Exhibit
10.1

    MANAGEMENT
AGREEMENT

     

    THIS
MANAGEMENT AGREEMENT is made as of October 28, 2009 by and among TWO HARBORS
INVESTMENT CORP., a Maryland corporation (the “Company”), TWO
HARBORS OPERATING COMPANY LLC, a Delaware limited liability company (the “Operating Company”)
and PRCM ADVISERS LLC, a Delaware limited liability company (together with its
permitted assignees, the “Manager”).

     

    WHEREAS,
the Company is a newly organized corporation that intends to elect to be taxed
as a REIT for federal income tax purposes;

     

    WHEREAS,
Pine River Capital (as defined below) is registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), and
the Manager is a wholly-owned subsidiary of Pine River Capital; and

     

    WHEREAS,
the Company and each of the Subsidiaries desire to retain the Manager to provide
investment advisory services to them on the terms and conditions hereinafter set
forth, and the Manager wishes to be retained to provide such
services.

     

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

     

    Section
1.              Definitions.  The
following terms have the following meanings assigned to them:

     

    (a)           “Agreement” means this
Management Agreement, as amended from time to time.

     

    (b)           “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 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.

     

    (c)           “Base Management Fee”
means a base management fee equal to 1.5% per annum, calculated and paid (in
cash) quarterly in arrears, of the Stockholders’ Equity.  The Base
Management Fee will be reduced, but not below zero, by the Company’s
proportionate share of any securitization base management fees that Pine River
receives in connection with any securitizations in which the Company invests,
based on the percentage of equity the Company holds in such
securitizations.

     

    (d)           “Board of Directors”
means the Board of Directors of the Company.

     

    (e)           “CLA Founders LLC”
means CLA Founders LLC, a Delaware limited liability company.

     

    (f)           “Code” means the
Internal Revenue Code of 1986, as amended.


    
      
         


      

      
         


        
          

        

      

      
         


      

    

     

    (g)           “Company” has the
meaning set forth in the first paragraph of this Agreement.

     

    (h)           “Company Account” has
the meaning set forth in Section 5 of this Agreement.

     

    (i)      
     “Company Indemnified
Party” has the meaning set forth in Section 11(b) of this
Agreement.

     

    (j)       
    “Effective Termination
Date” has the meaning set forth in Section 13(a) of this
Agreement.

     

    (k)           “Excess Funds” has the
meaning set forth in Section 2(m) of this Agreement.

     

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

     

    (m)          “Expenses” has the
meaning set forth in Section 9 of this Agreement.

     

    (n)           “GAAP” means generally
accepted accounting principles, as applied in the United States.

     

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

     

    (p)           “Guidelines” has the
meaning set forth in Section 2(b)(i) of this Agreement.

     

    (q)           “Indemnitee” has the
meaning set forth in Section 11(b) of this Agreement.

     

    (r)         
  “Indemnitor” has the
meaning set forth in Section 11(c) of this Agreement.

     

    (s)           “Independent
Directors” means the members of the Board of Directors who are not
officers or employees of the Manager or any Person directly or indirectly
controlling or controlled by the Manager, and who are otherwise “independent” in
accordance with the Company’s Governing Instruments and policies and, if
applicable, the rules of any national securities exchange on which the Company’s
common stock is listed.

     

    (t)           
“Initial Term”
has the meaning set forth in Section 13(a) of this Agreement.

     

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

     

    (v)           “Investments” means
the investments of the Company and the Subsidiaries.

     

    (w)          “Manager” has the
meaning set forth in the first paragraph of this Agreement.

     

    (x)           “Manager Indemnified
Party” has the meaning set forth in Section 11(a) of this
Agreement.

     

    (y)           “MBS” means
mortgage-backed securities.


    
      
         


      

      
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    (z)           “Monitoring Services”
has the meaning set forth in Section 2(b) of this Agreement.

     

    (aa)         “Notice of Proposal to
Negotiate” has the meaning set forth in Section 13(a) of this
Agreement.

     

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

     

    (cc)        
“Operating
Company” has the meaning set forth in the first paragraph of this
Agreement.

     

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

     

    (ee)         “Pine River” means,
separately and collectively, Pine River Capital and its direct and indirect
subsidiaries; provided,
however, that the term
“Pine River” shall not include the Company or any of the
Subsidiaries.

     

    (ff)          “Pine River Capital”
means Pine River Capital Management L.P., a Delaware limited
partnership.

     

    (gg)        “Portfolio Management
Services” has the meaning set forth in Section 2(b) of this
Agreement.

     

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

     

    (ii)          
“Renewal Term”
has the meaning set forth in Section 13(a) of this Agreement.

     

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

     

    (kk)         “Shared Services
Agreement” means the Shared Facilities and Services Agreement, dated the
date hereof, between the Manager and Pine River Capital.

     

    (ll)           “Stockholders’ Equity”
means:

     

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

     

     (ii)        the
Company’s retained earnings at the end of the most recently completed quarter
(without taking into account any non-cash equity compensation expense incurred
in current or prior periods), less

     

     (iii)      
any amount that the Company pays for repurchases of its common stock since
inception, any unrealized gains, losses or other items that do not affect
realized net income (regardless of whether such items are included in other
comprehensive income or loss, or in net income), as adjusted to
exclude


    
      
         


      

      
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    (iv)       
one-time events pursuant to changes in GAAP and certain non-cash charges after
discussions between the Manager and the Company’s Independent Directors and
approved by a majority of the Company’s Independent Directors.

     

    For
purposes of calculating Stockholders’ Equity, outstanding limited liability
company interests in the Operating Company (other than limited liability company
interests held by the Company) shall be treated as outstanding shares of capital
stock of the Company.

    


    (mm)       “Subsidiary” means any
subsidiary of the Company; any partnership, the general partner of which is the
Company or any subsidiary of the Company; any limited liability company, the
managing member of which is the Company or any subsidiary of the Company; 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 Company or any subsidiary of the
Company.

     

    (nn)        “Sub-Management
Agreement” has the meaning set forth in Section 2(e) of this
Agreement.

     

    (oo)        “Termination Fee” has
the meaning set forth in Section 13(b) of this Agreement.

     

    (pp)        “Termination Notice”
has the meaning set forth in Section 13(a) of this Agreement.

     

    (qq)        “Treasury Regulations”
means the regulations promulgated under the Code as amended from time to
time.

     

    Section
2.      
       Appointment and Duties of
the Manager.

     

    (a)           The
Company and each of the Subsidiaries hereby appoints the Manager to manage the
assets of the Company and the Subsidiaries subject to the further terms and
conditions set forth in this Agreement and the Manager hereby agrees to use its
commercially reasonable efforts to perform each of the duties set forth
herein.  The appointment of the Manager shall be exclusive to the
Manager except to the extent that the Manager otherwise agrees, in its sole and
absolute discretion, and except to the extent that the Manager elects, pursuant
to the terms of this Agreement, to cause the duties of the Manager hereunder to
be provided by third parties.

     

    (b)           The
Manager, in its capacity as manager of the assets and the day-to-day operations
of the Company and the Subsidiaries, at all times will be subject to the
supervision of the Company’s Board of Directors and will have only such
functions and authority as the Company may delegate to it including 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 Company and the Subsidiaries and will perform (or cause to be performed)
such services and activities relating to the assets and operations of the
Company and the Subsidiaries as may be appropriate, including:

     

    (i)           serving
as the Company’s and the Subsidiaries’ consultant with respect to the periodic
review of the investment guidelines and other parameters for the Investments,
financing activities and operations, any modifications to which shall be
approved by a majority of the Independent Directors (such guidelines as
initially approved and attached hereto as Exhibit A, as the same may be modified
with such approval, the “Guidelines”), and
other policies for approval by the Board of Directors;


    
      
         


      

      
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    (ii)          investigating,
analyzing and selecting possible investment opportunities and acquiring,
financing, retaining, selling, restructuring or disposing of Investments
consistent with the Guidelines;

     

    (iii)         with
respect to prospective purchases, sales or exchanges of Investments, conducting
negotiations on behalf of the Company and the Subsidiaries with sellers,
purchasers and brokers and, if applicable, their respective agents and
representatives;

     

    (iv)        negotiating
and entering into, on behalf of the Company and the Subsidiaries, repurchase
agreements, credit finance agreements, securitizations, agreements relating to
borrowings under programs established by the U.S. government, commercial papers,
interest rate swap agreements and other hedging instruments, custodial
agreements, warehouse facilities and all other agreements and engagements
required for the Company and the Subsidiaries to conduct their
business;

     

    (v)         engaging
and supervising, on behalf of the Company and the Subsidiaries and at the
Company’s expense, independent contractors which provide investment banking,
securities brokerage, mortgage brokerage, other financial services, due
diligence services, underwriting review services, legal and accounting services,
and all other services as may be required relating to Investments;

     

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

     

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

     

    (viii)      administering
the day-to-day operations and performing and supervising the performance of such
other administrative functions necessary to the management of the Company and
the Subsidiaries as may be agreed upon by the Manager and the Board of
Directors, including the collection of revenues and the payment of the debts and
obligations of the Company and the Subsidiaries and maintenance of appropriate
computer and technological services to perform such administrative
functions;

     

    (ix)       
communicating on behalf of the Company and the Subsidiaries with the holders of
any of their equity or debt securities as required to satisfy the reporting and
other requirements of any governmental bodies or agencies or trading markets and
to maintain effective relations with such holders;

     

    (x)          counseling
the Company in connection with policy decisions to be made by the Board of
Directors;

     

    (xi)         evaluating
and recommending to the Board of Directors hedging strategies and engaging in
hedging activities on behalf of the Company and the Subsidiaries, consistent
with such strategies as so modified from time to time, with the Company’s
qualification as a REIT and with the Guidelines;

     

    (xii)        counseling
the Company 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 thereunder and using commercially
reasonable efforts to cause the Company to qualify for taxation as a
REIT;


    
      
         


      

      
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    (xiii)       counseling
the Company and the Subsidiaries regarding the maintenance of their exemptions
from the status of an investment company required to register under the
Investment Company Act, monitoring compliance with the requirements for
maintaining such exemptions and using commercially reasonable efforts to cause
them to maintain such exemptions from such status;

     

    (xiv)      assisting
the Company and the Subsidiaries in developing criteria for asset purchase
commitments that are specifically tailored to the Company’s investment
objectives and making available to the Company and the Subsidiaries its
knowledge and experience with respect to MBS, mortgage loans, real estate, real
estate-related securities, other real estate-related assets and non-real
estate-related assets;

     

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

     

    (xvi)      monitoring
the operating performance of Investments and providing periodic reports with
respect thereto to the Board of Directors, including comparative information
with respect to such operating performance and budgeted or projected operating
results;

     

    (xvii)     investing
and reinvesting any moneys and securities of the Company and the Subsidiaries
(including investing in short-term Investments pending investment in other
Investments, payment of fees, costs and expenses, or payments of dividends or
distributions to stockholders and partners of the Company and the Subsidiaries)
and advising the Company and the Subsidiaries as to their capital structure and
capital raising;

     

    (xviii)    causing
the Company and the Subsidiaries to retain qualified accountants, auditors and
legal counsel, as applicable, to assist in developing appropriate accounting
procedures and systems, internal controls and other compliance procedures and
testing systems with respect to financial reporting obligations and compliance
with the provisions of the Code applicable to REITs and to conduct quarterly
compliance reviews with respect thereto;

     

    (xix)       assisting
the Company and the Subsidiaries in qualifying to do business in all applicable
jurisdictions and to obtain and maintain all appropriate licenses;

     

    (xx)        assisting
the Company 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 contractual undertakings and all reports and documents, if any,
required under the Exchange Act, the Securities Act, or by the
NYSE;

     

    (xxi)       assisting
the Company and the Subsidiaries in taking all necessary action to enable them
to make required tax filings and reports, including soliciting stockholders and
partners for required information to the extent required by the provisions of
the Code applicable to REITs;

     

    (xxii)      placing,
or arranging for the placement of, all orders pursuant to the Manager’s
investment determinations for the Company and the Subsidiaries, either directly
with the issuer or with a broker or dealer (including any affiliated broker or
dealer);

     

    (xxiii)     handling
and resolving all claims, disputes or controversies (including all litigation,
arbitration, settlement or other proceedings or negotiations) in which the
Company and/or the Subsidiaries may be involved or to which they may be subject
arising out of their 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 Directors;


    
      
         


      

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

     

    (xxv)      representing
and making recommendations to the Company and the Subsidiaries in connection
with the purchase and financing of, and commitment to purchase and finance, MBS,
mortgage loans (including on a portfolio basis), real estate, real
estate-related securities and loans, other real estate-related assets and
non-real estate-related assets, and the sale and commitment to sell such
assets;

     

    (xxvi)     advising
the Company and the Subsidiaries with respect to obtaining appropriate
repurchase agreements, warehouse facilities or other secured and unsecured forms
of borrowing for their assets;

     

    (xxvii)    advising
the Company on preparing, negotiating and entering into, on the Company’s
behalf, applications and agreements relating to programs established by the U.S.
government;

     

    (xxviii)   advising
the Company and the Subsidiaries with respect to and structuring long-term
financing vehicles for their portfolio of assets, and offering and selling
securities publicly or privately in connection with any such structured
financing;

     

    (xxix)     performing
such other services as may be required from time to time for management and
other activities relating to the assets and business of the Company and the
Subsidiaries as the Board of Directors shall reasonably request or the Manager
shall deem appropriate under the particular circumstances; and

     

    (xxx)      using
commercially reasonable efforts to cause the Company and the Subsidiaries to
comply with all applicable laws.

     

    Without
limiting the foregoing, the Manager will perform portfolio management services
(the “Portfolio
Management Services”) on behalf of the Company and the Subsidiaries with
respect to the Investments.  Such services will include consulting
with the Company and the Subsidiaries on the purchase and sale of, and other
investment opportunities in connection with, the Company’s portfolio of assets;
the collection of information and the submission of reports pertaining to the
Company’s assets, interest rates and general economic conditions; periodic
review and evaluation of the performance of the Company’s portfolio of assets;
acting as liaison between the Company 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. Additionally, the Manager will perform monitoring services
(the “Monitoring
Services”) on behalf of the Company and the Subsidiaries with respect to
any loan servicing activities provided by third parties. Such Monitoring
Services will include negotiating servicing agreements; acting as a liaison
between the servicers of the assets and the Company and the Subsidiaries; review
of servicers’ delinquency, foreclosure and other reports on assets; supervising
claims filed under any insurance policies; and enforcing the obligation of any
servicer to repurchase assets.


    
      
         


      

      
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    (c)           For
the period and on the terms and conditions set forth in this Agreement, the
Company and each of the Subsidiaries hereby constitutes, appoints and authorizes
the Manager as its true and lawful agent and attorney-in-fact, in its name,
place and stead, to negotiate, execute, deliver and enter into such credit
finance agreements and arrangements and securities repurchase and reverse
repurchase agreements and arrangements, brokerage agreements, interest rate swap
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, and at the
sole cost and expense, of the Company and the Subsidiaries to provide property
management, asset management, leasing, development and/or other services to the
Company and the Subsidiaries (including Portfolio Management Services and
Monitoring Services) pursuant to 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 Company 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 affiliate 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 Guidelines, approved by a majority of the
Independent Directors, (ii) with respect to Portfolio Management Services,
(A) any such agreements shall be subject to the Company’s prior written
approval and (B) the Manager shall remain liable for the performance of
such Portfolio Management Services, and (iii) with respect to Monitoring
Services, any such agreements shall be subject to the Company’s prior written
approval.  Notwithstanding the foregoing, the Shared Services
Agreement shall not be subject to further review or approval by the Independent
Directors prior to the expiration of its initial term, unless such agreement
shall be amended, in which case such amendment shall be subject to the foregoing
limitations on agreements between the Manager and its affiliates.

     

    (e)           The
Company and the Operating Company expressly acknowledge and agree that the
Manager and Pine River Capital are, concurrent with this Agreement, entering
into the Sub-Management Agreement, dated as of even date herewith, by and among
the Manager, Pine River Capital and CLA Founders LLC (the “Sub-Management
Agreement”), and nothing herein shall
limit the ability of the Manager or Pine River Capital to enter into and perform
their respective obligations under such Sub-Management Agreement or otherwise
limit the effectiveness of such agreement.  The Company represents and
warrants that the Sub-Management Agreement has been duly authorized and approved
by all necessary action of the Company.  After the date of this
Agreement, 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 Company and the Subsidiaries
specified by this Agreement; provided that any such
agreement (i) shall be on terms and conditions substantially identical to the
terms and conditions of this Agreement or otherwise not adverse to the Company
and the Subsidiaries, and (ii) shall be approved by the Independent Directors of
the Company.

     

    (f)           The
Manager may retain, for and on behalf and at the sole cost and expense of the
Company and the Subsidiaries, such services of accountants, legal counsel,
appraisers, insurers, brokers, transfer agents, registrars, developers,
investment banks, financial advisors, due diligence firms, underwriting review
firms, banks and other lenders and others as the Manager deems necessary or
advisable in connection with the management and operations of the Company 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 Company and the Subsidiaries 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.


    
      
         


      

      
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    (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 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 Company and the
Subsidiaries as a whole and may contribute to an improvement in the performance
of the Company and the Subsidiaries or the Manager or its affiliates in
providing services to the Company and the Subsidiaries on terms that 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 Company 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 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 Company 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 to promote the best interests of the Company and the
Subsidiaries.

     

    (j)           As
frequently as the Manager may deem necessary or advisable, or at the direction
of the Board of Directors, the Manager shall, at the sole cost and expense of
the Company and the Subsidiaries, prepare, or 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 Company.

     

    (k)           The
Manager shall prepare, or cause to be prepared, at the sole cost and expense of
the Company and the Subsidiaries, all reports, financial or otherwise, with
respect to the Company and the Subsidiaries reasonably required by the Board of
Directors in order for the Company 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 cause to be prepared, all
materials and data necessary to complete such reports and other materials
including an annual audit of the Company’s and the Subsidiaries’ books of
account by a nationally recognized registered independent public accounting
firm.


    
      
         


      

      
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    (l)           The
Manager shall prepare regular reports for the Board of Directors to enable the
Board of Directors to review the Company’s and the Subsidiaries’ acquisitions,
portfolio composition and characteristics, credit quality, performance and
compliance with the Guidelines and policies approved by the Board of
Directors.

     

    (m)        
Notwithstanding anything contained in this Agreement to the contrary, except to
the extent that the payment of additional moneys is proven by the Company to
have been required as a direct result of the Manager’s acts or omissions which
result in the right of the Company and the Subsidiaries to terminate this
Agreement pursuant to Section 15 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 Company and the Subsidiaries pursuant to Section 9 in excess of that
contained in any applicable Company Account (as herein defined) or otherwise
made available by the Company and the Subsidiaries 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 Company and the
Subsidiaries under Section 13(a) of this Agreement to terminate this
Agreement due to the Manager’s unsatisfactory performance.

     

    (n)          In
performing its duties under this Section 2, the Manager shall be entitled
to rely reasonably on qualified experts and professionals (including
accountants, legal counsel and other service providers) hired by the Manager at
the Company’s and the Subsidiaries’ sole cost and expense.

     

    Section
3.              Devotion of Time; Additional
Activities.

     

    (a)           The
Manager and its affiliates will provide the Company and the Subsidiaries with a
management team, including a Chief Executive Officer, President, Chief Financial
Officer, Chief Investment Officer, and other support personnel, to provide the
management services to be provided by the Manager to the Company and the
Subsidiaries hereunder, the members of which team shall devote such portion of
their time to the management of the Company and the Subsidiaries as is necessary
to enable the Company and the Subsidiaries to operate their
business.

     

    (b)           The
Manager agrees to offer the Company and the Subsidiaries the right to
participate in all investment opportunities that the Manager determines are
appropriate for the Company and the Subsidiaries in view of their investment
objectives, policies and strategies, and other relevant factors, subject to the
exception that the Company and the Subsidiaries might not participate in each
such opportunity but will on an overall basis equitably participate with the
Manager’s other clients in relevant investment opportunities in accordance with
the Manager’s then prevailing investment allocation policy.  Nothing
in this Agreement shall (i) prevent the Manager, Pine River or any of their
affiliates, officers, directors, employees or personnel, from engaging in other
businesses or from rendering services of any kind to any other Person, including
investing in, or rendering advisory services to others investing in, any type of
business (including investments that meet the principal investment objectives of
the Company), whether or not the investment objectives or policies of any such
other Person or entity are similar to those of the Company or (ii) in any
way bind or restrict the Manager, Pine River or any of their affiliates,
officers, directors, employees or personnel from buying, selling or trading any
securities or investments for their own accounts or for the account of others
for whom the Manager, Pine River or any of their affiliates, officers,
directors, employees or personnel may be acting.  When making
decisions where a conflict of interest may arise, the Manager will endeavor to
allocate investment and financing opportunities in a fair and equitable manner
over time as between the Company and the Subsidiaries and the Manager’s other
clients, in each case in accordance with the Manager’s then prevailing
allocation policy.


    
      
         


      

      
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    (c)           Managers,
partners, officers, employees, personnel and agents of the Manager or affiliates
of the Manager may serve as directors, officers, employees, personnel, agents,
nominees or signatories for the Company and/or any Subsidiary, to the extent
permitted by their Governing Instruments or by any resolutions duly adopted by
the Board of Directors pursuant to the Company’s Governing
Instruments.  When executing documents or otherwise acting in such
capacities for the Company or the Subsidiaries, such persons shall use their
respective titles in the Company or the Subsidiaries.

     

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

     

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

     

    Section
6.             Records;
Confidentiality.  The Manager shall maintain appropriate books
of accounts and records relating to services performed under this Agreement, and
such books of account and records shall be accessible for inspection by
representatives of the Company or any Subsidiary at any time during normal
business hours upon reasonable advance notice.  The Manager shall keep
confidential any and all information obtained in connection with the services
rendered under this Agreement and shall not disclose any such information (or
use the same except in furtherance of its duties under this Agreement) to
unaffiliated third parties except (i) with the prior written consent of the
Board of Directors; (ii) to legal counsel, accountants and other
professional advisors; (iii) to appraisers, financing sources and others in
the ordinary course of the Company’s business; (iv) to governmental
officials having jurisdiction over the Company or any Subsidiary; (v) in
connection with any governmental or regulatory filings of the Company or any
Subsidiary or disclosure or presentations to Company investors; or (vi) as
required by law or legal process to which the Manager or any Person to whom
disclosure is permitted hereunder is a party.  The foregoing shall not
apply to information which has previously become publicly available through the
actions of a Person other than the Manager not resulting from the Manager’s
violation of this Section 6.  The provisions of this
Section 6 shall survive the expiration or earlier termination of this
Agreement for a period of one year.

     

    Section
7.             
Obligations of
Manager; Restrictions.

     

    (a)           The
Manager shall require each seller or transferor of investment assets to the
Company 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.


    
      
         


      

      
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    (b)           The
Manager shall refrain from any action that, in its sole judgment, (i) is
not in compliance with the Guidelines, (ii) would adversely and materially
affect the status of the Company as a REIT under the Code, (iii) would
adversely and materially affect the Company’s or any Subsidiary’s status as an
entity intended to be exempted or excluded from investment company status under
the Investment Company Act or (iv) would violate any law, rule or
regulation of any governmental body or agency having jurisdiction over the
Company or any Subsidiary or that would otherwise not be permitted by the
Company’s Governing Instruments.  If the Manager is ordered to take
any such action by the Board of Directors, the Manager shall promptly notify the
Board of Directors of the Manager’s judgment that such action would adversely
and materially affect such status or violate any such law, rule or regulation or
the Governing Instruments. Notwithstanding the foregoing, the Manager, its
officers, stockholders, members, managers, personnel, directors, any Person
controlling or controlled by the Manager and any Person providing sub-advisory
services to the Manager shall not be liable to the Company or any Subsidiary,
the Board of Directors, or the Company’s or any Subsidiary’s stockholders,
members or partners, for any act or omission by any such Person except as
provided in Section 11 of this Agreement.

     

    (c)           The
Board of Directors shall periodically review the Guidelines and the Company’s
portfolio of Investments but will not review each proposed investment, except as
otherwise provided herein.  If a majority of the Independent Directors
determine in their periodic review of transactions that a particular transaction
does not comply with the Guidelines, then a majority of the Independent
Directors 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 Company to evidence the approval of the Board of Directors
or the Independent Directors with respect to a proposed investment.

     

    (d)           Neither
the Company 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 Guidelines;
(ii) such Investment is approved in advance by at least one of the
Independent Directors; and (iii) the Investment is made in accordance with
applicable laws.

     

    (e)           The
Manager shall use its best efforts to at all times during the term of this
Agreement maintain “errors and omissions” insurance coverage and other insurance
coverage which is customarily carried by property, asset and investment managers
performing functions similar to those of the Manager under this Agreement with
respect to assets similar to the assets of the Company and the Subsidiaries, in
an amount which is comparable to that customarily maintained by other managers
or servicers of similar assets.

     

    Section
8.              Compensation.

     

    (a)           During
the Initial Term and any Renewal Term (each as defined below), the Company shall
pay the Manager the Base Management Fee quarterly in arrears commencing with the
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).

     

    (b)           The
Manager shall compute each installment of the Base Management 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 and subject in any
event to Section 13(a) of this Agreement, promptly be delivered to the
Board of Directors and, upon such delivery, payment of such installment of the
Base Management Fee shown therein shall be due and payable in cash no later than
the date which is five business days after the date of delivery to the Board of
Directors of such computations.


    
      
         


      

      
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    (c)           The
Base Management Fee is subject to adjustment pursuant to and in accordance with
the provisions of Section 13(a) of this Agreement.

     

    Section
9.              Expenses of the
Company.  The Company shall pay all of its expenses and shall
reimburse the Manager for documented expenses of the Manager incurred on its
behalf (collectively, the “Expenses”) excepting
those expenses that are specifically the responsibility of the Manager as set
forth herein.  Such costs and reimbursements shall be in amounts which
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.  Expenses include all costs and expenses
which are expressly designated elsewhere in this Agreement as the Company’s,
together with the following:

     

    (i)          expenses
in connection with the issuance and transaction costs incident to the
acquisition, disposition and financing of Investments;

     

    (ii)         costs
of legal, tax, accounting, consulting, auditing, administrative, and other
similar services rendered for the Company and the Subsidiaries by providers
retained by the Manager or, if provided by the Manager’s personnel, in amounts
which 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;

     

    (iii)        the
compensation and expenses of the Company’s directors and the cost of liability
insurance to indemnify the Company’s directors and officers;

     

    (iv)        costs
associated with the establishment and maintenance of any of the Company’s or any
Subsidiary’s repurchase agreements, warehouse facilities and other secured and
unsecured forms of borrowings (including commitment fees, accounting fees, legal
fees, closing and other similar costs) or any of the Company’s or any
Subsidiary’s securities offerings;

     

    (v)    
    expenses in connection with the application for, and
participation in, programs established by the U.S. government;

     

    (vi)        expenses
connected with communications to holders of the Company’s or any Subsidiary’s
securities and other bookkeeping and clerical work necessary in maintaining
relations with holders of such securities and in complying with the continuous
reporting and other requirements of governmental bodies or agencies, including
all costs of preparing and filing required reports with the Securities and
Exchange Commission, the costs payable by the Company to any transfer agent and
registrar in connection with the listing and/or trading of the Company’s stock
on any exchange, the fees payable by the Company to any such exchange in
connection with its listing, and costs of preparing, printing and mailing the
Company’s annual report to its stockholders and proxy materials with respect to
any meeting of the Company’s stockholders;

     

    (vii)       costs
associated with any computer software or hardware, electronic equipment or
purchased information technology services from third party vendors that is used
for the Company and the Subsidiaries;

     

    (viii)      expenses
incurred by managers, officers, personnel and agents of the Manager for travel
or entertainment on the Company’s behalf and other out-of-pocket expenses
incurred by managers, officers, personnel and agents of the Manager in
connection with the purchase, financing, refinancing, sale or other disposition
of an Investment or establishment and maintenance of any repurchase agreements,
warehouse facilities, borrowings under programs established by the U.S.
government, other secured and unsecured forms of borrowings or any of the
Company’s or any Subsidiary’s securities offerings;


    
      
         


      

      
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    (ix)         costs
and expenses incurred with respect to market information systems and
publications, research publications and materials, including financial analytics
and market data, and settlement, clearing and custodial fees and
expenses;

     

    (x)       
  compensation and expenses of the Company’s custodian and transfer
agent, if any;

     

    (xi)         the
costs of maintaining compliance with all federal, state and local rules and
regulations or any other regulatory agency;

     

    (xii)        all
taxes and license fees;

     

    (xiii)       all
insurance costs incurred in connection with the operation of the Company’s
business, except for the costs attributable to the insurance that the Manager
elects to carry for itself and its personnel; provided, however, that the Company
will be responsible for its pro rata portion of the
premiums related to the Manager’s “errors and omissions” insurance coverage, as
provided below;

     

    (xiv)      costs
and expenses incurred in contracting with third parties, including affiliates of
the Manager, for the servicing and special servicing of the assets of the
Company and the Subsidiaries;

     

    (xv)       all
other costs and expenses relating to the business of the Company and the
Subsidiaries and investment operations, including the costs and expenses of
acquiring, owning, protecting, maintaining, developing and disposing of
Investments, including appraisal, valuation, reporting, audit and legal
fees;

     

    (xvi)      expenses
relating to any office(s) or office facilities, including disaster backup
recovery sites and facilities, maintained for the Company and the Subsidiaries
or Investments separate from the office or offices of the Manager;

     

    (xvii)     expenses
connected with the payments of interest, dividends or distributions in cash or
any other form authorized or caused to be made by the Board of Directors to or
on account of holders of the Company’s or any Subsidiary’s securities, including
in connection with any dividend reinvestment plan;

     

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

     

    (xix)       all
other expenses actually incurred by the Manager (except as described below)
which are reasonably necessary for the performance by the Manager of its duties
and functions under this Agreement; and

     

    (xx)        any
costs and expenses (including those described above) incurred by a sub-adviser
engaged by the Manager pursuant to Section 2(e) in connection with the provision
of sub-advisory services in respect of the Manager, including such costs and
expenses of CLA Founders LLC;
provided, however, that the
reimbursement of any such costs and expenses shall be subject to the same
limitations set forth in this Agreement on the reimbursement of the costs and
expenses of the Manager.


    
      
         


      

      
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    The
Company shall have no obligation to reimburse the Manager for the salary, bonus,
benefit and other compensation costs of the personnel of the Manager and its
affiliates who provide services to the Company under this Agreement, except
that, the Company shall reimburse the Manager for, without duplication, (i) the
Company’s allocable share of the compensation paid by the Manager to its
personnel serving as the Company’s principal financial officer and general
counsel and personnel employed by the Manager as in-house legal, tax,
accounting, consulting, auditing, administrative, information technology,
valuation, computer programming and development and back-office resources to the
Company, and (ii) any amounts for personnel of the Manager’s affiliates arising
under the Shared Services Agreement. The Company’s share of such out of pocket
costs shall be based upon commercially reasonable estimates of the percentage of
time devoted by such personnel of the Manager and its affiliates to the
Company’s affairs. The Manager shall provide the Company with such information
as the Company may reasonably request to support the determination of the
Company’s share of such costs. The Manager shall be responsible for the
compensation paid by the Manager to its personnel serving as the Company’s Chief
Executive Officer, President, and Chief Investment Officer and the Manager’s
investment professionals.

     

    In
addition, the Company will be required to pay the Company’s pro rata portion of (i) rent,
telephone, utilities, office furniture, equipment, machinery and other office,
internal and overhead expenses of the Manager and its affiliates required for
the operations of the Company and the Subsidiaries and (ii) premiums related to
the “errors and omissions” insurance coverage referred to in Section
7(e).  These expenses will be allocated between the Manager and the
Company based on the ratio of the Company’s proportion of net assets compared to
all remaining net assets managed or held by Pine River or managed or held by the
Manager as calculated at each quarter end.  The Manager and the
Company will modify this allocation methodology, subject to the Independent
Directors’ approval, if the allocation becomes inequitable.

     

    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.  In the event that the Company’s business combination
transaction (the “Business Combination
Transaction”) with Capitol Acquisition Corp., a Delaware corporation, is
consummated, the Company will reimburse the Manager for all organizational,
formation and transaction costs it has incurred on behalf of the Company, but
the Company shall not be responsible for such costs in the event the Business
Combination Transaction is not consummated.

     

    The
provisions of this Section 9 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.

     

    Section
10.            Calculations of
Expenses.  The Manager shall prepare a statement documenting
the Expenses of the Company and the Subsidiaries and the Expenses incurred by
the Manager on behalf of the Company and the Subsidiaries during each fiscal
quarter, and shall deliver such statement to the Company within 30 days after
the end of each fiscal quarter. Expenses incurred by the Manager on behalf of
the Company and the Subsidiaries shall be reimbursed by the Company to the
Manager on the fifth business day immediately following the date of delivery of
such statement; provided, however, that such
reimbursements may be offset by the Manager against amounts due to the Company
and the Subsidiaries.  The provisions of this Section 10 shall
survive the expiration or earlier termination of this Agreement.

     

    
      
         


      

      
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    Section
11.            Limits of Manager
Responsibility; Indemnification.

     

    (a)           The
Manager assumes no responsibility under this Agreement other than to render the
services called for under this Agreement and shall not be responsible for any
action of the Board of Directors in following or declining to follow any advice
or recommendations of the Manager, including as set forth in Section 7(b)
of this Agreement.  The Manager, CLA Founders LLC, their respective
officers, stockholders, members, managers, personnel and directors, any Person
controlling or controlled by the Manager or CLA Founders LLC and any Person
providing sub-advisory services to the Manager and the managers, officers,
directors and personnel of the Manager, CLA Founders LLC and their respective
officers, members, directors, managers and personnel will not be liable to the
Company or any Subsidiary, to the Board of Directors, or the Company’s or any
Subsidiary’s stockholders, members or partners for any acts or omissions by any
such Person (including trade errors that may result from ordinary negligence,
such as errors in the investment decision making process or in the trade
process), pursuant to or in accordance with this Agreement, except by reason of
acts constituting reckless disregard of the Manager’s duties under this
Agreement which has a material adverse effect on the Company and the
Subsidiaries, willful misconduct or gross negligence, as determined by a final
non-appealable order of a court of competent jurisdiction.  The
Company and the Operating Company shall, to the full extent lawful, reimburse,
indemnify and hold the Manager, CLA Founders LLC, their respective officers,
stockholders, directors, members and personnel, any Person controlling or
controlled by the Manager or CLA Founders LLC and any Person providing
sub-advisory services to the Manager, together with the managers, officers,
directors and personnel of the Manager, CLA Founders LLC and their respective
officers, members, directors, managers and personnel (each a “Manager Indemnified
Party”), harmless of and from any and all expenses, losses, damages,
liabilities, demands, charges and claims of any nature whatsoever (including
attorneys’ fees) in respect of or arising from any acts or omissions of such
Manager Indemnified Party not constituting such Manager Indemnified Party’s
reckless disregard of the Manager’s duties under this Agreement which has a
material adverse effect on the Company and the Subsidiaries, willful misconduct
or gross negligence.

     

    (b)           The
Manager shall, to the full extent lawful, reimburse, indemnify and hold the
Company (or any Subsidiary) and its directors and officers (each, a “Company Indemnified
Party” and together with a Manager Indemnified Party, the “Indemnitee”),
harmless of and from any and all expenses, losses, damages, liabilities,
demands, charges and claims of any nature whatsoever (including attorneys’ fees)
in respect of or arising from the Manager’s reckless disregard of the Manager’s
duties under this Agreement which has a material adverse effect on the Company
and the Subsidiaries, willful misconduct or gross negligence.

     

    (c)           The
Indemnitee will promptly notify the party against whom indemnity is claimed (the
“Indemnitor”)
of any claim for which it seeks indemnification; provided, however, that the failure to
so notify the Indemnitor will not relieve the Indemnitor from any liability
which it may have hereunder, except to the extent such failure actually
prejudices the Indemnitor.  The Indemnitor shall have the right to
assume the defense and settlement of such claim; provided, that the Indemnitor
notifies the Indemnitee of its election to assume such defense and settlement
within 30 days after the Indemnitee gives the Indemnitor notice of the
claim.  In such case, the Indemnitee will not settle or compromise
such claim, and the Indemnitor will not be liable for any such settlement made
without its prior written consent.  If the Indemnitor is entitled to,
and does, assume such defense by delivering the aforementioned notice to the
Indemnitee, the Indemnitee will (i) have the right to approve the
Indemnitor’s counsel (which approval will not be unreasonably withheld, delayed
or conditioned), (ii) be obligated to cooperate in furnishing evidence and
testimony and in any other manner in which the Indemnitor may reasonably request
and (iii) be entitled to participate in (but not control) the defense of
any such action, with its own counsel and at its own expense.


    
      
         


      

      
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    Section
12.            No Joint
Venture.  Nothing in this Agreement shall be construed to make
the Company (or any Subsidiary) and the Manager partners or joint venturers or
impose any liability as such on either of them.

     

    Section
13.            Term;
Termination.

     

    (a)           Until
this Agreement is terminated in accordance with its terms, this Agreement shall
be in effect until [  ], 2012 (the “Initial Term”) and
shall be automatically renewed for a one-year term (a “Renewal Term”) upon
the expiration of the Initial Term and on each anniversary date thereafter
unless at least two-thirds of all of the Independent Directors or the holders of
a majority of the outstanding shares of common stock (other than those shares
held by Pine River or its affiliates) agree that (i) there has been
unsatisfactory performance by the Manager that is materially detrimental to the
Company and the Subsidiaries or (ii) the compensation payable to the
Manager hereunder is unfair; provided that the Company
shall not have the right to terminate this Agreement under clause
(ii) above if the Manager agrees to continue to provide the services under
this Agreement at a reduced fee that at least two-thirds of all of the
Independent Directors determines to be fair pursuant to the procedure set forth
below.  If the Company elects not to renew this Agreement at the
expiration of the Initial Term or any Renewal Term as set forth above, the
Company shall deliver to the Manager prior written notice (the “Termination Notice”)
of the Company’s intention not to renew this Agreement based upon the terms set
forth in this Section 13(a) not less than 180 days prior to the expiration
of the then existing term.  If the Company so elects not to renew this
Agreement, the Company shall designate the date (the “Effective Termination
Date”), not less than 180 days from the date of the notice, on which the
Manager shall cease to provide services under this Agreement, and this Agreement
shall terminate on such date; provided, however, that in the event
that such Termination Notice is given in connection with a determination that
the compensation payable to the Manager is unfair, the Manager shall have the
right to renegotiate such compensation by delivering to the Company, 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 Company (represented by the Independent Directors) and
the Manager shall endeavor to negotiate the revised compensation payable to the
Manager under this Agreement. In the event that the Manager and at
least two-thirds of all of the Independent Directors 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 Company and the Manager
agree to execute and deliver an amendment to this Agreement setting forth such
revised compensation promptly upon reaching an agreement regarding
same.  In the event that the Company 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.

     

    (b)           In
recognition of the level of the upfront effort required by the Manager to
structure and acquire the assets of the Company and the Subsidiaries and the
commitment of resources by the Manager, in the event that this Agreement is
terminated in accordance with the provisions of Section 13(a) or Section
15(b) of this Agreement, the Company shall pay to the Manager, on the date on
which such termination is effective, a termination fee (the “Termination Fee”)
equal to three times the sum of the average annual Base Management Fee earned by
the Manager during the 24-month period immediately preceding the date of such
termination, calculated as of the end of the most recently completed fiscal
quarter prior to the date of termination.  The obligation of the
Company to pay the Termination Fee shall survive the termination of this
Agreement.


    
      
         


      

      
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    (c)           No
later than 180 days prior to the anniversary date of this Agreement of any year
during the Initial Term or Renewal Term, the Manager may deliver written notice
to the Company informing it of the Manager’s intention to decline to renew this
Agreement, whereupon this Agreement shall not be renewed and extended and this
Agreement shall terminate effective on the anniversary date of this Agreement
next following the delivery of such notice.  The Company is not
required to pay to the Manager the Termination Fee if the Manager terminates
this Agreement pursuant to this Section 13(c).

     

    (d)           If
this Agreement is terminated pursuant to Section 13 or Section 15 of
this Agreement, such termination shall be without any further liability or
obligation of either party to the other, except as provided in Sections 6, 9,
10, 13(b), 15(b), and 16 of this Agreement.  In addition, Sections 11,
13(d) and 21 of this Agreement shall survive termination of this
Agreement.

     

    Section
14.            Assignment.

     

    (a)           Except
as set forth in Section 14(b) of this Agreement, this Agreement shall terminate
automatically in the event of its “assignment” (as defined under the Advisers
Act), in whole or in part, by the Manager, unless such assignment is consented
to in writing by the Company with the consent of a majority of the Independent
Directors; provided, however, that no such consent shall be required in the case
of an assignment by the Manager to Pine River or any of its
affiliates.  Any such permitted assignment to an affiliate shall bind
the assignee under this Agreement in the same manner as the Manager is bound,
and the Manager shall be liable to the Company for all errors or omissions of
the assignee under any such assignment.  In addition, the assignee
shall execute and deliver to the Company a counterpart of this Agreement naming
such assignee as Manager.  This Agreement shall not be assigned by the
Company without the prior written consent of the Manager, except in the case of
assignment by the Company to another REIT or other organization which is a
successor (by merger, consolidation, purchase of assets, or similar transaction)
to the Company, 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
Company is bound under this Agreement.

     

    (b)           Notwithstanding
any provision of this Agreement, the Manager may subcontract and assign any or
all of its responsibilities under Sections 2(b), 2(c) and 2(d) of this
Agreement to any of its affiliates in accordance with the terms of this
Agreement applicable to any such subcontract or assignment, and the Company
hereby consents to any such assignment and subcontracting.  In
addition, provided that
the Manager provides prior written notice to the Company 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 this Agreement to any
of its affiliates without the approval of the Independent
Directors.

     

    Section
15.            Termination for
Cause.

     

    (a)           The
Company may terminate this Agreement effective upon 30 days’ prior written
notice of termination from the Company to the Manager, without payment of any
Termination Fee, if (i) the Manager, its agents or its assignees materially
breaches any provision of this Agreement and such breach shall continue for a
period of 30 days after written notice thereof specifying such breach and
requesting that the same be remedied in such 30-day period (or 90 days after
written notice of such breach if the Manager takes steps to cure such breach
within 30 days of the written notice), (ii) the Manager engages in any act
of fraud, misappropriation of funds, or embezzlement against the Company or any
Subsidiary, (iii) there is an event of any gross negligence on the part of
the Manager in the performance of its duties under this Agreement,
(iv) there is a commencement of any proceeding relating to the Manager’s
Bankruptcy or insolvency, including an order for relief in an involuntary
bankruptcy case or the Manager authorizing or filing a voluntary bankruptcy
petition, (v) there is a dissolution of the Manager or (vi) the
Manager is convicted of (including a plea of nolo contendere) a
felony.


    
      
         


      

      
        - 18
-

        
          

        

      

      
         


      

    

     

    (b)           The
Manager may terminate this Agreement effective upon 60 days’ prior written
notice of termination to the Company in the event that the Company shall default
in the performance or observance of any material term, condition or covenant
contained in this Agreement and such default shall continue for a period of 30
days after written notice thereof specifying such default and requesting that
the same be remedied in such 30-day period.  The Company is required
to pay to the Manager the Termination Fee if the termination of this Agreement
is made pursuant to this Section 15(b).

     

    (c)           The
Manager may terminate this Agreement, without payment of any Termination Fee, in
the event the Company becomes regulated as an “investment company” under the
Investment Company Act, with such termination deemed to have occurred
immediately prior to such event.

     

    Section
16.            Action Upon
Termination.  From and after the effective date of termination
of this Agreement, pursuant to Sections 13 or 15 of this Agreement, the Manager
shall not be entitled to compensation for further services under this Agreement,
but shall be paid all compensation accruing to the date of termination and, if
terminated pursuant to Section 13(a) or Section 15(b), the applicable
Termination Fee.  Upon such termination, the Manager shall
forthwith:

     

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

     

     (ii)           deliver
to the Board of Directors 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
Directors with respect to the Company or a Subsidiary; and

     

     (iii)           deliver
to the Board of Directors all property and documents of the Company or any
Subsidiary then in the custody of the Manager.

     

    Section
17.            Release of Money or Other
Property Upon Written Request.  The Manager agrees that any
money or other property of the Company or any Subsidiary held by the Manager
under this Agreement shall be held by the Manager as custodian for the Company
or Subsidiary, and the Manager’s records shall be appropriately marked clearly
to reflect the ownership of such money or other property by the Company or such
Subsidiary. Upon the receipt by the Manager of a written request signed by a
duly authorized officer of the Company requesting the Manager to release to the
Company or any Subsidiary any money or other property then held by the Manager
for the account of the Company or any Subsidiary under this Agreement, the
Manager shall release such money or other property to the Company or any
Subsidiary within a reasonable period of time, but in no event later than 30
days following such request.  The Manager shall not be liable to the
Company, any Subsidiary, the Independent Directors, or the Company’s or a
Subsidiary’s stockholders, members or partners for any acts performed or
omissions to act by the Company or any Subsidiary in connection with the money
or other property released to the Company or any Subsidiary in accordance with
the second sentence of this Section 17.  The Company and any
Subsidiary shall indemnify the Manager and the other Manager Indemnified Parties
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 to the Company or any Subsidiary in
accordance with the terms of this Section 17.  Indemnification
pursuant to this provision shall be in addition to any right of the Manager or
any such other Manager Indemnified Party to indemnification under
Section 11 of this Agreement.


    
      
         


      

      
        - 19
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    Section
18.           Notices.  Unless
expressly provided otherwise in this Agreement, all notices, requests, demands
and other communications required or permitted under this Agreement shall be in
writing and shall be deemed to have been duly given, made and received when
delivered against receipt or upon actual receipt of (i) personal delivery,
(ii) delivery by reputable overnight courier, (iii) delivery by
facsimile transmission with telephonic confirmation or (iv) delivery by
registered or certified mail, postage prepaid, return receipt requested,
addressed as set forth below:

     

    (a)           If
to the Company:

     

    Two
Harbors Investment Corp.

    601
Carlson Parkway

    Suite
330

    Minnetonka,
MN  55305

    Attention:  General
Counsel

     

    (b)           If
to the Manager:

     

    PRCM
Advisers LLC

    601
Carlson Parkway

    Suite
330

    Minnetonka,
MN  55305

    Attention:  General
Counsel

     

    Either
party may alter the address to which communications or copies are to be sent by
giving notice of such change of address in conformity with the provisions of
this Section 18 for the giving of notice.

     

    Section
19.            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 permitted assigns as provided in this
Agreement.

     

    Section
20.           Entire
Agreement.  This Agreement contains the entire agreement and
understanding among the parties hereto with respect to the subject matter of
this Agreement, 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 of this
Agreement.  The express terms of this Agreement control and supersede
any course of performance and/or usage of the trade inconsistent with any of the
terms of this Agreement.  This Agreement may not be modified or
amended other than by an agreement in writing signed by the parties
hereto.

     

    Section
21.           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 NEW YORK WITHOUT REGARD TO CONFLICTS
OF LAW PRINCIPLES TO THE CONTRARY.


    
      
         


      

      
        - 20
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    Section
22.            No Waiver; Cumulative
Remedies.  No failure to exercise and no delay in exercising,
on the part of any 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.  No waiver of any provision hereunder
shall be effective unless it is in writing and is signed by the party asserted
to have granted such waiver.

     

    Section
23.            Headings.  The
headings of the sections of this Agreement have been inserted for convenience of
reference only and shall not be deemed part of this Agreement.

     

    Section
24.            Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original as against any party whose signature appears thereon,
and all of which shall together constitute one and the same
instrument.  This Agreement shall become binding when one or more
counterparts of this Agreement, individually or taken together, shall bear the
signatures of all of the parties reflected hereon as the
signatories.

     

    Section
25.           Severability.  Any
provision of this Agreement that 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.

     

    Section
26.           Gender.  Words
used herein regardless of the number and gender specifically used, shall be
deemed and construed to include any other number, singular or plural, and any
other gender, masculine, feminine or neuter, as the context
requires.

     

    [SIGNATURE
PAGE FOLLOWS]


    
      
         


      

      
        - 21
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    IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first written above.

     

    
      
        
          
            
              	
                      TWO HARBORS INVESTMENT CORP.

                    
	 
      	 
      
	
                      By:

                    	
                      /s/
      Jeff Stolt

                    
	 
      	
                      Name:  Jeff
      Stolt

                    
	 
      	
                      Title:  Chief
      Financial Officer

                    
	 
      	 
      
	
                      TWO
      HARBORS OPERATING COMPANY LLC

                    
	 
      	 
      
	
                      By:

                    	
                      /s/
      Jeff Stolt

                    
	 
      	
                      Name:  Jeff
      Stolt

                    
	 
      	
                      Title:  Authorized
      Signatory

                    
	 
      	 
      
	
                            
                        PRCM
      ADVISERS LLC

                      

                    
	 
      	 
      
	
                      By:

                    	
                      /s/
      Jeff Stolt

                    
	 
      	
                      Name:  Jeff
      Stolt

                    
	 
      	
                      Title:  Chief
      Financial
Officer

                    


            

          

        

      

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Exhibit
A

     

    
      	
              ·

            	
              No
      investment shall be made that would cause the Company to fail to qualify
      as a REIT for U.S. federal income tax purposes;
  and

            


    

    


    
      	
              ·

            	
              No
      investment shall be made that would cause the Company to be required to
      register as an investment company under the Investment Company
      Act.

            


    

    


    
      	
              ·

            	
              The
      Company will primarily invest within the Company’s target assets,
      consisting primarily of Agency RMBS and non-Agency RMBS; approximately 5%
      to 10% of the Company’s portfolio may include financial assets other than
      Agency RMBS and non-Agency RMBS.

            


    

    


    
      	
              ·

            	
              Until
      appropriate investments can be identified, the Company may invest
      available cash in interest-bearing and short-term investments, that are
      consistent with (i) the Company’s intention to qualify as a REIT, and (ii)
      the Company’s and each Subsidiary’s exemption from “investment company”
      status under the Investment Company
Act.

            


    

    


    For
purposes of the above, “Agency RMBS” means
residential mortgage-backed securities (“RMBS”) for which a
U.S. government agency (including the Government National Mortgage Association)
or a federally chartered corporation (including the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation) guarantees payments
of principal and interest on the securities and “non-Agency RMBS”
means RMBS that are not issued or guaranteed by a U.S. government agency or a
federally chartered corporation.

    


    Exh.
A-1