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 [·], 2009




 





 

















 


MANAGEMENT AGREEMENT, dated as of [·], 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 


 


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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:


 


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(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:


 


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(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 Common Shares 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 up to [·] 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.


 


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“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.


 


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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 [·], 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 July [·], 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 


 


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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 their investments and pursuing a particular
arrangement for each 


 


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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;


 


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(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 


 


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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;


 


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(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 


 


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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 or otherwise, with
respect to the Trust and the Subsidiaries reasonably 


 


14

















 


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 [·], 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.


 


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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:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PENNYMAC
  OPERATING PARTNERSHIP, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  PENNYMAC GP
  OP, INC.,

  
	
   

  	
   

  	
  its General
  Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PNMAC
  CAPITAL MANAGEMENT, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


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