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 [·], 2009


 


 




 




















 


UNDERWRITING
FEE REIMBURSEMENT 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;


 


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 up
to [·]
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 [·], 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 Common Shares 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)  [·], 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:

  	
   

  
	
   

  	
   

  	
  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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