between the
Manager and the Independent Trustees and after approval by a majority of the
Independent Trustees.


 


The Conditional Payments shall be taken into account
in the calculation of Shareholders’ Equity only from and after the payment
thereof, if any.


 


5

















 


For purposes of calculating the Base
Management Fee, outstanding limited partnership interests in the Operating
Partnership (other than limited partnership interests held by the Trust) shall
be treated as outstanding Common Shares.


 


“Subsidiary”
means any subsidiary of the Trust, any partnership (including the Operating
Partnership), the general partner of which is the Trust or any subsidiary of
the Trust; any limited liability company, the managing member of which is the
Trust or any subsidiary of the Trust; and any corporation or other entity of
which a majority of (i) the voting power of the voting equity securities
or (ii) the outstanding equity interests is owned, directly or indirectly,
by the Trust or any subsidiary of the Trust.


 


“Termination Fee”
means a termination fee equal to three (3) times the sum of (a) the
average annual Base Management Fees and (b) the average annual (or, if the
period is less than 24 months, annualized) Incentive Fees earned by the Manager
during the 24-month period immediately preceding the date of termination,
calculated as of the end of the most recently completed fiscal quarter before
the date of termination.


 


“Termination Notice”
has the meaning set forth in Section 11(c) hereof.


 


“Trust Account”
has the meaning set forth in Section 5 hereof.


 


“Trust Indemnified Party”
has the meaning set forth in Section 9(b) hereof.


 


“Trust Permitted Disclosure Parties”
has the meaning set forth in Section 6(b) hereof.


 


“Underwriter Conditional Payment” means the conditional
obligation of the Trust pursuant to the terms of the Underwriting Agreement to
pay to the Underwriters the Conditional Payment (as defined in the Underwriting
Agreement) if the conditions set forth in the Underwriting Agreement are met
during the Conditional Payment Period (as defined in the Underwriting
Agreement).


 


“Underwriters” means the underwriters named in the
Underwriting Agreement.


 


“Underwriting Agreement” means the purchase agreement, dated July 29,
2009, among the Trust, the Operating Partnership, the Manager and the
Underwriters relating to the Initial Public Offering.


 


“Underwriting Fee Reimbursement Agreement” means the
Underwriting Fee Reimbursement Agreement, dated as of August 4, 2009,
among the Trust, the Operating Partnership and the Manager.


 


(b)           As used herein, accounting terms relating to the
Trust and the Subsidiaries, if any, not defined in Section 1(a) and
accounting terms partly defined in Section 1(a), to the extent not
defined, shall have the respective meanings given to them under GAAP.


 


(c)           The words “hereof,” “herein” and “hereunder” and
words of similar import when used in this Agreement shall refer to this
Agreement as a whole and not to any 


 


6

















 


particular provision of this Agreement, and Section references are
to this Agreement unless otherwise specified.


 


(d)           The meanings given to terms defined herein shall be
equally applicable to both the singular and plural forms of such terms.  The words include, includes and including
shall be deemed to be followed by the phrase “without limitation.”


 


Section 2.  Appointment and
Duties of the Manager.  (a)  The
Trust and the Operating Partnership hereby appoint the Manager to manage the
investments and day-to-day operations of the Trust and the Subsidiaries,
subject at all times to the further terms and conditions set forth in this
Agreement and to the supervision of, and such further limitations or parameters
as may be imposed from time to time by, the Board of Trustees.  The Manager hereby agrees to use its
commercially reasonable efforts to perform each of the duties set forth herein,
except where a specific standard of care is specified, in which case such
specific standard of care shall apply. 
The appointment of the Manager shall be exclusive to the Manager, except
to the extent that the Manager elects, in its sole and absolute discretion, in
accordance with the terms of this Agreement, to cause the duties of the Manager
as set forth herein to be provided by third parties.


 


(b)           The Manager, in its capacity as manager of the
investments and the day-to-day operations of the Trust and the Subsidiaries, at
all times will be subject to the supervision and direction of the Board of
Trustees and will have only such functions and authority as the Board of
Trustees may delegate to it, including, without limitation, the functions and
authority identified herein and delegated to the Manager hereby.  The Manager will be responsible for the
day-to-day operations of the Trust and the Subsidiaries and will perform (or
cause to be performed) such services and activities relating to the operations
of the Trust and the Subsidiaries, including the investments of the Trust and
the Subsidiaries and their financing, as may be appropriate, which may include,
without limitation:


 


(i)            serving as the Trust’s and
the Subsidiaries’ consultant with respect to the periodic review of the
Investment Policies and Allocation Policy, which review shall occur no less
often than annually, any modifications to which shall be approved by a majority
of the Independent Trustees, and other policies and recommendations with
respect thereto for approval by the Board of Trustees;


 


(ii)           serving as the Trust’s and
the Subsidiaries’ consultant with respect to the identification, investigation,
evaluation, analysis, underwriting, selection, purchase, origination,
negotiation, structuring, monitoring and disposition of the Trust’s and the
Subsidiaries’ investments;


 


(iii)          serving as the Trust’s and
the Subsidiaries’ consultant with respect to decisions regarding any
financings, securitizations and hedging activities undertaken by the Trust or
any Subsidiary, including (1) assisting the Trust or any Subsidiary in
developing criteria for debt and equity financing that is specifically tailored
to the Trust’s or such Subsidiary’s investment objectives, (2) advising
the Trust and the Subsidiaries with respect to obtaining appropriate short-term
financing arrangements for 


 


7

















 


their investments and pursuing a particular arrangement for each
individual investment, if necessary, and (3) advising the Trust and the
Subsidiaries with respect to pursuing and structuring long-term financing
alternatives for their investments, in each case consistent with the Investment
Policies;


 


(iv)          serving as the Trust’s and
the Subsidiaries’ consultant with respect to arranging for the issuance of
mortgage-backed securities from pools of mortgage loans or mortgage-backed
securities owned by the Trust or any Subsidiary;


 


(v)           representing and making
recommendations to the Trust and the Subsidiaries in connection with the
purchase and finance and commitment to purchase and finance investments and the
sale and commitment to sell such investments;


 


(vi)          negotiating and entering
into, on behalf of the Trust or any Subsidiary, credit finance agreements,
repurchase agreements, securitization agreements, agreements relating to
borrowings under temporary programs established by the U.S. government,
commercial paper, interest rate swap agreements, warehouse facilities and all
other agreements and instruments required for the Trust and the Subsidiaries to
conduct their business;


 


(vii)         advising the Trust and the
Subsidiaries on, preparing, negotiating and entering into, on behalf of the
Trust or any Subsidiary, applications and agreements relating to programs
established by the U.S. government;


 


(viii)        with respect to any
prospective investment by the Trust or any Subsidiary and any sale, exchange or
other disposition of any investment by the Trust or any Subsidiary, conducting
negotiations on behalf of the Trust or such Subsidiary with real estate
brokers, sellers and purchasers and their respective agents, representatives
and investment bankers and owners of privately and publicly held real estate
companies;


 


(ix)           evaluating and recommending
to the Trust and the Subsidiaries hedging strategies and engaging in hedging
activities on their behalf that are consistent with such strategies, as so
modified from time to time, and with the Trust’s qualification as a REIT and
with the Investment Policies;


 


(x)            making available to the
Trust and the Subsidiaries the Manager’s knowledge and experience with respect
to mortgage loans, mortgage-related securities, real estate, real estate
securities, other real estate-related assets and non-real estate-related assets
and real estate operating companies;


 


(xi)           investing and
re-investing any funds of the Trust and the Subsidiaries (including in
short-term investments) and advising the Trust and the Subsidiaries as to its
capital structure and capital-raising activities;


 


8

















 


(xii)          monitoring the operating performance
of the Trust’s and the Subsidiaries’ investments and providing periodic reports
with respect thereto to the Board of Trustees, including comparative
information with respect to such operating performance and budgeted or
projected operating results;


 


(xiii)         engaging and supervising, on
behalf of the Trust or any Subsidiary, and at the expense of the Operating
Partnership (except to the extent determined by the Operating Partnership, in
its sole discretion, to be the expense of a Subsidiary other than the Operating
Partnership), independent contractors that provide real estate, investment
banking, mortgage brokerage, securities brokerage, appraisal, engineering,
environmental, seismic, insurance, legal, accounting, transfer agent,
registrar, leasing, due diligence and such other services as may be required
relating to the operations of the Trust and the Subsidiaries, including their
investments (or potential investments);


 


(xiv)        coordinating and managing
operations of any joint venture or co-investment interests held by the Trust or
any Subsidiary and conducting all matters with the joint venture or
co-investment partners;


 


(xv)         providing executive and
administrative personnel, office space and office services required in
rendering services to the Trust and the Subsidiaries;


 


(xvi)        performing and supervising
the performance of administrative functions necessary in the management of the
Trust and the Subsidiaries as may be agreed upon by the Manager and the Board
of Trustees, including, without limitation, the services in respect of any of
the equity incentive plans, the collection of revenues and the payment of the
Trust’s or any Subsidiary’s debts and obligations and maintenance of
appropriate information technology services to perform such administrative
functions;


 


(xvii)       furnishing reports and
statistical and economic research to the Trust and the Subsidiaries regarding
their activities and services performed for the Trust and the Subsidiaries by
the Manager;


 


(xviii)      counseling the Trust and the
Subsidiaries in connection with policy decisions to be made by the Board of
Trustees;


 


(xix)         communicating on behalf of
the Trust or any Subsidiary with the holders of any equity or debt securities
of the Trust or such Subsidiary as required to satisfy the reporting and other
requirements of any governmental bodies or agencies or trading exchanges or
markets and to maintain effective relations with such holders, including
website maintenance, logo design, analyst presentations, investor conferences
and annual meeting arrangements;


 


(xx)          counseling the
Trust and the Subsidiaries regarding the maintenance of their exclusions and,
if applicable, exemptions from status as an


 


9

















 


investment company under the Investment Company Act, monitoring
compliance with the requirements for maintaining such exclusions and exemptions
and using commercially reasonable efforts to cause the Trust and the
Subsidiaries to maintain their exclusions and exemptions from such status;


 


(xxi)         assisting the Trust and the
Subsidiaries in complying with all regulatory requirements applicable to them
in respect of their business activities, including preparing or causing to be
prepared all financial statements required under applicable regulations and all
reports and documents, if any, required under the Exchange Act, the Securities
Act and by the NYSE;


 


(xxii)        counseling the Trust
regarding the maintenance of its qualification as a REIT and monitoring
compliance with the various REIT qualification tests and other rules set
out in the Code and Treasury Regulations promulgated thereunder;


 


(xxiii)       causing the Trust and the
Subsidiaries to retain qualified accountants and legal counsel, as applicable,
to (1) assist in developing appropriate accounting procedures, compliance
procedures and testing systems with respect to financial reporting obligations
and compliance with the provisions of the Code applicable to REITs and, if
applicable, taxable REIT subsidiaries and (2) conduct quarterly compliance
reviews with respect thereto;


 


(xxiv)       taking all necessary actions
to enable the Trust and any Subsidiary to make required tax filings and
reports, including soliciting Shareholders or interest holders in any such
Subsidiary for required information to the extent necessary under the Code and
Treasury Regulations promulgated thereunder applicable to REITs;


 


(xxv)        causing the Trust and the
Subsidiaries to qualify to do business in all jurisdictions in which such
qualification is required or advisable and to obtain and maintain all
appropriate licenses;


 


(xxvi)       using commercially
reasonable efforts to cause the Trust and the Subsidiaries to comply with all
applicable laws;


 


(xxvii)      handling and
resolving on the Trust’s or any Subsidiary’s behalf all claims, disputes or
controversies (including all litigation, arbitration, settlement or other
proceedings or negotiations) in which the Trust or such Subsidiary may be
involved or to which the Trust or such Subsidiary may be subject arising out of
its day-to-day operations (other than with the Manager or its Affiliates),
subject to such limitations or parameters as may be imposed from time to time
by the Board of Trustees;


 


10














 


(xxviii)              arranging
marketing materials, advertising, industry group activities (such as conference
participations and industry organization memberships) and other promotional
efforts designed to promote the Trust’s and the Subsidiaries’ business;


 


(xxix)                      using
commercially reasonable efforts to cause expenses incurred by or on behalf of
the Trust and the Subsidiaries to be commercially reasonable or commercially
customary and within any budgeted parameters or expense guidelines set by the
Board of Trustees from time to time; and


 


(xxx)                         performing such
other services as may be required from time to time for the management and
other activities relating to the operations, including investments, of the
Trust and the Subsidiaries as the Board of Trustees reasonably requests or the
Manager deems appropriate under the particular circumstances.


 


Without limiting the
foregoing, the Manager will perform portfolio management services (the “Portfolio Management Services”) on behalf of the Trust and
the Subsidiaries with respect to their investments. Such services will include,
but not be limited to, consulting with the Trust and the Subsidiaries on the
purchase and sale of, and other investment opportunities in connection with,
the Trust’s and the Subsidiaries’ portfolio of assets; the collection of
information and the submission of reports pertaining to the Trust’s and the
Subsidiaries’ assets, interest rates and general economic conditions; periodic
review and evaluation of the performance of the Trust’s and the Subsidiaries’
portfolio of assets; acting as liaison between the Trust and the Subsidiaries
and banking, mortgage banking, investment banking and other parties with
respect to the purchase, financing and disposition of assets; and other
customary functions related to portfolio management.


 


(c)           For the period and on the terms and conditions set
forth in this Agreement, each of the Trust and the Operating Partnership hereby
constitutes, appoints and authorizes the Manager as its true and lawful agent
and attorney-in-fact and as the true and lawful agent and attorney-in-fact of
any other Subsidiary, in its name, place and stead, to negotiate, execute,
deliver and enter into such credit agreements, repurchase agreements,
securitization agreements, agreements relating to borrowings under temporary
programs established by the U.S. government, commercial paper, interest rate
swap agreements, warehouse facilities, brokerage agreements, custodial
agreements and such other agreements, instruments and authorizations on their behalf,
on such terms and conditions as the Manager, acting in its sole and absolute
discretion, deems necessary or appropriate. This power of attorney is deemed to
be coupled with an interest.


 


(d)           The Manager may enter into agreements with other
parties, including its Affiliates, for the purpose of engaging one or more
parties for and on behalf of the Trust and/or one or more of the Subsidiaries,
and at the sole cost and expense of the Operating Partnership (except to the
extent determined by the Operating Partnership, in its sole discretion, to be
the expense of a Subsidiary other than the Operating Partnership), to provide
property management, asset management, securitization, leasing, development
and/or other services to the Trust and the Subsidiaries (including, without
limitation, Portfolio Management Services) pursuant to 


 


11

















 


agreement(s) with terms which are then customary for agreements
regarding the provision of services to companies that have assets similar in
type, quality and value to the assets of the Trust and the Subsidiaries; provided, that (i) any such
agreements entered into with Affiliates of the Manager shall be (A) on
terms no more favorable to such Affiliates than would be obtained from a third
party on an arm’s-length basis and (B) to the extent the same do not fall
within the provisions of the Investment Policies, approved by a majority of the
Independent Trustees and (ii) with respect to Portfolio Management
Services, (A) any such agreements shall be subject to the Trust’s prior
written approval and (B) the Manager shall remain liable for the
performance of such Portfolio Management Services.


 


(e)           To the extent that the Manager deems necessary or
advisable, the Manager may, from time to time, propose to retain one or more
additional entities for the provision of sub-advisory services to the Manager
in order to enable the Manager to provide the services to the Trust and the
Subsidiaries specified by this Agreement; provided,
that any such agreement (1) shall be on terms and conditions substantially
identical to the terms and conditions of this Agreement or otherwise not
adverse to the Trust and the Subsidiaries, (2) shall not result in an
increased Base Management Fee, Incentive Fee or expenses payable hereunder and (3) shall
be approved by a majority of the Independent Trustees.


 


(f)            The Manager may retain, for and on behalf of the
Trust and/or one or more of the Subsidiaries, and at the sole cost and expense
of the Operating Partnership (except to the extent determined by the Operating
Partnership, in its sole discretion, to be the expense of a Subsidiary other
than the Operating Partnership), such services of accountants, legal counsel,
appraisers, insurers, brokers, transfer agents, registrars, financial printers,
developers, investment banks, financial advisors, internal audit service
providers, due diligence firms, underwriting review firms, banks and other
lenders, surveyors, engineers, environmental and seismic consultants, information
technology consultants, tax advisors and preparers, other consultants, agents,
contractors, vendors, advisors and others as the Manager deems necessary or
advisable in connection with the management and operations of the Trust and the
Subsidiaries. Notwithstanding anything contained herein to the contrary, the
Manager shall have the right to cause any such services to be rendered by its
employees or Affiliates. Except as otherwise provided herein, the Operating
Partnership (or such other Subsidiary) shall pay or reimburse the Manager or
its Affiliates performing such services for the cost thereof; provided, that such costs and
reimbursements are no greater than those which would be payable to outside
professionals or consultants engaged to perform such services pursuant to
agreements negotiated on an arm’s-length basis.


 


(g)           The Manager may effect transactions by or through
the agency of another person with it or its Affiliates which have an
arrangement under which that party or its Affiliates will from time to time
provide to or procure for the Manager and/or its Affiliates goods, services or
other benefits (including, but not limited to, research and advisory services;
economic and political analysis, including valuation and performance
measurement; market analysis, data and quotation services; computer hardware
and software incidental to the above goods and services; clearing and custodian
services and investment related publications), the nature of which is such that
provision can reasonably be expected to benefit the Trust and the Subsidiaries
as a whole and may contribute to an improvement in the performance of the Trust
and the Subsidiaries or the Manager or its Affiliates in providing services to
the Trust and the Subsidiaries on terms that 


 


12

















 


no direct payment is made but instead the Manager and/or its Affiliates
undertake to place business with that party.


 


(h)           In executing portfolio transactions and selecting
brokers or dealers, the Manager will use its best efforts to seek on behalf of
the Trust and the Subsidiaries the best overall terms available. In assessing
the best overall terms available for any transaction, the Manager shall
consider all factors that it deems relevant, including, without limitation, the
breadth of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, both for the specific transaction and
on a continuing basis. In evaluating the best overall terms available, and in
selecting the broker or dealer to execute a particular transaction, the Manager
may also consider whether such broker or dealer furnishes research and other
information or services to the Manager.


 


(i)            The Manager has no duty or obligation to seek in
advance competitive bidding for the most favorable commission rate applicable
to any particular purchase, sale or other transaction, or to select any
broker-dealer on the basis of its purported or “posted” commission rate, but
will endeavor to be aware of the current level of charges of eligible
broker-dealers and to minimize the expense incurred for effecting purchases,
sales and other transactions to the extent consistent with the interests and policies
of the Trust and the Subsidiaries. 
Although the Manager will generally seek competitive commission rates,
it is not required to pay the lowest commission or commission equivalent, provided, that such decision is made in
good faith to promote the best interests of the Trust and the Subsidiaries.


 


(j)            The Manager shall refrain from any action that, in
its sole judgment made in good faith, (1) is not in compliance with the
Investment Policies, (2) would adversely affect the qualification of the
Trust as a REIT under the Code or the status of the Trust or any Subsidiary as
an entity excluded or exempted from investment company status under the
Investment Company Act, or (3) would violate any law, rule or
regulation of any governmental body or agency having jurisdiction over the
Trust or any Subsidiary or of any exchange on which the securities of the Trust
may be listed or that would otherwise not be permitted by the Governing
Instruments of the Trust or such Subsidiary. 
If the Manager is ordered to take any action by the Board of Trustees,
the Manager shall promptly notify the Board of Trustees if it is the Manager’s
judgment that such action would adversely affect such status or violate any
such law, rule or regulation or the Governing Instruments.  Notwithstanding the foregoing, the Manager,
its Affiliates and their respective managers, officers, trustees, directors,
employees and members and any Person providing sub-advisory services to the
Manager shall not be liable to the Trust, the Subsidiaries, the Board of
Trustees, the Shareholders or the interest holders in any Subsidiary for any
act or omission by such Person except as provided in Section 9 of this
Agreement.


 


(k)           The Trust (including the Board of Trustees) and the
Operating Partnership agree to take all actions reasonably required to permit
and enable the Manager to carry out its duties and obligations under this
Agreement, including, without limitation, all steps reasonably necessary to
allow the Manager to file any registration statement or other filing required
to be made under the Securities Act, the Exchange Act, rules of the NYSE
or such other securities exchange on which the Common Shares may be listed, the
Code or other applicable law, rule or 


 


13

















 


regulation on behalf of the Trust and any applicable Subsidiary in a
timely manner.  The Trust and the
Operating Partnership further agree to use commercially reasonable efforts to
make available to the Manager all resources, information and materials
reasonably requested by the Manager to enable the Manager to satisfy its
obligations hereunder, including its obligations to deliver financial
statements and any other information or reports with respect to the Trust and
the Subsidiaries.  If the Manager is not
able to provide a service, or in the reasonable judgment of the Manager it is
not prudent to provide a service, without the approval of the Board of
Trustees, as applicable, then the Manager shall be excused from providing such
service (and shall not be in breach of this Agreement) until the applicable
approval has been obtained, which the Manager shall seek promptly upon
determining an approval is required.


 


(l)            The Manager shall require each seller or transferor
of investment assets to the Trust and the Subsidiaries to make such
representations and warranties regarding such assets as may, in the judgment of
the Manager, be necessary and appropriate. In addition, the Manager shall take
such other action as it deems necessary or appropriate with regard to the
protection of the investments of the Trust and the Subsidiaries.


 


(m)          The Board of Trustees shall periodically review the
Investment Policies and the Trust’s and the Subsidiaries’ portfolio of
investments but will not review each proposed investment, except as otherwise
provided herein. If a majority of the Independent Trustees determines in such
periodic review of transactions that a particular transaction does not comply
with the Investment Policies, then a majority of the Independent Trustees will
consider what corrective action, if any, can be taken. The Manager shall be
permitted to rely upon the direction of the Secretary of the Trust to evidence
the approval of the Board of Trustees or the Independent Trustees with respect
to a proposed investment.


 


(n)           Neither the Trust nor the Subsidiaries shall invest
in any security structured or issued by an entity managed by the Manager or any
Affiliate thereof, unless (i) the investment is made in accordance with
the Investment Policies; (ii) such investment is approved in advance by a
majority of the Independent Trustees; and (iii) the investment is made in
accordance with applicable laws.


 


(o)           Reporting Requirements.


 


(i)                                     As frequently
as the Manager may deem reasonably necessary or advisable, or at the direction
of the Board of Trustees, the Manager shall prepare, or, at the sole cost and
expense of the Operating Partnership (except to the extent determined by the
Operating Partnership, in its sole discretion, to be the expense of a
Subsidiary other than the Operating Partnership), cause to be prepared, with
respect to any investment, reports and other information with respect to such
investment as may be reasonably requested by the Trust.


 


(ii)                                  The Manager
shall prepare, or, at the sole cost and expense of the Operating Partnership
(except to the extent determined by the Operating Partnership, in its sole
discretion, to be the expense of a Subsidiary other than the Operating
Partnership), cause to be prepared, all reports, financial 


 


14

















 


or
otherwise, with respect to the Trust and the Subsidiaries reasonably required
by the Board of Trustees in order for the Trust and the Subsidiaries to comply
with their Governing Instruments, or any other materials required to be filed
with any governmental body or agency, and shall prepare, or, at the sole cost
and expense of the Operating Partnership (except to the extent determined by
the Operating Partnership, in its sole discretion, to be the expense of a Subsidiary
other than the Operating Partnership), cause to be prepared, all materials and
data necessary to complete such reports and other materials including, without
limitation, an annual audit of the Trust’s and the Subsidiaries’ books of
account by a nationally recognized independent accounting firm.


 


(iii)                               The Manager
shall prepare, or, at the sole cost and expense of the Operating Partnership
(except to the extent determined by the Operating Partnership, in its sole
discretion, to be the expense of a Subsidiary other than the Operating
Partnership), cause to be prepared, regular reports for the Board of Trustees
to enable the Board of Trustees to review the Trust’s and the Subsidiaries’
acquisitions, portfolio composition and characteristics, credit quality,
performance and compliance with the Investment Policies and policies approved
by the Board of Trustees.


 


(p)           Managers, officers, trustees, directors, members,
employees and agents of the Manager or Affiliates of the Manager may serve as
trustees, officers, agents, nominees or signatories for the Trust and the
Subsidiaries, to the extent permitted by their Governing Instruments, as from
time to time amended, or by any resolutions duly adopted by the Board of
Trustees pursuant to the Trust’s Governing Instruments or, to the extent
applicable, the governing body of any Subsidiary, pursuant to the Governing
Instruments of such Subsidiary.  When
executing documents or otherwise acting in such capacities for the Trust or any
Subsidiary, such Persons shall indicate in what capacity they are executing on
behalf of the Trust or such Subsidiary. 
Without limiting the foregoing, but subject to Section 13 below,
the Manager will be obligated to supply the Trust with a management team,
including a Chief Executive Officer, Chief Financial Officer and Chief
Operating Officer or similar positions, along with appropriate support
personnel, to provide the management services to be provided by the Manager to
the Trust and the Subsidiaries hereunder, who shall devote such of their time
to the management of the Trust and the Subsidiaries as is necessary and
appropriate, commensurate with the level of activity of the Trust from time to
time.


 


(q)           The Manager shall provide personnel for service on
an investment or similar type of committee.


 


(r)            The Manager shall maintain reasonable and customary “errors
and omissions” insurance coverage and other customary insurance coverage.


 


(s)           The Manager shall provide such internal audit,
compliance and control services as may be required for the Trust and the
Subsidiaries to comply with applicable law (including the Securities Act and
the Exchange Act), regulation (including SEC regulations) and the rules and
requirements of the NYSE or such other securities exchange on which the Common 


 


15

















 


Shares may be listed and as otherwise reasonably requested by the
Trust, the Operating Partnership or the Board of Trustees from time to time.


 


(t)            The Manager acknowledges receipt of the Trust’s Code
of Business Conduct and Ethics and Policy Against Insider Trading
(collectively, the “Conduct Policies”)
and agrees to require its officers and employees who provide services to the
Trust to comply with such Conduct Policies in the performance of such services
hereunder or such comparable policies as shall in substance hold officers and
employees of the Manager to at least the standards of conduct set forth in the
Conduct Policies.


 


(u)           Notwithstanding anything contained in this Agreement
to the contrary, except to the extent that the payment of additional moneys is
proven by the Trust to have been required as a direct result of the Manager’s
acts or omissions which result in the right of the Trust to terminate this
Agreement pursuant to Section 13 of this Agreement, the Manager shall not
be required to expend money (“Excess Funds”)
in connection with any expenses that are required to be paid for or reimbursed
by the Operating Partnership (or any other Subsidiary) pursuant to Section 8
in excess of that contained in any applicable Trust Account (as herein defined)
or otherwise made available by the Operating Partnership (or such other
Subsidiary) to be expended by the Manager hereunder.  Failure of the Manager to expend Excess Funds
out-of-pocket shall not give rise or be a contributing factor to the right of
the Trust under Section 11(c) of this Agreement to terminate this
Agreement due to the Manager’s unsatisfactory performance.


 


(v)           In performing its duties under this Section 2,
the Manager shall be entitled to rely reasonably on qualified experts and
professionals (including, without limitation, accountants, legal counsel and
other professional service providers) hired by the Manager at the sole cost and
expense of the Operating Partnership (except to the extent determined by the
Operating Partnership, in its sole discretion, to be the expense of a
Subsidiary other than the Operating Partnership).


 


Section 3.  Additional
Activities of the Manager.  Except as
otherwise provided in this Section 3, the Allocation Policy and the
Investment Policies, nothing in this Agreement shall (i) prevent the
Manager or any of its Affiliates, managers, officers, trustees, directors,
employees or members from engaging in other businesses or from rendering
services of any kind to any other Person or entity, whether or not the
investment objectives or policies of any such other Person or entity are
similar to those of the Trust or (ii) in any way bind or restrict the
Manager or any of its Affiliates, managers, officers, trustees, directors,
employees or members from buying, selling or trading any securities or
commodities for their own accounts or for the account of others for whom the
Manager or any of its Affiliates, managers, officers, trustees, directors,
employees or members may be acting. 
Notwithstanding the foregoing, during the term of this Agreement,
neither the Manager nor any of its Affiliates may act as the manager to, or
otherwise provide investment advisory services to, any other entity the primary
investment objective of which is to invest in distressed residential mortgage
loans, excluding (a) the two private fund vehicles managed by the Manager
as of the date of this Agreement, (b) any entity in which the Trust or any
of its Subsidiaries is an investor and (c) any government-related entity; provided,
however, that the Manager and/or any of its Affiliates may act as
manager to an entity that it would otherwise not be permitted to manage
pursuant to the foregoing if the Trust and its Subsidiaries are not able to
pursue additional investment in distressed residential mortgage loans due to 


 


16

















 


limitations on available capital and the Trust and its Subsidiaries
determine not to raise additional capital, as long as the Independent Trustees
do not determine that such activities would be detrimental to the Trust and its
Subsidiaries.


 


While
information and recommendations supplied to the Trust and the Subsidiaries
shall, in the Manager’s reasonable and good faith judgment, be appropriate
under the circumstances and in light of the investment objectives and policies
of the Trust and the Subsidiaries, they may be different from the information
and recommendations supplied by the Manager or any Affiliate of the Manager to
others.  The Trust and the Subsidiaries
shall be entitled to equitable treatment under the circumstances in receiving
information, recommendations and any other services, but the Trust and the
Operating Partnership recognize that the Trust and the Subsidiaries are not entitled
to receive preferential treatment as compared with the treatment given by the
Manager or any Affiliate of the Manager to others.  The Trust and the Subsidiaries shall have the
benefit of the Manager’s best judgment and effort in rendering services hereunder
and, in furtherance of the foregoing, the Manager shall not undertake
activities that, in its good faith judgment, will adversely affect the
performance of its obligations under this Agreement.


 


Section 4.  Agency. The Manager shall act as agent of the Trust and the
Subsidiaries in making, acquiring, financing and disposing of investments,
disbursing and collecting the funds of the Trust and the Subsidiaries, paying
the debts and fulfilling the obligations of the Trust and the Subsidiaries,
supervising the performance of professionals engaged by or on behalf of the
Trust and the Subsidiaries and handling, prosecuting and settling any claims of
or against the Trust and the Subsidiaries, the Board of Trustees, holders of
the Trust’s or any Subsidiary’s securities or representatives or properties of
the Trust and the Subsidiaries.


 


Section 5.  Bank
Accounts.  At the
direction of the Board of Trustees, the Manager may establish and maintain one
or more bank accounts in the name of the Trust or any Subsidiary (any such
account, a “Trust Account”), and may collect and
deposit into any such account or accounts, and disburse funds from any such
account or accounts, under such terms and conditions as the Board of Trustees
may approve; and the Manager shall from time to time render appropriate
accountings of such collections and payments to the Board of Trustees and, upon
request, to the auditors of the Trust or any Subsidiary.


 


Section 6.  Records;
Confidentiality.  (a)  The
Manager shall maintain appropriate books of accounts and records relating to
services performed hereunder, and such books of account and records shall be
accessible for inspection by representatives of the Trust or any Subsidiary at
any time during normal business hours upon reasonable advance notice.  The Manager shall keep confidential any and
all non-public information, written or oral, obtained by it in connection with
the services rendered hereunder (“Confidential Information”)
and shall not use Confidential Information except in furtherance of its duties
under this Agreement or disclose Confidential Information, in whole or in part,
to any Person other than (1) to its Affiliates, managers, officers,
trustees, directors, employees, members, agents, representatives or advisors
who need to know such Confidential Information for the purpose of rendering
services hereunder, (2) to appraisers, financing sources and others in the
ordinary course of the Trust’s and any Subsidiary’s business ((1) and (2) collectively,
“Manager Permitted Disclosure Parties”), (3) in
connection with any governmental or regulatory filings of the Trust or any
Subsidiary or disclosure or presentations to Trust investors, (4) to
governmental officials having 


 


17

















 


jurisdiction over the Trust, (5) as required by law or legal
process to which the Manager or any Person to whom disclosure is permitted
hereunder is a party, or (6) with the consent of the Board of
Trustees.  The Manager agrees to inform
each of its Manager Permitted Disclosure Parties of the non-public nature of
the Confidential Information and to direct such Persons to treat such
Confidential Information in accordance with the terms hereof.  Nothing herein shall prevent the Manager from
disclosing Confidential Information (1) upon the order of any court or
administrative agency, (2) upon the request or demand of, or pursuant to
any law or regulation, any regulatory agency or authority, (3) to the
extent reasonably required in connection with the exercise of any remedy
hereunder, or (4) to its legal counsel or independent auditors; provided, however,
that with respect to clauses (1) and (2), it is agreed that the Manager
will provide the Trust and the Operating Partnership with prompt written notice
of such order, request or demand so that the Trust and the Operating
Partnership may seek an appropriate protective order and/or waive the Manager’s
compliance with the provisions of this Agreement.  If, failing the entry of a protective order
or the receipt of a waiver hereunder, the Manager is, in the opinion of
counsel, required to disclose Confidential Information, the Manager may
disclose only that portion of such information that its counsel advises is
legally required without liability hereunder; provided,
that the Manager agrees to exercise its best efforts to obtain reliable
assurance that confidential treatment will be accorded such information.  Notwithstanding anything herein to the
contrary, each of the following shall be deemed to be excluded from the
provisions hereof:  any Confidential
Information that (A) is available to the public from a source other than
the Manager, (B) is released in writing by the Trust to the public or to
Persons who are not under similar obligation of confidentiality to the Trust
and the Subsidiaries, or (C) is obtained by the Manager from a third party
without breach by such third party of an obligation of confidence with respect
to the Confidential Information disclosed.


 


(b)           Each of the Trust and the Operating Partnership
shall keep confidential, and shall cause any other Subsidiary to keep
confidential, any and all Confidential Information and shall not use, and shall
cause any other Subsidiary not to use, Confidential Information except in
furtherance of the terms of this Agreement or disclose Confidential
Information, in whole or in part, to any Person other than (1) to its
Affiliates, officers, trustees, directors, employees, members, agents,
representatives or advisors who need to know such Confidential Information for
the purpose of fulfilling the Trust’s and the Operating Partnership’s
obligations hereunder (collectively, “Trust Permitted Disclosure
Parties”), (2) as required by law or legal process to which the
Trust or any Subsidiary or any Person to whom disclosure is permitted hereunder
is a party, or (3) with the consent of the Manager.  Each of the Trust and the Operating
Partnership agrees to (1) inform each of its Trust Permitted Disclosure
Parties of the non-public nature of the Confidential Information and to direct
such Persons to treat such Confidential Information in accordance with the
terms hereof and (2) not disclose any Confidential Information to its
Trust Permitted Disclosure Parties upon the termination of this Agreement in
accordance with Section 11 hereof. 
Nothing herein shall prevent the Trust or any Subsidiary from disclosing
Confidential Information (1) upon the order of any court or administrative
agency, (2) upon the request or demand of, or pursuant to any law or
regulation, any regulatory agency or authority, (3) to the extent
reasonably required in connection with the exercise of any remedy hereunder, or
(4) to its legal counsel or independent auditors; provided, however,
that with respect to clauses (1) and (2), it is agreed that the Trust and
the Operating Partnership will provide the Manager with prompt written notice
of such order, request or demand so that the Manager may seek an appropriate
protective order and/or waive the Trust’s and the Operating 


 


18

















 


Partnership’s compliance with the provisions of this Section.  If, failing the entry of a protective order
or the receipt of a waiver hereunder, the Trust or any Subsidiary is, in the
opinion of counsel, required to disclose Confidential Information, the Trust or
such Subsidiary may disclose only that portion of such information that its
counsel advises is legally required without liability hereunder; provided, that each of the Trust and the
Operating Partnership shall exercise, and shall cause any other Subsidiary to
exercise, its best efforts to obtain reliable assurance that confidential
treatment will be accorded such information. 
Notwithstanding anything herein to the contrary, each of the following
shall be deemed to be excluded from the provisions hereof:  any Confidential Information that (A) is
available to the public from a source other than the Trust or any Subsidiary, (B) is
released in writing by the Manager to the public or to Persons who are not
under similar obligation of confidentiality to the Manager, or (C) is
obtained by the Trust or any Subsidiary from a third party without breach by
such third party of an obligation of confidence with respect to the
Confidential Information disclosed.  For
the avoidance of doubt, information about the systems, employees, policies,
procedures and investment portfolio (other than investments in which the Trust
or any Subsidiary and the Manager have co-invested) shall be deemed to be
included within the meaning of “Confidential Information” for purposes of the
Trust’s and the Subsidiaries’ obligations pursuant to this Section 6(b).


 


(c)           The provisions of this Section 6 shall survive
the expiration or earlier termination of this Agreement for a period of one
year.


 


Section 7.  Compensation. 
(a)  For the services rendered under this Agreement, the Operating
Partnership shall pay to the Manager the Base Management Fee and the Incentive
Fee.  Notwithstanding the foregoing or
any other provision contained in this Agreement, in the event that any of the
services provided hereunder by the Manager are rendered to or for the benefit
of any Subsidiary other than the Operating Partnership, then, in the sole
discretion of the Operating Partnership, a portion of the Base Management Fee
and/or the Incentive Fee, as determined by the Operating Partnership, shall be
payable by such Subsidiary.


 


(b)           The parties acknowledge that the Base Management Fee
is intended to compensate the Manager for the costs and expenses of its
executive officers and employees (and certain related overhead and employee
costs not otherwise reimbursable under Section 8 below) incurred in
providing to the Trust the investment advisory services and certain general
management services rendered under this Agreement.


 


(c)           The Manager will not receive any compensation for
the period prior to the Closing Date other than expenses incurred and
reimbursed pursuant to the provisions of Section 8 hereunder.


 


(d)           The Base Management Fee shall be payable in arrears
in cash, in quarterly installments commencing with the fiscal quarter in which
this Agreement was executed (with such initial payment pro-rated based on the
number of days during such quarter that this Agreement was in effect).   The Manager shall calculate each installment
of the Base Management Fee within thirty (30) days after the end of the fiscal
quarter with respect to which such installment is payable.  A copy of the computations made by the
Manager to calculate such installment shall thereafter, for informational
purposes only, promptly be delivered to the Board of Trustees and, upon such
delivery, payment of such installment of the Base Management Fee 


 


19

















 


shown therein shall be due and payable no later than the date which is
five (5) Business Days after the date of delivery to the Board of Trustees
of such computations.


 


(e)           The Manager shall compute each installment of the
Incentive Fee within 30 days after the end of the fiscal quarter with respect
to which such installment is payable.  A
copy of the computations made by the Manager to calculate such installment
shall thereafter, for informational purposes only, promptly be delivered to the
Board of Trustees and, upon such delivery, payment of such installment of the
Incentive Fee shown therein shall be due and payable no later than the date
which is five (5) Business Days after the date of delivery to the Board of
Trustees of such computations.


 


Section 8.  Expenses of the
Trust.  (a)  The Manager shall
be responsible for compensation and related expenses of the Manager’s employees
(including the officers of the Trust who are also employees of the Manager),
including, without limitation, salaries, bonus and other wages, payroll taxes
and the cost of employee benefit plans of such personnel; provided, however,
that the Operating Partnership (or any other Subsidiary, as provided below)
shall pay or reimburse the Manager or any Affiliate of the Manager for the
costs and expenses (including any employment expenses) incurred in connection
with the performance by the Manager or such Affiliate of any services performed
by the Manager or such Affiliate pursuant to Section 2(d) or 2(f) hereof.


 


(b)           The Trust and the Subsidiaries shall pay all of
their costs and expenses and the Operating Partnership (or any other
Subsidiary, as provided below) shall reimburse the Manager or its Affiliates
for expenses of the Manager and its Affiliates incurred on behalf of the Trust
or any Subsidiary, excepting only those expenses that are specifically the
responsibility of the Manager pursuant to Section 8(a) of this
Agreement.  Without limiting the
generality of the foregoing, it is specifically agreed that the following costs
and expenses of the Trust or any Subsidiary shall be paid by the Operating
Partnership (or such other Subsidiary) and shall not be paid by the Manager or
Affiliates of the Manager:


 


(i)                                     all costs and
expenses associated with the formation and capital raising activities of the
Trust and the Subsidiaries, if any, including, without limitation, the costs and
expenses of the preparation of the Trust’s registration statements, any and all
costs and expenses of the Initial Public Offering, any subsequent offerings and
any filing fees and costs of being a public company, including, without
limitation, filings with the SEC, the Financial Industry Regulatory Authority
and the NYSE (or any other exchange or over-the-counter market), among other
such entities;


 


(ii)                                  all costs and
expenses in connection with the acquisition, origination, disposition,
development, modification, protection, maintenance, financing, refinancing,
hedging, administration and ownership of the Trust’s or any Subsidiary’s
investment assets (including costs and expenses incurred for transactions that
are not subsequently completed), including, without limitation, costs and
expenses incurred in contracting with third parties, including Affiliates of
the Manager, to provide such services, such as legal fees, accounting fees,
consulting fees, loan


 


20














 


	
   

  	
   

  	
  servicing
  fees, trustee fees, appraisal fees, insurance premiums, commitment fees,
  brokerage fees, guaranty fees, ad valorem taxes, costs of diligence,
  foreclosure, maintenance, repair and improvement of property and premiums for
  insurance on property owned or leased by the Trust or any Subsidiary;

  
	
   

  	
   

  	
   

  
	
   

  	
  (iii)

  	
  all
  legal, audit, accounting, consulting, underwriting, brokerage, listing,
  filing, custodian, transfer agent, rating agency, registration and other fees
  and charges, printing, engraving and other expenses and taxes incurred in
  connection with the issuance, distribution, transfer, registration and stock
  exchange listing of the Trust’s or any Subsidiary’s equity securities or debt
  securities;

  
	
   

  	
   

  	
   

  
	
   

  	
  (iv)

  	
  all
  costs and expenses in connection with legal, accounting, due diligence
  (including due diligence costs for assets that are not subsequently
  acquired), asset management, securitization, property management, brokerage,
  leasing and other services that outside professionals or outside consultants
  perform or otherwise would perform on the Trust’s behalf and that are
  performed by the Manager or an Affiliate thereof, as provided in
  Section 2(d) or 2(f);

  
	
   

  	
   

  	
   

  
	
   

  	
  (v)

  	
  all
  expenses relating to communications to holders of equity securities or debt
  securities issued by the Trust or any Subsidiary and the other third party
  services utilized in maintaining relations with holders of such securities
  and in complying with the continuous reporting and other requirements of
  governmental bodies or agencies (including, without limitation, the SEC),
  including any costs of computer services in connection with this function,
  the cost of printing and mailing certificates for such securities and proxy
  solicitation materials and reports to holders of the Trust’s or any Subsidiary’s
  securities and the cost of any reports to third parties required under any
  indenture to which the Trust or any Subsidiary is a party;

  
	
   

  	
   

  	
   

  
	
   

  	
  (vi)

  	
  all
  costs and expenses of money borrowed by the Trust or any Subsidiary,
  including, without limitation, principal, interest and the costs associated
  with the establishment and maintenance of any credit facilities, warehouse
  loans, repurchase agreements and other indebtedness of the Trust or any
  Subsidiary (including commitment fees, accounting fees, legal fees, closing
  and other costs and expenses);

  
	
   

  	
   

  	
   

  
	
   

  	
  (vii)

  	
  all
  taxes and license fees applicable to the Trust or any Subsidiary, including
  interest and penalties thereon;

  
	
   

  	
   

  	
   

  
	
   

  	
  (viii)

  	
  all fees paid to and
  expenses of third-party advisors and independent contractors, consultants,
  managers and other agents (including real estate underwriters, brokers and
  special servicers) engaged by the Trust or any 

  



 


21

















 


	
   

  	
   

  	
  Subsidiary
  or by the Manager for the account of the Trust or any Subsidiary;

  
	
   

  	
   

  	
   

  
	
   

  	
  (ix)

  	
  all
  insurance costs incurred by the Trust or any Subsidiary, including, without
  limitation, any costs to obtain liability or other insurance to indemnify the
  Manager and underwriters of any securities of the Trust;

  
	
   

  	
   

  	
   

  
	
   

  	
  (x)

  	
  all
  costs and expenses relating to the acquisition of, and maintenance and
  upgrades to, the portfolio accounting systems of the Trust or any Subsidiary;

  
	
   

  	
   

  	
   

  
	
   

  	
  (xi)

  	
  all
  compensation and fees paid to trustees or directors of the Trust or any
  Subsidiary (excluding those trustees or directors who are also officers or
  employees of the Manager), all expenses of trustees or directors of the Trust
  or any Subsidiary (including those trustees or directors who are also
  employees of the Manager), the cost of trustees and officers liability
  insurance and premiums for errors and omissions insurance, and any other
  insurance deemed necessary or advisable by the Board of Trustees for the
  benefit of the Trust and its trustees and officers (including those trustees
  who are also employees of the Manager);

  
	
   

  	
   

  	
   

  
	
   

  	
  (xii)

  	
  all
  third-party legal, accounting and auditing fees and expenses and other
  similar services relating to the Trust’s or any Subsidiary’s operations
  (including, without limitation, all quarterly and annual audit or tax fees
  and expenses);

  
	
   

  	
   

  	
   

  
	
   

  	
  (xiii)

  	
  all
  third-party legal, expert and other fees and expenses relating to any
  actions, proceedings, lawsuits, demands, causes of action and claims, whether
  actual or threatened, made by or against the Trust or any Subsidiary, or
  which the Trust or any Subsidiary is authorized or obligated to pay under
  applicable law or its Governing Instruments or by the Board of Trustees;

  
	
   

  	
   

  	
   

  
	
   

  	
  (xiv)

  	
  subject
  to Section 9 below, any judgment or settlement of pending or threatened
  proceedings (whether civil, criminal or otherwise) against the Trust or any
  Subsidiary, or against any trustee, director or officer of the Trust or any
  Subsidiary in his capacity as such for which the Trust or any Subsidiary is
  required to indemnify such trustee, director or officer by any court or
  governmental agency, or settlement of pending or threatened proceedings;

  
	
   

  	
   

  	
   

  
	
   

  	
  (xv)

  	
  all
  travel and related expenses of trustees, directors, officers and employees of
  the Trust or any Subsidiary and the Manager, incurred in connection with
  attending meetings of the Board of Trustees or holders of securities of the
  Trust or any Subsidiary or performing other business activities that relate
  to the Trust or any Subsidiary, including, without limitations, travel and
  expenses incurred in connection with the purchase,

  



 


22

















 


	
   

  	
   

  	
  consideration
  for purchase, financing, refinancing, sale or other disposition of any
  investment or potential investment of the Trust or any Subsidiary; provided, however, that the Operating Partnership (or any other
  Subsidiary, as provided below) shall only be responsible for a proportionate
  share of such expenses, as determined by the Manager in good faith, where
  such expenses were not incurred solely for the benefit of the Trust or any
  Subsidiary;

  
	
   

  	
   

  	
   

  
	
   

  	
  (xvi)

  	
  all
  expenses of organizing, modifying or dissolving the Trust or any Subsidiary
  and costs preparatory to entering into a business or activity, or of winding
  up or disposing of a business activity of the Trust or any Subsidiary, if
  any;

  
	
   

  	
   

  	
   

  
	
   

  	
  (xvii)

  	
  all
  expenses relating to payments of dividends or interest or distributions in
  cash or any other form made or caused to be made by the Board of Trustees to
  or on account of holders of the securities of the Trust or any Subsidiary,
  including, without limitation, in connection with any dividend reinvestment
  plan;

  
	
   

  	
   

  	
   

  
	
   

  	
  (xviii)

  	
  all
  costs and expenses related to the design and maintenance of the Trust’s
  website or sites and associated with any computer software, hardware, electronic
  equipment or purchased information technology services from third party
  vendors that is used primarily for the Trust or any Subsidiary;

  
	
   

  	
   

  	
   

  
	
   

  	
  (xix)

  	
  costs
  and expenses incurred with respect to market information systems and
  publications, research publications and materials, and settlement, clearing
  and custodial fees and expenses; provided,
  however, that the Operating
  Partnership (or any other Subsidiary, as provided below) shall only be
  responsible for a proportionate share of such expenses, as determined by the
  Manager in good faith, where such expenses were not incurred solely for the
  benefit of the Trust or any Subsidiary;

  
	
   

  	
   

  	
   

  
	
   

  	
  (xx)

  	
  the
  costs and expenses incurred with respect to administering the Trust’s
  incentive plans;

  
	
   

  	
   

  	
   

  
	
   

  	
  (xxi)

  	
  the
  costs and expenses of maintaining compliance with all U.S. federal, state,
  local and applicable regulatory body rules and regulations; provided, however, that the Operating Partnership (or any other
  Subsidiary, as provided below) shall only be responsible for a proportionate
  share of such costs and expenses, as determined by the Manager in good faith,
  where such costs and expenses were not incurred solely for the benefit of the
  Trust or any Subsidiary;

  
	
   

  	
   

  	
   

  
	
   

  	
  (xxii)

  	
  expenses relating to any
  office or office facilities, including disaster backup recovery sites and
  facilities, maintained for the Trust or any Subsidiary separate from the
  offices of the Manager;

  



 


23

















 


	
   

  	
  (xxiii)

  	
  all
  other expenses of the Trust or any Subsidiary relating to the business and
  investment operations of the Trust and the Subsidiaries, including, without
  limitation, the costs and expenses of acquiring, originating, owning,
  protecting, maintaining, financing, refinancing, developing, modifying and disposing
  of investments that are not the responsibility of the Manager under
  Section 9(a) of this Agreement; and

  
	
   

  	
   

  	
   

  
	
   

  	
  (xxiv)

  	
  all other expenses actually incurred by the
  Manager or its Affiliates or their respective managers, officers, trustees,
  directors, employees, members, representatives or agents, or any Affiliates
  thereof, that are reasonably necessary for the performance by the Manager of
  its duties and functions under this Agreement.

  



 


In addition, the Operating Partnership (or
any other Subsidiary, as provided below) will be required to pay the Trust’s
and the Subsidiaries’ pro rata portion of rent, telephone, utilities, office
furniture, equipment, machinery and other office, internal and overhead
expenses of the Manager and its Affiliates required for the Trust’s and the
Subsidiaries’ operations. These expenses will be allocated between the Manager,
on the one hand, and the Operating Partnership (or such other Subsidiary), on
the other hand, based on the ratio of the Trust’s and the Subsidiaries’ proportion
of gross assets compared to all remaining gross assets managed by the Manager
as calculated at each fiscal quarter end. The Manager, the Trust and the
Operating Partnership will modify this allocation methodology, subject to the
Board of Trustees’ approval, if the allocation becomes inequitable.


 


Notwithstanding the foregoing or any other
provision contained in this Agreement, in the event that any of the services
provided hereunder by the Manager are rendered to or for the benefit of any
Subsidiary other than the Operating Partnership, then, in the sole discretion
of the Operating Partnership, a portion of the expense reimbursements to the
Manager and/or its Affiliates hereunder, as determined by the Operating
Partnership, shall be payable by such Subsidiary.


 


(c)           Costs and expenses incurred by the Manager or an
Affiliate thereof on behalf of the Trust or any Subsidiary shall be reimbursed
quarterly to the Manager.  The Manager
shall prepare a written statement in reasonable detail documenting the costs
and expenses of the Trust and the Subsidiaries and those incurred by the
Manager on behalf of the Trust or any Subsidiary during each fiscal quarter,
and shall deliver such written statement to the Trust within 30 days after the
end of each fiscal quarter.  The
Operating Partnership (or any other Subsidiary, as provided in the immediately
preceding paragraph) shall pay all amounts payable to the Manager pursuant to
this Section 8 within five (5) Business Days after the date of
delivery of such written statement without demand, deduction, offset or
delay.  Cost and expense reimbursement to
the Manager shall be subject to adjustment at the end of each calendar year in
connection with the annual audit of the Trust and the Subsidiaries.  The provisions of this Section 8 shall
survive the expiration or earlier termination of this Agreement to the extent
such expenses have previously been incurred or are incurred in connection with
such expiration or termination.


 


24

















 


(d)           Notwithstanding the foregoing, the Manager may, at
its option, elect not to seek reimbursement for certain expenses during a given
quarterly period, which determination shall not be deemed to construe a waiver
of reimbursement for similar expenses in future periods.


 


Section 9.  Limits of the
Manager’s Responsibility; Indemnification. 
(a)  The Manager assumes no responsibility under this Agreement
other than to provide the services specified hereunder in good faith and shall
not be responsible for any action of the Board of Trustees in following or
declining to follow any advice or recommendations of the Manager.  None of the Manager or its Affiliates or
their respective managers, officers, trustees, directors, employees or members
or any Person providing sub-advisory services to the Manager will be liable to
the Trust, any Subsidiary, the Board of Trustees, or the Shareholders or
interest holders of any Subsidiary for any acts or omissions performed under
this Agreement, except because of acts constituting bad faith, willful
misconduct, gross negligence or reckless disregard of the Manager’s duties
under this Agreement.  The Trust and the
Operating Partnership shall, to the full extent lawful, reimburse, indemnify
and hold harmless the Manager and its Affiliates and their respective managers,
officers, trustees, directors, employees and members and any Person providing
sub-advisory services to the Manager (each, a “Manager
Indemnified Party”), with respect to all expenses, losses, damages,
liabilities, demands, charges and claims of any nature whatsoever (including
reasonable attorneys’ fees) (collectively “Losses”) in
respect of or arising from any acts or omissions of such Manager Indemnified
Party, performed in good faith under this Agreement and not constituting bad
faith, willful misconduct, gross negligence or reckless disregard of the duties
of the Manager under this Agreement.


 


(b)           The Manager shall, to the full extent lawful,
reimburse, indemnify and hold harmless the Trust (or any Subsidiary), and the
trustees, officers and Shareholders and each Person, if any, controlling the
Trust (each, a “Trust Indemnified Party”; a
Manager Indemnified Party and a Trust Indemnified Party are each sometimes
hereinafter referred to as an “Indemnified Party”)
with respect to all Losses in respect of or arising from any acts or omissions
under this Agreement constituting bad faith, willful misconduct, gross
negligence or reckless disregard of the duties of the Manager under this
Agreement or any claims by the Manager’s employees relating to the terms and
conditions of their employment by the Manager.


 


(c)           In case any such claim, suit, action or proceeding
(a “Claim”) is brought against any
Indemnified Party in respect of which indemnification may be sought by such
Indemnified Party pursuant hereto, the Indemnified Party shall give prompt
written notice thereof to the indemnifying party, which notice shall include
all documents and information in the possession of or under the control of such
Indemnified Party reasonably necessary for the evaluation and/or defense of
such Claim and shall specifically state that indemnification for such Claim is
being sought under this Section; provided,
however, that the failure of the
Indemnified Party to so notify the indemnifying party shall not limit or affect
such Indemnified Party’s rights to be indemnified pursuant to this
Section.  Upon receipt of such notice of
Claim (together with such documents and information from such Indemnified
Party), the indemnifying party shall, at its sole cost and expense, in good
faith defend any such Claim with counsel reasonably satisfactory to such
Indemnified Party, which counsel may, without limiting the rights of such
Indemnified Party pursuant to the next succeeding sentence of this Section,
also represent the indemnifying party in such investigation, action or
proceeding.  In the alternative, such 


 


25

















 


Indemnified Party may elect to conduct the defense of the Claim, if (1) such
Indemnified Party reasonably determines that the conduct of its defense by the
indemnifying party could be materially prejudicial to its interests, (2) the
indemnifying party refuses to defend (or fails to give written notice to the
Indemnified Party within ten (10) days of receipt of a notice of Claim
that the indemnifying party assumes such defense), or (3) the indemnifying
party shall have failed, in such Indemnified Party’s reasonable judgment, to
defend the Claim in good faith.  The
indemnifying party may settle any Claim against such Indemnified Party without
such Indemnified Party’s consent, provided,
(1) such settlement is without any Losses whatsoever to such Indemnified
Party, (2) the settlement does not include or require any admission of
liability or culpability by such Indemnified Party and (3) the
indemnifying party obtains an effective written release of liability for such
Indemnified Party from the party to the Claim with whom such settlement is
being made, which release must be reasonably acceptable to such Indemnified
Party, and a dismissal with prejudice with respect to all claims made by the
party against such Indemnified Party in connection with such Claim.  The applicable Indemnified Party shall
reasonably cooperate with the indemnifying party, at the indemnifying party’s
sole cost and expense, in connection with the defense or settlement of any
Claim in accordance with the terms hereof. 
If such Indemnified Party is entitled pursuant to this Section to
elect to defend such Claim by counsel of its own choosing and so elects, then
the indemnifying party shall be responsible for any good faith settlement of
such Claim entered into by such Indemnified Party.  Except as provided in the immediately
preceding sentence, no Indemnified Party may pay or settle any Claim and seek
reimbursement therefor under this Section.


 


(d)           The provisions of this Section 9 shall survive
the expiration or earlier termination of this Agreement.


 


Section 10.  No Joint
Venture.  The Trust, the Operating
Partnership and the Manager are not partners or joint venturers with each other
and nothing herein shall be construed to make them such partners or joint
venturers or impose any liability as such on any of them.


 


Section 11.  Term; Termination.


 


(a)           Initial Term.  This Agreement shall become effective on the
Closing Date and shall continue in operation, unless terminated in accordance
with the terms hereof, until August 4, 2012 (the “Initial Term”).


 


(b)           Automatic Renewal Terms.  After the Initial Term, this Agreement shall
be deemed renewed automatically each year for an additional one-year period (an
“Automatic Renewal Term”) unless the
Trust or the Manager terminates this Agreement in accordance with Section 11(c) of
this Agreement.


 


(c)           Termination of this Agreement.  Notwithstanding any other provision of this
Agreement to the contrary, upon the expiration of the Initial Term or any
Automatic Renewal Term and upon at least 180 days’ prior written notice to the
Manager or the Trust, as applicable (the “Termination Notice”),
either (A) the Trust (without cause), upon the affirmative vote of at
least two-thirds of the Independent Trustees or by a vote of the holders of at
least two-thirds of the Trust’s outstanding Common Shares (other than those
Common Shares held by the Manager or any Affiliate thereof), in each case based
upon (1) unsatisfactory performance by the 


 


26

















 


Manager that is materially detrimental to the Trust and the
Subsidiaries or (2) the determination that the compensation payable to the
Manager under this Agreement is not fair; or (B) the Manager (without
cause) may, in connection with the expiration of the Initial Term or any
Automatic Renewal Term, decline to renew this Agreement (any such nonrenewal, a
“Nonrenewal Termination”); provided, that the Trust shall not have
the right to terminate this Agreement under clause (2) above if the
Manager agrees to continue to provide services under this Agreement at fees
that at least two-thirds of the Independent Trustees determine to be fair
pursuant to the procedures set forth below.


 


If the Trust (but not the Manager) issues the
Termination Notice, the Operating Partnership shall be obligated to pay the
Manager the Termination Fee within 90 days of the last day of the Initial Term
or Automatic Renewal Term, as applicable (the “Effective
Termination Date”); provided,
however, that in the event a
Termination Notice is given in connection with a determination that the
compensation payable to the Manager is not fair, the Manager shall have the
right to renegotiate such compensation by delivering to the Trust and the
Operating Partnership, no fewer than 45 days prior to the prospective Effective
Termination Date, written notice (any such notice, a “Notice of
Proposal to Negotiate”) of its intention to renegotiate its
compensation under this Agreement. 
Thereupon, the Trust (represented by the Independent Trustees), the
Operating Partnership and the Manager shall endeavor to negotiate in good
faith the revised compensation payable to the Manager under this Agreement.
Provided that the Manager, the Trust and the Operating Partnership agree to the
terms of the revised compensation to be payable to the Manager within
45 days following the receipt of the Notice of Proposal to Negotiate, the
Termination Notice shall be deemed of no force and effect and this Agreement
shall continue in full force and effect on the terms stated in this Agreement,
except that the compensation payable to the Manager hereunder shall be the
revised compensation then agreed upon by the parties to this Agreement. The
Trust, the Operating Partnership and the Manager agree to execute and deliver
an amendment to this Agreement setting forth such revised compensation promptly
upon reaching an agreement regarding the same. In the event that the Trust, the
Operating Partnership and the Manager are unable to agree to the terms of the
revised compensation to be payable to the Manager during such 45-day period,
this Agreement shall terminate, such termination to be effective on the date
which is the later of (A) 10 days following the end of such 45-day
period and (B) the Effective Termination Date originally set forth in the
Termination Notice.  In the event of any
Nonrenewal Termination, after delivery of the Termination Notice, the Manager
shall thereafter have the authority to invest only such capital that represents
the return of capital resulting from the liquidation or repayment of
investments of the Trust or any Subsidiary existing at the time of the
Termination Notice, and subject to the Investment Policies and all other
existing investment and other policies of the Trust.  The Manager shall cooperate with the Trust
and the Subsidiaries in executing an orderly transition of the management of
the Trust’s assets to a new manager.  The
Trust may terminate this Agreement for cause pursuant to Section 13 of
this Agreement even after a Nonrenewal Termination and no Termination Fee shall
be payable.


 


(d)           If this Agreement is terminated pursuant to this Section 11
or pursuant to Section 12, 13 or 14, such termination shall be without any
further liability or obligation of any party to the other, except with respect
to the payment of a Termination Fee, if applicable, and except as provided in
Sections 6, 8 and 15 of this Agreement. In addition, Sections 9, 17(b) and
18(e) of this Agreement shall survive termination of this Agreement.


 


27

















 


Section 12. 
Assignments.  (a) Except
as set forth in Section 12(b) of this Agreement, this Agreement shall
terminate automatically without payment of the Termination Fee in the event of
its assignment, in whole or in part, by the Manager, unless such assignment is
consented to in writing by the Trust with the consent of a majority of the
Independent Trustees.  Any such permitted
assignment shall bind the assignee under this Agreement in the same manner as
the Manager is bound, and the Manager shall be liable to the Trust and the
Subsidiaries for all errors or omissions of the assignee under any such assignment.  In addition, the assignee shall execute and
deliver to the Trust and the Operating Partnership a counterpart of this
Agreement naming such assignee as the Manager. 
This Agreement shall not be assigned by the Trust or the Operating
Partnership without the prior written consent of the Manager, except in the
case of assignment by the Trust or the Operating Partnership to another REIT
(in the case of the Trust) or other organization which is a successor (by
merger, consolidation, purchase of assets, or similar transaction) to the Trust
or the Operating Partnership, in which case such successor organization shall
be bound under this Agreement and by the terms of such assignment in the same
manner as the Trust and the Operating Partnership are bound under this
Agreement.


 


(b)           Notwithstanding any provision of this Agreement, the
Manager may subcontract and assign any or all of its responsibilities under
this Agreement to any of its Affiliates in accordance with the terms of this
Agreement applicable to any such subcontract or assignment, and the Trust and
the Operating Partnership hereby consent to any such assignment and
subcontracting. In addition, provided that the Manager provides prior written
notice to the Trust and the Operating Partnership for informational purposes
only, nothing contained in this Agreement shall preclude any pledge,
hypothecation or other transfer of any amounts payable to the Manager under
this Agreement. In addition, the Manager may assign one or more of its duties
under this Agreement to any of its Affiliates without the Trust’s or the
Operating Partnership’s approval if such assignment does not require their
approval under the Investment Advisers Act of 1940, as amended.


 


Section 13.  Termination by
the Trust for Cause.  At the option
of the Trust and at any time during the term of this Agreement, this Agreement
shall be and become terminated upon at least 30 days’ prior written notice of
termination from the Board of Trustees to the Manager, without payment of the
Termination Fee, if any of the following events shall occur, which shall be
determined by a majority of the Board of Trustees:


 


(i)                                     the Manager
shall materially breach any provision of this Agreement and such breach shall
continue for a period of 30 days after the Manager’s receipt of written notice
thereof specifying such breach and requesting that the same be remedied in such
30-day period (or 45 days after the Manager’s receipt of written notice of such
breach if the Manager takes steps to cure such breach within 30 days of the
written notice);


 


(ii)                                  the Manager
shall commit any act of fraud, misappropriation of funds, or embezzlement
against the Trust or any Subsidiary;


 


(iii)                               the Manager
shall commit any act of gross negligence in the performance of its duties under
this Agreement;


 


28

















 


(iv)                              upon the
commencement of any proceeding relating to the Manager’s Bankruptcy or
insolvency;


 


(v)                                 upon the
dissolution of the Manager; or


 


(vi)                              upon a Change
in Control of the Manager.


 


If any of the events specified above shall occur,
the Manager shall give prompt written notice thereof to the Board of Trustees.


 


Section 14.  Termination by
the Manager for Cause.


 


(a)           At the option of the Manager and at any time during
the term of this Agreement, this Agreement shall be and become terminated upon
at least 60 days’ prior written notice of termination from the Manager to the
Trust and the Operating Partnership, with payment of the Termination Fee, if
the Trust or the Subsidiaries shall have defaulted in the performance of any
material term of this Agreement, and such default has continued uncured for a
period of 30 days after the Trust’s and the Operating Partnership’s receipt of
written notice of such default from the Manager.


 


(b)           At the option of the Manager and at any time during
the term of this Agreement, this Agreement shall be and become terminated,
without payment of the Termination Fee, if the Trust becomes required to
register as an investment company under the Investment Company Act, with such
termination deemed to occur immediately before such event.


 


Section 15.  Action Upon
Termination.  From and after
the effective date of termination of this Agreement pursuant to Sections 11,
12, 13 or 14 of this Agreement, the Manager shall not be entitled to
compensation for further services hereunder, but shall be paid all compensation
accruing to the date of termination and, if the Manager is so entitled in
accordance with the terms of this Agreement, the Termination Fee.  Upon any such termination, the Manager shall
forthwith:


 


(a)           after deducting any accrued compensation and
reimbursement for its expenses to which it is then entitled, pay over to the
Trust or a Subsidiary all money collected and held for the account of the Trust
or a Subsidiary pursuant to this Agreement;


 


(b)           deliver to the Board of Trustees a full accounting,
including a statement showing all payments collected by it and a statement of
all money held by it, covering the period following the date of the last
accounting furnished to the Board of Trustees with respect to the Trust and any
Subsidiary; and


 


(c)           deliver to the Board of Trustees all property and
documents of the Trust and any Subsidiary then in the custody of the Manager.


 


Section 16.  Release of
Money or Other Property Upon Written Request. 
The Manager agrees that any money or other property of the Trust or any
Subsidiary held by the Manager shall be held by the Manager as custodian for
the Trust or such Subsidiary, and the Manager’s records shall be appropriately
and clearly marked to reflect the ownership of such 


 


29

















 


money or other property by the Trust or such Subsidiary.  Upon the receipt by the Manager of a written
request signed by a duly authorized officer of the Trust requesting the Manager
to release to the Trust any money or other property then held by the Manager
for the account of the Trust or any Subsidiary under this Agreement, the
Manager shall release such money or other property to the Trust or any
Subsidiary within a reasonable period of time, but in no event later than 45
days following such request.  Upon
delivery of such money or other property to the Trust, the Manager shall not be
liable to the Trust, any Subsidiary, the Board of Trustees, or the Shareholders
or the interest holders of any Subsidiary for any acts or omissions by the
Trust or any Subsidiary in connection with the money or other property released
in accordance with this Section.  The
Trust and the Operating Partnership shall indemnify the Manager and its
Affiliates and their respective managers, officers, trustees, directors,
employees and members and any Person providing sub-advisory services to the
Manager against any and all expenses, losses, damages, liabilities, demands, charges
and claims of any nature whatsoever, which arise in connection with the Manager’s
release of such money or other property in accordance with the terms of this Section 16.  Indemnification pursuant to this provision
shall be in addition to any right of the Manager to indemnification under Section 9
of this Agreement.


 


Section 17.  Use of Name.


 


(a)           The Manager hereby grants to the Trust and the
Subsidiaries during the term of this Agreement a non-exclusive, royalty-free
license to use the “PennyMac” brand, trademark, logo and service marks and any
derivation thereof related thereto (the “PennyMac
Brand”) in the United States. 
Notwithstanding the foregoing, it is acknowledged and agreed that the
Manager and its other Affiliates retain the right to continue to use the
PennyMac Brand during the term of this Agreement.  It is further acknowledged and agreed that
under no circumstances shall the Manager be prohibited from licensing or
transferring the ownership of the PennyMac Brand to third parties.


 


(b)           In the event of the termination of this Agreement,
the Trust shall be required to cease using the PennyMac Brand as promptly as
possible, including by changing its name to remove the word “PennyMac”
therefrom as promptly as practicable. 
The provisions of this Section 17(b) shall survive the
expiration or earlier termination of this Agreement.


 


Section 18.  Miscellaneous.


 


(a)           Notices.  All notices, requests and demands to or upon
the respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall be deemed to
have been duly given or made when delivered against receipt or upon actual
receipt of (1) personal delivery, (2) delivery by reputable overnight
courier, (3) delivery by facsimile transmission with telephonic
confirmation or (4) delivery by registered or certified mail, postage
prepaid, return receipt requested, addressed as set forth below (or to such
other address as may be hereafter notified by the respective parties hereto in
accordance with this Section 18):


 


30














 


	
  The Trust and the Operating Partnership:

  	
   

  	
  PennyMac Mortgage Investment Trust

  
	
   

  	
   

  	
  PennyMac Operating Partnership, L.P.

  
	
   

  	
   

  	
  27001 Agoura Road, Third Floor

  
	
   

  	
   

  	
  Calabasas, California 91301

  
	
   

  	
   

  	
  Attention: Chief Executive Officer

  
	
   

  	
   

  	
  Fax:
  (818) 337-2138

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Sidley Austin LLP

  
	
   

  	
   

  	
  787 Seventh Avenue

  
	
   

  	
   

  	
  New York, New York 10019

  
	
   

  	
   

  	
  Attention: Edward J. Fine and J. Gerard Cummins

  
	
   

  	
   

  	
  Fax:
  (212) 839-5599

  
	
   

  	
   

  	
   

  
	
  The Manager:

  	
   

  	
  PNMAC Capital Management, LLC

  
	
   

  	
   

  	
  27001 Agoura Road, Third Floor

  
	
   

  	
   

  	
  Calabasas, California 91301

  
	
   

  	
   

  	
  Attention: Chief Executive Officer

  
	
   

  	
   

  	
  Fax:
  (818) 337-2138

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  PNMAC Capital Management, LLC

  
	
   

  	
   

  	
  27001 Agoura Road, Third Floor

  
	
   

  	
   

  	
  Calabasas, California 91301

  
	
   

  	
   

  	
  Attention: Chief Legal Officer

  
	
   

  	
   

  	
  Fax:
  (818) 337-2138

  



 


(b)           Binding Nature of Agreement; Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective heirs, personal
representatives, successors and assigns as provided herein.


 


(c)           Integration.  This Agreement contains the entire agreement
and understanding among the parties hereto with respect to the subject matter
hereof, and supersedes all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied, oral or written,
of any nature whatsoever with respect to the subject matter hereof.  The express terms hereof control and
supersede any course of performance and/or usage of the trade inconsistent with
any of the terms hereof.


 


(d)           Amendments.  Neither this Agreement, nor any terms hereof,
may be amended, supplemented or modified except in an instrument in writing
executed by the parties hereto.


 


(e)           GOVERNING LAW.  THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS
OF THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF CALIFORNIA, WITHOUT
REGARD TO PRINCIPLES OF CONFLICTS OF LAW. 
EACH OF THE PARTIES HERETO IRREVOCABLY SUBMITS TO THE EXCLUSIVE
JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA AND 


 


31

















 


THE UNITED STATES DISTRICT COURT FOR ANY DISTRICT WITHIN SUCH STATE FOR
THE PURPOSE OF ANY ACTION OR JUDGMENT RELATING TO OR ARISING OUT OF THIS
AGREEMENT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY AND TO THE LAYING OF
VENUE IN SUCH COURT.


 


(f)            WAIVER OF JURY TRIAL.  EACH PARTY HERETO ACKNOWLEDGES AND AGREES
THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO
INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH SUCH PARTY
HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN
RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN
CONNECTION WITH OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
BY THIS AGREEMENT.


 


(g)           No Waiver; Cumulative Remedies.  No failure to exercise and no delay in
exercising, on the part of a party hereto, any right, remedy, power or
privilege hereunder shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege.  The rights,
remedies, powers and privileges herein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law.


 


(h)           Costs and Expenses.  Each party hereto shall bear its own costs
and expenses (including the fees and disbursements of counsel and accountants)
incurred in connection with the negotiations and preparation of and the closing
under this Agreement, and all matters incident thereto.


 


(i)            Section Headings.  The section and subsection headings in this
Agreement are for convenience of reference only and shall not be deemed to
alter or affect the interpretation of any provisions hereof.


 


(j)            Counterparts.  This Agreement may be executed by the parties
to this Agreement on any number of separate counterparts (including by
telecopy), and all of said counterparts taken together shall be deemed to
constitute one and the same instrument.


 


(k)           Severability.  Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.


 


[REMAINDER OF PAGE
INTENTIONALLY LEFT BLANK]


 


32

















 


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


 


	
   

  	
   

  	
  PENNYMAC MORTGAGE INVESTMENT TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Jeff Grogin

  
	
   

  	
   

  	
   

  	
  Name:
  Jeff Grogin

  
	
   

  	
   

  	
   

  	
  Title:
  Chief Legal Officer and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PENNYMAC OPERATING PARTNERSHIP, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:
  PENNYMAC GP OP, INC.,

  
	
   

  	
   

  	
  its General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Jeff Grogin

  
	
   

  	
   

  	
   

  	
  Name:
  Jeff Grogin

  
	
   

  	
   

  	
   

  	
  Title:
  Executive Vice President and Secretary

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  PNMAC
  CAPITAL MANAGEMENT, LLC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/
  Jeff Grogin

  
	
   

  	
   

  	
   

  	
  Name:
  Jeff Grogin

  
	
   

  	
   

  	
   

  	
  Title:
  Secretary and Chief Legal Officer

  



 


33