Exhibit 10.7


 




 





UNDERWRITING FEE REIMBURSEMENT AGREEMENT


 


by and
among


 


PENNYMAC
MORTGAGE INVESTMENT TRUST,


 


PENNYMAC
OPERATING PARTNERSHIP, L.P.


 


and


 


PNMAC
CAPITAL MANAGEMENT, LLC


 


Dated
as of August 4, 2009




 





 

















 


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


 


W I T N E S S E T H:


 


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


 


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


 


WHEREAS, the Manager has
entered into the Management Agreement (as defined herein), pursuant to which
the Manager will manage the business and investment affairs of the Trust and
its subsidiaries; and


 


WHEREAS, the Manager has
entered into the Underwriting Agreement (as defined herein), pursuant to which,
among other things, the Manager has agreed to pay to the Underwriters (as
defined herein) the Manager Offering Payments (as defined herein).


 


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 Underwriting Fee Reimbursement Agreement, as amended, supplemented
or otherwise modified from time to time.


 


“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.


 


“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
Payment Period” has the meaning set forth in Section 2(a).


 


“Core Earnings”
means:


 


(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.


 


“Core Earnings Offset” has the meaning ascribed to such term
in the Management Agreement.


 


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


 


“Incentive Fee” has the meaning ascribed to such term in the
Management Agreement.


 


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


 


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


 


“Manager Conditional Payment” has the meaning set forth in Section
2(a).


 


“Manager Offering Payments” has the meaning ascribed to such
term in the Underwriting Agreement.


 


“Management Agreement” means that certain management
agreement, dated the date hereof, among the Trust, the Operating Partnership
and the Manager.


 


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


 


“Performance Hurdle” has the meaning set forth in Section 2(a).


 


“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.


 


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


 


“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” has the meaning ascribed to such term in the Management
Agreement.


 


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


 


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


 


(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 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.  Conditional Payment to the Manager.


 


(a)           The Trust and the Operating Partnership acknowledge the
obligation of the Manager to pay to the Underwriters the Manager Offering
Payments pursuant to the terms of the Underwriting Agreement.  The Trust and the Operating Partnership agree
to reimburse the Manager an amount (the “Manager
Conditional Payment”) equal to
the Manager Offering Payments if during any full four calendar quarter period
during the 24 full calendar quarters after the Closing Date (the “Conditional Payment Period”), the Trust’s
Core Earnings for such four-quarter period and excluding the amount of any
Incentive Fee equals or exceeds the product of:


 


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


 


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(2)                                  8.0% (such
product of (1) and (2), the “Performance
Hurdle”).


 


For the avoidance of doubt,
for purposes of determining whether the Manager Conditional Payment is payable,
Core Earnings shall not be offset by the Core Earnings Offset in determining
whether the Performance Hurdle has been met.


 


For purposes of determining
whether the Performance Hurdle has been met, outstanding
limited partnership interests in the Operating Partnership (other than limited
partnership interests held by the Trust) shall be treated as outstanding Common
Shares.


 


(b)           During the Conditional Payment Period if the Manager
Conditional Payment has not been made, the Manager shall compute Core Earnings
for each full four-quarter period within 30 days after the end of each calendar
quarter and shall promptly deliver such computations to the Board of Trustees
(but in no event later than the date that is 35 days after the end of each
calendar quarter).  In the event that the
Performance Hurdle has been met, the Manager Conditional Payment shall be paid
in cash to the Manager no later than the date which is five (5) Business Days
after the date of delivery to the Board of Trustees of such computations of
Core Earnings.


 


(c)           In the event the Termination Fee is payable under the
Management  Agreement prior to the end of
the Conditional Payment Period and the Manager Conditional Payment has not been
paid, the amount of the Manager Conditional Payment shall be paid in cash to
the Manager on the same date as the payment of the Termination Fee in
reimbursement of the Manager’s payment of the Manager Offering Payments.


 


Section 3.  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 4.  Term;
Termination.  This Agreement
shall become effective on the Closing Date and shall continue in operation,
until the earlier of (a) the payment in full of the Manager Conditional Payment
and (b)  August 4, 2015.  If the Performance Hurdle is not met or
exceeded for a full four calendar quarter period during the Conditional Payment
Period, this Agreement and the conditional obligation to reimburse the Manager
for the Manager Offering Payments shall terminate.


 


Section 5.  Assignments.  (a)  This Agreement shall not be assigned by any
party hereto  without the prior written
consent of the other parties, 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.


 


Section 6.  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 


 


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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 6):


 


	
  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.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


	
   

  	
  PENNYMAC MORTGAGE INVESTMENT TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jeff Grogin

  
	
   

  	
   

  	
  Name:
  Jeff Grogin

  
	
   

  	
   

  	
  Title:
  Secretary and Chief Legal Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PENNYMAC OPERATING PARTNERSHIP, L.P.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  PENNYMAC
  GP OP, INC.,

  
	
   

  	
   

  	
  its
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jeff Grogin

  
	
   

  	
   

  	
  Name:
  Jeff Grogin

  
	
   

  	
   

  	
  Title:
  Executive Vice President and Secretary

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  PNMAC
  CAPITAL MANAGEMENT, LLC

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Jeff Grogin

  
	
   

  	
   

  	
  Name:
  Jeff Grogin

  
	
   

  	
   

  	
  Title:   Secretary
  and Chief Legal Officer

  



 


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