Exhibit 10.8

DYNEX CAPITAL, INC.
 
3,000,000 SHARES
 

 
CONTROLLED EQUITY OFFERINGSM
 

 
SALES AGREEMENT
 

 
March 16, 2009
 

 
CANTOR FITZGERALD & CO.
499 Park Avenue
New York, NY  10022
 

Ladies and Gentlemen:

DYNEX CAPITAL, INC., a Virginia corporation (the “Company”), confirms its
agreement (this “Agreement”) with Cantor Fitzgerald & Co. (“CF&Co”), as follows:
 
1.   Issuance and Sale of Shares.  The Company agrees that, from time to time
during the term of this Agreement, on the terms and subject to the conditions
set forth herein, it may issue and sell through CF&Co, acting as agent and/or
principal, up to 3,000,000 shares (the “Shares”) of the Company’s common stock,
par value $0.01 per share (the “Common Stock”). Notwithstanding anything to the
contrary contained herein, the parties hereto agree that compliance with the
limitations set forth in this Section 1 on the number of Shares issued and sold
under this Agreement shall be the sole responsibility of the Company, and CF&Co
shall have no obligation in connection with such compliance.  The issuance and
sale of Shares through CF&Co will be effected pursuant to the Registration
Statement (as defined below) filed by the Company and declared effective by the
Securities and Exchange Commission (the “Commission”), although nothing in this
Agreement shall be construed as requiring the Company to use the Registration
Statement to issue Shares.
 
The Company has filed, in accordance with the provisions of the Securities Act
of 1933, as amended, and the rules and regulations thereunder (collectively, the
“Securities Act”), with the Commission a registration statement on Form S-3
(File No. 333-149475), and two pre-effective amendments thereto, including a
base prospectus, with respect to the Shares, which registration statement, as
amended by such pre-effective amendments, incorporates by reference documents
which the Company has filed or will file in accordance with the provisions of
the Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (collectively, the “Exchange Act”).   Such registration statement, as
amended by such pre-effective amendments, has become effective under the
Securities Act.  The Company may file one or more additional registration
statements from time to time that will contain a base prospectus with respect to
the Shares. The Company shall prepare one or more prospectus supplements
(collectively, the “Prospectus Supplement”) to the base prospectus included as
part of each registration statement containing a base prospectus relating to
certain securities of
 

 
 

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the Company, including the Shares to be issued from time to time by the Company.
The Company shall furnish to CF&Co, for use by CF&Co, copies of the prospectus
included as part of each such registration statement, as supplemented by the
Prospectus Supplement, relating to the Shares.  Except where the context
otherwise requires, each such registration statement, as amended (including by
such pre-effective amendments) when it became effective, including all documents
filed as part thereof or incorporated by reference therein, and including any
information contained in a Prospectus (as defined below) subsequently filed with
the Commission pursuant to Rule 424(b) under the Securities Act and or deemed to
be part of each such registration statement filed pursuant to Rule 430B of the
Securities Act, is herein called the “Registration Statement.” Each base
prospectus, including all documents incorporated therein by reference, included
in the Registration Statement, as it may be supplemented by the Prospectus
Supplement, in the form in which such base prospectus and/or Prospectus
Supplement have most recently been filed by the Company with the Commission
pursuant to Rule 424(b) under the Securities Act, together with any “issuer free
writing prospectus,” as defined in Rule 433 under the Securities Act (“Rule
433”), if any, relating to the offering of the Shares, which (i) is required to
be filed with the Commission by the Company or (ii) is exempt from filing
pursuant to Rule 433(d)(5)(i), in each case in the form filed or required to be
filed with the Commission or, if not required to be filed, in the form retained
in the Company’s records pursuant to Rule 433(g), is herein called the
“Prospectus”. Any reference herein to the Registration Statement, the Prospectus
or any amendment or supplement thereto shall be deemed to refer to and include
the documents incorporated by reference therein, and any reference herein to the
terms “amend”, “amendment” or “supplement” with respect to the Registration
Statement or the Prospectus shall be deemed to refer to and include the filing
after the execution hereof of any document with the Commission deemed to be
incorporated by reference therein. For purposes of this Agreement, all
references to the Registration Statement, the Prospectus, or to any amendment or
supplement thereto shall be deemed to include any copy filed with the Commission
pursuant to either the Electronic Data Gathering Analysis and Retrieval System
or Interactive Data Electronic Applications (collectively, “IDEA”).
 
2.   Placements.  Each time that the Company wishes to issue and sell Shares
hereunder (each, a “Placement”), it will notify CF&Co by email notice (or other
method mutually agreed to in writing by the parties) (a “Placement Notice”)
containing the parameters in accordance with which it desires the Shares to be
sold, which shall, at a minimum, include the number of Shares to be issued (the
“Placement Shares”), the time period during which sales are requested to be
made, any limitation on the number of Shares that may be sold in any one Trading
Day (as defined in Section 3 below) and any minimum price below which sales may
not be made, a form of which containing such minimum sales parameters necessary
is attached hereto as Schedule 1. The Placement Notice shall originate from any
of the individuals from the Company set forth on Schedule 3 (with a copy to each
of the other individuals from the Company listed on such schedule), and shall be
addressed to each of the individuals from CF&Co set forth on Schedule 3, as such
Schedule 3 may be amended from time to time by notice given in accordance with
Section 12 hereto. The Placement Notice shall be effective upon receipt by CF&Co
unless and until (i) in accordance with the notice requirement set forth in
Section 4, CF&Co declines to accept the terms contained therein for any reason,
in its sole discretion, (ii) the entire amount of the Placement Shares have been
sold, (iii) in accordance with the notice requirements set forth in Section 4,
the Company suspends or terminates the Placement Notice, (iv) the Company issues
a subsequent Placement Notice with parameters superseding those on the earlier
dated Placement
 
3.   Notice, or (v) the Agreement has been terminated under the provisions of
Section 11. The amount of any discount, commission or other compensation to be
paid by the Company to CF&Co in connection with the sale of the Placement Shares
shall be calculated in accordance with the terms set forth in Schedule 2. It is
expressly acknowledged and agreed that neither the Company nor CF&Co will have
any obligation whatsoever with respect to a Placement or any Placement Shares
unless and until the Company delivers a Placement Notice to CF&Co and CF&Co does
not decline such Placement Notice pursuant to the terms set forth above, and
then only upon the terms specified therein and herein.  In the event of a
conflict between the terms of this Agreement and the terms of a Placement
Notice, the terms of the Placement Notice will control.
 
4.   Sale of Placement Shares by CF&Co.  Subject to the terms and conditions
herein set forth, upon the Company’s issuance of a Placement Notice, and unless
the sale of the Placement Shares described therein has been declined, suspended
or otherwise terminated in accordance with the terms of this Agreement, CF&Co,
for the period specified in the Placement Notice, will use its commercially
reasonable efforts consistent with its normal trading and sales practices and
applicable state and federal laws, rules and regulations and the rules of the
New York Stock Exchange (the “Exchange”) to sell such Placement Shares up to the
amount specified, and otherwise in accordance with the terms of such Placement
Notice.  CF&Co will provide written confirmation to the Company (including by
email correspondence to each of the individuals of the Company set forth on
Schedule 3, if receipt of such correspondence is actually acknowledged by any of
the individuals to whom the notice is sent, other than via auto-reply) no later
than the opening of the Trading Day (as defined below) immediately following the
Trading Day on which it has made sales of Placement Shares hereunder, setting
forth the number of Placement Shares sold on such day, the prices at which such
Placement Shares were sold, the gross proceeds from such sales, the compensation
payable by the Company to CF&Co pursuant to Section 2 with respect to such
sales, with an itemization of deductions made by CF&Co (as set forth in Section
5(a)) from the gross proceeds that it receives from such sales and the Net
Proceeds (as defined below) payable to the Company. Subject to the terms of the
Placement Notice, CF&Co may sell Placement Shares by any method permitted by law
deemed to be an “at the market” offering as defined in Rule 415 of the
Securities Act, including, without limitation, sales made directly on the
Exchange, on any other existing trading market for the Common Stock or to or
through a market maker.  After consultation with the Company and subject to the
terms of the Placement Notice, CF&Co may also sell Placement Shares in privately
negotiated transactions.  The Company acknowledges and agrees that (i) there can
be no assurance that CF&Co will be successful in selling Placement Shares, and
(ii) CF&Co will incur no liability or obligation to the Company or any other
person or entity if it does not sell Placement Shares for any reason other than
a failure by CF&Co to use its commercially reasonable efforts consistent with
its normal trading and sales practices and applicable state and federal laws,
rules and regulations and the rules of the Exchange to sell such Placement
Shares as required under this Section 3.  For the purposes hereof, “Trading Day”
means any day on which Common Stock is purchased and sold on the principal
market on which the Common Stock is listed or quoted.
 
5.   Suspension of Sales.  The Company or CF&Co may, upon notice to the other
party in writing (including by email correspondence to each of the individuals
of the other party set forth on Schedule 3, if receipt of such correspondence is
actually acknowledged by any of the individuals to whom the notice is sent,
other than via auto-reply) or by telephone (confirmed
 

 
 

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6.   immediately by verifiable facsimile transmission or email correspondence to
each of the individuals of the other party set forth on Schedule 3), suspend any
sale of Placement Shares; provided, however, that such suspension shall not
affect or impair either party’s obligations with respect to any Placement Shares
sold hereunder prior to the receipt of such notice or sold at any point
thereafter once such suspension has been lifted by the subsequent issuance of an
additional Placement Notice.  Each of the Parties agrees that no such notice of
suspension shall be effective against the other unless it is made to one of the
individuals named on Schedule 3 hereto, as such Schedule may be amended from
time to time.
 
7.   Settlement.
 
(a)  Settlement of Placement Shares.  Unless otherwise specified in the
applicable Placement Notice, settlement for sales of Placement Shares will occur
on the third (3rd) Business Day (as defined in Section 12 below) (or such
earlier day as is industry practice for regular-way trading) following the date
on which such sales are made (each, a “Settlement Date”).  The amount of
proceeds to be delivered to the Company on a Settlement Date against the receipt
of the Placement Shares sold (the “Net Proceeds”) will be equal to the aggregate
sales price at which such Placement Shares were sold, after deduction for
(i) CF&Co’s commission, discount or other compensation for such sales payable by
the Company pursuant to Section 2 hereof, (ii) any other amounts due and payable
by the Company to CF&Co hereunder pursuant to Section 7(g) hereof, and (iii) any
transaction fees imposed by any governmental or self-regulatory organization in
respect of such sales.
 
(b)  Delivery of Placement Shares.  On or before each Settlement Date, the
Company will, or will cause its transfer agent to, electronically transfer the
Placement Shares being sold by crediting CF&Co’s or its designee’s account
(provided CF&Co shall have given the Company written notice of such designee
prior to the Settlement Date) at The Depository Trust Company through its
Deposit and Withdrawal at Custodian System or by such other means of delivery as
may be mutually agreed upon by the parties hereto and, upon receipt of such
Placement Shares, which in all cases shall be freely tradable, transferable,
registered shares in good deliverable form, CF&Co will deliver the related Net
Proceeds in same day funds delivered to an account designated by the Company
prior to the Settlement Date. The Company agrees that if the Company defaults on
its obligation to deliver Placement Shares on a Settlement Date, in addition to
and in no way limiting the rights and obligations set forth in Section 9(a)
hereto, it will (i) hold CF&Co harmless against any loss, claim, damage, or
expense (including reasonable legal fees and expenses), as incurred, arising out
of or in connection with such default by the Company and (ii) pay to CF&Co any
commission, discount, or other compensation to which it would otherwise have
been entitled absent such default; provided, however, that the Company shall not
be obligated to so indemnify and reimburse CF&Co if the Placement Shares are not
delivered due to (1) a suspension or material limitation in trading in
securities generally on the Exchange or the NASDAQ; (2) a general moratorium on
commercial banking activities declared by either federal or New York State
authorities or a material disruption in commercial banking or securities
settlement or clearance services in the United States; (3) an outbreak or
escalation of hostilities or acts of terrorism involving the United States or a
declaration by the United States of a national emergency or war; or (4) any
other calamity or crisis or any change in financial, political or economic
conditions in the United States or elsewhere.
 

 
 

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(c)  Representations and Warranties of the Company.  The Company represents and
warrants to, and agrees with, CF&Co that as of each Applicable Time (as defined
in Section 20):
 
(d)    The Company meets the requirements for use of Form S-3 under the
Securities Act. The Registration Statement has been filed with the Commission
and has been declared effective under the Securities Act. The Company has
prepared or will prepare the Prospectus Supplement that names CF&Co as an
underwriter, acting as principal and/or agent, in the section entitled “Plan of
Distribution.”  The Company has not received, and has no written notice of, any
order of the Commission preventing or suspending the use of the Registration
Statement, or threatening or instituting proceedings for that purpose. Any
statutes, regulations, contracts or other documents that are required to be
described in the Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement have been so described or filed. The
Prospectus Supplement has been or will be prepared and will be filed pursuant to
Rule 424(b) of the Securities Act.  Copies of the Registration Statement, the
Prospectus, and any such amendments or supplements and all documents
incorporated by reference therein that were filed with the Commission on or
prior to the date of this Agreement and requested by CF&Co or its counsel have
been delivered, or made available, to CF&Co and its counsel. The Company has not
distributed and will not distribute any offering material in connection with the
offering or sale of the Placement Shares other than the Registration Statement
and the Prospectus. The Common Stock is currently listed on the Exchange under
the trading symbol “DX.”
 
(e)    Each part of the Registration Statement, when such part became or becomes
effective or was or is filed with the Commission, and the Prospectus, and any
amendment or supplement thereto, on the date of filing thereof with the
Commission and at each Settlement Date, conformed or will conform in all
material respects with the requirements of the Securities Act. Each part of the
Registration Statement, when such part became or becomes effective or was or is
filed with the Commission, did not, or 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. The Prospectus and
any amendment or supplement thereto, on the date of filing thereof with the
Commission and at each Settlement Date, did not or will not include an untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, except that the foregoing shall not apply to statements
in, or omissions from, any such document made in reliance upon, and in
conformity with, written information concerning CF&Co that was furnished in
writing to the Company by CF&Co, specifically for use in the preparation
thereof.
 
(f)    The documents incorporated by reference in the Registration Statement,
the Prospectus or any amendment or supplement thereto, when they became or
become effective under the Securities Act or were or are filed with the
Commission under the Securities Act or the Exchange Act, as the case may be,
conformed or will conform in all material respects with the requirements of the
Securities Act and the Exchange Act, as applicable, as such requirements existed
at the time such incorporated documents were initially filed with the
Commission.
 
(g)   The consolidated financial statements of the Company, together with the
related schedules and notes thereto, set forth or included or incorporated by
reference in the Registration Statement and the Prospectus are accurate in all
material respects and fairly present the financial condition of the Company as
of the dates indicated and the results of operations, changes in
 

 
 

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(h)  financial position, stockholders’ equity and cash flows for the periods
therein specified are in conformity with accounting principles generally
accepted in the United States consistently applied throughout the periods
involved (except as otherwise stated therein). The selected financial and
statistical data included or incorporated by reference in the Registration
Statement and the Prospectus present fairly the information shown therein and,
to the extent based upon or derived from the financial statements, have been
compiled on a basis consistent with the financial statements presented therein.
Any pro forma financial statements of the Company, and the related notes
thereto, included or incorporated by reference in the Registration Statement and
the Prospectus present fairly the information shown therein, have been prepared
in accordance with the Commission’s rules and guidelines with respect to pro
forma financial statements and have been properly compiled on the basis
described therein, and the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect to
the transactions and circumstances referred to therein. The Company and, to the
Company’s knowledge, the Subsidiaries (as defined in Section 6(g) below) do not
have any material liabilities or obligations, direct or contingent (including
any off-balance sheet obligations), not disclosed in the Registration Statement
and the Prospectus. No other financial statements are required to be set forth
or to be incorporated by reference in the Registration Statement or the
Prospectus under the Securities Act.
 
(i)    The Prospectus delivered to CF&Co for use in connection with the sale of
Placement Shares pursuant to this Agreement will be identical to the versions of
the Prospectus created to be transmitted to the Commission for filing via IDEA,
except to the extent permitted by Regulation S-T.
 
(j)    The Company has been duly formed and incorporated and is validly existing
as a corporation in good standing under the laws of the Commonwealth of Virginia
and is duly qualified to do business and is in good standing as a foreign
corporation in each jurisdiction in which its ownership or lease of property or
assets or the conduct of its business requires such qualification, except where
the failure to so qualify would not have a material adverse effect on the
business, assets, properties, prospects, financial condition, or results of
operations of the Company and the Subsidiaries taken as a whole (a “Material
Adverse Effect”) and has full corporate power and authority necessary to own,
hold, lease and/or operate its assets and properties, to conduct the business in
which it is engaged and as described in the Registration Statement and the
Prospectus and to enter into and perform its obligations under this Agreement
and to consummate the transactions contemplated hereby, and the Company is in
compliance in all material respects with the laws, orders, rules, regulations
and directives issued or administered by any jurisdictions in which it owns or
leases property or conducts business.
 
(k)    Each “significant subsidiary” (as such term is defined in Rule 1-02 of
Regulation S-X promulgated under the Securities Act) (the “Subsidiaries”) of the
Company is set forth on Schedule 4.  The Company does not own, directly or
indirectly, any shares of stock or any other equity or long-term debt securities
of any corporation or have any equity interest in any firm, partnership, joint
venture, association or other entity, except (i) the subsidiaries and the
ownership interests set forth in Schedule 4; (ii) the securities comprising the
investment portfolio of the Company; and (iii) as otherwise disclosed in the
Registration Statement and/or Prospectus. Complete and correct copies of the
articles of incorporation and of the bylaws or other formation documents of the
Company and each of the Subsidiaries, as applicable, and all amendments thereto
have been made available to CF&Co and/or its counsel upon request.  To the
Company’s
 

 
 

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(l)  knowledge, each Subsidiary has been duly formed and incorporated or
organized and is validly existing as a corporation, partnership or limited
liability company in good standing under the laws of the jurisdiction of its
incorporation or formation or organization and is duly qualified to do business
and is in good standing as a foreign corporation, partnership or limited
liability company in each jurisdiction where the ownership or leasing of its
properties or the conduct of its business requires such qualification, except
where the failure to be in good standing or to be so qualified would not have a
Material Adverse Effect and, to the Company’s knowledge, each Subsidiary has
full corporate, partnership or limited liability power and authority, as
applicable, necessary to own, hold, lease and/or operate its assets and
properties and to conduct its business in which it is engaged and as described
in the Registration Statement and the Prospectus, and, to the Company’s
knowledge, each Subsidiary is in compliance in all material respects with the
laws, orders, rules, regulations and directives issued or administered by
jurisdictions in which it owns or leases property or conducts business; to the
Company’s knowledge, all of the outstanding shares of capital stock or other
equity interests, as the case may be, of each of the Subsidiaries have been duly
authorized and validly issued, are fully paid and nonassessable with respect to
the corporate Subsidiaries, and have been issued in compliance with all federal
and state securities laws and were not issued in violation of any preemptive
right, resale right, right of first refusal or similar right and are not subject
to any security interest, other encumbrance or adverse claims; and to the
Company’s knowledge, no options, warrants or other rights to purchase,
agreements or other obligations to issue or other rights to convert any
obligation into shares of capital stock or ownership interests in the
Subsidiaries are outstanding.
 
(m)  Neither the Company nor, to the Company’s knowledge, any of the
Subsidiaries is in breach or violation of or in default under (nor has any event
occurred which with notice, lapse of time or both would result in any breach or
violation of or constitute a default under or give the holder of any
indebtedness (or a person acting on such holder’s behalf) the right to require
the repurchase, redemption or repayment of all or a part of such indebtedness
under) (i) its respective charter, bylaws, certificate of formation, partnership
agreement or limited liability company agreement, as the case may be, or (ii)
any indenture, mortgage, deed of trust, bank loan or credit agreement or other
evidence of indebtedness, or any license, lease, contract or other agreement or
instrument to which the Company or any of the Subsidiaries is a party or by
which any of them or any of their respective properties may be bound or affected
the effect of which breach, violation or default under clause (ii) could
reasonably be expected to result in a Material Adverse Effect, and the
execution, delivery and performance of this Agreement, the issuance and sale of
the Placement Shares and the consummation of the transactions contemplated
hereby will not conflict with, result in any breach or violation of or
constitute a default under (nor constitute any event which, with notice, lapse
of time or both, would result in any breach or violation of or constitute a
default under) (1) the charter, bylaws, certificate of formation, partnership
agreement or limited liability company agreement, as the case may be, of the
Company or, to the Company’s knowledge, any of the Subsidiaries, or (2) any
indenture, mortgage, deed of trust, bank loan or credit agreement or other
evidence of indebtedness, or any license, lease, contract or other agreement or
instrument to which the Company or, to the Company’s knowledge, any of the
Subsidiaries is a party or by which any of them or any of their respective
properties may be bound or affected, the effect of which breach, violation or
default under clause (2) could reasonably be expected to result in a Material
Adverse Effect or (3) any federal, state, local or foreign law, regulation or
rule or any decree, judgment or order applicable to the Company or, to the
Company’s knowledge, any of the Subsidiaries.
 

 
 

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(n)    As of December 31, 2008, the Company had an authorized, issued and
outstanding capitalization as set forth in its consolidated statements of
financial condition included in the Company’s Annual Report on Form 10-K for the
year ended December 31, 2008.  All of the issued and outstanding shares of
capital stock of the Company have been duly and validly authorized and issued
and are fully paid and nonassessable, have been issued in compliance with all
federal and state securities laws and were not issued in violation of any
preemptive right, resale right, right of first refusal or similar right.
 
(o)    This Agreement has been duly authorized, executed and delivered by the
Company and is a legal, valid and binding agreement of the Company enforceable
in accordance with its terms, except to the extent that (i) enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ rights generally and by general equitable principles and
(ii) the indemnification and contribution provisions of Section 9 hereof may be
limited by federal or state securities laws and public policy considerations in
respect thereof.
 
(p)     The Common Stock, including the Placement Shares, conforms in all
material respects to the description thereof contained in the Registration
Statement and the Prospectus.
 
(q)    The Placement Shares have been duly and validly authorized by the Company
for issuance and sale pursuant to this Agreement and, when issued and delivered
against payment therefor as provided herein, will be duly and validly issued and
fully paid and nonassessable, free and clear of any pledge, lien, encumbrance,
security interest or other claim, including any statutory or contractual
preemptive rights, resale rights, rights of first refusal or other similar
rights, and will be registered pursuant to Section 12 of the Exchange Act.
 
(r)    No approval, authorization, consent or order of or filing with any
national, state or local governmental or regulatory commission, board, body,
authority or agency is required in connection with the issuance and sale of the
Placement Shares or the consummation by the Company of the transactions
contemplated hereby other than (i) registration of the Placement Shares under
the Securities Act, (ii) any necessary qualification under the securities or
blue sky laws of the various jurisdictions in which the Placement Shares are
being offered by CF&Co, (iii) such approvals obtained in connection with the
approval of the listing of the Placement Shares on the Exchange or (iv) any
approvals, authorizations, consents or orders of or filings with the Financial
Industry Regulatory Authority (“FINRA”).
 
(s)    Except (i) as set forth in the Registration Statement and the Prospectus
or in filings with the Commission via IDEA pursuant to Section 16 of the
Exchange Act and (ii) for holders of shares of the Company’s Series D 9.50%
Cumulative Convertible Preferred Stock, $.01 par value, (1) no person, as such
term is defined in Rule 1-02 of Regulation S-X promulgated under the Securities
Act (each, a “Person”), has the right, contractual or otherwise, to cause the
Company to issue or sell to such Person any shares of Common Stock or shares of
any other capital stock or other securities of the Company, (2) no Person has
any preemptive rights, resale rights, rights of first refusal, or any other
rights (whether pursuant to a “poison pill” provision or otherwise) to purchase
any shares of Common Stock or shares of any other capital stock or other
securities of the Company, and (3) no Person other than CF&Co has the right to
act as an underwriter or as a financial advisor to the Company in connection
with the offer and sale of the Shares, in the case of each of the foregoing
clauses (1), (2) and (3), whether as a result of the
 

 
 

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(t)  filing or effectiveness of the Registration Statement or the sale of the
Placement Shares as contemplated hereby or otherwise; no Person has the right,
contractual or otherwise, to require the Company to register under the
Securities Act any shares of Common Stock or shares of any other capital stock
or other securities of the Company, or to include any such shares or other
securities in the Registration Statement or the offering contemplated thereby,
whether as a result of the filing or effectiveness of the Registration Statement
or the sale of the Placement Shares as contemplated thereby or otherwise.
 
(u)    BDO Seidman LLP, whose report on the consolidated financial statements of
the Company is filed with the Commission as part of the Registration Statement
and the Prospectus, was, during the periods covered by its report, an
independent registered public accounting firm as required by the Securities Act.
 
(v)    The descriptions in the Registration Statement and the Prospectus of the
legal or governmental proceedings, affiliate transactions, off-balance sheet
transactions, contracts, leases and other legal documents therein described
present fairly the information required to be shown, and there are no legal or
governmental proceedings, affiliate transactions, off-balance sheet
transactions, contracts, leases, or other legal documents of a character
required to be described in the Registration Statement or the Prospectus or to
be filed as exhibits to the Registration Statement which are not described or
filed as required. All agreements between the Company and third parties
expressly referenced in the Registration Statement and the Prospectus are legal,
valid and binding obligations of the Company enforceable in accordance with
their respective terms, except to the extent enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws affecting
creditors’ rights generally and by general equitable principles.
 
(w)    Except as set forth in the Registration Statement and the Prospectus,
there are no actions, suits, claims, investigations, inquiries or proceedings
pending or, to the best of the Company’s knowledge, threatened to which either
the Company or, to the Company’s knowledge, any Subsidiaries or any of their
respective officers or directors is a party or of which any of their respective
properties or other assets is subject at law or in equity, or before or by any
federal, state, local or foreign governmental or regulatory commission, board,
body, authority or agency which could result in a judgment, decree or order
having individually or in the aggregate a Material Adverse Effect or prevent or
interfere in any material respect with the consummation of the transactions
contemplated hereby.
 
(x)    During the twelve (12) calendar months prior to the date of this
Agreement, the Company has timely filed with the Commission all documents and
other material required to be filed pursuant to Sections 13, 14 and 15(d) under
the Exchange Act. During the twelve (12) calendar months preceding the filing of
the Registration Statement, the Company filed all reports required to be filed
pursuant to Sections 13, 14 and 15(d) under the Exchange Act.  The Company is
not an “ineligible issuer” as defined in Rule 405 of the Securities Act.
 
(y)    Subsequent to the respective dates as of which information is given in,
or incorporated by reference into, the Registration Statement and the
Prospectus, there has not been (i) any material adverse change, or any
development which is likely to cause a material adverse change, in the business,
properties, management or assets described or referred to in the Registration
Statement or the Prospectus, or the results of operations, condition (financial
or
 

 
 

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(z)  otherwise), net worth, business or operations of the Company and the
Subsidiaries taken as a whole, (ii) any transaction which is material to the
Company and the Subsidiaries taken as a whole, except transactions in the
ordinary course of business consistent with past practices, (iii) any
obligation, direct or contingent (including off-balance sheet obligations),
which is material to the Company and the Subsidiaries taken as a whole, except
transactions in the ordinary course of business consistent with past practices
or (iv) any change in the number of authorized shares of capital stock or,
except obligations incurred in the ordinary course of business, outstanding
indebtedness of the Company.  The Company has no material contingent obligation
(including off-balance sheet obligations) which is not disclosed in the
Registration Statement or the Prospectus.
 
(aa)    The Company has not defaulted on any installment on indebtedness for
borrowed money or on any rental on one or more long-term leases, which defaults
would have a Material Adverse Effect. The Company has not filed a report
pursuant to Section 13(a) or 15(d) of the Exchange Act since the filing of its
last Annual Report on Form 10-K, indicating that it (i) has failed to pay any
dividend or sinking fund installment on preferred stock or (ii) has defaulted on
any installment on indebtedness for borrowed money or on any rental on one or
more long-term leases, which defaults would have a Material Adverse Effect.
 
(bb)    Neither the Company nor, to the Company’s knowledge, any of the
Subsidiaries nor any of their respective directors, officers or controlling
persons has taken, directly or indirectly, any action designed to result in, or
which has constituted or might reasonably be expected to cause or result in,
under the Exchange Act or otherwise, the stabilization or manipulation of the
price of any security of the Company to facilitate the sale or resale of the
Placement Shares.
 
(cc)    At the time of purchase, the Placement Shares will be approved for
listing on the Exchange, subject to official notice of issuance, or the Company
will have filed an application for listing of the Shares on the Exchange.
 
(dd)    Neither the Company nor any of its affiliates (i) is required to
register as a “broker” or “dealer” in accordance with the provisions of the
Exchange Act or (ii) directly or indirectly through one or more intermediaries,
controls or has any other association with (within the meaning of Article I of
the Bylaws of the National Association of Securities Dealers, Inc.) any member
of the FINRA.
 
(ee)  The Company has not relied upon CF&Co or legal counsel for CF&Co for any
legal, tax or accounting advice in connection with the offering and sale of the
Placement Shares.
 
(ff)    On each Representation Date (as defined in Section 7(m) below), the
Company shall be deemed to have confirmed (i) the accuracy and completeness, as
of such date, of each representation and warranty made by it in this Agreement;
and (ii) that the Company has complied with all of the agreements to be
performed by it hereunder at or prior to such date.
 
(gg)    Any certificate signed by any officer of the Company delivered to CF&Co
pursuant to or in connection with this Agreement shall be deemed a
representation and warranty by the Company to CF&Co as to the matters covered
thereby.
 

 
 

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(hh)    As of the date of this Agreement and except as otherwise disclosed in
the Prospectus, (i) the Company has no current plan or intention to materially
alter its stated investment policies and operating policies and strategies, as
such are described in the Registration Statement and the Prospectus, if any;
(ii) the Company and, to the Company’s knowledge, the Subsidiaries have good and
marketable title to all properties and assets owned directly by them, in each
case free and clear of all liens, security interests, pledges, charges,
encumbrances, mortgages and defects (except for any security interest, lien
encumbrance or claim that may otherwise exist under any applicable repurchase
agreement or as otherwise disclosed in the Registration Statement and the
Prospectus), except such as do not interfere with the use made or proposed to be
made of such asset or property by the Company or any Subsidiary, as the case may
be; (iii) other than real estate acquired in the ordinary course of business
through, or in lieu of, foreclosure, the Company does not directly own any real
property; and (iv) any real property and buildings held under lease directly by
the Company are held under valid, existing and enforceable leases, with such
exceptions, liens, security interests, pledges, charges, encumbrances, mortgages
and defects, as are not material and do not interfere with the use made or
proposed to be made of such property and buildings by the Company.
 
(ii)    The Company and, to the Company’s knowledge, each of the Subsidiaries
has filed on a timely basis (taking into account all applicable extensions) all
necessary federal, state, local and foreign income and franchise tax returns, if
any such returns were required to be filed, through the date hereof and have
paid all taxes shown as due thereon; and no tax deficiency has been asserted
against the Company or, to the Company’s knowledge, any of the Subsidiaries, nor
does the Company know of any tax deficiency which is likely to be asserted
against any such entity which, if determined adversely to any such entity, could
have a Material Adverse Effect.  All tax liabilities, if any, are adequately
provided for on the books of the Company and, to the Company’s knowledge, the
Subsidiaries.
 
(jj)    The Company and, to the Company’s knowledge, each Subsidiary owns or
possesses adequate license or other rights to use all patents, trademarks,
service marks, trade names, copyrights, software and design licenses, trade
secrets, manufacturing processes, other intangible property rights and know-how,
if any (collectively, “Intangibles”), necessary to entitle the Company and, to
the Company’s knowledge, each Subsidiary to conduct its business as described in
the Prospectus, and neither the Company nor, to the Company’s knowledge, any
Subsidiary has received written notice of infringement of or conflict with (and
knows of no such infringement of or conflict with) asserted rights of others
with respect to any Intangibles which could have a Material Adverse Effect.
 
(kk)    The Company has established and maintains and evaluates “disclosure
controls and procedures” (as such term is defined in Rules 13a-15 and 15d-15
under the Exchange Act) and “internal control over financial reporting” (as such
term is defined in Rules 13a-15 and 15d-15 under the Exchange Act); the
principal executive officers (or their equivalents) and principal financial
officers (or their equivalents) of the Company have made all certifications
required by the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and any
related rules and regulations promulgated by the Commission, and the statements
contained in each such certification are complete and correct; and the Company,
the Subsidiaries and the Company’s directors and officers are each in compliance
in all material respects with all applicable effective provisions of the
Sarbanes-Oxley Act and the rules and regulations of the Commission and the
Exchange promulgated thereunder.
 

 
 

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(ll)    The Company and, to the Company’s knowledge, each of the Subsidiaries
maintains insurance (issued by insurers of recognized financial responsibility)
of the types and in the amounts generally deemed adequate by the Company, if
any, for their respective businesses and consistent with insurance coverage
maintained by similar companies in similar businesses, including, but not
limited to, insurance covering real and personal property owned or leased by the
Company and the Subsidiaries against theft, damage, destruction, acts of
vandalism and all other risks customarily insured against, all of which
insurance is in full force and effect.
 
(mm)    Neither the Company nor, to the Company’s knowledge, any Subsidiary is
in violation of, and none of them has received notice of any violation with
respect to, any applicable environmental, safety or similar law applicable to
its business which could reasonably be expected to result in a Material Adverse
Effect. The Company and, to the Company’s knowledge, each Subsidiary have
received all permits, licenses or other approvals required of them under
applicable federal and state occupational safety and health and environmental
laws and regulations to conduct their businesses, and the Company and, to the
Company’s knowledge, each Subsidiary is in compliance with all terms and
conditions of any such permit, license or approval, except any such violation of
law or regulation, failure to receive required permits, licenses or other
approvals or failure to comply with the terms and conditions of such permits,
licenses or approvals which could not, singly or in the aggregate, have a
Material Adverse Effect.
 
(nn)   The Company has not incurred any liability for any finder’s fees or
similar payments in connection with the transactions herein contemplated, except
as may otherwise exist with respect to CF&Co pursuant to this Agreement.
 
(oo)    There are no existing or threatened labor disputes with the employees of
the Company or, to the Company’s knowledge, any Subsidiary which are likely to
have individually or in the aggregate a Material Adverse Effect.
 
(pp)    None of the Company or, to the Company’s knowledge, any Subsidiary or
any employee or agent of the Company or any Subsidiary, has made any payment of
funds or received or retained any funds in violation of any law, rule or
regulation or of a character required to be disclosed in the Registration
Statement or the Prospectus. No relationship, direct or indirect, exists between
or among the Company or, to the Company’s knowledge, any Subsidiary or any
affiliate of any of them, on the one hand, and the directors, officers and
stockholders of the Company or, to the Company’s knowledge, any Subsidiary, on
the other hand, which is required by the Securities Act to be described in the
Registration Statement or the Prospectus that is not so described.
 
(qq)    The Company has been, and upon the sale of the Placement Shares will
continue to be, organized and operated in conformity with the requirements for
qualification and taxation as a “real estate investment trust” (a “REIT”) under
Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the
“Code”), for all taxable years commencing with its taxable year ended December
31, 2004. The proposed method of operation of the Company as described in the
Prospectus will enable the Company to continue to meet the requirements for
qualification and taxation as a REIT under the Code, and no actions have been
taken (or not taken which are required to be taken) which would cause such
qualification to be lost.  The Company intends to continue to operate in a
manner which would permit it to qualify as a REIT under the Code. The Company
has no intention of changing its operations or engaging in
 

 
 

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(rr)  activities which would cause it to fail to qualify, or make economically
undesirable its continued qualification, as a REIT.
 
(ss)    Neither the Company nor, to the knowledge of the Company, the
Subsidiaries, after giving effect to the offering and sale of the Placement
Shares, will be an “investment company” or an entity “controlled” by an
“investment company,” as such terms are defined in the Investment Company Act of
1940, as amended (the “Investment Company Act”).
 
(tt)  No relationship, direct or indirect, exists between or among the Company
or any Subsidiary or any affiliate of them, on the one hand, and the directors,
officers, stockholders or directors of the Company or any Subsidiary, on the
other hand, which is required by the rules of the FINRA to be described in the
Registration Statement or the Prospectus which is not so described. Except as
otherwise disclosed in the Registration Statement or the Prospectus, there are
no material outstanding loans or advances or material guarantees of indebtedness
by the Company or, to the Company’s knowledge, any Subsidiary or any affiliate
of any of them to or for the benefit of any of the officers or directors of the
Company or any Subsidiary or any of the members of the families of any of them.
 
(uu)    Neither the Company nor, to the Company’s knowledge, any of the
Subsidiaries has sustained since the date of the last audited financial
statements included in the Registration Statement and the Prospectus any loss or
interference with its respective business from fire, explosion, flood or other
calamity, whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, in each case which is likely
either individually or in the aggregate to have a Material Adverse Effect.
 
(vv)    The Company is not a party to any agreement with an agent or underwriter
for any “at-the-market” or continuous equity transaction other than this
Agreement.
 
(ww)    The Company acknowledges and agrees that CF&Co has informed the Company
that CF&Co may, to the extent permitted under the Securities Act and the
Exchange Act, purchase and sell shares of Common Stock for its own account while
this Agreement is in effect provided that (i) no such purchase or sales shall
take place while a Placement Notice is in effect (except to the extent CF&Co may
engage in sales of Placement Shares purchased or deemed purchased from the
Company as a “riskless principal” or in a similar capacity) and (ii) the Company
shall not be deemed to have authorized or consented to any such purchases or
sales by CF&Co.
 
8.   Covenants of the Company.  The Company covenants and agrees with CF&Co
that:
 
(a)  After the date of this Agreement and during any period in which a
Prospectus relating to the Placement Shares is required to be delivered by CF&Co
under the Securities Act, (including in circumstances where such requirement may
be satisfied pursuant to Rule 172 under the Securities Act), (i) the Company
will notify CF&Co promptly of the time when any subsequent amendment to the
Registration Statement, other than documents incorporated by reference, has been
filed with the Commission and/or has become effective or any subsequent
supplement to the Prospectus has been filed and of any request by the Commission
for any amendment or supplement to the Registration Statement or Prospectus or
for additional information, (ii) the Company will prepare and file with the
Commission, promptly upon
 

 
 

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(b)  CF&Co’s request, any amendments or supplements to the Registration
Statement or Prospectus that, in CF&Co’s reasonable judgment, may be necessary
or advisable in connection with the distribution of the Placement Shares by
CF&Co (provided, however, that the failure of CF&Co to make such request shall
not relieve the Company of any obligation or liability hereunder, or affect
CF&Co’s right to rely on the representations and warranties made by the Company
in this Agreement other than to the extent any such amendment or supplement is
necessary or advisable due to information that must be disclosed strictly with
regard as to CF&Co), (iii) the Company will not file any amendment or supplement
to the Registration Statement or Prospectus relating to the Placement Shares,
other than documents incorporated by reference, unless a copy thereof has been
submitted to CF&Co a reasonable period of time before the filing and CF&Co has
not reasonably objected thereto (provided, however, (A) that the failure of
CF&Co to make such objection shall not relieve the Company of any obligation or
liability hereunder, or affect CF&Co’s right to rely on the representations and
warranties made by the Company in this Agreement except to the extent such
objection would have been necessary or advisable due to information that must be
disclosed strictly with regard as to CF&Co, and (B) that the Company has no
obligation to provide CF&Co any advance copy of such filing or to provide CF&Co
an opportunity to object to such filing if such filing does not name CF&Co or
does not relate to the transactions contemplated hereunder); (iv) the Company
will furnish to CF&Co at the time of filing thereof a copy of any document that
upon filing is deemed to be incorporated by reference into the Registration
Statement or Prospectus, except for those documents available via IDEA; and (v)
the Company will cause each amendment or supplement to the Prospectus to be
filed with the Commission as required pursuant to the applicable paragraph of
Rule 424(b) of the Securities Act or, in the case of any document to be
incorporated therein by reference, to be filed with the Commission as required
pursuant to the Exchange Act, within the time period prescribed (the
determination to file or not file any amendment or supplement with the
Commission under this Section 7(a), based on the Company’s reasonable opinion or
reasonable objections, shall be made exclusively by the Company).
 
(c)  The Company will advise CF&Co, promptly after it receives notice or obtains
knowledge thereof, of the issuance or threatened issuance by the Commission of
any stop order suspending the effectiveness of the Registration Statement, of
the suspension of the qualification of the Placement Shares for offering or sale
in any jurisdiction, or of the initiation or threatening of any proceeding for
any such purpose; and it will promptly use its reasonable efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such a stop order
should be issued.
 
(d)  During any period in which a Prospectus relating to the Placement Shares is
required to be delivered by CF&Co under the Securities Act (including in
circumstances where such requirement may be satisfied pursuant to Rule 172 under
the Securities Act), the Company will use its commercially reasonable efforts to
comply in all material respects with all requirements imposed upon it by the
Securities Act, as from time to time in force, so far as necessary to permit the
continuance of sales of the Placement Shares during such period in accordance
with the provisions hereof and the Prospectus, and will file on or before their
respective due dates all reports and any definitive proxy or information
statements required to be filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14, 15(d) or any other provision of or under the Exchange
Act.  If during such period any event occurs as a result of which the Prospectus
as then amended or supplemented would include an untrue statement of a material
 

 
 

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(e)  fact or omit to state a material fact necessary to make the statements
therein, in the light of the circumstances then existing, not misleading, or if
during such period it is necessary to amend or supplement the Registration
Statement or Prospectus to comply with the Securities Act, the Company will
promptly notify CF&Co to suspend the offering of Placement Shares during such
period and the Company will promptly amend or supplement the Registration
Statement or Prospectus (at the expense of the Company) so as to correct such
statement or omission or effect such compliance.
 
(f)  During any period in which the Prospectus relating to the Placement Shares
is required to be delivered by CF&Co under the Securities Act (including in
circumstances where such requirement may be satisfied pursuant to Rule 172 under
the Securities Act), the Company will use its commercially reasonable efforts to
cause the Placement Shares to be listed on the Exchange and to qualify the
Placement Shares for sale under the securities laws of such jurisdictions as
CF&Co reasonably designates and to continue such qualifications in effect so
long as required for the distribution of the Placement Shares; provided,
however, that the Company shall not be required in connection therewith to
qualify as a foreign corporation or dealer in securities, file a general consent
to service of process in any jurisdiction, or meet any other requirement in
connection with this Section 7(d) deemed by the Company to be unduly burdensome.
 
(g)  The Company will furnish to CF&Co and its counsel (at the expense of the
Company) copies of the Registration Statement, the Prospectus (including all
documents incorporated by reference therein) and all amendments and supplements
to the Registration Statement or Prospectus that are filed with the Commission
during any period in which a Prospectus relating to the Placement Shares is
required to be delivered under the Securities Act (including all documents filed
with the Commission during such period that are deemed to be incorporated by
reference therein), in each case as soon as reasonably practicable and in such
quantities as CF&Co may from time to time reasonably request and, at CF&Co’s
request, will also furnish copies of the Prospectus to each exchange or market
on which sales of Shares may be made; provided, however, that the Company shall
not be required to furnish any document (other than the Prospectus) to CF&Co to
the extent such document is available on IDEA.
 
(h)  The Company will make generally available to its security holders as soon
as practicable, but in any event not later than 15 months after the end of the
Company’s current fiscal quarter, an earnings statement covering a 12-month
period that satisfies the provisions of Section 11(a) and Rule 158 of the
Securities Act.
 
(i)  The Company, whether or not the transactions contemplated hereunder are
consummated or this Agreement is terminated, in accordance with the provisions
of Section 11 hereunder, will pay all expenses incident to the performance of
its obligations hereunder, including, but not limited to, expenses relating to
(i) the preparation, printing and filing of the Registration Statement and each
amendment and supplement thereto, of each Prospectus and of each amendment and
supplement thereto, (ii) the preparation, issuance and delivery of the Placement
Shares, (iii) the qualification of the Placement Shares under securities laws in
accordance with the provisions of Section 7(d) of this Agreement, including
filing fees and any reasonable fees or disbursements of counsel for CF&Co in
connection therewith, (iv) the printing and delivery to CF&Co of copies of the
Prospectus and any amendments or supplements thereto, and of this Agreement, (v)
the fees and expenses incurred in connection with the listing or
 

 
 

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(j)  qualification of the Placement Shares for trading on the Exchange, or (vi)
the filing fees and charges, if any, of the Commission and the FINRA Corporate
Finance Department.
 
(k)  The Company will use the Net Proceeds as described in the Prospectus in the
section entitled “Use of Proceeds”.
 
(l)  During either the pendency of any Placement Notice given hereunder, or any
period in which the Prospectus relating to the Placement Shares is required to
be delivered by CF&Co, the Company shall provide CF&Co notice as promptly as
reasonably practicable before it offers to sell, contracts to sell, sells,
grants any option to sell or otherwise disposes of any shares of Common Stock
(other than Placement Shares offered pursuant to the provisions of this
Agreement) or securities convertible into or exchangeable for shares of Common
Stock, warrants or any rights to purchase or acquire shares of Common Stock;
provided, however, that such notice shall not be required in connection with the
(i) issuance, grant or sale of shares of Common Stock, options to purchase
shares of Common Stock or shares of Common Stock issuable upon the exercise of
options, or other equity awards pursuant to the any stock option, stock bonus or
other stock plan or arrangement then in effect or which the Company may from
time to time adopt provided the implementation of such is disclosed to CF&Co in
advance, (ii) the issuance of shares of Common Stock in connection with an
acquisition, merger or sale or purchase of assets described in the Prospectus,
(iii) any shares of Common Stock issuable upon conversion or exchange of
securities or the exercise of warrants, options or other rights in effect or
outstanding or (iv) the issuance or sale of shares of Common Shares pursuant to
any dividend reinvestment plan that the Company may adopt from time to time
provided the implementation of such is disclosed to CF&Co in advance.
 
(m)  The Company will, at any time during the term of this Agreement, as
supplemented from time to time, advise CF&Co promptly after it shall have
received notice or obtained knowledge thereof, of any information or fact that
would alter or affect in any material respect any opinion, certificate, letter
or other document required to be provided to CF&Co pursuant to this Agreement.
 
(n)  The Company will cooperate with any reasonable due diligence review
conducted by CF&Co or its agents in connection with the transactions
contemplated hereby, including, without limitation, providing information and
making available documents and senior corporate officers, as CF&Co may
reasonably request; provided, however, that the Company shall be required to
make available documents and senior corporate officers only (i) at the Company’s
principal offices and (ii) during the Company’s ordinary business hours.
 
(o)  The Company shall disclose in its quarterly reports on Form 10-Q and in its
annual report on Form 10-K the number of Placement Shares sold through CF&Co
under this Agreement, the Net Proceeds to the Company and the compensation
payable by the Company to CF&Co with respect to such Placement Shares pursuant
to this Agreement during the relevant quarter.
 

(p)  During the term of this Agreement, on a date prior to or concurrent with
the giving of the first Placement Notice (such date, the “Initial Representation
Date”), and thereafter each time the Company (i) files the Prospectus relating
to the Placement Shares or amends or
 

 
 

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(q)  supplements the Registration Statement or the Prospectus relating to the
Placement Shares by means of a post-effective amendment, sticker, or supplement
but not by means of incorporation of document(s) by reference to the
Registration Statement or the Prospectus relating to the Placement Shares; (ii)
files an annual report on Form 10-K under the Exchange Act; (iii) files its
quarterly reports on Form 10-Q under the Exchange Act; (iv) files a report on
Form 8-K containing amended financial information (other than information
“furnished” pursuant to Items 2.02 or 7.01 of Form 8-K) under the Exchange Act;
or (v) files a Form 8-K under the Exchange Act for any other purpose (other than
to “furnish” information) (each date of filing of one or more of the documents
referred to in clauses (i) through (v) shall be a “Representation Date”), the
Company shall furnish CF&Co (but in the case of clause (v) above only if CF&Co
reasonably determines that the information contained in such Form 8-K is
material) with a certificate, in the form attached hereto as Exhibit 7(m) within
three (3) Trading Days of the applicable Representation Date.  The requirement
to provide a certificate under this Section 7(m) shall be waived for any
Representation Date occurring during a fiscal quarter during which the Company
does not intend to sell Placement Shares prior to the next occurring
Representation Date; provided, however, that such waiver shall not apply for any
Representation Date on which the Company files its annual report on Form 10-K.
Notwithstanding the foregoing, if the Company subsequently decides to sell
Placement Shares following a Representation Date when the Company relied on such
waiver and did not provide CF&Co with a certificate under this Section 7(m),
then before CF&Co either delivers the Placement Notice or sells any Placement
Shares, the Company shall provide CF&Co with a certificate, in the form attached
hereto as Exhibit 7(m), dated the date of the Placement Notice.
 
(r)  On the Initial Representation Date and thereafter within three (3) Trading
Days of each Representation Date, the Company shall cause to be furnished to
CF&Co (but in the case of Section 7(m)(v) only if requested by CF&Co in
accordance with the provisions of Section 7(m)) with a written opinion of
Troutman Sanders LLP (the “Company Counsel”), dated the Representation Date, in
substantially the form attached hereto as Exhibit 7(n)(1) (for the filing of the
Prospectus relating to the Placement Shares), and Exhibit 7(n)(2) (for
subsequent Representation Dates), but modified, as necessary, to relate to the
Registration Statement and the Prospectus as then amended or supplemented;
provided, however, that in lieu of such opinion, the Company Counsel may furnish
CF&Co with a letter to the effect that CF&Co may rely on a prior opinion
delivered under this Section 7(n) to the same extent as if it were dated the
date of such letter (except that statements in such prior opinion shall be
deemed to relate to the Registration Statement and the Prospectus as amended or
supplemented at such Representation Date).  The requirement to provide such
opinion shall be waived for any Representation Date occurring during a fiscal
quarter during which the Company does not intend to sell Placement Shares prior
to the next occurring Representation Date; provided further, however, that such
waiver shall not apply for any Representation Date on which the Company files
its annual report on Form 10-K. Notwithstanding the foregoing, if the Company
subsequently decides to sell Placement Shares following a Representation Date
when the Company relied on such waiver and did not provide CF&Co with an opinion
from Company Counsel, then before CF&Co either delivers the Placement Notice or
sells any Placement Shares, the Company shall provide CF&Co with an opinion from
Company Counsel dated the date of the Placement Notice.
 
(s)  On the Initial Representation Date and thereafter within three (3) Trading
Days of each Representation Date on which the Registration Statement is amended
or the Prospectus
 

 
 

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(t)  supplemented to include additional amended financial information or there
is filed with the Commission any document incorporated by reference into the
Prospectus which contains additional amended financial information, the Company
shall cause BDO Seidman LLP to furnish CF&Co a letter (a “Comfort Letter”),
dated the date of such Representation Date, in form and substance satisfactory
to CF&Co, (i) confirming that it is an independent registered public accounting
firm within the meaning of the Securities Act and is in compliance with the
applicable requirements relating to the qualification of accountants under Rule
2-01 of Regulation S-X of the Commission, (ii) stating, as of such date, the
conclusions and findings of such firm with respect to the financial information
and other matters ordinarily covered by accountants’ “comfort letters” to
underwriters in connection with registered public offerings (the first such
letter, the “Initial Comfort Letter”) and (iii) updating the Initial Comfort
Letter with any information which would have been included in the Initial
Comfort Letter had it been given on such date and modified as necessary to
relate to the Registration Statement and the Prospectus, as amended and
supplemented to the date of such Comfort Letter.  The requirement to provide a
Comfort Letter under this Section 7(o) shall be waived for any Representation
Date occurring during a fiscal quarter during which the Company does not intend
to sell Placement Shares prior to the next occurring Representation Date;
provided, however, that such waiver shall not apply for any Representation Date
on which the Company files its annual report on Form 10-K. Notwithstanding the
foregoing, if the Company subsequently decides to sell Placement Shares
following a Representation Date when the Company relied on such waiver and did
not provide CF&Co with a Comfort Letter under this Section 7(o), then before
CF&Co either delivers the Placement Notice or sells any Placement Shares, the
Company shall provide CF&Co with a Comfort Letter dated the date of the
Placement Notice.
 
(u)  The Company will not, directly or indirectly take any action designed to
cause or result in, or that constitutes or might reasonably be expected to
constitute, the stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Placement Shares.
 
(v)  The Company acknowledges and agrees that CF&Co has informed the Company
that CF&Co may, to the extent permitted under the Securities Act and the
Exchange Act, purchase and sell Placement Shares for its own account at the same
time as Placement Shares are being sold by the Company pursuant to this
Agreement, provided that the Company shall not be deemed to have authorized or
consented to any such purchases or sales by CF&Co.
 
(w)  Each Placement Notice issued by the Company to CF&Co to solicit offers to
purchase Placement Shares shall be deemed to be an affirmation that the
representations and warranties made by it in this Agreement are true and correct
in all material respects at the time such Placement Notice is issued, and that
the Company has complied in all material respects with all of the agreements to
be performed by it hereunder at or prior to such time.
 
(x)    The Company has been organized and operated in conformity with the
requirements for qualification and taxation of the Company as a REIT under the
Code, and the Company’s proposed methods of operation will enable the Company to
continue to meet the requirements for qualification and taxation as a REIT under
the Code for subsequent taxable years.
 
(y)   Other than a “free writing prospectus” (as defined in Rule 405 under the
Securities Act) approved in advance by the Company and CF&Co in its capacity as
principal or agent
 

 
 

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(z)  hereunder, neither CF&Co nor the Company (including its agents and
representatives, other than CF&Co in its capacity as such) will make, use,
prepare, authorize, approve or refer to any “written communication” (as defined
in Rule 405 under the Securities Act), required to be filed with the Commission,
that constitutes an offer to sell or solicitation of an offer to buy Shares
hereunder.
 
(aa)   The Company will not be or become, at any time prior to the termination
of this Agreement, an “investment company,” as such term is defined in the
Investment Company Act, assuming no change in the Commission’s current
interpretation as to entities that are not considered an “investment company”.
 
(bb)    The Company will substantially comply with all material requirements
imposed upon it by the Securities Act and the Exchange Act as from time to time
in force, so far as necessary to permit the continuance of sales of, or dealings
in, the Placement Shares as contemplated by the provisions hereof and the
Prospectus.
 
(cc)    The Company will maintain such controls and other procedures, including,
without limitation, those required by Sections 302 and 906 of the Sarbanes-Oxley
Act and the applicable regulations thereunder, that are designed to ensure that
information required to be disclosed by the Company in the reports that it files
or submits under the Exchange Act is recorded, processed, summarized and
reported within the time periods specified in the Commission’s rules and forms,
including, without limitation, controls and procedures designed to ensure that
information required to be disclosed by the Company in the reports that it files
or submits under the Exchange Act is accumulated and communicated to the
Company’s management, including its chief executive officer and chief financial
officer, or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure and to ensure that material information
relating to the Company is made known.
 
9.   Conditions to CF&Co’s Obligations. The obligations of CF&Co hereunder with
respect to a Placement will be subject to the continuing accuracy and
completeness of the representations and warranties made by the Company herein,
to the due performance by the Company of its obligations hereunder, to the
completion by CF&Co of a due diligence review satisfactory to CF&Co in its
reasonable judgment, and to the continuing satisfaction (or waiver by CF&Co in
its sole discretion) of the following additional conditions:
 
(a)    The Registration Statement shall have become effective and shall be
available for the sale of (i) all Placement Shares covered by prior Placement
Notices and not yet sold by CF&Co and (ii) all Placement Shares contemplated to
be issued by the Placement Notice relating to such Placement.
 
(b)    None of the following events shall have occurred and be continuing:  (i)
receipt by the Company of any request for additional information from the
Commission or any other federal or state governmental authority during the
period of effectiveness of the Registration Statement, the response to which
would require any amendments or supplements to the Registration Statement or the
Prospectus; (ii) the issuance by the Commission or any other federal or state
governmental authority of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose;
(iii) receipt by the Company of any notification with respect to the suspension
of the qualification or exemption from
 

 
 

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(c)  qualification of any of the Placement Shares for sale in any jurisdiction
or the initiation or threatening of any proceeding for such purpose; (iv) the
occurrence of any event that makes any material statement made in the
Registration Statement or the Prospectus or any document incorporated or deemed
to be incorporated therein by reference untrue in any material respect or that
requires the making of any changes in the Registration Statement, the Prospectus
or documents incorporated therein by reference so that, in the case of the
Registration Statement, it will not contain any 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 and, that in the case of
the Prospectus, it will not contain any 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, in the light of the circumstances under which they
were made, not misleading; and (v) the Company’s reasonable determination that a
post-effective amendment to the Registration Statement would be appropriate.
 
(d)    CF&Co shall not have advised the Company that the Registration Statement
or Prospectus, or any amendment or supplement thereto, contains an untrue
statement of fact that in CF&Co’s opinion is material, or omits to state a fact
that in CF&Co’s opinion is material and is required to be stated therein or is
necessary to make the statements therein not misleading.
 
(e)    Except as contemplated in the Prospectus, or disclosed in the Company’s
reports filed with the Commission, there shall not have been any material
adverse change, on a consolidated basis, in the authorized capital stock of the
Company or any Material Adverse Effect, or any development that may reasonably
be expected to cause a Material Adverse Effect, or a downgrading in or
withdrawal of the rating assigned to any of the Company’s securities by any
rating organization or a public announcement by any rating organization that it
has under surveillance or review its rating of any of the Company’s securities,
the effect of which, in the case of any such action by a rating organization
described above, in the reasonable judgment of CF&Co (without relieving the
Company of any obligation or liability it may otherwise have), is so material as
to make it impracticable or inadvisable to proceed with the offering of the
Placement Shares on the terms and in the manner contemplated in the Prospectus.
 
(f)    CF&Co shall have received the opinion of Company Counsel required to be
delivered pursuant Section 7(n) on or before the date on which such delivery of
such opinion is required pursuant to Section 7(n).
 
(g)    CF&Co shall have received the Comfort Letter required to be delivered
pursuant Section 7(o) on or before the date on which such delivery of such
letter is required pursuant to Section 7(o).
 
(h)    CF&Co shall have received the certificate required to be delivered
pursuant to Section 7(m) on or before the date on which delivery of such
certificate is required pursuant to Section 7(m).
 
(i)    Trading in the Common Stock shall not have been suspended on the
Exchange.
 
(j)    On each date on which the Company is required to deliver a certificate
pursuant to Section 7(m), the Company shall have furnished to CF&Co such
appropriate further information, certificates and documents as CF&Co may
reasonably request. All such certificates and other
 

 
 

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(k)  documents will be in compliance with the provisions hereof. The Company
will furnish CF&Co with such conformed copies of such certificates and other
documents as CF&Co shall reasonably request.
 
(l)   Prior to the giving of any Placement Notice, (i) no stop order with
respect to the effectiveness of the Registration Statement shall have been
issued under the Securities Act or proceedings initiated under Section 8(d) or
8(e) of the Securities Act; (ii) the Registration Statement and all amendments
thereto, or modifications thereof, if any, shall 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 (iii)
the Prospectus and all amendments or supplements thereto, or modifications
thereof, if any, shall 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, in the light of the circumstances under which they are
made, not misleading.
 
(m)    All filings with the Commission required by Rule 424 under the Securities
Act to have been filed prior to the giving of any Placement Notice hereunder
shall have been made within the applicable time period prescribed for such
filing by Rule 424.
 
(n)    Either (i) the Placement Shares shall have been approved for listing on
the Exchange, subject only to notice of issuance, or (ii) the Company shall have
filed an application for listing of the Placement Shares on the Exchange, in
either case at, or prior to, the giving of any Placement Notice.
 
(o)    There shall not have occurred any event that would permit CF&Co to
terminate this Agreement pursuant to Section 11(a).
 
10.   Indemnification and Contribution.
 
(a)  The Company agrees to indemnify and hold harmless CF&Co, the directors,
officers, partners, employees and agents of CF&Co and each person, if any, who
(i) controls CF&Co within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, or (ii) is controlled by or is under common
control with CF&Co (a “CF&Co Affiliate”) from and against any and all losses,
claims, liabilities, expenses and damages (including, but not limited to, any
and all investigative, legal and other expenses reasonably incurred in
connection with, and any and all amounts paid in settlement of, any action, suit
or proceeding between any of the indemnified parties and any indemnifying
parties or between any indemnified party and any third party, or otherwise, or
any claim asserted), as and when incurred, to which CF&Co, or any such person,
may become subject under the Securities Act, the Exchange Act or other federal
or state statutory law or regulation, at common law or otherwise, insofar as
such losses, claims, liabilities, expenses or damages arise out of or are based,
directly or indirectly, on (1) any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or the Prospectus or
any amendment or supplement to the Registration Statement or the Prospectus, or
in any application or other document executed by or on behalf of the Company or
based on written information furnished by or on behalf of the Company filed in
any jurisdiction in order to qualify the Placement Shares under the securities
laws thereof or filed with the Commission, (2) the omission or alleged omission
to state in such document a material fact required to be stated in it or
necessary to make the statements in it not misleading or (3) any
 

 
 

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(b)  breach by any of the indemnifying parties of any of their respective
representations, warranties and agreements contained in this Agreement;
provided, however, that this indemnity agreement shall not apply to the extent
that such loss, claim, liability, expense or damage arises from the sale of the
Placement Shares pursuant to this Agreement and is caused directly or indirectly
by an untrue statement or omission, or alleged untrue statement or omission,
made in reliance on and in conformity with information relating to CF&Co and
furnished in writing to the Company by CF&Co expressly stating that such
information is intended for inclusion in any document described in clause (a)(1)
above. This indemnity agreement will be in addition to any liability that the
Company might otherwise have.
 
(c)  CF&Co agrees to indemnify and hold harmless the Company and its directors
and each officer of the Company who signed the Registration Statement, and each
person, if any, who (i) controls the Company within the meaning of Section 15 of
the Securities Act or Section 20 of the Exchange Act or (ii) is controlled by or
is under common control with the Company (a “Company Affiliate”) against any and
all losses, claims, liabilities, expenses and damages described in the indemnity
contained in Section 9(a), as and when incurred, but only with respect to untrue
statements or omissions, or alleged untrue statements or omissions, made in the
Registration Statement (or any amendments thereto) or the Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with
information relating to CF&Co and furnished in writing to the Company by CF&Co
expressly stating that such information is intended for inclusion in any
document described in clause (1) of Section 9(a) above.
 
(d)  Any party that proposes to assert the right to be indemnified under this
Section 9 will, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim is to be made against an
indemnifying party or parties under this Section 9, notify each such
indemnifying party of the commencement of such action, enclosing a copy of all
papers served, but the omission so to notify such indemnifying party will not
relieve the indemnifying party from (i) any liability that it might have to any
indemnified party otherwise than under this Section 9 and (ii) any liability
that it may have to any indemnified party under the foregoing provision of this
Section 9 unless, and only to the extent that, such omission results in the
forfeiture of substantive rights or defenses by the indemnifying party. If any
such action is brought against any indemnified party and it notifies the
indemnifying party of its commencement, the indemnifying party will be entitled
to participate in and, to the extent that it elects by delivering written notice
to the indemnified party promptly after receiving notice of the commencement of
the action from the indemnified party, jointly with any other indemnifying party
similarly notified, to assume the defense of the action, with counsel reasonably
satisfactory to the indemnified party, and after notice from the indemnifying
party to the indemnified party of its election to assume the defense, the
indemnifying party will not be liable to the indemnified party for any legal or
other expenses except as provided below and except for the reasonable costs of
investigation subsequently incurred by the indemnified party in connection with
the defense. The indemnified party will have the right to employ its own counsel
in any such action, but the fees, expenses and other charges of such counsel
will be at the expense of such indemnified party unless (1) the employment of
counsel by the indemnified party has been authorized in writing by the
indemnifying party, (2) the indemnified party has reasonably concluded (based on
advice of counsel) that there may be legal defenses available to it or other
indemnified parties that are different from or in addition to those available to
the indemnifying party, (3) a conflict or potential conflict exists (based on
advice of counsel to the indemnified
 

 
 

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(e)  party) between the indemnified party and the indemnifying party (in which
case the indemnifying party will not have the right to direct the defense of
such action on behalf of the indemnified party) or (4) the indemnifying party
has not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, in
each of which cases the reasonable fees, disbursements and other charges of
counsel will be at the expense of the indemnifying party or parties. It is
understood that the indemnifying party or parties shall not, in connection with
any proceeding or related proceedings in the same jurisdiction, be liable for
the reasonable fees, disbursements and other charges of more than one separate
firm admitted to practice in such jurisdiction at any one time for all such
indemnified party or parties. All such fees, disbursements and other charges
will be reimbursed by the indemnifying party promptly as they are incurred. An
indemnifying party will not, in any event, be liable for any settlement of any
action or claim effected without its written consent.  No indemnifying party
shall, without the prior written consent of each indemnified party, settle or
compromise or consent to the entry of any judgment in any pending or threatened
claim, action or proceeding relating to the matters contemplated by this Section
9 (whether or not any indemnified party is a party thereto), unless such
settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising or that may arise out of such
claim, action or proceeding.  Notwithstanding any other provision of this
Section 9(c), if at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel for which it is entitled to reimbursement pursuant to this Section 9(c),
such indemnifying party agrees that it shall be liable for any settlement
effected without its written consent if (i) such settlement is entered into more
than 45 days after receipt by such indemnifying party of the aforesaid request,
(ii) such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into, and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement; provided,
however, that an indemnifying party shall not be liable for any such settlement
effected without its consent if such indemnifying party, at least five days
prior to the date of such settlement, (1) reimburses such indemnified party in
accordance with such request for the amount of such fees and expenses of counsel
as the indemnifying party believes in good faith to be reasonable and (2)
provides written notice to the indemnified party that the indemnifying party
disputes in good faith the reasonableness of the unpaid balance of such fees and
expenses.
 
(f)  In order to provide for just and equitable contribution in circumstances in
which the indemnification provided for in the foregoing paragraphs of this
Section 9 is applicable in accordance with its terms but for any reason is held
to be unavailable from the Company or CF&Co, the Company and CF&Co will
contribute to the total losses, claims, liabilities, expenses and damages
(including any investigative, legal and other expenses reasonably incurred in
connection with, and any amount paid in settlement of, any action, suit or
proceeding or any claim asserted, but after deducting any contribution received
by the Company from persons other than CF&Co, such as persons who control the
Company within the meaning of the Securities Act, officers of the Company who
signed the Registration Statement and directors of the Company, who also may be
liable for contribution) to which the Company and CF&Co may be subject in such
proportion as shall be appropriate to reflect the relative benefits received by
the Company on the one hand and CF&Co on the other. The relative benefits
received by the Company on the one hand and CF&Co on the other hand shall be
deemed to be in the same proportion as the total Net Proceeds from the offering
(before deducting expenses) received by
 

 
 

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(g)  the Company bear to the total compensation (before deducting expenses)
received by CF&Co from the sale of Placement Shares on behalf of the
Company.  If, but only if, the allocation provided by the foregoing sentence is
not permitted by applicable law, the allocation of contribution shall be made in
such proportion as is appropriate to reflect not only the relative benefits
referred to in the foregoing sentence but also the relative fault of the
Company, on the one hand, and CF&Co, on the other, with respect to the
statements or omission which resulted in such loss, claim, liability, expense or
damage, or action in respect thereof, as well as any other relevant equitable
considerations with respect to such offering. Such relative fault shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by the Company or CF&Co, the
intent of the parties and their relative knowledge, access to information and
opportunity to correct or prevent such statement or omission. The Company and
CF&Co agree that it would not be just and equitable if contributions pursuant to
this Section 9(d) were to be determined by pro rata allocation or by any other
method of allocation which does not take into account the equitable
considerations referred to herein. The amount paid or payable by an indemnified
party as a result of the loss, claim, liability, expense, or damage, or action
in respect thereof, referred to above in this Section 9(d) shall be deemed to
include, for the purpose of this Section 9(d), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim to the extent consistent with Section 9(c)
hereof.  Notwithstanding the foregoing provisions of this Section 9(d), CF&Co
shall not be required to contribute any amount in excess of the commissions
received by it under this Agreement and no person found guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
will be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 9(d), any person who
controls a party to this Agreement within the meaning of the Securities Act, and
any officers, directors, partners, employees or agents of CF&Co, will have the
same rights to contribution as that party, and each officer of the Company who
signed the Registration Statement will have the same rights to contribution as
the Company, subject in each case to the provisions hereof. Any party entitled
to contribution, promptly after receipt of notice of commencement of any action
against such party in respect of which a claim for contribution may be made
under this Section 9(d), will notify any such party or parties from whom
contribution may be sought, but the omission to so notify will not relieve that
party or parties from whom contribution may be sought from any other obligation
it or they may have under this Section 9(d) except to the extent that the
failure to so notify such other party materially prejudiced the defenses of the
party from whom contribution is sought. Except for a settlement entered into
pursuant to the last sentence of Section 9(c) hereof, no party will be liable
for contribution with respect to any action or claim settled without its written
consent if such consent is required pursuant to Section 9(c) hereof.
 
11.   Representations and Agreements to Survive Delivery.  All representations
and warranties of the Company herein or in certificates delivered pursuant
hereto shall survive, as of their respective dates, regardless of (i) any
investigation made by or on behalf of CF&Co, any controlling persons, or the
Company (or any of their respective officers, directors or controlling persons),
(ii) delivery and acceptance of the Placement Shares and payment therefor or
(iii) any termination of this Agreement.
 
12.   Termination.
 

 
 

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13.   CF&Co shall have the right by giving notice as hereinafter specified at
any time to terminate this Agreement if (i) any Material Adverse Effect, or any
development that has actually occurred and that is reasonably expected to cause
a Material Adverse Effect has occurred which, in the reasonable judgment of
CF&Co, may materially impair the ability of CF&Co to sell the Placement Shares
hereunder, (ii) the Company shall have failed, refused or been unable to perform
any agreement on its part to be performed hereunder; provided, however, in the
case of any failure of the Company to deliver (or cause another person to
deliver) any certification, opinion, or letter required under Sections 7(m),
7(n), or 7(o), CF&Co’s right to terminate shall not arise unless such failure to
deliver (or cause to be delivered) continues for more than thirty (30) days from
the date of the Representation Date pursuant to which such delivery was
required; provided, further, that, CF&Co shall have the right to suspend its
obligations hereunder, regardless of whether a Placement Notice is pending,
beginning on the sixth (6th) Trading Day after the date of any Representation
Date if any certification, opinion, or letter referenced in the foregoing
proviso has not yet been (or caused to be) delivered; (iii) any other condition
of CF&Co’s obligations hereunder is not fulfilled, or (iv) any suspension or
limitation of trading in the Placement Shares or in securities generally on the
Exchange shall have occurred.  Any such termination shall be without liability
of any party to any other party except that the provisions of Section 7(g),
Section 7(v), Section 9, Section 10, Section 16 and Section 17 hereof shall
remain in full force and effect notwithstanding such termination.  If CF&Co
elects to terminate this Agreement as provided in this Section 11, CF&Co shall
provide the required notice as specified herein.
 
(a)  The Company shall have the right, by giving ten (10) days notice as
hereinafter specified to terminate this Agreement in its sole discretion at any
time following the period of three (3) months after the date of this
Agreement.  Any such termination shall be without liability of any party to any
other party except that the provisions of Section 7(g), Section 7(v), Section 9,
Section 10, Section 16 and Section 17 hereof shall remain in full force and
effect notwithstanding such termination.
 
(b)  CF&Co shall have the right, by giving ten (10) days notice as hereinafter
specified to terminate this Agreement in its sole discretion at any time
following the period of three (3) months after the date of this Agreement.  Any
such termination shall be without liability of any party to any other party
except that the provisions of Section 7(g), Section 7(v), Section 9, Section 10,
Section 16 and Section 17 hereof shall remain in full force and effect
notwithstanding such termination.
 
(c)  This Agreement shall remain in full force and effect unless terminated
pursuant to Sections 11(a), 11(b), or 11(c) above or otherwise by mutual
agreement of the parties or until automatic termination upon the issuance and
sale of all of the Shares through CF&Co on the terms and subject to the
conditions set forth herein; provided, however, that any such termination by
mutual agreement shall in all cases be deemed to provide that Section 7(g),
Section 7(v), Section 9, Section 10, Section 16 and Section 17 shall remain in
full force and effect.
 
(d)  Any termination of this Agreement shall be effective on the date specified
in such notice of termination; provided, however, that such termination shall
not be effective until the close of business on the date of receipt of such
notice by CF&Co or the Company, as the case may be. If such termination shall
occur prior to the Settlement Date for any sale of Placement Shares, such
Placement Shares shall settle in accordance with the provisions of this
Agreement.
 

 
 

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(e)  Notices.
 
All notices or other communications required or permitted to be given by any
party to any other party pursuant to the terms of this Agreement shall be in
writing and if sent to CF&Co, shall be delivered to CF&Co at Cantor Fitzgerald &
Co., 499 Park Avenue, New York, New York 10022, fax no.: (212) 308-3730,
Attention: Capital Markets/Jeff Lumby, with copies to Stephen Merkel, General
Counsel, at the same address, and DLA Piper US LLP, 1251 Avenue of the Americas,
New York, NY 10020, fax no.: (212) 884-8494, Attention: Dean M. Colucci; or if
sent to the Company, shall be delivered to Dynex Capital, Inc., 4551 Cox Road,
Suite 300, Glen Allen, VA  23060, phone: (804) 217-5800,  fax no.: (804)
217-5860, Attention: Stephen J. Benedetti, with a copy to Troutman Sanders LLP,
222 Central Park Avenue, Suite 2000, Virginia Beach, VA  23462, phone: (757)
687-7719, fax no.: (757) 687-1501, Attention: James J. Wheaton.  Each party to
this Agreement may change such address for notices by sending to the parties to
this Agreement written notice of a new address for such purpose.  Each such
notice or other communication shall be deemed given (i) when delivered
personally or by verifiable facsimile transmission (with an original to follow)
on or before 4:30 p.m., New York City time, on a Business Day or, if such day is
not a Business Day, on the next succeeding Business Day, (ii) on the next
Business Day after timely delivery to a nationally-recognized overnight courier
and (iii) on the Business Day actually received if deposited in the U.S. mail
(certified or registered mail, return receipt requested, postage prepaid). For
purposes of this Agreement, “Business Day” shall mean any day on which the
Exchange and commercial banks in the City of New York are open for business.

14.   Successors and Assigns.  This Agreement shall inure to the benefit of and
be binding upon the Company and CF&Co and their respective successors and the
affiliates, controlling persons, officers and directors referred to in Section 9
hereof. References to any of the parties contained in this Agreement shall be
deemed to include the successors and permitted assigns of such party. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and permitted assigns any
rights, remedies, obligations or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement. Neither party may
assign its rights or obligations under this Agreement without the prior written
consent of the other party.
 
15.    Adjustments for Stock Splits.  The parties acknowledge and agree that all
share related numbers contained in this Agreement shall be adjusted to take into
account any stock split, stock dividend or similar event effected with respect
to the Common Stock.
 
16.   Entire Agreement; Amendment; Severability.  This Agreement (including all
schedules and exhibits attached hereto and placement notices issued pursuant
hereto) constitutes the entire agreement and supersedes all other prior and
contemporaneous agreements and undertakings, both written and oral, among the
parties hereto with regard to the subject matter hereof. Neither this Agreement
nor any term hereof may be amended except pursuant to a written instrument
executed by the Company and CF&Co.  In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
 

 
 

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17.   Applicable Law; Consent to Jurisdiction. This Agreement shall be governed
by, and construed in accordance with, the internal laws of the State of New York
without regard to the principles of conflicts of laws. Each party hereby
irrevocably submits to the non-exclusive jurisdiction of the state and federal
courts sitting in the City of New York, borough of Manhattan, for the
adjudication of any dispute hereunder or in connection with any transaction
contemplated hereby, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper.  Each party hereby irrevocably waives personal service
of process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof (certified or registered mail, return
receipt requested) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof.  Nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner
permitted by law.
 
18.   Waiver of Jury Trial.  The Company and CF&Co each hereby irrevocably
waives any right it may have to a trial by jury in respect of any claim based
upon or arising out of this agreement or any transaction contemplated hereby.
 
19.   Counterparts.  This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. Delivery of an executed Agreement by one
party to the other may be made by facsimile transmission.
 
20.   Absence of Fiduciary Relationship.  The Company acknowledges and agrees
that:
 
(a)  CF&Co has been retained solely to act as underwriter and agent in
connection with the sale of the Shares and that no fiduciary or advisory
relationship between the Company and CF&Co has been created in respect of any of
the transactions contemplated by this Agreement, irrespective of whether CF&Co
has advised or is advising the Company on other matters;
 
(b)  the Company is capable of evaluating and understanding and understands and
accepts the terms, risks and conditions of the transactions contemplated by this
Agreement; and
 
(c)  the Company has been advised that CF&Co and its affiliates are engaged in a
broad range of transactions which may involve interests that differ from those
of the Company and that CF&Co has no obligation to disclose such interests and
transactions to the Company by virtue of any fiduciary, advisory or agency
relationship.
 
21.   Defined Terms.  As used in this Agreement, the term “Applicable Time”
means the date of this Agreement, each Representation Date, the date on which a
Placement Notice is given or any date on which Placement Shares are sold
hereunder.
 

[Remainder of Page Intentionally Blank]

 
 

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If the foregoing correctly sets forth the understanding between the Company and
CF&Co, please so indicate in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement between the Company
and CF&Co.
 
 
Very truly yours,

DYNEX CAPITAL, INC.

By:    /s/ Stephen J. Benedetti                                
Name:  Stephen J. Benedetti
Title:    Executive Vice Presient, Chief Operating Officer and Chief Financial
Officer

ACCEPTED as of the date
first-above written:

CANTOR FITZGERALD & CO.

By:    /s/ Jeffrey Lumby                                         
Jeffrey Lumby
Managing Director

EAST\42275790. 7
                                                                

 
 

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SCHEDULE 1
 

 
FORM OF PLACEMENT NOTICE
 

 
From:
[                              
]

Cc:
[                              
]

To:
[
]

Subject:                      Controlled Equity Offering—Placement Notice
 
Gentlemen:
 
Pursuant to the terms and subject to the conditions contained in the Controlled
Equity OfferingSM Sales Agreement between DYNEX CAPITAL, INC., (the “Company”)
and Cantor Fitzgerald & Co. (“CF&Co”) dated March 16, 2009 (the “Agreement”), I
hereby request on behalf of the Company that CF&Co sell up to [ ] shares (the
“Placement Shares”) of the Company’s common stock, par value $0.01 per share, at
a minimum market price of $_______ per Placement Share between [__], 2009 and
[__], 20[__].  [There shall be no limitation on the number of Placement Shares
that may be sold on any one (1) day.][No more than [__] Placement Shares may be
sold on any one (1) day.]
 
Very truly yours,

By:  __________________________
Name: [_______________]
Title:   [_______________]

ADDITIONAL SALES PARAMETERS MAY BE ADDED, SUCH AS THE SPECIFIC DATES THE SHARES
MAY NOT BE SOLD ON, THE MANNER IN WHICH SALES ARE TO BE MADE BY CF&CO, AND/OR
THE CAPACITY IN WHICH CF&CO MAY ACT IN SELLING SHARES (AS PRINCIPAL, AGENT, OR
BOTH).

EAST\42275790.7
 
 

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SCHEDULE 2
 

 
Compensation
 
The amount of any discount, commission or other compensation to be paid by the
Company to CF&Co shall be up to three percent (3.0%) of the gross proceeds from
the sales of the Placement Shares.
 

EAST\42275790.7
 
 

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SCHEDULE 3
 

 
CANTOR FITZGERALD & CO.
 
Peter Dippolito                                pdippolito@cantor.com
 
Joshua Feldman                                           jfeldman@cantor.com
 
Jeff Lumby                                jlumby@cantor.com
 

DYNEX CAPITAL, INC.

Tom Akin                                tom.akin@dynexcapital.com
 
Steve
Benedetti                                           stephen.benedetti@dynexcapital.com
 
Leon Felman                                lafelman@msn.com
 
(Lead Independent
 
 Director)
 

EAST\42275790.7
 
 

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SCHEDULE 4
 
Subsidiaries
 
Mortgage Investment Corporation*
MSC I L.P.
Investment Capital Access, Inc.*
Commercial Capital Access One, Inc.*
MERIT Securities Corporation*
Financial Asset Securitization, Inc.*
Issued Holdings Capital Corporation*
Resource Finance Co. One
Resource Finance Co. Two
ND Holding Co.
GLS Capital, Inc.
GLS Properties, LLC
Allegheny Commercial Properties I, LLC
Allegheny Income Properties I, LLC
Allegheny Special Properties, LLC
Dynex Commercial Services, Inc.
Dynex Securities Corporation
GLS Capital Services, Inc.
GLS Development, Inc.
SMFC Funding Corporation
GLS Capital - Cuyahoga, Inc.
GGLS - Cuyahoga Lien Pool One, Inc.
GLS Capital Services - Marlborough, Inc.
Samma Properties Limited Partnership
SHF Corp.
St. Paul Acquisition Limited Partnership

*           Denotes a “significant subsidiary”, as such term is defined in Rule
1-02 of Regulation S-Xpromulgated under the Securities Act.

NOTE:
All companies were incorporated in Virginia except for GLS Properties, LLC,
Allegheny Commercial Properties I, LLC, Allegheny Income Properties I, LLC, and
Allegheny Special Properties, LLC (Pennsylvania).

 
Joint Ventures
 
Copperhead Ventures LLC
 

 

 

EAST\42275790.7
 
 

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Exhibit 7(m)

OFFICER CERTIFICATE

The undersigned, the duly qualified and elected Executive Vice President,
Treasurer and Secretary of DYNEX CAPITAL, INC. (“Company”), a Virginia
corporation, does hereby certify in such capacity and on behalf of the Company,
pursuant to Section 7(m) of the Sales Agreement dated March 16, 2009 (the “Sales
Agreement”) between the Company and Cantor Fitzgerald & Co. (“CF&Co”), that to
the best of the knowledge of the undersigned:
 
(i)           Except for non-material exceptions, the representations and
warranties of the Company in Section 6 of the Sales Agreement are true and
correct on and as of the date hereof, with the same force and effect as if
expressly made on and as of the date hereof; and
 
(ii)           The Company has complied in all material respects with all
material agreements and satisfied all conditions to be performed or satisfied on
its part pursuant to the Sales Agreement at or prior to the date hereof to the
extent not waived by CF&Co.
 

 

By:                                                                
Name:  Stephen Benedetti
Title:    Executive Vice President,
       Treasurer and Secretary

Date:                                                      

EAST\42275790.7
 
 

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Exhibit 7(n)(1)
 
MATTERS TO BE COVERED BY INITIAL OPINION OF
 
TROUTMAN SANDERS LLP
 
1.           As of December 31, 2008, the Company had an authorized
capitalization as set forth in its consolidated statements of financial
condition included in the Company’s Annual Report on Form 10-K for the year
ended December 31, 2008.
 
2.           The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the Commonwealth of
Virginia.  The Company has full corporate power and authority to own its assets
and to conduct its business as described in the Prospectus.
 
3.           The execution, delivery and performance of the Agreement by the
Company and the consummation by the Company of the transactions contemplated
thereby do not conflict with, or result in any breach of, or constitute a
default under (nor constitute any event that with notice, lapse of time or both
would constitute a breach of or default under), (i) the articles of
incorporation or bylaws of the Company, (ii) to our knowledge, violate any U.S.
federal or Virginia state law or regulation binding upon or applicable to the
Company or any of its properties or assets, or (iii) violate any decree,
judgment or order known to us to be applicable to the Company, except in the
case of clause (ii) for such violations, conflicts, breaches or defaults that
individually or in the aggregate would not be reasonably expected to have a
Material Adverse Effect; provided, however, that we express no opinion regarding
any state securities, blue sky or real estate syndication laws or Section 9 of
the Agreement.
 
5.           The Company has full corporate power and authority to enter into,
and to perform its obligations under, the Agreement and to consummate the
transactions contemplated therein. The execution and delivery of the Agreement
has been duly authorized by all necessary corporate action of the Company and
the Agreement has been duly executed and delivered by the Company.
 
6.           No approval, authorization, consent or order of, or filing with,
any U.S. federal or Virginia governmental or regulatory commission, board, body,
authority or agency is required in connection with the execution, delivery and
performance of the Agreement and the consummation of the transactions
contemplated therein, including the sale and delivery of the Placement Shares by
the Company as contemplated therein, other than such as have been obtained or
made under the Securities Act or the Exchange Act of 1934 (except that we
express no opinion as to any necessary qualification under the state securities,
blue sky or real estate syndication laws of the various jurisdictions in which
the Placement Shares are being offered by CF&Co or under the rules and
regulations of the FINRA).

7.           The Placement Shares have been duly authorized by the Company for
issuance and sale pursuant to the Agreement. The Placement Shares, when issued
and delivered by the Company in accordance with such authorization and pursuant
to the Agreement against payment of the consideration specified in the
Agreement, will be validly issued, fully paid and

EAST\42275790.7
 
 

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nonassessable and free of any preemptive right under the Company’s articles of
incorporation and bylaws and the laws of the Commonwealth of Virginia.
 
8.           The Registration Statement, at the last deemed effective date of
the Registration Statement with respect to CF&Co pursuant to Rule 430B(f)(2) of
the Securities Act, and Prospectus, as of the date of this letter, complied as
to form in all material respects with the requirements of the Securities Act (it
being understood that we express no belief with respect to the financial
statements, related schedules and other data derived from such financial
statements, schedules and other financial information and other data derived
from such financial information included or incorporated by reference therein or
excluded therefrom).
 
9.           The statements under the captions “DESCRIPTION OF OUR CAPITAL
STOCK” and “DESCRIPTION OF OUR COMMON STOCK” in the Prospectus, insofar as such
statements purport to summarize or describe matters of law and legal
conclusions, constitute accurate summaries thereof in all material respects.

*           *           *           *

In addition, we have participated in the preparation of the Registration
Statement and the Prospectus and in discussions with officers, directors,
employees and other representatives of the Company, with representatives of its
independent public accountants, and with you and your representatives, at which
time the contents of the Registration Statement and the Prospectus and related
matters were discussed, and we have reviewed certain company records, documents
and proceedings. On the basis of the foregoing, nothing has come to our
attention that leads us to believe that (1) each part of the Registration
Statement, at the last deemed effective date of the Registration Statement with
respect to CF&Co. pursuant to Rule 430(B)(f)(2) of the Securities Act, contained
an untrue statement of a material fact or omitted to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading, or (2) the Prospectus, as of date of this letter, included or
includes an untrue statement of a material fact or omitted or omits to state a
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading (it being understood
that we express no belief with respect to the financial statements, related
schedules and other data derived from such financial statements, schedules and
other financial information included or incorporated by reference therein or
excluded therefrom).
 
The limitations inherent in the independent verification of factual matters and
the character of determinations involved in the preparation of a disclosure
document are such, however, that (other than with respect to paragraph 9 above)
we do not assume any responsibility for the accuracy, completeness or fairness
of the statements contained in the Registration Statement or the Prospectus or
any amendments or supplements to them (including any of the documents
incorporated by reference in them).
 
We have been informed by the Commission that the Registration Statement is
effective under the Securities Act and, to our knowledge, (i) no stop order
suspending the effectiveness of the Registration Statement has been issued under
the Securities Act and (ii) no proceedings seeking the issuance of such a stop
order have been initiated or threatened by the Commission.

 
 

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As used herein, the phrase “to our knowledge” means knowledge based upon and
limited to the representations and warranties of the Company contained in the
Agreement and in the documents delivered by the Company pursuant to the
Agreement, inquiries of an appropriate officer of the Company whom we have
determined is likely to have personal knowledge of the matters covered by the
opinion, and the current conscious awareness of facts of the attorneys currently
practicing law with our firm who had involvement in the transaction contemplated
by the Agreement.

In rendering the opinions set forth in paragraphs 1 through 9 above, we do not
purport to express an opinion on any laws other than those of the Commonwealth
of Virginia and the United States of America.  This opinion may not be relied
upon by, nor may copies be delivered to, any person without our prior written
consent.

 

 
 

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Exhibit 7(n)(2)
 

Matters to be covered by subsequent Company Counsel Opinions
 
We have participated in the preparation of the Registration Statement and the
Prospectus and in discussions with officers, directors, employees and other
representatives of the Company, with representatives of its independent public
accountants, and with you and your representatives, at which time the contents
of the Registration Statement and the Prospectus and related matters were
discussed, and we have reviewed certain company records, documents and
proceedings. On the basis of the foregoing, nothing has come to our attention
that leads us to believe that (1) each part of the Registration Statement, at
the last deemed effective date of the Registration Statement with respect to
CF&Co. pursuant to Rule 430(B)(f)(2) of the Securities Act, contained an untrue
statement of a material fact or omitted to state any material fact required to
be stated therein or necessary to make the statements therein not misleading, or
(2) the Prospectus, as of date of this letter, included or includes an untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading (it being understood that we express
no belief with respect to the financial statements, related schedules and other
data derived from such financial statements, schedules and other financial
information included or incorporated by reference therein or excluded
therefrom).
 
The limitations inherent in the independent verification of factual matters and
the character of determinations involved in the preparation of a disclosure
document are such, however, that we do not assume any responsibility for the
accuracy, completeness or fairness of the statements contained in the
Registration Statement or the Prospectus or any amendments or supplements to
them (including any of the documents incorporated by reference in them).
 
We have been informed by the Commission that the Registration Statement is
effective under the Securities Act and, to our knowledge, (i) no stop order
suspending the effectiveness of the Registration Statement has been issued under
the Securities Act and (ii) no proceedings seeking the issuance of such a stop
order have been initiated or threatened by the Commission.

 

 

 
 

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