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Exhibit 10.7    
    

FORM
OF INSIDER LETTER 

                            ,
2007 

Prospect
Acquisition Corp.

695 East Main Street

Stamford, Connecticut 06901 

        Re:    Initial
Public Offering 

Gentlemen:

        This
letter is being delivered to you in accordance with the Underwriting Agreement (the "Underwriting Agreement") entered into by and
between Prospect Acquisition Corp., a Delaware corporation (the "Company"), and Citigroup Global Markets Inc., as Representative (the  "Representative") of the several Underwriters named in Schedule I thereto (the "Underwriters"),
relating to an underwritten initial public offering (the "IPO") of the Company's units (the "Units"),
each Unit consisting of one share of the Company's common stock, par value $0.0001 per share (the "Common Stock"), and one warrant to purchase one share
of Common Stock (each, a "Warrant"). Certain capitalized terms used herein are defined in paragraph 19 hereof. 

        In
order to induce the Company and the Underwriters to enter into the Underwriting Agreement and to proceed with the IPO, and in recognition of the benefit that such IPO will confer upon
the undersigned as a stockholder of the Company, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the undersigned hereby agrees with the Company as follows: 

        1.     If
the Company solicits approval of its stockholders of an Initial Business Combination, the undersigned will vote all shares of Founders' Common Stock owned by him, her
or it in accordance with the majority of the votes cast by the holders of the IPO Shares and will vote all shares of Common Stock owned by him, her or it in favor of an amendment to the Company's
certificate of incorporation to provide for the Company's perpetual existence. 

        2.     [In
the event that the Company fails to consummate an Initial Business Combination within twenty-four (24) months from the date
("Effective Date") of the final prospectus relating to the IPO, the undersigned will, as promptly as possible, take all reasonable actions within his
power to (a) cause the Trust Fund to be liquidated and distributed to the holders of IPO Shares and (b) cause the Company to liquidate as soon as reasonably
practicable.](1) The undersigned hereby waives any and all right, title, interest or claim of any kind in or to any distribution of the Trust Account and any remaining net
assets of the Company as a result of such liquidation with respect to the undersigned's shares of Founders' Common Stock ("Claim") and hereby waives any
Claim the undersigned may have in the future as a result of, or arising out of, any contracts or agreements with the Company and will not seek recourse against the Trust Account for any reason
whatsoever; provided that the foregoing shall not apply to any IPO Shares acquired by the undersigned. [In the event of the liquidation of the Trust Account, the undersigned agrees to
indemnify and hold harmless the Company against any and all loss, liability, claims, damage and expense whatsoever (including, but not limited to, any and all legal or other expenses reasonably
incurred in investigating, preparing or defending against any litigation, whether pending or threatened, or any claim whatsoever) which the Company may become subject as a result of any claim by any
vendor or other person who is owed money by the Company for services rendered or products sold or contracted for, or by any target business, but only to the extent necessary to ensure that such loss,
liability, claim, damage or expense does not reduce the amount of funds in the Trust Account and only if such a vendor or prospective target business does not execute an agreement waiving any claims
against the Trust Fund and provided, further, that such indemnity shall not apply as to any claims under
the Company's obligation to indemnify the 

	(1)
	Applies
only to officers and directors. 

 

Underwriters
against certain liabilities, including liabilities under the Securities Act of 1933, as amended. The undersigned hereby represents and warrants that [he/it] is an
"accredited investor" (as defined in Regulation D of the Securities Act of 1933, and that [he/it] has sufficient funds available to [him/it] to
satisfy [his/its] indemnification obligations set forth in this paragraph 2.](2) The undersigned acknowledges and agrees that there will be no
distribution from the Trust Account with respect to any warrants, all rights of which will terminate on the Company's liquidation. 

        3.     The
undersigned acknowledges and agrees that the Company will not consummate any Initial Business Combination which involves a company which is affiliated with any of the
Insiders, including any businesses that are either portfolio companies of, or have otherwise received a material financial investment from any Insider or any entity affiliated with any Insider. 

        4.     Neither
the undersigned, any member of the family of the undersigned, nor any affiliate of the undersigned will be entitled to receive and will not accept any
compensation for services rendered to the Company prior to or in connection with the consummation of an Initial Business Combination; provided that
commencing on the Effective Date, each of Teleos Asset Management LLC and LLM Advisors L.P. (each, a "Related Party"), entities affiliated with Daniel
Gressel, a director, and Patrick J. Landers, our president and a director, and J. Clive Allison, our chief financial officer and secretary, shall be allowed to charge the Company $4,500 and $3,000,
respectively, per month, representing an allocable share of Related Party's overhead, to compensate it for the Company's use of Related Party's offices, utilities and personnel. The undersigned shall
also be entitled to reimbursement from the Company for its out-of-pocket expenses incurred in connection with seeking and consummating an Initial Business Combination. In
addition, Flat Ridge Investments LLC, LLM Structured Equity Fund L.P. and LLM Investors L.P. each will be entitled to repayment of the $120,000, $78,400 and $1,600 non-interest bearing
loans made by them, respectively, to the Company to cover offering expenses, in accordance with the repayment terms thereof. 

        5.     Neither
the undersigned, any member of the family of the undersigned, nor any affiliate of the undersigned will be entitled to receive or accept a finder's fee or any
other compensation in the event the undersigned, any member of the family of the undersigned or any affiliate of the undersigned originates an Initial Business Combination. 

        6.     The
undersigned will escrow all of the undersigned's shares of Founders' Common Stock until one year after the consummation by the Company of a Business Combination
subject to the terms of an escrow agreement which the Company will enter into with the undersigned and Continental Stock Transfer & Trust Company, as escrow agent.(3) 

        7.     To
the extent that the Underwriters do not exercise their over-allotment option to purchase as additional 3,750,000 Units of the Company (as described in the
Prospectus), the undersigned agrees to permit the Company to repurchase from the undersigned, at a purchase price equal to $0.0001 per share, a number of shares of Founders' Common Stock determined by
multiplying the number of shares of Founders' Common Stock held by the undersigned by a fraction, (i) the numerator of which is 3,750,000 minus the number of Units purchased by the Underwriters
upon exercise of their over-allotment option, and (ii) the denominator of which is 3,750,000.(4) 

	(2)
	Applies
only to Mr. Minella, LLM Structured Equity Fund L.P. and LLM Investors L.P. 
	(3)
	Applies
only to parties to the Escrow Agreement. 
	(4)
	Applies
only to parties to the Escrow Agreement. 

2

 

        8.     The
undersigned will escrow all of the undersigned's Sponsors' Warrants until thirty days after the consummation by the Company of a Business Combination subject to the
terms of an escrow agreement which the Company will enter into with the undersigned and Continental Stock Transfer & Trust Company, as escrow agent.(5) 

        9.     The
undersigned agrees that the undersigned will not transfer or sell any Sponsors' Warrants the undersigned holds except in accordance with the transfer restrictions set
forth in such warrants, including the Warrant Agreement relating thereto and the Escrow Agreement.(6) 

        10.   The
undersigned agrees not sell or transfer any Founders' Common Stock for a period of one year from the consummation of an Initial Business Combination or earlier if,
subsequent to the Business Combination, (i) the closing price of the Common Stock equals or exceeds $14.50 per share for any 20 trading days within any 30-trading day period or
(ii) the Company consummates a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of the Company's stockholders having the right to exchange their
shares of common stock for cash, securities or other property; provided, however, that transfers can be
made to Permitted Transferees who agree in writing to be bound to the transfer restrictions, agree to vote in accordance with the majority of the votes cast by the holders of the IPO Shares in the
event that the Company solicits approval of its stockholders of an Initial Business Combination and waive any rights to participate in any liquidation distribution if the Company fails to consummate
an Initial Business Combination. As used herein, "Permitted Transferee" means a transfer (i) to any officer or director of the Company, any
affiliates or family members of any officer or director of the Company or any affiliates of any Sponsor (as defined herein), (ii) in the case of a natural person, by gift to a member of such
person's immediate family or to a trust, the beneficiary of which is a member of such person's immediate family, an affiliate of such person or to a charitable organization, (iii) in the case
of a natural person, by virtue of the laws of descent and distribution upon death of such person, (iv) with respect to any Sponsor, by virtue of the laws of Delaware or such Sponsor's
organizational documents upon dissolution of such Sponsor, (v) in the case of a natural person, pursuant to a qualified domestic relations order, (vi) in the event of the Company's
liquidation prior to completion of an Initial Business Combination or (vii) in the event the Company's consummation of a liquidation, merger, stock exchange or other similar transaction which
results in all of the Company's stockholders having the right to exchange their shares of common stock for cash, securities or other property subsequent to the Company's consummation of its Initial
Business Combination. 

        The
undersigned agrees that prior to any transfer of any Founders' Common Stock the undersigned will give written notice to the Company expressing his desire to effect such transfer and
describing briefly the proposed transfer. Upon receiving such notice, the Company shall present copies thereof to its counsel and the undersigned agrees not to make any disposition of all or any
portion of the Founders' Common Stock unless and until: 

        (a)   there
is then in effect a registration statement under the Securities Act of 1933, as amended (the "Securities Act")
covering such proposed disposition and such disposition is made in accordance with such registration statement, in which case the required legends with respect to the Founders' Common Stock sold
pursuant to such registration statement shall be removed; or 

        (b)   if
reasonably requested by the Company, (A) the undersigned shall have furnished the Company with an opinion of counsel, reasonably satisfactory to the Company,
that such disposition will not require registration of such Founders' Common Stock under the Securities Act, (B) the Company shall have received customary representations and warranties
regarding the transferee that are reasonably satisfactory to the Company signed by the proposed transferee and (C) the Company shall have received an agreement by such transferee to the
restrictions contained in the legend required with respect to the Founders' Common Stock and if applicable, those referred to in the first paragraph of this Section 10. 

	(5)
	Applies
only to parties to the Escrow Agreement. 
	(6)
	Applies
only to parties to the Escrow Agreement. 

3

 

        11.   The
undersigned agrees not to participate in the formation of, or become an officer or director of, any blank check company that may complete a business combination with
an entity in the financial services industry as its principal business until the earlier of (i) the date on which the Company entered into a definitive agreement regarding its Initial Business
Combination or (ii) 24 months after the date of the Prospectus. 

        12.   The
undersigned agrees to be the                        of the Company until the earlier of the consummation by the Company of a
Business Combination or the liquidation of the
Company. The undersigned's biographical information furnished to the Company and the Representative and attached hereto as Exhibit A is true and accurate in all respects, does not omit any
material information with respect to the undersigned's background. Each of the undersigned's Director and Officer Questionnaire and NASD Questionnaire furnished to the Company and the Representative
and annexed as Exhibit B hereto is true and accurate in all respects. The undersigned represents and warrants that(7): 

        (a)   the
undersigned is not subject to, or a respondent in, any legal action for, any injunction, cease-and-desist order or order or stipulation to
desist or refrain from any act or practice relating to the offering of securities in any jurisdiction; 

        (b)   the
undersigned has never been convicted of or pleaded guilty to any crime (i) involving any fraud, (ii) relating to any financial transaction or handling
of funds of another person, or (iii) pertaining to any dealings in any securities and he is not currently a defendant in any such criminal proceeding; and 

        (c)   the
undersigned has never been suspended or expelled from membership in any securities or commodities exchange or association or had a securities or commodities license
or registration denied, suspended or revoked. 

        13.   The
undersigned has full right and power, without violating any agreement by which the undersigned is bound, to enter into this letter agreement and to serve as
                        of the Company. 

        14.   The
undersigned hereby waives the undersigned's right to exercise conversion rights with respect to any shares of the Company's Common Stock owned or to be owned by the
undersigned, directly or indirectly, and agrees that the undersigned will not seek conversion with respect to such shares in connection with any vote to approve an Initial Business Combination. 

        15.   The
undersigned hereby agrees to not propose, or vote in favor of, an amendment to the Company's Certificate of Incorporation to extend the period of time in which the
Company must consummate an Initial Business Combination prior to its liquidation. Should such a proposal be put before stockholders, the undersigned hereby agrees to vote against such proposal. The
undersigned further agrees that prior to the consummation of an Initial Business Combination, he will not propose any amendment to Article SIXTH of the Company's Amended and Restated Certificate of
Incorporation or support, endorse or recommend any proposal that stockholders amend any of these provisions. This paragraph may not be modified or amended under any circumstances. 

        16.   The
undersigned hereby agrees to not amend or cause to be amended, without the written consent of the Underwriters, the Escrow Agreement to which the undersigned is a
party.(8) 

	(7)
	Applies
only to directors and officers of the Company. 
	(8)
	Applies
only to parties to the Escrow Agreement. 

4

 

        17.   In
the event that the Company does not consummate an Initial Business Combination and must liquidate and its remaining net assets are insufficient to complete such
liquidation, the undersigned agrees to advance such funds necessary to complete such liquidation and agrees not to seek repayment for such expenses.(9) 

        18.   This
letter agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflicts of law
principles that would result in the application of the substantive laws of another jurisdiction. The undersigned hereby (a) agrees that any action, proceeding or claim against him arising out
of or relating in any way to this letter agreement (a "Proceeding") shall be brought and enforced in the courts of the State of New York of the United
States of America for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive and (b) waives any objection to such exclusive
jurisdiction and that such courts represent an inconvenient forum. If for any reason such agent is unable to act as such, the undersigned will promptly notify the Company and the Representative and
appoint a substitute agent acceptable to each of the Company and the Representative within thirty (30) days and nothing in this letter will affect the right of either party to serve process in
any other manner permitted by law. 

        19.   As
used herein: 

        (a)   "Escrow Agreement" shall mean the Escrow Agreement dated [?], 2007 among Prospect Acquisition
Corp., Continental Stock Transfer & Trust Company and Flat Ridge Investments LLC, LLM Structured Equity Fund L.P., LLM Investors L.P., Capital Management Systems, Inc., Michael P.
Castine, SJC Capital, LLC, Michael Downey, James Cahill and Daniel Gressel; 

        (b)   "Initial Business Combination" shall mean the acquisition by the Company, whether through a merger, capital stock
exchange, asset acquisition, stock purchase, reorganization or similar type of transaction, of one or more business or assets ("Target Business" or  "Target
Businesses"), whose collective fair market value is equal to at least 80% of the balance in the Trust Fund, excluding deferred underwriting
discounts and commissions and resulting in ownership by the Company of at least 51% of the voting equity interests of the Target Business or Businesses and control by the Company of the majority of
any governing body of the Target Business or Businesses; 

        (c)   "Insiders" shall mean all officers, directors and stockholders of the Company immediately prior to the IPO; 

        (d)   "Founders' Common Stock" shall mean all of the shares of Common Stock of the Company acquired by an Insider prior to the
IPO; 

        (e)   "IPO Shares" shall mean the shares of Common Stock issued in the Company's IPO; 

        (f)    "Prospectus" shall mean the final prospectus relating to the IPO; 

        (g)   "Sponsors' Warrants" shall mean the warrants that are being sold privately by the Company simultaneously with the
consummation of the IPO; and 

        (h)   "Trust Account" shall mean the trust account into which a portion of the net proceeds of the Company's IPO will be
deposited. 

	(9)
	Applies
only to David A. Minella, LLM Structured Equity Fund L.P. and LLM Investors L.P. 

5

 

        20.   The
undersigned acknowledges and understands that the Underwriters and the Company will rely upon the agreements, representations and warranties set forth herein in
proceeding with the IPO. Nothing contained herein shall be deemed to render the Underwriters a representative of, or a fiduciary with respect to, the Company, its stockholders or any creditor or
vendor of the Company with respect to the subject matter hereof. 

        21.   This
letter agreement shall be binding on the undersigned and such person's respective successors, heirs, personal representatives and assigns. This letter agreement
shall terminate on the earlier of (a) the consummation of an Initial Business Combination and (b) the liquidation of the Company;  provided, that such termination shall not relieve the
undersigned from liability from any breach of this agreement prior to its termination
[and provided further, that those provisions of Section 2 hereof relating to the indemnification of the Company in the case of a
liquidation shall survive such liquidation.](10) 

	 	 	
 Print Name of Insider
	

 	
 	

 Signature

	(10)
	Applies
only to David A. Minella, LLM Structured Equity Fund L.P. and LLM Investors L.P. 

6

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Exhibit 10.8    
    

INVESTMENT MANAGEMENT TRUST AGREEMENT  

        This
Agreement is made as of [    •    ], 2007 by and between Prospect Acquisition Corp., a Delaware corporation (the
"Company"), and Continental Stock Transfer & Trust Company (the "Trustee"). 

        WHEREAS, the Company's registration statement on Form S-1, No. 333-145110
("Registration Statement"), for its initial public offering of securities ("IPO") has been declared
effective as of the date hereof ("Effective Date") by the Securities and Exchange Commission (capitalized terms used herein and not otherwise defined
shall have the meanings set forth in the Registration Statement); and 

        WHEREAS, Citigroup Global Markets Inc. ("Citigroup") is acting as the
representative of the several underwriters in the IPO (the "Underwriters") pursuant to an underwriting agreement dated on or about the date hereof
between the Company and Citigroup (the "Underwriting Agreement"); and 

        WHEREAS, as described in the Registration Statement, and in accordance with the Company's Certificate of Incorporation, $245,250,000 of
the gross proceeds of the IPO, including certain deferred underwriting discounts and commissions and proceeds from the sale of the Sponsors' Warrants (or $281,362,500 if the underwriters'
over-allotment option is exercised in full or a pro rata portion thereof pursuant to the terms of the Underwriting Agreement if the underwriters' over-allotment option is
exercised in part, but not in full, prior to the time of its expiration), will be delivered to the Trustee to be deposited and held in a trust account for the benefit of the Company and the holders of
the Company's common stock, par value $.0001 per share, issued in the IPO as hereinafter provided (the amount to be delivered to the Trustee will be referred to herein as the
"Property", the stockholders for whose benefit the Trustee shall hold the Property will be referred to as the "Public
Stockholders," and the Public Stockholders and the Company will be referred to together as the "Beneficiaries"); 

        WHEREAS, pursuant to the Underwriting Agreement, a portion of the Property equal to $8,250,000 (or $9,487,500, if the underwriters'
over-allotment option is exercised in full or a pro rata portion thereof pursuant to the terms of the Underwriting Agreement if the underwriters' over-allotment option is
exercised in part, but not in full, prior to the time of its expiration as specified in a notice pursuant to Paragraph 3(e) hereof) is attributable to deferred underwriting commissions that
will become payable by the Company to Citigroup upon the consummation of an Initial Business Combination (as defined in the Registration Statement) (the "Deferred
Discount"); and 

        WHEREAS, the Company and the Trustee desire to enter into this Agreement to set forth the terms and conditions pursuant to which the
Trustee shall hold the Property; 

 IT IS AGREED:  

        1.     Agreements and Covenants of Trustee. The Trustee hereby agrees and covenants to: 

        (a)   Hold
the Property in trust for the Beneficiaries in accordance with the terms of this Agreement in a segregated trust account (the "Trust
Account") established by the Trustee at JPMorgan Chase, N.A.; 

        (b)   Manage,
supervise and administer the Trust Account subject to the terms and conditions set forth herein; 

        (c)   In
a timely manner, upon the instruction of the Company, to invest and reinvest the Property in United States "government securities" within the meaning of
Section 2(a)(16) of the Investment Company Act of 1940 having a maturity of 180 days or less, and/or in any open ended investment company registered under the Investment Company Act of
1940 that holds itself out as a money market fund selected by the Company meeting the conditions of paragraphs (c)(2), (c)(3) and (c) (4) of Rule 2a-7 promulgated under the
Investment Company Act of 1940, as determined by the Company; 

 

        (d)   Collect
and receive, when due, all principal and income arising from the Property, which shall become part of the "Property," as such term is used herein; 

        (e)   Notify
the Company and Citigroup of all communications received by it with respect to any Property requiring action by the Company; 

        (f)    Supply
any necessary information or documents as may be requested by the Company in connection with the Company's preparation of the tax returns for the Trust Account; 

        (g)   Participate
in any plan or proceeding for protecting or enforcing any right or interest arising from the Property if, as and when instructed by the Company to do so; 

        (h)   Render
to the Company, and to such other person as the Company may instruct, monthly written statements of the activities of and amounts in the Trust Account reflecting
all receipts and disbursements of the Trust Account; and 

        (i)    Commence
liquidation of the Trust Account only after and promptly after receipt of, and only in accordance with, the terms of a letter (each, a
"Termination Letter"), in a form substantially similar to that attached hereto as either  Exhibit A or Exhibit B hereto, signed on behalf of the Company by its Chief Executive
Officer, Chief Financial Officer, Secretary or Assistant Secretary or other authorized officer of the Company, and complete the liquidation of the Trust Account and distribute the Property in the
Trust Account only as directed in the Termination Letter and the other documents referred to therein; provided,  however, that in the event that a
Termination Letter has not been received by the Trustee by the date which is 24-months after the date of
the final prospectus for the IPO (the "Last Date"), the Trust Account shall be liquidated in accordance with the procedures set forth in the Termination
Letter attached as Exhibit B hereto and distributed to the stockholders of record on the Last Date. In all cases, the Trustee shall provide Citigroup with a copy of any Termination Letters
and/or any other correspondence that it receives with respect to any proposed withdrawal from the Trust Account promptly after it receives same. The provisions of this Section 1(i) may
not be modified, amended or deleted under any circumstances. 

        2.     Limited Distributions of Income from Trust Account.

        (a)   Upon
written request from the Company, which may be given from time to time in a form substantially similar to that attached hereto as  Exhibit C, the Trustee shall distribute to the Company the amount
requested by the Company to cover any income, franchise or other tax obligation
owed by the Company as a result of interest or other income earned on the funds held in the Trust Account; 

        (b)   Upon
written request from the Company, which may be given from time to time in a form substantially similar to that attached hereto as  Exhibit D, the Trustee shall distribute to the Company the amount
requested by the Company to cover expenses related to investigating and
selecting a target business and other working capital requirements; provided, however, that the
aggregate amount of all such distributions shall not exceed the lesser of (y) the aggregate amount of income actually received on amounts in the Trust Account less an amount equal to estimated
taxes that are or will be due on such income at an assumed rate of 40% and (z) $3,250,000; 

        (c)   Distribute,
upon notice by the Company, the Deferred Discount, as defined in Section 3(e) to Citibank; and 

        (d)   The
limited distributions referred to in Sections 2(a) and 2(b) above shall be made only from interest collected on the Property and, in the case of Section 2(b),
the aggregate amount distributed by the Trustee to the Company may not exceed $8,250,000, in the event the Underwriters' over-allotment option in the Offering is not exercised, or
$9,487,500 if the Underwriters' over-allotment option in the Offering is exercised in full (or, if the size of the Offering is increased or decreased, such greater or lesser amount as
shall be set forth in the 

2

 

Prospectus),
less any applicable income taxes on the Property. Except as provided in Section 1(i) and this Section 2, no other distributions from the Trust Account shall be
permitted. 

        3.     Agreements and Covenants of the Company. The Company hereby agrees and covenants to: 

        (a)   Give
all instructions to the Trustee hereunder in writing, signed by the Company's Chief Executive Officer, Chief Financial Officer or other authorized officer. In
addition, except with respect to its duties under paragraphs 1(i), 2(a) and 2(b) above, the Trustee shall be entitled to rely on, and shall be protected in relying on, any verbal or telephonic advice
or instruction which it in good faith believes to be given by any one of the persons authorized above to give written instructions, provided that the Company shall promptly confirm such instructions
in writing; 

        (b)   Hold
the Trustee harmless and indemnify the Trustee from and against, any and all expenses, including reasonable counsel fees and disbursements, or loss suffered by the
Trustee in connection with any action, suit or other proceeding brought against the Trustee involving any claim, or in connection
with any claim or demand which in any way arises out of or relates to this Agreement, the services of the Trustee hereunder, or the Property or any income earned from investment of the Property,
except for expenses and losses resulting from the Trustee's gross negligence or willful misconduct. Promptly after the receipt by the Trustee of notice of demand or claim or the commencement of any
action, suit or proceeding, pursuant to which the Trustee intends to seek indemnification under this paragraph, it shall notify the Company in writing of such claim (hereinafter referred to as the
"Indemnified Claim"). The Trustee shall have the right to conduct and manage the defense against such Indemnified Claim, provided, that the Trustee
shall obtain the consent of the Company with respect to the selection of counsel, which consent shall not be unreasonably withheld. The Trustee may not agree to settle any Indemnified Claim without
the prior written consent of the Company, which consent shall not be unreasonably withheld, unless such settlement includes a full release of the Company with respect to such Indemnified Claim. The
Company may participate in such action with its own counsel; 

        (c)   Pay
the Trustee an initial acceptance fee, an annual fee and a transaction processing fee for each disbursement made pursuant to Section 2 as set forth on
Schedule A hereto, which fees shall be subject to modification by the parties from time to time. It is expressly understood that the Property shall not be used to pay such fees unless and until
it is distributed to the Company pursuant to Section 2. The Company shall pay the Trustee the initial acceptance fee and first year's fee at the consummation of the IPO and thereafter on the
anniversary of the Effective Date. The Trustee shall refund to the Company the annual fee (on a pro rata basis) with respect to any period after the liquidation of the Trust Account. The Company shall
not be responsible for any other fees or charges of the Trustee except as set forth in this Section 3(c) and as may be provided in Section 3(b) hereof (it being expressly understood that
the Property shall not be used to make any payments to the Trustee under such Sections); 

        (d)   In
connection with any vote of the Company's stockholders regarding a Business Combination, provide to the Trustee an affidavit or certificate of a firm regularly
engaged in the business of soliciting proxies and/or tabulating stockholder votes (which firm may be the Trustee) verifying the vote of the Company's stockholders regarding such Business Combination;
and 

        (e)   Within
five business days after Citigroup's over-allotment option (or any unexercised portion thereof) expires or is exercised in full, provide the Trustee
with a notice in writing (with a copy to Citigroup) of the total amount of the Deferred Discount to be released to Citigroup upon consummation of an Initial Business Combination, which shall in no
event be less than $8,250,000. 

3

 

        4.     Limitations of Liability. The Trustee shall have no responsibility or liability to: 

        (a)   Take
any action with respect to the Property, other than as directed in paragraphs 1 and 2 hereof and the Trustee shall have no liability to any party except for
liability arising out of its own gross negligence or willful misconduct; 

        (b)   Institute
any proceeding for the collection of any principal and income arising from, or institute, appear in or defend any proceeding of any kind with respect to, any
of the Property unless and until it shall have received instructions from the Company given as provided herein to do so and the Company shall have advanced or guaranteed to it funds sufficient to pay
any expenses incident thereto; 

        (c)   Change
the investment of any Property, other than in compliance with paragraph 1(c); 

        (d)   Refund
any depreciation in principal of any Property; 

        (e)   Assume
that the authority of any person designated by the Company to give instructions hereunder shall not be continuing unless provided otherwise in such designation,
or unless the Company shall have delivered a written revocation of such authority to the Trustee; 

        (f)    The
other parties hereto or to anyone else for any action taken or omitted by it, or any action suffered by it to be taken or omitted, in good faith and in the exercise
of its own best judgment, except for its gross negligence or willful misconduct. The Trustee may rely conclusively and shall be protected in acting upon any order, notice, demand, certificate, opinion
or advice of counsel (including counsel chosen by the Trustee), statement, instrument, report or other paper or document (not only as to its due execution and the validity and effectiveness of its
provisions, but also as to the truth and acceptability of any information therein contained) which is believed by the Trustee, in good faith, to be genuine and to be signed or presented by the proper
person or persons. The Trustee shall not be bound by any notice or demand, or any waiver, modification, termination or rescission of this Agreement or any of the terms hereof, unless evidenced by a
written instrument delivered to the Trustee signed by the proper party or parties and, if the duties or rights of the Trustee are affected, unless it shall give its prior written consent thereto; 

        (g)   Verify
the correctness of the information set forth in the Registration Statement or to confirm or assure that any acquisition made by the Company or any other action
taken by it is as contemplated by the Registration Statement it being understood that the foregoing shall not limit the Trustee's obligation to act upon such requests for distribution; and 

        (h)   File
information returns with the United States Internal Revenue Service and payee statements with the Company, documenting the taxes payable by the Company, if any,
relating to interest earned on the Property. 

        (i)    Prepare,
execute and file tax reports, income or other tax returns and pay any taxes with respect to income and activities relating to the Trust Account, regardless of
whether such tax is payable by the Trust Account or the Company (including, but not limited to, income tax obligations), it being expressly understood that as set forth in Section 1(i), if
there is any income or other tax obligation relating to the Trust Account or the Property in the Trust Account, as determined from time to time by the Company and regardless of whether such tax is
payable by the Company or the Trust, at the written instruction of the Company, the Trustee shall make funds available in cash from the Property in the Trust Account an amount specified by the Company
as owing to the applicable taxing authority, which amount shall be paid directly to the company by electronic funds transfer, account debit or other method of payment, and the Company shall forward
such payment to the applicable taxing authority. 

4

 

        5.     Termination. This Agreement shall terminate as follows: 

        (a)   If
the Trustee gives written notice to the Company that it desires to resign under this Agreement, the Company shall use its reasonable efforts to locate a successor
trustee. At such time that the Company notifies the Trustee that a successor trustee has been appointed by the Company and has agreed to become subject to the terms of this Agreement, the Trustee
shall transfer the management of the Trust Account to the successor trustee, including but not limited to the transfer of copies of the reports and statements relating to the Trust Account, whereupon
this Agreement shall terminate; provided, however, that, in the event that the Company does not locate a successor trustee within ninety days of receipt of the resignation notice from the Trustee, the
Trustee may submit an application to have the Property deposited with any court in the State of New York or with the United States District Court for the Southern District of New York and upon such
deposit, the Trustee shall be immune from any liability whatsoever; or 

        (b)   At
such time that the Trustee has completed the liquidation of the Trust Account in accordance with the provisions of paragraph 1(i) hereof, and
distributed the Property in accordance with the provisions of the Termination Letter, this Agreement shall terminate except with respect to Paragraph 3(b). 

        6.     Trust Account Waiver. The Trustee has no right, title, interest, or claim of any kind
("Claim") in or to any monies or Property in the Trust Account, and hereby waives any Claim in or to any monies or Property in the Trust Account it may
have in the future, and hereby agrees not to seek recourse, reimbursement, payment or satisfaction for any Claim against the Trust Account for any reason whatsoever. 

        7.     Miscellaneous.

        (a)   The
Company and the Trustee each acknowledge that the Trustee will follow the security procedures set forth below with respect to funds transferred from the Trust
Account. Upon receipt of written instructions, the Trustee will confirm such instructions with an Authorized Individual at an Authorized Telephone Number listed on the attached  Exhibit E. The
Company and the Trustee will each restrict access to confidential information relating to such security procedures to authorized
persons. Each party must notify the other party immediately if it has reason to believe unauthorized persons may have obtained access to such information, or of any change in its authorized personnel.
In executing funds transfers, the Trustee will rely upon account numbers or other identifying numbers of a beneficiary, beneficiary's bank or intermediary bank, rather than names. The Trustee shall
not be liable for any loss, liability or expense resulting from any error in an account number or other identifying number, provided it has accurately transmitted the numbers provided. 

        (b)   This
Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without giving effect to conflicts of law principles
that would result in the application of the substantive laws of another jurisdiction. It may be executed in several original or facsimile counterparts, each one of which shall constitute an original,
and together shall constitute but one instrument. 

        (c)   This
Agreement contains the entire agreement and understanding of the parties hereto with respect to the subject matter hereof. Except for
Section 1(i) (which may not be amended under any circumstances), this Agreement or any provision hereof may only be changed, amended or modified by a writing signed by each of the
parties hereto; provided, however, that no such change, amendment or modification may be made without
the prior written consent of the Public Stockholders, it being the specific intention of the parties hereto that each Public Stockholder is and shall be a third-party beneficiary of this
paragraph 7(c) with the same right and power to enforce this paragraph 7(c) as either of the parties hereto, and provided, further, that this Agreement may not be changed, waived,
amended or modified in such a manner as to adversely 

5

 

affect
the right of the Underwriters to receive the Deferred Discount as contemplated herein without the written consent of Citigroup. For purposes of this paragraph 6(c), the "consent of the
Public Stockholders" shall mean receipt by the Trustee of a certificate from an entity certifying that (i) such entity regularly engages in the business of serving as inspector of elections for
companies whose securities are publicly traded, and (ii) either (a) 70% of the Public Stockholders of record as of a record date established in accordance with Section 213(a) of
the Delaware General Corporation Law, as amended (the "DGCL"), have voted in favor of such amendment or modification or (b) 70% of the Public
Stockholders of record as of a record date established in accordance with Section 213(b) of the DGCL have delivered to such entity a signed writing approving such amendment or modification. As
to any claim, cross-claim or counterclaim in any way relating to this Agreement, each party waives the right to trial by jury. 

        (d)   The
parties hereto consent to the jurisdiction and venue of any state or federal court located in the City of New York, Borough of Manhattan, for purposes of resolving
any disputes hereunder. 

        (e)   Any
notice, consent or request to be given in connection with any of the terms or provisions of this Agreement shall be in writing and shall be sent by express mail or
similar private courier service, by certified mail (return receipt requested), by hand delivery or by facsimile transmission: 

	if to the Trustee, to:	 	Continental Stock Transfer & Trust Company

17 Battery Place

New York, New York 10004

Attn: Steven G. Nelson and Frank DiPaolo

Fax No.: (212) 509-5150
	

if to the Company, to:	
 	

Prospect Acquisition Corp.

695 East Main Street

Stamford, Connecticut 06901

Attn: Chief Executive Officer

Fax No.: (203) 656-0051
	

in either case,	
 	

 
	with a copy to:	 	Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013

Attn: General Counsel

Fax No.: (212) 816-7912
	

and	
 	

Bingham McCutchen LLP

399 Park Avenue

New York, New York 10022

Attn: Floyd I. Wittlin, Esq.

Fax No.: (212) 752-5378

        (f)    This
Agreement may not be assigned by the Trustee without the prior consent of the Company and Citigroup. 

        (g)   Each
of the Trustee and the Company hereby represents that it has the full right and power and has been duly authorized to enter into this Agreement and to perform its
respective obligations as contemplated hereunder. The Trustee acknowledges and agrees that it shall not make any claims or proceed against the Trust Account, including by way of set-off,
and shall not be entitled to any funds in the Trust Account under any circumstance. 

        (h)   Each
of the Company and the Trustee hereby acknowledge that Citigroup is a third party beneficiary of this Agreement. 

[SIGNATURE PAGE FOLLOWS]

6

 

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

	 	 	CONTINENTAL STOCK TRANSFER &

TRUST COMPANY, as Trustee
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	Name:	 	 
	 	 	 	 	

	 	 	Title:	 	 
	 	 	 	 	

	

 	
 	
PROSPECT ACQUISITION CORP.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	Name:	 	 
	 	 	 	 	

	 	 	Title:	 	 
	 	 	 	 	

7

SCHEDULE A  

	Fee Item
 
	 	Time and method of payment
	 	Amount

	Initial acceptance fee	 	Initial closing of IPO by wire transfer	 	$	1,000
	

Annual fee	
 	

First year, initial closing of IPO by wire transfer; thereafter on the anniversary of the effective date of the IPO by wire transfer or check	
 	
$	

3,000
	

Transaction processing fee for disbursements to Company under Section 2	
 	

Deduction by Trustee from accumulated income following disbursement made to Company under Section 2	
 	
$	

250

EXHIBIT A  

[Letterhead
of Company] 

[Insert
date] 

Continental
Stock Transfer & Trust Company

17 Battery Place

New York, New York 10004

Attn: Steven Nelson and Frank DiPaolo 

	Re:
	Trust
Account No.                        Termination Letter 

Gentlemen:

        Pursuant
to paragraph 1(i) of the Investment Management Trust Agreement between Prospect Acquisition Corp. ("Company") and
Continental Stock Transfer & Trust Company ("Trustee"), dated as
of                        , 2007 ("Trust
Agreement"), this is to advise you that the Company has entered into an agreement ("Business Agreement")
with                        
("Target Business") to consummate a business combination with Target Business ("Business Combination")
on or about [insert date]. The Company shall notify you at least 48 hours in advance of the actual date of the
consummation of the Business Combination ("Consummation Date"). 

        In
accordance with the terms of the Trust Agreement, we hereby authorize you to commence liquidation of the Trust Account to the effect that, on the Consummation Date, all of funds held
in the Trust Account will be immediately available for transfer to the account or accounts that the Company shall direct on the Consummation Date. 

        On
the Consummation Date (i) counsel for the Company shall deliver to you written notification that the Business Combination has been consummated
("Counsel's Letter"), (ii) the Company shall deliver to you (a) [an affidavit]
[a certificate] of                        , which verifies the vote of the Company's stockholders in
connection with the Business Combination and
(b) written instructions with respect to the transfer of the funds held in the Trust Account other than the Deferred Discount ("Instruction
Letter") and (iii) Citigroup shall deliver to you written instructions for delivery of the Deferred Discount. You are hereby directed and authorized to transfer the
funds held in the Trust Account immediately upon your receipt of the Counsel's Letter and the Instruction Letter. In the event that certain deposits held in the Trust Account may not be liquidated by
the Consummation Date without penalty, you will notify the Company of the same and the Company shall direct you as to whether such funds should remain in the Trust Account and distributed
after the Consummation Date to the Company. Upon the distribution of all the funds in the Trust Account pursuant to the terms hereof, the Trust Agreement shall be terminated and the Trust Account
closed. 

        In
the event that the Business Combination is not consummated on the Consummation Date described in the notice thereof and we have not notified you on or before the original Consummation
Date of a new Consummation Date, then, upon receipt of written instruction from the Company, the funds held in the Trust Account shall be reinvested as provided in the Trust Agreement on the business
day immediately following the Consummation Date as set forth in the notice. 

	 	 	Very truly yours,
	

 	
 	
PROSPECT ACQUISITION CORP.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	Name:	 	 
	 	 	 	 	

	 	 	Title:	 	 
	 	 	 	 	

cc:
Citigroup Global Markets Inc. 

EXHIBIT B  

[Letterhead
of Company] 

[Insert
date] 

Continental
Stock Transfer & Trust Company

17 Battery Place

New York, New York 10004

Attn: Steven Nelson and Frank DiPaolo 

	Re:
	Trust
Account No.                        Termination Letter 

Gentlemen:

        Pursuant
to paragraph 1(i) of the Investment Management Trust Agreement between Prospect Acquisition Corp. ("Company") and
Continental Stock Transfer & Trust Company ("Trustee"), dated as
of                        , 2007 ("Trust
Agreement"), this is to advise you that the Company has been unable to effect a Business Combination with a Target Company within the time frame specified in the Company's
Certificate of Incorporation, as described in the Company's prospectus relating to its IPO. 

        In
accordance with the terms of the Trust Agreement, we hereby authorize you, to commence liquidation of the Trust Account. The Company has
appointed                        to serve as its
paying agent (the "Designated Paying Agent"); accordingly, you will notify the Company and the Designated Paying Agent in writing as to when all of the
funds in the Trust Account will be available for immediate transfer (the "Transfer Date"). The Designated Paying Agent shall thereafter notify you as to
the account or accounts of the Designated Paying Agent that the funds in the Trust Account should be transferred to on the Transfer Date so that the Designated Paying Agent may commence distribution
of such funds in accordance with the Company's instructions. You shall have no obligation to oversee the Designated
Paying Agent's distribution of the funds. Upon the distribution of all the funds in the Trust Account, your obligations under the Trust Agreement shall be terminated. 

	 	 	Very truly yours,
	

 	
 	
PROSPECT ACQUISITION CORP.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	Name:	 	 
	 	 	 	 	

	 	 	Title:	 	 
	 	 	 	 	

cc:
Citigroup Global Markets Inc. 

EXHIBIT C  

[Letterhead
of Company] 

[Insert
date] 

Continental
Stock Transfer & Trust Company

17 Battery Place

New York, New York 10004

Attn: Frank DiPaolo and Cynthia Jordan 

	Re:
	Trust
Account No.            

Gentlemen:

        Pursuant
to paragraph 2(a) of the Investment Management Trust Agreement between Prospect Acquisition Corp. ("Company") and
Continental Stock Transfer & Trust Company ("Trustee"), dated as
of                        , 2007 ("Trust
Agreement"), this is to advise you that the Company hereby requests that you deliver to the Company
$                        of the income earned and collected on the Property as of the
date hereof. The Company needs such funds to pay for the tax obligations as set forth on the attached tax return or tax statement. In accordance with the terms of the Trust Agreement, you are hereby
directed and authorized to transfer (via wire transfer) such funds promptly upon your receipt of this letter to the Company's operating account at: 

[WIRE INSTRUCTION INFORMATION]

	 	 	Very truly yours,
	

 	
 	
PROSPECT ACQUISITION CORP.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	Name:	 	 
	 	 	 	 	

	 	 	Title:	 	 
	 	 	 	 	

EXHIBIT D  

[Letterhead
of Company] 

[Insert
date] 

Continental
Stock Transfer & Trust Company

17 Battery Place

New York, New York 10004

Attn: Frank DiPaolo and Cynthia Jordan 

	Re:
	Trust
Account No. 

Gentlemen:

        Pursuant
to paragraph 2(b) of the Investment Management Trust Agreement between Prospect Acquisition Corp. ("Company") and
Continental Stock Transfer & Trust Company ("Trustee"), dated as
of                        , 2007 ("Trust
Agreement"), this is to advise you that the Company hereby requests that you deliver to the Company
$                        of the income earned and collected on the Property as of the
date hereof, which does not exceed, in the aggregate with all such prior disbursements pursuant to paragraph 2(b), if any, the maximum amount set forth in paragraph 2(b). The Company
needs such funds to cover its expenses relating to investigating and selecting a target business and other working capital requirements. In accordance with the terms of the Trust Agreement, you are
hereby directed and authorized to transfer (via wire transfer) such funds promptly upon your receipt of this letter to the Company's operating account at: 

[WIRE INSTRUCTION INFORMATION]

	 	 	Very truly yours,
	

 	
 	
PROSPECT ACQUISITION CORP.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	Name:	 	 
	 	 	 	 	

	 	 	Title:	 	 
	 	 	 	 	

cc:
Citigroup Global Markets Inc. 

EXHIBIT E  

	AUTHORIZED INDIVIDUAL(S) FOR

TELEPHONE CALL BACK	 	AUTHORIZED TELEPHONE NUMBER(S)
	
Company:	
 	

(203) 363-0885
	

Prospect Acquisition Corp.

695 East Main Street

Stamford, Connecticut 06901

Attn: Chief Financial Officer	
 	

 
	
Trustee:	
 	

(212) 845-3200
	

Continental Stock Transfer & Trust Company

17 Battery Place

New York, New York 10004

Attn: Frank DiPaolo, CFO	
 	

 

QuickLinks

Exhibit 10.8

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