Exhibit 10.1

 

REGISTRATION RIGHTS AGREEMENT

 

This REGISTRATION RIGHTS AGREEMENT is entered into as of [ · ], 2009 by and among PennyMac Mortgage Investment Trust, a Maryland real estate investment trust (the “ Trust ”), Stanford L. Kurland, David A. Spector, BlackRock Holdco II, Inc., a Delaware corporation (“ BlackRock ”), Highfields Capital Investments LLC, a Delaware limited liability company (“ Highfields ”), and Private National Mortgage Acceptance Company, LLC, a Delaware limited liability company (“ PNMAC ”).  For purposes of this Agreement, each of Stanford L. Kurland, David A. Spector, BlackRock, Highfields and PNMAC shall be referred to individually as a “ Purchaser ” and collectively as the “ Purchasers ”).

 

WHEREAS, the Trust and each Purchaser are parties to a Share Purchase Agreement, dated as of July [ · ], 2009 (the “ Share Purchase Agreement ”), pursuant to which concurrently with the Trust’s proposed initial public offering (the “ IPO ”), the Trust agreed to issue in a private placement to each Purchaser and each Purchaser agreed, severally and not jointly, to purchase a number of common shares of beneficial interest, par value $0.01 per share (the “ Common Shares ”), equal to the product of (x) the number of Common Shares sold to the public in the IPO, excluding any Common Shares that may be sold pursuant to the exercise of the overallotment option applicable to the IPO, multiplied by (y) the percentage set forth opposite such Purchaser’s name on Schedule A thereto (the “ Private Placement Common Shares ”); and

 

WHEREAS, the Trust and each Purchaser desire to enter into this Agreement to provide each Purchaser and its permitted transferees with certain registration rights described herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

 

1.         Definitions .  The following capitalized terms used herein have the following meanings:

 

“ Affiliate ” means (i) any Person that directly, or indirectly through one or more intermediaries, controls, is controlled by or is 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 executive officer or general partner, and “control” for these purposes means the direct or indirect power to direct or cause the direction of the management and policies of another Person, whether by operation of law or regulation, through ownership of securities, as trustee or executor or in any other manner.

 

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

 

“ BlackRock ” is defined in the preamble to this Agreement.

 

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

 

“ Business Day ” means any day, other than a Saturday or Sunday or a day on which commercial banks in New York, New York are authorized or required by law to close.

 

 

“ Commission ” means the Securities and Exchange Commission, or any other federal agency then administering the Securities Act or the Exchange Act.

 

“ Common Shares ” is defined in the recitals to this Agreement.

 

“ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time.

 

“ Highfields ” is defined in the preamble to this Agreement.

 

“ Holder ” means (i) each Purchaser in his, her or its capacity as a holder of record of Registrable Securities, as reflected on Schedule 1 hereto, and (ii) any direct or indirect transferee of such Registrable Securities from such Purchaser.  For purposes of this Agreement, the Trust may deem and treat the registered holder of Registrable Securities as the Holder and absolute owner thereof, unless notified to the contrary in writing by the registered Holder thereof .

 

“ Indemnified Party ” is defined in Section 5.3 .

 

“ Indemnifying Party ” is defined in Section 5.3 .

 

“ Inspectors ” is defined in Section 4.1.8 .

 

“ IPO ” is defined in the recitals to this Agreement.

 

“ Losses ” is defined in Section 5.1 .

 

“ Majority-in-Interest ” means holders of more than 50% of the Registrable Securities.

 

“ Maximum Threshold ” is defined in Section 2.1.2 .

 

“ Person ” means an individual or a real estate investment trust, corporation, limited liability company, partnership, joint venture, trust, unincorporated organization, association (including any group, organization, co-tenancy, plan, board, council or committee), government (including a country, state, county, or any other governmental or political subdivision, agency or instrumentality thereof) or other entity (or series thereof).

 

“ Piggy-Back Registration ” is defined in Section 2.3.1 .

 

“ PNMAC ” is defined in the preamble to this Agreement.

 

“ Private Placement Common Shares ” is defined in the recitals to this Agreement.

 

“ Pro Rata Adjusted ” is defined in Section 2.1.2 .

 

“ Prospectus ” means the prospectus or prospectuses included in any Registration Statement (including without limitation, any “free writing prospectus” (as defined in Rule 405 under the Securities Act) and any prospectus subject to completion and a prospectus that includes any information previously omitted from a prospectus filed as part of an effective registration

 

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statement in reliance upon Rule 430A promulgated under the Securities Act and any term sheet filed pursuant to Rule 434 under the Securities Act), as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including post-effective amendments and all material incorporated by reference or deemed to be incorporated by reference in such prospectus or prospectuses.

 

“ Purchaser ” and “ Purchasers ” are defined in the preamble to this Agreement.

 

“ Records ” is defined in Section 4.1.8 .

 

“ Registration ” mean a registration effected by preparing and filing a registration statement or similar document in compliance with the requirements of the Securities Act, and such registration statement becoming effective.

 

“ Registrable Securities ” means at any time the Private Placement Common Shares (with the initial amount of Private Placement Common Shares held by each Holder set forth opposite such Holder’s name on Schedule 1 hereto), together with any class of shares of beneficial interest of the Trust or a successor to the entire business of the Trust which may be issued in exchange for such Private Placement Common Shares or with respect to any dividend on such Private Placement Common Shares.  As to any particular Registrable Securities, such securities shall cease to be Registrable Securities on the earliest to occur of:  (a) the date on which a Registration Statement with respect to the sale of such securities shall have become effective under the Securities Act and such securities shall have been sold, transferred, disposed of or exchanged in accordance with such Registration Statement; (b) the date on which such securities shall have ceased to be outstanding; and (c) the date on which the Registrable Securities have been sold and all transfer restrictions and restrictive legends with respect to such Registrable Securities are removed upon the consummation of such sale and the seller and purchaser of such Registrable Securities receive an opinion of counsel for the Trust, which shall be in form and content reasonably satisfactory to the seller and purchaser and their respective counsel, to the effect that such Registrable Securities in the hands of the purchaser are freely transferable without restriction or registration under the Securities Act in any public or private transaction.

 

“ Registration Statement ” means any registration statement filed by the Trust with the Commission in compliance with the Securities Act (including the Resale Shelf Registration Statement or any Registration Statement filed in connection with a Piggy-Back Registration) for a public offering and sale of Common Shares or other securities of the Trust, including the Prospectus, amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all materials incorporated by reference or deemed to be incorporated by reference in such Registration Statement (other than a registration statement (a) on Form S-4 or Form S-8, or their successors, (b) covering only securities proposed to be issued in exchange for securities or assets of another entity, (c) for an exchange offer or offering of securities solely to the Trust’s existing shareholders, (d) for an offering of debt that is convertible into equity securities of the Trust or (e) for a dividend reinvestment plan).

 

“ Resale Shelf Registration ” is defined in Section 2.1.1 .

 

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“ Resale Shelf Registration Statement ” is defined in Section 2.1.1 .

 

“ Securities Act ” means the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder, all as the same shall be in effect at the time.

 

“ Share Purchase Agreement ” is defined in the recitals to this Agreement.

 

“ Trust ” is defined in the preamble to this Agreement.

 

“ underwritten offering ” means a Registration in which securities of the Trust are sold to one or more underwriters for reoffering to the public.

 

2.         Registration Rights .

 

2.1.           Shelf Registration .

 

2.1.1          Shelf Registration Requirement .  The Trust shall prepare and file, at its own expense, not later than the 30 th  day prior to the expiration of the lockup period described in the Share Purchase Agreement, a “shelf” registration statement with respect to the resale of all Registrable Securities (“ Resale Shelf Registration ”) by the Holders on an appropriate form for an offering to be made on a delayed or continuous basis pursuant to Rule 415 under the Securities Act or any successor thereof (the “ Resale Shelf Registration Statement ”) and permitting registration of such Registrable Securities for resale by such Holders in accordance with the methods of distribution elected by the Holders pursuant to the questionnaire referred to in Section 2.1.3 below and set forth in the Resale Shelf Registration Statement. The Trust may include in such registration additional securities of the class of Registrable Securities to be registered thereunder, including securities to be sold for the Trust’s own account or the account of Persons who are not Holders of Registrable Securities.   The Trust shall use its reasonable best efforts to cause the Resale Shelf Registration Statement to be declared effective by the Commission within 150 days after the filing thereof (if it is not an automatic shelf registration statement) , and, subject to Section 2.2 , to keep such Resale Shelf Registration Statement continuously effective for a period ending when all Private Placement Common Shares covered by the Resale Shelf Registration Statement are no longer Registrable Securities, including, if necessary, by filing with the SEC a post-effective amendment or a supplement to the Resale Registration Statement or the related Prospectus or any document incorporated therein by reference or by filing any other required document or otherwise supplementing or amending the Resale Registration Statement, if required by the rules, regulations or instructions applicable to the registration form used by the Trust for such Resale Registration Statement or by the Securities Act, the Exchange Act, any state securities or blue sky laws or any rules and regulations thereunder.

 

2.1.2          Underwritten Offering; Reduction of Offering .  Each Holder of the Registrable Securities shall have the right to request that an underwritten offering be effected off the Resale Shelf Registration at any time, subject to Section 2.2 .  All Holders proposing to participate in such underwriting shall (i) enter into an underwriting agreement in customary form with the underwriter(s) selected for such underwriting by a Majority-in-Interest of the Registrable Securities included in such offering, which underwriter(s) shall be reasonably

 

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acceptable to the Trust and (ii) complete and execute all questionnaires, powers-of-attorney, indemnities, opinions and other documents required under the terms of such underwriting agreement.  Notwithstanding the foregoing, in no event shall the Trust be obligated to effect more than two (2) underwritten offerings hereunder in any single six-month period.  If the managing underwriter(s) for an underwritten offering advises the Trust and the Holders in writing that the dollar amount or number of Registrable Securities which the Holders desire to sell, taken together with all other Common Shares or other securities which the Trust desires to sell and the Common Shares or other securities, if any, as to which registration has been requested pursuant to written contractual piggy-back registration rights held by other shareholders of the Trust who desire to sell or otherwise, exceeds the maximum dollar amount or maximum number of securities that can be sold in such offering without adversely affecting the proposed offering price, the timing, the distribution method, or the probability of success of such offering (such maximum dollar amount or maximum number of securities, as applicable, the “ Maximum Threshold ”), then the Trust shall include in such registration:  (a)  first , the Registrable Securities ( pro rata in accordance with the number of Registrable Securities which such Holders have requested be included in such underwritten offering, regardless of the number of Registrable Securities or other securities held by each such Person (such proportion is referred to herein as “ Pro Rata Adjusted ”)) that can be sold without exceeding the Maximum Threshold; (b)  second , to the extent that the Maximum Threshold has not been reached under the foregoing clause (a), the Common Shares or other securities that the Trust desires to sell that can be sold without exceeding the Maximum Threshold; (c)  third , to the extent that the Maximum Threshold has not been reached under the foregoing clauses (a) and (b), the Common Shares or other securities for the account of other Persons that the Trust is obligated to register pursuant to written contractual arrangements with such Persons and that can be sold without exceeding the Maximum Threshold; and (d)  fourth , to the extent that the Maximum Threshold has not been reached under the foregoing clauses (a), (b) and (c), the Common Shares that other shareholders desire to sell that can be sold without exceeding the Maximum Threshold to the extent that the Trust, in its sole discretion, wishes to permit such sales pursuant to this clause (d).

 

A request for an underwritten offering may be withdrawn by a Majority-in-Interest of the Registrable Shares included in such offering prior to the consummation thereof, and, in such event, such withdrawal shall not be treated as a request for an underwritten offering which shall have been effected pursuant to the immediately preceding paragraph.

 

2.1.3          Inclusion in Resale Shelf Registration .  The Trust shall give written notice to all Holders at least 20 Business Days prior to the anticipated filing date of the Resale Shelf Registration Statement, which notice shall include a questionnaire seeking information from the Holders deemed necessary or advisable by the Trust or its counsel in order to file the Resale Shelf Registration Statement. At the time the Resale Shelf Registration Statement is declared effective (or becomes effective, if the Registration Statement is an automatic shelf registration statement) , each Holder that has delivered to the Trust a duly completed and executed questionnaire on or prior to the date which is ten Business Days prior to such time of effectiveness shall be named as a selling shareholder in the Resale Shelf Registration Statement and the related Prospectus in such a manner as to permit such Holder to deliver such Prospectus to purchasers of Registrable Securities in accordance with applicable law. Subject to the terms and conditions hereof, after effectiveness of the Resale Shelf Registration Statement, the Trust shall file a supplement to such Prospectus or amendment to the Resale Shelf Registration

 

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Statement upon request of any Holder as necessary to name as selling shareholders therein any Holders that provide to the Trust duly completed and executed questionnaires and shall use commercially reasonable efforts to cause any post-effective amendment to such Resale Shelf Registration Statement filed for such purpose to be declared effective (if it is not an automatic shelf registration statement) by the Commission as promptly as reasonably practicable after the filing thereof.

 

2.1.4          Continued Effectiveness .  The Trust shall prepare and file such additional Registration Statements as necessary every three years (or such other period of time as may be required to maintain continuously effective shelf registration statements) and use its reasonable best efforts to cause such Registration Statements to be declared effective by the Commission (if it is not an automatic shelf registration statement) so that a shelf registration statement remains continuously effective, subject to Section 2.2 , with respect to resales of Registrable Securities as and for the periods required under Section 2.1.1 , each such subsequent Registration Statement to constitute a Resale Shelf Registration Statement hereunder.

 

2.2.           Suspension of Use of Registration Statement .

 

2.2.1          Upon prior written notice to the Holders, the Trust may suspend the use of a Resale Shelf Registration Statement pursuant to Section 2.1 on up to two occasions during any period of twelve consecutive months for a reasonable time specified in the notice but not exceeding 90 days in the aggregate during any such twelve month period (which period may not be extended or renewed), if (i) the Board determines in good faith that permitting sales under the Registration Statement would materially and adversely affect an offering of securities of the Trust; (ii) a Piggy-Back Registration (defined below) in which Holders were able to participate was completed within the prior 90 days; or (iii) the Trust is in possession of material non-public information and the Board determines in good faith that the disclosure of such information during the period specified in such notice would not be in the best interests of the Trust.

 

2.2.2          If all reports required to be filed by the Trust pursuant to the Exchange Act have not been filed by the required date taking into account any permissible extension, upon written notice thereof by the Trust to the Holders, the rights of the Holders to offer, sell or distribute any Registrable Securities pursuant to any Registration Statement or to require the Trust to take action with respect to the registration or sale of any Registrable Securities pursuant to any Registration Statement shall be suspended until the date on which the Trust has filed such reports, and the Trust shall notify the Holders in writing as promptly as practicable when such suspension is no longer required.

 

2.3.           Piggy-Back Registration .

 

2.3.1          Piggy-Back Rights .  At any time after [ · ], 2012 (the third anniversary of the closing of the transactions under the Share Purchase Agreement), if the Trust proposes to file a Registration Statement under the Securities Act with respect to an offering of equity securities by the Trust for its own account or for shareholders of the Trust for their account and the registration form to be used may be used for any registration of Registrable Securities or if the Trust proposes to conduct an offering at any time after [ · ], 2012 using any such Registration Statement filed prior to [ · ], 2012 for its own account or for shareholders of the Trust, then the

 

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Trust shall (a) give written notice of such proposed filing and/or offering to the Holders of Registrable Securities as soon as practicable but in no event less than ten Business Days before the anticipated filing date, which notice shall describe the amount and type of securities to be included in such offering, the intended method(s) of distribution, and the name of the proposed managing underwriter(s), if any, of the offering, and (b) offer to the Holders of Registrable Securities in such notice the opportunity to register the sale of such number of Registrable Securities as such Holders may request in writing within five Business Days following receipt of such notice (a “ Piggy-Back Registration ”).  If at any time after giving written notice of its intention to register any securities and prior to the effective date of the Registration Statement filed in connection with such registration, the Trust shall determine for any reason not to register or to delay registration of such securities, the Trust may, at its election, give written notice of such determination to each Holder of Registrable Securities and, (x) in the case of a determination not to register, shall be relieved of its obligation to register any Registrable Securities in connection with such registration, and (y) in the case of a determination to delay registering, shall be permitted to delay registering any Registrable Securities for the same period as the delay in registering such other securities.  The Trust shall cause such Registrable Securities to be included in such registration and shall use its reasonable best efforts to cause the managing underwriter(s) of a proposed underwritten offering to permit the Registrable Securities requested to be included in a Piggy-Back Registration on the same terms and conditions as any similar securities of the Trust and to permit the sale or other disposition of such Registrable Securities in accordance with the intended method(s) of distribution thereof.  All Holders of Registrable Securities proposing to distribute their securities through a Piggy-Back Registration that involves an underwriter(s) shall enter into an underwriting agreement in reasonable and customary form with the underwriter(s) selected for such Piggy-Back Registration and (ii) complete and execute all questionnaires, powers-of-attorney, indemnities, opinions and other documents reasonably required under the terms of such underwriting agreement.  No registration effected under this Section 2.3 shall relieve the Trust of its obligations to effect a Resale Shelf Registration required by Section 2.1 .

 

2.3.2          Reduction of Offering .  If the managing underwriter(s) for a Piggy-Back Registration that is to be an underwritten offering advises the Trust and the Holders of Registrable Securities that in their opinion the dollar amount or number of Common Shares or other securities which the Trust desires to sell, taken together with Common Shares or other securities, if any, as to which registration has been demanded pursuant to written contractual arrangements with third parties, the Registrable Securities as to which registration has been requested under this Section 2.3 , and the Common Shares or other securities, if any, as to which registration has been requested pursuant to the written contractual piggy-back registration rights of other shareholders of the Trust, exceeds the Maximum Threshold, then the Trust shall include in any such registration:

 

(a)                If the registration is undertaken for the Trust’s account:  (i)  first , the Common Shares or other securities that the Trust desires to sell that can be sold without exceeding the Maximum Threshold; (ii)  second , to the extent that the Maximum Threshold has not been reached under the foregoing clause (i), the Common Shares or other securities, if any, comprised of Registrable Securities as to which registration has been requested pursuant to the terms hereof, Pro Rata Adjusted, that can be sold without exceeding the Maximum Threshold; and (iii)  third , to the extent that the Maximum Threshold has not been reached under the

 

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foregoing clauses (i) and (ii), the Common Shares or other securities for the account of other Persons that the Trust is obligated to register pursuant to written contractual piggy-back registration rights with such Persons and that can be sold without exceeding the Maximum Threshold; and

 

(b)                If the registration is a “ demand ” registration undertaken at the demand of one or more parties other than the Trust, (i)  first , the Common Shares or other securities for the account of such demanding parties that can be sold without exceeding the Maximum Threshold; (ii)  second , to the extent that the Maximum Threshold has not been reached under the foregoing clause (i), the Common Shares or other securities that the Trust desires to sell that can be sold without exceeding the Maximum Threshold; (iii)  third , to the extent that the Maximum Threshold has not been reached under the foregoing clauses (i) and (ii), the Common Shares or other securities, if any, comprised of Registrable Securities as to which registration has been requested pursuant to the terms hereof, Pro Rata Adjusted, that can be sold without exceeding the Maximum Threshold; and (iv)  fourth , to the extent that the Maximum Threshold has not been reached under the foregoing clauses (i), (ii) and (iii), the Common Shares or other securities, if any, for the account of other Persons that the Trust is obligated to register pursuant to written contractual piggy-back registration rights with such Persons that can be sold without exceeding the Maximum Threshold.

 

2.3.3          Withdrawal .  Any Holder of Registrable Securities may elect to withdraw such Holder’s request for inclusion of Registrable Securities in any Piggy-Back Registration by giving written notice to the Trust of such request to withdraw prior to the effectiveness of the Registration Statement or filing of a Prospectus naming such Holder as a selling shareholder, as applicable.  The Trust (whether on its own determination or as the result of a withdrawal by Persons making a demand pursuant to written contractual obligations) may withdraw a Registration Statement at any time prior to the effectiveness of the Registration Statement without thereby incurring any liability to the Holders of Registrable Securities.  Notwithstanding any such withdrawal, the Trust shall pay all expenses incurred by the Holders of Registrable Securities in connection with such Piggy-Back Registration as provided in Section 4.3 .

 

3.         Restrictions on Public Sale by the Trust .

 

If requested by the lead underwriter(s) in any underwritten offering, the Trust agrees not to effect any public sale or distribution (other than, in the case of the Trust, in connection with (a) any merger, acquisition or similar transaction that involves the public offering of securities, (b) public sales or distributions solely by and for the account of the Trust of securities issued pursuant to any employee benefit or similar plan, including employee stock and stock option plans or, (c) any dividend reinvestment plan), of any securities during the period commencing on the date the Trust receives a request for an underwritten offering from any Holder and continuing until 90 days after the commencement of an underwritten offering (or for such shorter period as the lead underwriter(s) shall request) unless earlier terminated by the lead underwriter(s) in such underwritten offering.

 

4.         Registration Procedures .

 

4.1.           Filings .  In connection with the filing of any Registration Statement as provided in

 

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this Agreement, the paragraphs below shall be applicable:

 

4.1.1          Filing Registration Statement .  The Trust shall (a) as expeditiously as reasonably possible prepare and file with the Commission a Registration Statement on any form for which the Trust then qualifies or which counsel for the Trust shall deem appropriate and which form shall be available for the sale of all Registrable Securities to be registered thereunder in accordance with the intended method(s) of distribution thereof, which shall comply as to form with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith, (b) use its reasonable best efforts to cause such Registration Statement to be declared (if it is not an automatic shelf registration statement) and remain effective for the period required by Section 4.1.3 , (c) not take any action that would cause a Registration Statement to contain a material misstatement or omission or to be not effective and usable for resale of Registrable Securities during the period that such Registration Statement is required to be effective and usable, (d) use its reasonable best efforts to cause each Registration Statement and the related Prospectus and any amendment or supplement thereto, as of the effective date of such Registration Statement, amendment or supplement to comply in all material respects with any requirements of the Securities Act and the rules and regulations of the SEC and (e) cause such Registration Statement and the related Prospectus and any amendment or supplement thereto not to contain any untrue statement of a material fact required to be stated therein or necessary to make the statements therein not misleading during the period that such Registration Statement is required to be effective and usable.

 

4.1.2          Copies .  The Trust shall, upon request, prior to filing a Registration Statement or Prospectus in respect of Registrable Securities, or any amendment or supplement thereto, furnish without charge to the Holders of Registrable Securities included in such registration, any underwriter and such Holders’ or underwriter’s legal counsel, copies of such Registration Statement as proposed to be filed, each amendment and supplement to such Registration Statement (in each case including all exhibits thereto and documents incorporated by reference therein), the Prospectus included in such Registration Statement (including each preliminary Prospectus) and such other documents as the Holders of Registrable Securities included in such Registration, underwriter or legal counsel for any such Holders or underwriter may reasonably request.  Following the filing of such Registration Statement, the Trust shall furnish to the Holders of Registrable Securities included in such registration (in each case in an electronic format, unless otherwise required by applicable law), without charge, such number of copies of such Registration Statement, each amendment and supplement thereto (in each case including all exhibits thereto and documents incorporated by reference therein), the Prospectus included in such Registration Statement (including each preliminary Prospectus) and such other documents as the Holders of Registrable Securities included in such Registration, underwriter or legal counsel for any such Holders or underwriter may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Holders.  Each Holder of Registrable Securities included in the Registration Statement shall have the right to request in writing that the Trust modify any information contained in such Registration Statement, amendment and supplement thereto pertaining solely to such Holder or which such counsel to Holder may reasonably request in order to ensure that the Registration Statement complies with the Securities Act and the rules and regulations promulgated thereunder and the Trust shall use its reasonable best efforts to comply with such request; provided, however , that the Trust shall not have any obligation to so modify any information if the Trust reasonably expects that so doing would

 

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cause the Prospectus to contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading.

 

4.1.3          Amendments and Supplements .  The Trust shall prepare and file with the Commission such amendments, including post-effective amendments, and supplements to such Registration Statement and the Prospectus used in connection therewith as may be necessary to keep such Registration Statement effective and in compliance with the provisions of the Securities Act until all Registrable Securities and other securities covered by such Registration Statement have been disposed of in accordance with the intended method(s) of distribution set forth in such Registration Statement or such securities have been withdrawn.

 

4.1.4          Notification .  After the filing of a Registration Statement, the Trust shall promptly, and in no event more than three Business Days after such filing, notify the Holders of Registrable Securities included in such Registration Statement of such filing, and shall further promptly notify such Holders of the occurrence, and in no event more than three Business Days after such occurrence of any of the following and, if requested by any Holder, confirm such advice in writing:  (a) when such Registration Statement becomes effective; (b) when any post-effective amendment to such Registration Statement becomes effective; (c) the issuance by the Commission of any stop order (and the Trust shall take all reasonable actions required to prevent the entry of such stop order or to remove it if entered); and (d) any request by the Commission for any amendment or supplement to such Registration Statement or any Prospectus relating thereto or for additional information or of the occurrence of an event requiring the preparation of a supplement or amendment to such Prospectus so that, as thereafter delivered to the purchasers of the securities covered by such Registration Statement, such Prospectus will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and promptly make available to the Holders of Registrable Securities included in such Registration Statement any such supplement or amendment; except that before filing with the Commission a Registration Statement or Prospectus or any amendment or supplement thereto, including documents incorporated by reference, the Trust shall furnish to the Holders of Registrable Securities included in such Registration Statement and to the legal counsel for any such Holders, copies of all such documents proposed to be filed sufficiently in advance of filing to provide such Holders and legal counsel with a reasonable opportunity to review such documents and comment thereon, and the Trust shall not file any Registration Statement or Prospectus or amendment or supplement thereto, including documents incorporated by reference, to which such Holders or their legal counsel shall reasonably object.  The Trust shall use its reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness or qualification of a Registration Statement or suspending or preventing the use of any related Prospectus at the earliest possible time.

 

4.1.5          State Securities Laws Compliance .  The Trust shall use its reasonable best efforts to (a) register or qualify the Registrable Securities covered by the Registration Statement under such securities or “blue sky” laws of such jurisdictions in the United States as the Holders of Registrable Securities included in such Registration Statement (in light of their intended plan of distribution) may reasonably request and (b) take such action as reasonably necessary to cause such Registrable Securities covered by the Registration Statement to be registered with or

 

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approved by such other governmental authorities as may be necessary by virtue of the business and operations of the Trust and do any and all other acts and things that may be necessary or advisable to enable the Holders of Registrable Securities included in such Registration Statement to consummate the disposition of such Registrable Securities in such jurisdictions; provided, however , that the Trust shall not be required to qualify generally to do business in any jurisdiction where it would not otherwise be required to qualify but for this paragraph, consent to general service of process in any such jurisdiction or subject itself to taxation in any such jurisdiction.

 

4.1.6          Agreements for Disposition .  The Trust shall enter into customary agreements (including, if applicable, an underwriting agreement in customary form) and take such other actions as are reasonably required in order to expedite or facilitate the disposition of such Registrable Securities.  Such Holders of Registrable Securities shall agree to such representations, warranties, covenants and indemnification and contribution obligations for selling shareholders as are customarily contained in agreements of that type used by the underwriters.

 

4.1.7          Cooperation .  (a) The chief executive officer of the Trust, the chief financial officer of the Trust and all other officers and members of the management of the Trust, including applicable officers and employees of PNMAC Capital Management, LLC, the external manager of the Trust, shall cooperate fully in any offering of Registrable Securities hereunder, which cooperation shall include, without limitation, the preparation of the Registration Statement with respect to such offering and all other offering materials and related documents, and participation in meetings with underwriters, attorneys, accountants and potential purchasers, including without limitation, participation in any roadshow for an underwritten offering.

 

(b)                The Trust shall, upon request, furnish to the lead underwriter of an underwritten offering of Registrable Securities, if any, without charge, at least one signed copy of each Registration Statement and any post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits; and furnish to each Holder of Registrable Securities, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without documents incorporated therein by reference or exhibits thereto, unless requested) and shall cooperate with the selling Holders of Registrable Securities and the lead underwriter of an underwritten offering of Registrable Securities, if any, to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends; and enable such Registrable Securities to be in such denominations (consistent with the provisions of the governing documents thereof) and registered in such names as the selling Holders or the lead underwriter of an underwritten offering of Registrable Securities, if any, may reasonably request at least three business days prior to any sale of Registrable Securities.

 

4.1.8          Records .  The Trust shall make available for inspection by the Holders of Registrable Securities included in such Registration Statement, any underwriter participating in any disposition pursuant to such Registration Statement and any attorney, accountant or other professional retained by any Holder of Registrable Securities included in such Registration Statement or any underwriter (collectively, the “ Inspectors ”), all financial and other records, pertinent corporate documents and properties of the Trust (collectively, the “ Records ”) as shall

 

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be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Trust’s officers, trustees and employees to supply all information reasonably requested by any of them in connection with such Registration Statement.  Records which the Trust determines, in good faith, to be confidential and which it notifies the Inspectors are confidential shall not be disclosed by the Inspectors unless (i) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in such Registration Statement or (ii) the release of such Records is ordered pursuant to a subpoena or other order from a court of competent jurisdiction.  Each Holder of Registrable Securities included in such Registration Statement agrees that information obtained by it as a result of such inspections shall be deemed confidential and shall not be used by it as the basis for any market transactions in the securities of the Trust unless and until such is made generally available to the public.  Each Holder of Registrable Securities included in such Registration Statement further agrees that it will, upon learning that disclosure of such Records is sought in a court of competent jurisdiction, give notice to the Trust and allow the Trust, at its expense, to undertake appropriate action to prevent disclosure of the Records deemed confidential.

 

4.1.9          Opinions and Comfort Letters .  If an underwritten offering is effected off the Resale Shelf Registration Statement, or if a Registration Statement in respect of Registrable Securities includes an underwritten offering, the Trust shall furnish (a) any opinion of counsel to the Trust delivered to any underwriter and (b) any comfort letter from the Trust’s independent public accountants delivered to any underwriter, each in the form reasonably requested by counsel to such underwriter and shall furnish to each Holder of Registrable Securities included in such Registration Statement a signed counterpart, addressed to such Holder, of any such opinion of counsel or comfort letter.

 

4.1.10        Earnings Statement .  The Trust shall make available to its shareholders, as soon as practicable but not more than 12 months after the effective date of the Registration Statement, an earnings statement satisfying the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder.

 

4.1.11        Listing .  To the extent any Registrable Securities are not then listed on an exchange, the Trust shall use its commercially reasonable efforts to cause all Registrable Securities included in any Registration Statement to be listed on such exchanges or otherwise designated for trading in the same manner as similar securities issued by the Trust are then listed or designated.

 

4.2.           Obligation to Suspend Distribution .  Upon receipt of any notice from the Trust of the happening of any event of the kind described in Section 4.1.4(d) , each Holder of Registrable Securities included in any registration shall immediately discontinue disposition of such Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until such Holder receives the supplemented or amended Prospectus contemplated by Section 4.1.4(d)  and, if so directed by the Trust, each such Holder will destroy all copies, other than permanent file copies then in such Holder’s possession, of the most recent Prospectus covering such Registrable Securities at the time of receipt of such notice.

 

4.3.           Registration Expenses .  The Trust shall pay the following costs and expenses incurred in connection with (a) any Resale Shelf Registration pursuant to Section 2.1 and (b) any

 

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Piggy-Back Registration pursuant to Section 2.3 , and all expenses incurred in performing or complying with its other obligations under this Agreement, whether or not the Registration Statement becomes effective, including, without limitation:  (i) all registration and filing fees; (ii) fees and expenses of compliance with securities or “blue sky” laws (including fees and disbursements of counsel in connection with blue sky qualifications of the Registrable Securities); (iii) printing expenses; (iv) the fees and expenses incurred in connection with the listing of the Registrable Securities as required by Section 4.1.11 ; (v) Financial Industry Regulatory Authority, Inc. fees; (vi) fees and disbursements of counsel for the Trust and fees and expenses for independent public accountants retained by the Trust (including the expenses or costs associated with the delivery of any opinions or comfort letters requested pursuant to Section 4.1.9 ); (vii) the fees and expenses of any special experts retained by the Trust in connection with such Registration; and (viii) the reasonable fees and expenses of one legal counsel selected by the holders of a Majority-in-Interest of the Registrable Securities included in such Registration.  The Trust shall have no obligation to pay any other costs or expenses in the course of the transaction contemplated hereby, including underwriting discounts or selling commissions attributable to the Registrable Securities being sold by the Holders thereof, which underwriting discounts or selling commissions shall be borne by such Holders.

 

The Trust shall have the right to exclude any Holder that does not comply with the preceding sentence from the applicable Registration.

 

The obligation of the Trust to bear the expenses described in this Section 4.3 shall apply irrespective of whether a registration becomes effective, is withdrawn or suspended, is converted to another form of registration and irrespective of when any of the foregoing shall occur.

 

4.4.           Information .  In connection with the filing of any Registration Statement covering Registrable Securities, the Holders of Registrable Securities shall provide such information as may reasonably be requested by the Trust in connection with the preparation of any Registration Statement in order to effect the registration of any Registrable Securities under the Securities Act pursuant to Section 2 and in connection with the Trust’s obligation to comply with federal and applicable state securities laws.  If a Holder fails to provide such information after reasonably requested, the Trust may omit such Holder’s Registrable Securities from such Registration Statement.

 

5.         Indemnification and Contribution .

 

5.1.           Indemnification by the Trust .  The Trust agrees to indemnify and hold harmless to the fullest extent permitted by law each Holder of Registrable Securities, and each of their respective officers, employees, Affiliates, trustees, directors, partners, members, attorneys and agents, and each Person, if any, who controls (within the meaning of Section 15 of the Securities Act or Section 20(a) of the Exchange Act) such Holder of Registrable Securities from and against any expenses, losses, judgments, claims, damages or liabilities (“ Losses ”) arising out of or based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was registered under the Securities Act, Prospectus (including any preliminary Prospectus), or any amendment thereof or supplement thereto, or arising out of or based upon any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein,

 

13

 

in the case of the Prospectus in the light of the circumstances under which they were made, not misleading; provided , however , that the Trust will not be liable in any such case to any Holder to the extent that any such Loss arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in such Registration Statement, Prospectus, or any such amendment thereof or supplement thereto, in reliance upon and in conformity with information furnished to the Trust, in writing, by such Holder expressly for use therein.

 

5.2.           Indemnification by Holders of Registrable Securities .  In connection with any Registration Statement in which a Holder is participating and as a condition to such participation, each Holder of Registrable Securities agrees, severally and not jointly, to indemnify and hold harmless to the fullest extent permitted by law the Trust, and each of its officers, employees, Affiliates, trustees and agents, and each Person who controls the Trust within the meaning of the Securities Act and each underwriter (if any), and each Person, if any, who controls such underwriter within the meaning of the Securities Act, against any Losses, insofar as such Losses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement under which the sale of such Registrable Securities was registered under the Securities Act, Prospectus (including any preliminary Prospectus), or any amendment thereof or supplement thereto, or arise out of or are based upon any omission or alleged omission to state a material fact required to be stated therein or necessary to make the statement therein, in the case of the Prospectus in the light of the circumstances under which they were made, not misleading, if the statement or omission was made in reliance upon and in conformity with information furnished in writing to the Trust by such Holder expressly for use therein.  Each Holder’s indemnification obligations hereunder shall be several and not joint and shall be limited to the amount of gross proceeds actually received by such Holder from sales of Registrable Securities giving rise to such obligations.

 

Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Trust or any Indemnified Party and shall survive the transfer of such securities by any Holder .

 

5.3.           Conduct of Indemnification Proceedings .  Promptly after receipt by any Person of any notice of any Loss or any action in respect of which indemnity may be sought pursuant to Section 5.1 or 5 .2 , such Person (the “ Indemnified Party ”) shall, if a claim in respect thereof is to be made against any other Person for indemnification hereunder, notify such other Person (the “ Indemnifying Party ”) in writing of the Loss or action; provided , however , that the failure by the Indemnified Party to notify the Indemnifying Party shall not relieve the Indemnifying Party from any liability which the Indemnifying Party may have to such Indemnified Party hereunder, except and solely to the extent the Indemnifying Party is actually and materially prejudiced by such failure.  If the Indemnified Party is seeking indemnification with respect to any claim or action brought against the Indemnified Party, then the Indemnifying Party shall be entitled to participate in such claim or action, and, to the extent that it wishes, jointly with all other Indemnifying Parties, to assume control of the defense thereof with counsel reasonably satisfactory to the Indemnified Party.  After notice from the Indemnifying Party to the Indemnified Party of its election to assume control of the defense of such claim or action, the Indemnifying Party shall not be liable to the Indemnified Party for any legal or other expenses subsequently incurred by the Indemnified Party in connection with the defense thereof other than

 

14

 

reasonable costs of investigation; provided , however , that in any action in which both the Indemnified Party and the Indemnifying Party are named as defendants or if such Indemnified Party or parties determines in good faith that a conflict of interest exists and that therefore it is advisable for such Indemnified Party or parties to be represented by separate counsel or that, upon advice of counsel, there may be legal defenses available to it or them which are different from or in addition to those available to the Indemnifying Party, then the Indemnifying Party or parties shall not be entitled to assume such defense and the Indemnified Party or parties shall be entitled to separate counsel at the Indemnifying Party’s or parties’ expense.  If an Indemnifying Party or parties is not so entitled to assume the defense of such action or does not assume such defense, after having received the notice referred to in the first sentence of this paragraph, the Indemnifying Party or parties will pay the reasonable fees and expenses of counsel for the Indemnified Party or parties (limited in each jurisdiction to one counsel for all underwriters and another counsel for all other Indemnified Parties under this Agreement).  The Indemnified Party shall have the right to employ separate counsel (but no more than one such separate counsel, which firm shall be designated in writing by those Indemnified Parties who sold a majority of the Registrable Shares sold by all such Indemnified Parties) to represent the Indemnified Party or parties and their respective controlling Persons who may be subject to liability arising out of any claim in respect of which indemnity may be sought by the Indemnified Party or parties against the Indemnifying Party or parties, with the fees and expenses of such counsel to be paid by such Indemnifying Party.  No Indemnifying Party shall, without the prior written consent of any Indemnified Party or parties, consent to entry of judgment or effect any settlement of any claim or pending or threatened proceeding in respect of which the Indemnified Party or parties are or could have been a party and indemnity could have been sought hereunder by such Indemnified Party, unless such judgment or settlement includes an unconditional release of such Indemnified Party from all liability arising out of such claim or proceeding and does not include any statement of admission of fault, culpability or failure to act by or on behalf of such Indemnified Party.

 

5.4.           Contribution .

 

5.4.1          If the indemnification provided for in this Section 5 is unavailable to any Indemnified Party or insufficient to hold it harmless in respect of any Loss referred to herein, then each such Indemnifying Party, in lieu of indemnifying such Indemnified Party or parties, shall contribute to the amount paid or payable by such Indemnified Party or parties as a result of such Loss in such proportion as is appropriate to reflect the relative fault of the Indemnified Parties and the Indemnifying Parties in connection with the actions or omissions which resulted in such Loss, as well as any other relevant equitable considerations.  The relative fault of any Indemnified Party and any Indemnifying Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such Indemnified Party or such Indemnifying Party and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission.

 

5.4.2          The parties agree that it would not be just and equitable if contribution pursuant to this Section 5.4 were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding Section 5.4.1 .

 

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5.4.3          The amount paid or payable by an Indemnifying Party as a result of any Loss shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this Section 5.4 , no Holder of Registrable Securities shall be required to contribute any amount in excess of the dollar amount by which the gross proceeds actually received by such Holder from the sale of Registrable Securities exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation.

 

5.4.4          The indemnity and contribution agreements contained in this Section 5 are in addition to any liability which the Indemnifying Parties may otherwise have to the Indemnified Parties hereunder, under applicable law or at equity.

 

6.         Underwriting and Distribution .

 

6.1.           Rule 144 .  At such times as the Trust is obligated to file reports in compliance with either Section 13 or 15(d) of the Exchange Act, the Trust covenants that it shall file any reports required to be filed by it under the Securities Act or the Exchange Act and shall take such further action as the Holders of Registrable Securities may reasonably request, all to the extent required from time to time to enable such Holders to sell Registrable Securities (subject to any contractual obligation of such Holders to the contrary) without registration under the Securities Act within the limitation of the exemptions provided by Rule 144 under the Securities Act, as such Rules may be amended from time to time, or any similar Rule or regulation hereafter adopted by the Commission.  Upon the request of any Holder, the Trust will deliver to such Holder a written statement as to whether it has complied with such requirements.

 

7.         Miscellaneous .

 

7.1.           Assignment; No Third Party Beneficiaries .  This Agreement and the rights, duties and obligations of the Trust hereunder may not be assigned or delegated by the Trust in whole or in part.  This Agreement and the rights, duties and obligations of the Holders of Registrable Securities hereunder may be freely assigned or delegated by such Holder of Registrable Securities in conjunction with and to the extent of any transfer of Registrable Securities held by any such Holder (subject to any contractual obligation of such Holders to the contrary).  This Agreement and the provisions hereof shall be binding upon and shall inure to the benefit of each of the parties hereto and their respective permitted successors and assigns; provided , however , that no such transfer or assignment shall be binding upon or obligate the Trust to any such assignee unless and until the Trust shall have received written notice of such transfer or assignment as herein provided and a written agreement of the assignee to be bound by the provisions of this Agreement.  This Agreement is not intended to confer any rights or benefits on any Persons that are not party hereto other than as expressly set forth in Article 5 and this Section 7.1 .

 

7.2.           Notices . All notices, demands, requests, consents, approvals or other

 

16

 

communications required or permitted to be given hereunder or which are given with respect to this Agreement shall be in writing and shall be personally served, delivered by reputable overnight courier service with charges prepaid, or transmitted by hand delivery, telex or facsimile, addressed as set forth below, or to such other address as such party shall have specified most recently by written notice.  Notice shall be deemed given on the date of service or transmission if personally served or transmitted by telex or facsimile; provided , however , that if such service or transmission is not on a Business Day or is after normal business hours, then such notice shall be deemed given on the next Business Day.  Notice otherwise sent as provided herein shall be deemed given on the next Business Day following timely delivery of such notice to a reputable overnight courier service with an order for next-day delivery.

 

To the Trust:

 

PennyMac Mortgage Investment Trust

27001 Agoura Road, Third Floor

Calabasas, California 91301

Facsimile:  (818) 337-2138

Attention:   Chief Legal Officer

 

with a copy (which shall not constitute notice) to:

 

Sidley Austin LLP

787 Seventh Avenue

New York, New York 10019

Facsimile:  (212) 839-5599

Attention:   Edward J. Fine

J. Gerard Cummins

 

To a Holder, at the address set forth under such Holder’s name on Schedule 1 hereto.

 

7.3.           Severability .  This Agreement shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Agreement or of any other term or provision hereof.  Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Agreement a provision as similar in terms to such invalid or unenforceable provision as may be possible that is valid and enforceable.

 

7.4.           Counterparts .  This Agreement may be executed by facsimile and in multiple counterparts, and all of which taken together shall constitute one and the same instrument.

 

7.5.           Entire Agreement .  This Agreement (including all agreements entered into pursuant hereto and all certificates and instruments delivered pursuant hereto and thereto) constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, representations, understandings, negotiations and discussions among the parties, whether oral or written.

 

7.6.           Modifications and Amendments .  The provisions of this Agreement, including the

 

17

 

provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Trust has obtained the written consent of a Majority-In-Interest of Registrable Securities outstanding at such time.

 

7.7.           Titles and Headings .  Titles and headings of sections of this Agreement are for convenience only and shall not affect the construction of any provision of this Agreement.

 

7.8.           Waivers and Extensions .  Any party to this Agreement may waive any right, breach or default which such party has the right to waive, provided , that such waiver will not be effective against the waiving party unless it is in writing, is signed by such party, and specifically refers to this Agreement.  Waivers may be made in advance or after the right waived has arisen or the breach or default waived has occurred.  Any waiver may be conditional.  No waiver of any breach of any agreement or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof nor of any other agreement or provision herein contained.  No waiver or extension of time for performance of any obligations or acts shall be deemed a waiver or extension of the time for performance of any other obligations or acts.

 

7.9.           Remedies Cumulative .  In the event that the Trust fails to observe or perform any covenant or agreement to be observed or performed under this Agreement, each Holder of Registrable Securities may proceed to protect and enforce its rights by suit in equity or action at law, whether for specific performance of any term contained in this Agreement or for an injunction against the breach of any such term or in aid of the exercise of any power granted in this Agreement or to enforce any other legal or equitable right, or to take any one or more of such actions, without being required to post a bond.  None of the rights, powers or remedies conferred under this Agreement shall be mutually exclusive, and each such right, power or remedy shall be cumulative and in addition to any other right, power or remedy, whether conferred by this Agreement or now or hereafter available at law, in equity, by statute or otherwise.

 

7.10.         Waiver of Trial by Jury .  EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO A TRIAL BY JURY IN ANY ACTION, SUIT, COUNTERCLAIM OR OTHER PROCEEDING (WHETHER BASED ON CONTRACT, TORT OR OTHERWISE) ARISING OUT OF, CONNECTED WITH OR RELATING TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY, OR THE ACTIONS OF ANY HOLDER IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE OR ENFORCEMENT HEREOF.

 

7.11.         Governing Law; Jurisdiction .  This Agreement shall for all purposes be deemed to be made under and shall be construed in accordance with the laws of the State of New York.  Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby may be brought in any federal or state court located in the State of New York, and each of the parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum.  Process in any

 

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such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 7.2 shall be deemed effective service of process on such party.

 

7.12.         Other Registration Rights .  Should the Trust grant any new registration rights to any other Person, or amend or modify the registration rights of any Person in such a way to make such registration rights more favorable to one Person than to another Person, the registration rights granted under this Agreement shall be automatically amended so as to be not less favorable to any Holder than those granted to such other Person; provided, however, that this provision shall under no circumstances require the registration of any Registrable Securities prior to the time contemplated by this Agreement.

 

7.13.         Specific Performance .  The parties hereto acknowledge that there would be no adequate remedy at law if any party fails to perform in any material respect any of its obligations hereunder, and accordingly agree that each party, in addition to any other remedy to which it may be entitled at law or in equity, shall be entitled to compel specific performance of the obligations of any other party under this Agreement in accordance with the terms and conditions of this Agreement in any court of the United States or any State thereof having jurisdiction.

 

7.14.         Expenses .  Except as otherwise provided for herein or otherwise agreed to in writing by the parties, all costs and expenses incurred in connection with the preparation of this Agreement shall be paid by the Trust.

 

7.15.         Holdback Agreement .  In connection with an underwritten primary or secondary offering to the public, each Holder of Registrable Securities agrees, subject to any exceptions that may be agreed upon at the time of such offering, not to sell or otherwise transfer or dispose of any Registrable Securities (or other securities) of the Trust held by them (other than Registrable Securities included in such offering in accordance with the terms hereof) for a period equal to the lesser of 45 days following the effective date of a Registration Statement of the Trust filed under the Securities Act or such shorter period as the managing underwriter(s) shall agree to; provided , that such Holder owns more than 10% of the outstanding Common Shares of the Trust and all other shareholders who own more than 10% of the outstanding Common Shares of the Trust and all officers and trustees of the Trust enter into similar agreements.  Such agreement shall be in writing in form reasonably satisfactory to the Trust and the managing underwriter.  The Trust may impose stop-transfer instructions with respect to the Registrable Securities (or other securities of the Trust) subject to the foregoing restriction until the end of said period.

 

[ Remainder of page intentionally left blank ]

 

19

 

IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be executed and delivered as of the date first written above.

 

	PENNYMAC MORTGAGE INVESTMENT TRUST
	By:
		Name:
		Title:
	Stanford L. Kurland
	David A. Spector
	BLACKROCK HOLDCO II, INC.
	By:
		Name:
		Title:
	HIGHFIELDS CAPITAL INVESTMENTS LLC
	By:
		Name:
		Title:
	PRIVATE NATIONAL MORTGAGE ACCEPTANCE COMPANY, LLC
	By:
		Name:
		Title:

 

[ Agreement Signature Page ]

 

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

 

1

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

“ Core Earnings ” means:

 

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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

 

9

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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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

 

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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

 

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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

 

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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

 

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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

 

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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

 

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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

 

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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

 

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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

 

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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

 

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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,

 

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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;

 

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(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.

 

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(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

 

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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

 

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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.

 

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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;

 

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(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):

 

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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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

 

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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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Exhibit 10.4

 

FLOW SERVICING AGREEMENT

 

between

 

PENNYMAC OPERATING PARTNERSHIP, L.P.,
as Owner

 

and

 

PENNYMAC LOAN SERVICES, LLC,
as Servicer

 

Dated as of                      , 2009

 

FIXED- AND ADJUSTABLE-RATE RESIDENTIAL MORTGAGE LOANS

 

 

TABLE OF CONTENTS

 

				Page
ARTICLE I	DEFINITIONS			2
Section 1.01		Definitions		2
ARTICLE II	SERVICING			18
Section 2.01		Servicer to Act as Servicer		18
Section 2.02		Liquidation of Mortgage Loans		20
Section 2.03		Collection of Mortgage Loan Payments; Payment Clearing Account		20
Section 2.04		Establishment of and Deposits to Custodial Account		21
Section 2.05		Permitted Withdrawals From Custodial Account		22
Section 2.06		Establishment of and Deposits to Escrow Account		23
Section 2.07		Permitted Withdrawals From Escrow Account		24
Section 2.08		Payment of Taxes, Insurance and Other Charges		25
Section 2.09		Protection of Accounts		25
Section 2.10		Maintenance of Hazard Insurance		26
Section 2.11		Maintenance of Mortgage Impairment Insurance Policy		27
Section 2.12		Maintenance of Fidelity Bond and Errors and Omissions Insurance		28
Section 2.13		Inspections		28
Section 2.14		Restoration of Mortgaged Property		29
Section 2.15		Title, Management and Disposition of REO Property		29
Section 2.16		Costs and Expenses		30
Section 2.17		Liquidity and Litigation Reserves		31
Section 2.18		[Reserved]		32
Section 2.19		[Reserved]		32
Section 2.20		Notification of Adjustments		32
Section 2.21		Recordation of Assignments of Mortgage		32
Section 2.22		[Reserved]		32
Section 2.23		Credit Reporting		32
Section 2.24		Superior Liens		32
Section 2.25		Prepayments in Full		33
Section 2.26		Tax and Flood Service Contracts		33
Section 2.27		Maintenance of PMI Policies and LPMI Policies; Collections Thereunder		34
Section 2.28		Obligations of the Owner and the Servicer Related to Servicing Transfers		34
Section 2.29		Reliability of Information/Exceptional Expenses		36
Section 2.30		Escrow Obligations		36
Section 2.31		[Reserved]		37
Section 2.32		Additional Activities of the Servicer		37
Section 2.33		No Obligation to Advance Delinquent Payments		37

 

i