Exhibit 10.1
 
MANAGEMENT AGREEMENT
 
This MANAGEMENT AGREEMENT is entered into as of October 5, 2012, by and between
(i) JAVELIN Mortgage Investment Corp., a Maryland corporation (the “REIT”), and
(ii) ARMOUR RESIDENTIAL MANAGEMENT LLC, a Delaware limited liability company
(the “Manager”).
 
RECITALS
 
WHEREAS, the REIT intends to use the net proceeds of borrowings and securities
offerings and the net returns on its investments which are not otherwise
distributed to stockholders (i) in Mortgage Assets (as defined below), and
(ii) in any such other assets, in a manner which allows the REIT to qualify as a
“real estate investment trust” under the Code (as defined below); and
 
WHEREAS, the REIT desires that the Manager undertake, on the REIT’s behalf, the
duties and responsibilities as set forth in this Agreement, subject to the
direction of the Manager or, only where applicable and only if and when any of
the stock of the REIT becomes publicly traded, subject to the direction and
oversight of the Board of Directors (as defined below), on the terms and
conditions set forth in this Agreement; and
 
WHEREAS, the Manager desires to undertake, on the REIT’s behalf, the duties and
responsibilities as set forth in this Agreement on the terms and conditions set
forth in this Agreement; and
 
WHEREAS, the REIT and the Manager desire to state in its entirety the management
agreement by and between the REIT and the Manager;
 
NOW, THEREFORE, in consideration of the mutual covenants and agreements herein
contained and other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
 
1.             Definitions. Capitalized terms used but not otherwise defined in
this Agreement shall have the respective meanings assigned to them below:
 
1.1           “Affiliate” means, with respect to any specified Person, any other
Person that directly or indirectly controls, is controlled by, or is under
common control with, that specified Person. For purposes of this definition,
“control” (including, with correlative meanings, the terms “controlling”,
“controlled by” and “under common control with”), with respect to any specified
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management and policies of that specified Person,
whether by contract, through the ownership of voting securities or other equity
interests (including partnership or membership interests), or otherwise.
 
1.2           “Agreement” means this Management Agreement, as the same may be
amended from time to time.
 
1.3            “Base Management Fee” shall have the meaning set forth in Section
6.1 of this Agreement.
 
1.4           “Board of Directors” means the member(s) of the Board of Directors
of the REIT, applicable if and when any of the stock of the REIT becomes
publicly traded.
 
1.5           “Business Day” means a day on which the banks are opened for
business (Saturdays, Sundays, statutory and civic holidays excluded) in New
York, New York, United States.
 
1.6           “Cause” means, for purposes of a termination of this Agreement by
the REIT without penalty or payment of a Termination Fee, a final determination
by a court of competent jurisdiction (a) that the Manager has materially
breached this Agreement that has a material adverse effect on the REIT and such
material breach has continued for a period of 30 days after receipt by the
Manager of written notice thereof specifying such breach and requesting that the
same be remedied in such 30-day period, (b) that an action taken or omitted to
be taken by the Manager in connection with this Agreement constitutes willful
misconduct or gross negligence that results in material harm to the REIT and
such willful misconduct or gross negligence has not been cured within a period
of 30 days after receipt by the Manager of written notice thereof specifying
such willful misconduct or gross negligence and requesting that the same be
remedied in such 30-day period, or (c) that an action taken or omitted to be
taken by the Manager in connection with this Agreement constitutes fraud that
results in material harm to the REIT.
 
 
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1.7           “Code” means the Internal Revenue Code of 1986, as amended.
 
1.8           “Effective Date” means the date of this Agreement.
 
1.9           “Governing Instruments” means the articles of incorporation, as
amended from time to time, or charter, as the case may be, and the bylaws of the
REIT and its subsidiaries, as those documents may be amended from time to time.
 
1.10          “Gross Equity Raised” means an amount in dollars calculated as of
the date of determination that is equal to (a) the initial equity capital of the
REIT following the consummation of the REIT's initial public offering and the
concurrent private placement, and (b) equity capital raised in public or private
issuances of the REIT’s equity securities (calculated before underwriting fees
and distribution expenses, if any), less (c) capital returned to the
stockholders of the REIT, as adjusted to exclude (d) one-time charges pursuant
to changes in GAAP and certain non-cash charges after discussion between the
Manager and the Board of Directors and approved by a majority of the Board of
Directors, if and when any of the stock of the REIT becomes publicly traded.
 
1.11          “Independent Directors” means the members of the Board of
Directors who are not officers or employees of the Manager or any Person
directly or indirectly controlling or controlled by the Manager, and who are
otherwise “independent” in accordance with the REIT’s Governing Instruments and
policies and, if applicable, the rules of any national securities exchange on
which the REIT’s common stock is listed.
 
1.12          “Initial Term” shall have the meaning set forth in Section 10.1 of
this Agreement.
 
1.13          “Investment Company Act” shall mean the Investment Company Act of
1940, as amended.
 
1.14          “Manager” shall have the meaning set forth in the Preamble of this
Agreement and shall include any successor thereto (subject to the provisions of
Section 13).
 
1.15          “Manager Obligations” shall have the meaning set forth in Section
2.4.2 of this Agreement and may be limited from time to time in the REIT’s
discretion.
 
1.16          “Manager Shareholders” shall have the meaning set forth in Section
2.5 of this Agreement.
 
1.17           “Mortgage Assets” means the following assets types of the REIT
which the REIT may determine from time to time shall be solely managed by the
Manager:
 
(i)           mortgage securities (or interests therein), including (a)
adjustable-rate, hybrid adjustable-rate and pass-through certificates (including
GNMA certificates, FNMA certificates and FHLMC certificates), collateralized
mortgage obligations, (c) securities representing interests in, or secured by,
agency wrapped mortgages on real property other than pass-through certificates
and CMOs, (d) agency mortgage derivative securities and other agency
mortgage-backed and mortgage collateralized obligations, (e) non-agency mortgage
derivative securities and other non-agency mortgage-backed and mortgage
collateralized obligations, and (f) mortgage derivative securities;
 
(ii)           U.S. government issued bills, notes and bonds including general
obligations of the agencies of the U.S. government (including, but not limited
to GNMA, FNMA and FHLMC); and
 
(iii)           short-term investments, including short-term bank certificates
of deposit, short-term U.S. Treasury securities, short-term U.S. government
agency securities, commercial paper, repurchase agreements, short-term CMOs,
short-term asset backed securities and other similar types of short-term
investment instruments, all of which will have maturities or average lives of
less than one (1) year.
 
 
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1.18           “Non-Renewal Notice” shall have the meaning set forth in Section
10.1 of this Agreement.
 
1.19           “Notice of Proposal to Negotiate” shall have the meaning set
Forth in Section 10.5 of this Agreement.
 
1.20           “Person” means any individual, corporation, partnership, joint
venture, limited liability company, estate, trust, unincorporated association,
any federal, state, county or municipal government or any bureau, department or
agency thereof and any fiduciary acting in such capacity on behalf of any of the
foregoing.
 
1.21           “Real Estate Investment Trust” means a “real estate investment
trust” as defined under the Code.
 
1.22           “REIT” shall have the meaning set forth in the Preamble of this
Agreement and shall include any subsidiary and any successor thereto.
 
1.23           “REIT Provisions of the Code” means Sections 856 through 860 of
the Code.
 
1.24           “Renewal Term” shall have the meaning set forth in Section 10.1
of this Agreement.
 
1.25           “Staton Bell” shall have the meaning set forth in Section 2.5 of
this Agreement.
 
1.26           “Sub-Management Agreement” shall have the meaning set forth in
Section 2.5 of this Agreement.
 
1.27           “Termination Fee” means an amount equal to three (3) times the
Base Management Fee paid to the Manager in the preceding full twelve (12)
months, calculated as of the effective date of the termination of this Agreement
pursuant to Section 10.2.
 
2.              General Duties of the Manager.
 
2.1            Services. Until any of the stock of the REIT becomes publicly
traded, all services performed by the Manager under this Agreement shall be
under the direction of the Manager. If and when any of the stock of the REIT
becomes publicly traded, all services performed by the Manager under this
Agreement shall be subject to the direction and oversight of the Board of
Directors. As may be limited from time to time by the REIT in its discretion,
the Manager shall (i) manage the day-to-day operations of the REIT and perform
the services and other activities described below, and (ii) to the extent
directed by the Board of Directors (if and when any of the stock of the REIT
becomes publicly traded), perform similar management and services for any
subsidiary of the REIT; provided, however, that nothing herein shall give the
Manager the right (or obligate the Manager) to supervise any other manager
engaged by the REIT (each such other manager, an “Other Manager”), or to manage
or otherwise participate in any way in any securitization transaction undertaken
by the REIT or any joint venture formed by the REIT. Subject to the REIT’s right
to retain Other Managers and the REIT’s right to limit the following duties in
its discretion from time to time to the Mortgage Assets which the REIT
determines from time to time shall be solely managed by the Manager, the Manager
shall perform the following services from time to time as may be required for
the management of the REIT and its assets (other than any such assets solely
being managed by an Other Manager):
 
2.1.1           serving as a consultant to the REIT with respect to the
formulation of investment criteria for assets managed by the Manager and the
preparation of policy guidelines by the Board of Directors (if and when any of
the stock of the REIT becomes publicly traded) for such assets;
 
2.1.2           assisting the REIT in developing criteria for Mortgage Asset
purchase commitments that are consistent with the REIT’s long-term investment
objectives and making available to the REIT its knowledge and experience with
respect to Mortgage Assets managed by the Manager;
 
2.1.3           representing the REIT in connection with certain of the REIT’s
purchases, sales and commitments to purchase or sell Mortgage Assets managed by
the Manager that meet in all material respects the REIT’s investment criteria,
including without limitation by providing repurchase agreement and similar
portfolio management expertise as appropriate in connection therewith;
 
 
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2.1.4           managing the REIT’s Mortgage Assets (other than any Mortgage
Assets managed solely by Other Managers);
 
2.1.5           advising the REIT and negotiating the REIT’s agreements with
third-party lenders for borrowings by the REIT;
 
2.1.6           making available to the REIT statistical and economic research
and analysis regarding the REIT’s activities managed by the Manager and the
services performed for the REIT by the Manager;
 
2.1.7           monitoring and providing to the Board of Directors, if and when
any of the stock of the REIT becomes publicly traded, from time to time price
information and other data obtained from certain nationally-recognized dealers
that maintain markets in mortgage assets identified by the Board of Directors
(if and when any of the stock of the REIT becomes publicly traded) from time to
time, and providing data and advice to the Board of Directors (if and when any
of the stock of the REIT becomes publicly traded) in connection with the
identification of such dealers, in each case with respect to assets managed by
the Manager;
 
2.1.8           investing or reinvesting money of the REIT, which the REIT
determines from time to time shall be solely managed by the Manager, in
accordance with the REIT’s policies and procedures;
 
2.1.9           providing executive and administrative personnel, office space
and other appropriate services required in rendering services to the REIT, in
accordance with and subject to the terms of this Agreement;
 
2.1.10         administering the day-to-day operations of the REIT and
performing and supervising the performance of such other administrative
functions necessary to the management of the REIT as may be agreed upon by the
Manager and the Board of Directors (if and when any of the stock of the REIT
becomes publicly traded), including, without limitation, the collection of
revenues and the payment of the REIT’s debts and obligations from the REIT’s
accounts (in each case in respect of assets managed by the Manager), and the
maintenance of appropriate computer systems and related information technology
to perform such administrative and management functions;
 
2.1.11         advising the Board of Directors (if and when any of the stock of
the REIT becomes publicly traded) in connection with certain policy decisions
(other than any such decisions solely relating to Other Managers);
 
2.1.12         evaluating and recommending hedging strategies to the Board of
Directors (if and when any of the stock of the REIT becomes publicly traded)
and, upon approval by the Board of Directors (if and when any of the stock of
the REIT becomes publicly traded), engaging in hedging activities on behalf of
the REIT consistent with the REIT’s status as a Real Estate Investment Trust, in
each case in respect of assets managed by the Manager;
 
2.1.13         supervising compliance by the REIT with the REIT Provisions of
the Code and maintenance of its status as a Real Estate Investment Trust (other
than in respect of any assets not managed by the Manager);
 
2.1.14         qualifying and causing the REIT to qualify to do business in all
applicable jurisdictions and obtaining and maintaining all appropriate licenses
(other than in respect of any activities not managed by the Manager);
 
2.1.15         assisting the REIT to retain qualified accountants and tax
experts to assist in developing and monitoring appropriate accounting procedures
and testing systems and to conduct quarterly compliance reviews as the Board of
Directors (if and when any of the stock of the REIT becomes publicly traded) may
deem necessary or advisable (other than any such procedures or reviews relating
solely to Other Managers);
 
 
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2.1.16           assisting the REIT in its compliance with all federal
(including, without limitation, the Sarbanes-Oxley Act of 2002), state and local
regulatory requirements applicable to the REIT in respect of its business
activities, including preparing or causing to be prepared all financial
statements required under applicable regulations and contractual undertakings
and all reports, documents and filings, if any, required under the Securities
Exchange Act of 1934, as amended, or other federal or state laws;
 
2.1.17           assisting the REIT in its compliance with federal, state and
local tax filings and reports, and generally enable the REIT to maintain its
status as a Real Estate Investment Trust, including soliciting stockholders, as
defined below, for required information to the extent provided in the REIT
Provisions of the Code;
 
2.1.18           assisting the REIT in its maintenance of an exemption from the
Investment Company Act and monitoring compliance with the requirements for
maintaining an exemption from the Investment Company Act;
 
2.1.19           advising the REIT as to its capital structure and capital
raising activities (other than in respect of capital not to be managed by the
Manager);
 
2.1.20           handling and resolving all claims, disputes or controversies
(including all litigation, arbitration, settlement or other proceedings or
negotiations) in which the REIT may be involved or to which the REIT may be
subject arising out of the REIT’s day-to-day operations, subject to the approval
of the Board of Directors (if and when any of the stock of the REIT becomes
publicly traded) and excluding any such proceedings or negotiations solely
involving Other Managers;
 
2.1.21           engaging and supervising, on behalf of the REIT at the REIT’s
request and at the REIT’s expense, the following, without limitation:
independent contractors to provide investment banking services, leasing
services, mortgage brokerage services, securities brokerage services, other
financial services and such other services as may be deemed by the Board of
Directors (if and when any of the stock of the REIT becomes publicly traded) to
be necessary or advisable from time to time (other than Other Managers, or any
of the foregoing to be utilized in connection with activities being solely
conducted by Other Managers);
 
2.1.22           so long as the Manager does not incur additional costs or
expenses, and the REIT does not incur additional costs or expenses which are not
specifically approved in writing by the REIT, performing such other services as
may be necessary or advisable from time to time for management and other
activities relating to the assets of the REIT as the Board of Directors (if and
when any of the stock of the REIT becomes publicly traded) shall reasonably
request or the Manager shall deem appropriate under the particular
circumstances; and
 
2.1.23           assisting the REIT, upon the REIT’s request therefor, in
evaluating the advantages and disadvantages of the REIT internalizing the
functions of the Manager or of any merger and acquisition transaction that the
REIT may elect to pursue, which also may be subject to approval by the
shareholders of the REIT.
 
2.2           Obligations of the Manager.
 
2.2.1             Verify Conformity with Acquisition Criteria. At all times
(and, if and when any of the stock of the REIT becomes publicly traded, subject
to the direction of the Board of Directors), the Manager shall use commercially
reasonable efforts to provide that each Mortgage Asset acquired by the Manager
for the REIT conforms in all material respects to the acquisition criteria of
the REIT and shall seek to cause each seller or transferor of such Mortgage
Assets to the REIT to make such representations and warranties regarding such
Mortgage Assets as may, in the reasonable judgment of the Manager, be necessary
and appropriate, subject to market custom. In addition, the Manager shall take
such other action as it deems reasonably necessary or appropriate in seeking to
protect the REIT’s investments to the extent consistent with its duties under
this Agreement.
 
 
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2.2.2           Conduct Activities in Conformity with REIT Status and All
Applicable Restrictions. At all times (and, if and when any of the stock of the
REIT becomes publicly traded, subject to the direction of the Board of
Directors) and with reasonable advance notice from the REIT of any pertinent
information relating to any activities of the REIT as may then be conducted by
Other Managers, the Manager shall refrain from any action which would adversely
affect the status of the REIT or, if applicable, any subsidiary of the REIT as a
Real Estate Investment Trust or (i) which would violate any material law, rule
or regulation of any governmental body or agency having jurisdiction over the
REIT or any such subsidiary or (ii) which would otherwise not be permitted by
the REIT’s or such subsidiary’s Governing Instruments, any material operating
policies adopted by the REIT, or any agreements actually known by the Manager,
except in each of clauses (i) and (ii) as could not reasonably be expected to
have a material adverse effect on the REIT. If the Manager is directed to take
any such action by the Board of Directors (if and when any of the stock of the
REIT becomes publicly traded), the Manager shall promptly notify the Board of
Directors (if and when any of the stock of the REIT becomes publicly traded) of
the Manager’s judgment that such action would adversely affect such status or
cause such violation or not be permitted as aforesaid.
 
2.2.3           Reports. If and when any of the stock of the REIT becomes
publicly traded and upon the request of the Board of Directors and at the sole
cost and expense of the REIT, the Manager shall cause an annual compliance
report of the REIT to be prepared by a firm independent of the Manager and its
Affiliates and having the proper expertise to determine compliance with the REIT
Provisions of the Code and related matters. In addition, the Manager shall
prepare regular reports for the Board of Directors (if and when any of the stock
of the REIT becomes publicly traded) that will review the REIT’s acquisitions of
Mortgage Assets, portfolio composition and characteristics, credit quality (if
applicable), performance and compliance with the REIT’s investment policies and
policies that enable the REIT to maintain its qualification as a Real Estate
Investment Trust and to maintain its exemption from being deemed an “investment
company” under the Investment Company Act; provided that such reports shall only
relate to assets the REIT has determined shall be managed by the Manager.
 
2.2.4           Portfolio Transactions. In placing portfolio transactions and
selecting brokers or dealers, the Manager shall seek to obtain on behalf of the
REIT commercially reasonable terms. In assessing commercially reasonable terms
for any transaction, the Manager shall consider all factors it deems relevant,
including, without limitation, the breadth of the market for the security, the
price of the security, the financial condition and execution capability of the
broker or dealer, and the reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis.
 
2.3           Cooperation of the REIT. The REIT (and, if and when any of the
stock of the REIT becomes publicly traded, the Board of Directors) shall take
such actions as may reasonably be required to permit and enable the Manager to
carry out its duties and obligations under this Agreement, including, without
limitation, the steps reasonably necessary to allow the Manager to file any
registration statement on behalf of the REIT in a timely manner if the REIT
requests that the Manager do so. The REIT further agrees to use commercially
reasonable efforts to make available to the Manager reasonably available
resources, information and materials reasonably requested by the Manager to
enable the Manager to satisfy its obligations hereunder, including its
obligations to deliver financial statements and any other information or reports
with respect to the REIT. If the Manager is not able to provide a service, or in
the reasonable judgment of the Manager it is not prudent to provide a service,
without the approval of the Board of Directors (if and when any of the stock of
the REIT becomes publicly traded), then the Manager shall be excused from
providing such service (and shall not be in breach of this Agreement) until the
applicable approval has been obtained; provided, however, that the Manager shall
have promptly advised the Board of Directors (if and when any of the stock of
the REIT becomes publicly traded) in writing that the Manager is awaiting such
approval.
 
2.4           Engagement of Third Parties.
 
2.4.1           Securities Dealers. Subject to the REIT’s right to retain Other
Managers and the REIT’s right to limit the Manager’s authorizations in the
REIT’s discretion from time to time, the Manager is authorized, for and on
behalf, and at the sole cost and expense of the REIT, to employ such securities
dealers (including Affiliates of the Manager) for the purchase and sale of the
REIT’s Mortgage Assets managed by the Manager as may, in the reasonable judgment
of the Manager, be necessary to obtain the best commercially available net
results taking into account such factors as the policies of the REIT, price,
dealer spread, the size, type and difficulty of the transaction involved, the
firm’s general execution and operational facilities and the firm’s risk in
positioning the securities involved. Consistent with this policy, and subject to
the foregoing caveats with respect to the REIT’s rights, the Manager is
authorized to direct the execution of the REIT’s portfolio transactions to
dealers and brokers furnishing statistical information or research deemed by the
Manager to be reasonably necessary to the performance of its investment advisory
functions for the REIT.
 
 
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2.4.2           Other Third Parties. The Manager is authorized to retain, for
and on behalf of the REIT, the services of third parties (including Affiliates
of the Manager), including, without limitation, accountants, legal counsel,
appraisers, insurers, brokers, dealers, transfer agents, registrars, developers,
investment banks, financial advisors, banks and other lenders and others as the
Manager deems reasonably necessary or advisable in connection with the
management and operations of the REIT. The costs and expenses related to the
retention of third parties shall be the sole cost and expense of the REIT except
to the extent (i) the third party is retained to make decisions to invest in and
dispose of Mortgage Assets, provide administrative, data processing or clerical
services, prepare the financial records of the REIT or prepare a report
summarizing the REIT’s acquisitions of Mortgage Assets, portfolio compensation
and characteristics, credit quality (if applicable) or performance of the
portfolio, in each case with respect to assets the REIT has determined shall be
managed by the Manager, in which case it shall be at the sole cost and expense
of the Manager unless otherwise approved by the Board of Directors (if and when
any of the stock of the REIT becomes publicly traded) or (ii) the costs and
expenses are not reimbursable pursuant to Section 7.1 of this Agreement
(collectively, the “Manager Obligations”). Notwithstanding anything in this
Agreement to the contrary, in no event shall the Manager be responsible for any
costs or expenses related to or incurred by any Other Manager.
 
2.4.3           Affiliates. Notwithstanding anything contained in this Agreement
to the contrary, the Manager shall have the right to cause any of its services
under this Agreement to be rendered by the Manager’s employees or Affiliates of
the Manager. The REIT shall pay or reimburse the Manager or its Affiliates
(subject to the foregoing approval) for the reasonable and actually incurred
cost and expense of performing such services by the Affiliate, including,
without limitation, back office support services specifically requested by the
REIT if the costs and expenses of such Affiliate would have been reimbursable
under this Agreement if such Affiliate were an unaffiliated third party, or if
such service had been performed by the Manager itself.
 
2.5           Sub-Management Agreement. The REIT and the Manager expressly
acknowledge and agree that, concurrent with this Agreement, the Manager is
entering into the Sub-Management Agreement, dated as of even date herewith, by
and among the Manager, Staton Bell Blank Check LLC (“Staton Bell”), and Jeffrey
J. Zimmer and Scott J. Ulm (Messrs. Zimmer and Ulm, together, the “Manager
Shareholders”) (such agreement, the “Sub-Management Agreement”), and nothing to
the contrary contained in this Agreement shall limit the ability of the Manager,
Staton Bell, or the Manager Shareholders to enter into and perform their
respective obligations under such Sub-Management Agreement or otherwise limit
the effectiveness of such Sub-Management Agreement. The REIT represents and
warrants that the Sub-Management Agreement has been duly authorized and approved
by all necessary action of the REIT.
 
3.             Additional Activities.
 
3.1           Other Activities of the Manager. Nothing in this Agreement shall
(i) prevent the Manager or its Affiliates, officers, directors or employees,
from engaging in other businesses or from rendering services of any kind to any
other person or entity, including, without limitation, investing in, or
rendering advisory service to others investing in, any type of mortgage assets
or other real estate investments (including, without limitation, investments
that meet the principal investment objectives of the REIT), whether or not the
investment objectives or policies of any such other person or entity are similar
to those of the REIT, or (ii) in any way bind or restrict the Manager or its
Affiliates, officers, directors or employees from buying, selling or trading any
securities or commodities for their own accounts or for the account of others
for whom the Manager or its Affiliates, officers, directors or employees may be
acting. The REIT acknowledges that the Manager will base allocation decisions on
the procedures the Manager and the REIT reasonably and in good faith consider
fair and equitable, including, without limitation, such considerations as
investment objectives, restrictions and time horizon, availability of cash and
the amount of existing holdings. While information and recommendations supplied
to the REIT shall, in the Manager’s reasonable and good faith judgment, be
appropriate under the circumstances and in light of the investment objectives
and policies of the REIT, they may be different from the information and
recommendations supplied by the Manager or any Affiliate of the Manager to other
investment companies, funds and advisory accounts. The REIT shall be entitled to
equitable treatment under the circumstances in receiving information,
recommendations and any other services. However, the REIT recognizes that it is
not entitled to receive preferential treatment as compared with the treatment
given by the Manager or any Affiliate of the Manager to any investment company,
fund or advisory account other than any fund or advisory account which contains
only funds invested by the Manager (and not of any of its clients or customers)
or its officers and directors.
 
 
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3.2           Other Activities of the REIT. Except to the extent expressly set
forth in this Agreement or any other written agreement between the REIT and the
Manager, neither this Agreement nor the relationship between the REIT and the
Manager shall be deemed (i) to limit or restrict the activities of the REIT, its
officers, its employees, or members of its Board of Directors (if and when any
of the stock of the REIT becomes publicly traded), or (ii) impose a fee or other
penalty on the REIT, its officers, its employees, or members of its Board of
Directors (if and when any of the stock of the REIT becomes publicly traded) for
pursuing any such other activities.
 
3.3           Service to the REIT; Execution of Documents. Directors, officers,
employees and agents of the Manager and its Affiliates may serve as trustees,
directors, officers, employees, agents, nominees or signatories for the REIT or
any subsidiary of the REIT, to the extent permitted by the Governing
Instruments, as from time to time amended, or by any resolutions duly adopted by
the Board of Directors (if and when any of the stock of the REIT becomes
publicly traded) pursuant to the Governing Instruments. When executing documents
or otherwise acting in such capacities for the REIT, such persons shall use
their respective titles in the REIT.
 
4.           Bank Accounts. The Manager may establish and maintain one or more
bank accounts in the name of the REIT or any subsidiary of the REIT, and may
collect and deposit into any such account or accounts, and disburse funds from
any such account or accounts in a manner consistent with this Agreement,
including, without limitation, the following: (a) the payment of the Base
Management Fee, (b) the payment (or advance) of reimbursable costs and expenses,
and (c) such other amounts. The Manager shall from time to time render
appropriate accountings of such collections and payments to the Board of
Directors (if and when any of the stock of the REIT becomes publicly traded)
and, upon request (whether or not the REIT is publicly traded), to the auditors
of the REIT or any subsidiary of the REIT. One or more of the obligations of the
Manager hereunder may be revoked in whole or in part by the REIT from time to
time in its sole discretion.
 
5.           Records; Confidentiality. The Manager shall maintain appropriate
and accurate books of account and records relating to services performed under
this Agreement, and such books of account and records shall be accessible for
inspection by representatives (including the auditors) of the REIT or any
subsidiary of the REIT at any time during normal business hours. Except in the
ordinary course of business of the REIT, the Manager shall, and shall use
commercially reasonable efforts to cause each of its Affiliates to, keep
confidential any and all information they (or such Affiliates) may obtain from
time to time in connection with the services they (or such Affiliates) render
under this Agreement.
 
6.           Compensation of the Manager.
 
6.1         Base Management Fee. For services rendered under this Agreement,
commencing after the end of the first month of business, the REIT shall pay to
the Manager each month in arrears (by wire transfer of immediately available
funds) compensation equal to 1/12th of the sum of (a) 1.5% of the Gross Equity
Raised up to $1 billion plus (b) 1.0% of the Gross Equity Raised in excess of $1
billion (the “Base Management Fee”) within one (1) Business Day after the end of
such month. In the event of a termination of this Agreement during a calendar
month, the Base Management Fee shall be pro-rated based upon the number of days
elapsed in such calendar month prior to the effective date of such termination.
 
6.2         No Incentive Management Compensation. The Manager shall not receive
any incentive-based compensation.
 
7.           Expenses of the Manager and the REIT.
 
 
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7.1           Expenses of the Manager. The Manager shall be responsible for the
following expenses:
 
7.1.1           employment expenses of the personnel employed by the Manager,
including, without limitation, salaries (base and bonuses alike), wages, payroll
taxes and the cost of employee benefit plans of such personnel (but excluding
any stock of the REIT that the Board of Directors, if and when any of the stock
of the REIT becomes publicly traded, may determine to grant to such personnel,
which stock shall not reduce employment expenses otherwise payable by the
Manager pursuant to this Section 7.1.1 or cause the Manager or the REIT to pay
any payroll taxes in respect thereof); and
 
7.1.2           rent, telephone, utilities, office furniture, equipment,
machinery and other office, internal and overhead expenses of the Manager
required for the REIT’s day-to-day operations, including, bookkeeping, clerical
and back-office services provided by the Manager, provided, however, that the
REIT shall pay for supplies applicable to operations (paper, software,
presentation materials, etc.).
 
7.2          Expenses of the REIT. The REIT shall pay all of the costs and
expenses of the REIT and the Manager incurred solely on behalf of the REIT or
any subsidiary or in connection with this Agreement, other than (i) those
expenses that are specifically the responsibility of the Manager pursuant to
Section 7.1 of this Agreement, and (ii) any costs or expenses incurred by the
Manager which the REIT is not required to reimburse pursuant to the provisions
of Section 7.3 below. Without limiting the generality of the foregoing, it is
specifically agreed that the following costs and expenses of the REIT or any
subsidiary of the REIT shall be paid by the REIT and shall not be paid by the
Manager and/or the Affiliates of the Manager (except to the extent of any costs
or expenses which the REIT is not required to reimburse pursuant to the
provisions of Section 7.3 below):
 
7.2.1           all costs and expenses associated with the formation and capital
raising activities of the REIT and its subsidiaries, including, without
limitation, the costs and expenses of the preparation of the REIT’s registration
statements, and any and all costs and expenses of any public offering of the
REIT, any subsequent offerings and any filing fees and costs of being a public
company, including, without limitation, filings with the Securities and Exchange
Commission, the Financial Industry Regulatory Authority, the New York Stock
Exchange (and any other exchange or over-the-counter market), among other such
entities;
 
7.2.2           all costs and expenses of the REIT in connection with the
acquisition, disposition, financing, hedging, administration and ownership of
the REIT’s or any subsidiary’s investment assets (including, without limitation,
the Mortgage Assets) and, including, without limitation, costs and expenses
incurred in contracting with third parties, including Affiliates of the Manager
(as may be approved by the REIT pursuant to the terms of this Agreement), to
provide such services, such as legal fees, accounting fees, consulting fees,
trustee fees, appraisal fees, insurance premiums, commitment fees, brokerage
fees, guaranty fees, ad valorem taxes, costs of foreclosure, maintenance, repair
and improvement of property and premiums for insurance on property owned by the
REIT or any subsidiary of the REIT;
 
7.2.3           all costs and expenses relating to the acquisition of, and
maintenance and upgrades to, the REIT’s portfolio analytics and accounting
systems (including, but not limited to Bloomberg);
 
7.2.4           all costs and expenses of money borrowed by the REIT or its
subsidiaries, including, without limitation, principal, interest and the costs
associated with the establishment and maintenance of any credit facilities,
warehouse loans and other indebtedness of the REIT and its subsidiaries
(including commitment fees, legal fees, closing and other costs);
 
7.2.5           all taxes and license fees applicable to the REIT or any
subsidiary of the REIT, including interest and penalties thereon;
 
7.2.6           all legal, audit, accounting, underwriting, brokerage, listing,
filing, rating agency, registration and other fees, printing, engraving,
clerical, personnel and other expenses and taxes of the REIT incurred in
connection with the issuance, distribution, transfer, registration and stock
exchange listing of the REIT’s or any subsidiary’s equity securities or debt
securities;
 
7.2.7           other than for the Manager Obligations, all fees paid to and
expenses of third-party advisors and independent contractors, consultants,
managers and other agents (other than the Manager) engaged by the REIT or any
subsidiary of the REIT or by the Manager for the account of the REIT or any
subsidiary of the REIT (other than the Manager) and all employment expenses of
the personnel employed by the REIT or any subsidiary of the REIT, including,
without limitation, the salaries (base and bonuses alike), wages, equity based
compensation of such personnel, and payroll taxes;
 
 
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7.2.8           all insurance costs incurred by the REIT or any subsidiary of
the REIT and including, but not limited to, insurance paid for by the REIT to
insure the Manager for liabilities as a result of being the manager for the
REIT;
 
7.2.9           all custodian, transfer agent and registrar fees and charges
incurred by the REIT;
 
7.2.10         all compensation and fees paid to directors of the REIT or any
subsidiary of the REIT, all expenses of directors of the REIT or any subsidiary
of the REIT (including those directors who are also employees of the Manager),
the cost of directors and officers liability insurance and premiums for errors
and omissions insurance, and any other insurance deemed necessary or advisable
by the Board of Directors (if and when any of the stock of the REIT becomes
publicly traded) for the benefit of the REIT and its directors and officers
(including those directors who are also employees of the Manager), the cost of
all meetings of the REIT’s Board of Directors (if and when any of the stock of
the REIT becomes publicly traded), and the cost of travel, hotel accommodations,
food and entertainment for all participants in the meetings of the REIT’s Board
of Directors (if and when any of the stock of the REIT becomes publicly traded);
 
7.2.11         all third-party legal, accounting and auditing fees and expenses
and other similar services relating to the REIT’s or any subsidiary’s operations
(including, without limitation, all quarterly and annual audit or tax fees and
expenses);
 
7.2.12         all legal, expert and other fees and expenses relating to any
actions, proceedings, lawsuits, demands, causes of action and claims, whether
actual or threatened, made by or against the REIT, or which the REIT is
authorized or obligated to pay under applicable law or its Governing Instruments
or by the Board of Directors (if and when any of the stock of the REIT becomes
publicly traded);
 
7.2.13         any judgment or settlement of pending or threatened proceedings
(whether civil, criminal or otherwise) against the REIT or any subsidiary of the
REIT, or against any trustee, director or officer of the REIT or any subsidiary
of the REIT in his capacity as such for which the REIT or any subsidiary of the
REIT is required to indemnify such trustee, director or officer by any court or
governmental agency, or settlement of pending or threatened proceedings;
 
7.2.14         at all times all travel and related expenses of directors,
officers and employees of the REIT and the Manager incurred in connection with
meetings related to the business of the REIT, attending meetings of the Board of
Directors (if and when any of the stock of the REIT becomes publicly traded) or
holders of securities of the REIT or any subsidiary of the REIT or performing
other business activities that relate to the REIT or any subsidiary of the REIT,
including, without limitation, travel and expenses incurred in connection with
the purchase, financing, refinancing, sale or other disposition of Mortgage
Assets or other investments of the REIT; provided, however, that the REIT shall
only be responsible for a proportionate share of such expenses, as reasonably
determined by the Manager in good faith after full disclosure to the REIT, in
instances in which such expenses were not incurred solely for the benefit of the
REIT;
 
7.2.15         all expenses of organizing, modifying or dissolving the REIT or
any subsidiary of the REIT, costs preparatory to entering into a business or
activity, and costs of winding up or disposing of a business or activity of the
REIT or its subsidiaries;
 
7.2.16         all expenses relating to payments of dividends or interest or
distributions in cash or any other form made or caused to be made by the Board
of Directors (if and when any of the stock of the REIT becomes publicly traded)
to or on account of holders of the securities of the REIT or any subsidiary of
the REIT, including, without limitation, in connection with any dividend
reinvestment plan;
 
 
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7.2.17           all expenses of third parties relating to communications to
holders of equity securities or debt securities issued by the REIT or any
subsidiary of the REIT and the other bookkeeping and clerical work necessary in
maintaining relations with holders of such securities and in complying with the
continuous reporting and other requirements of governmental bodies or agencies,
including any costs of computer services in connection with this function, the
cost of printing and mailing certificates for such securities and proxy
solicitation materials and reports to holders of the REIT’s or any subsidiary’s
securities and reports to third parties required under any indenture to which
the REIT or any subsidiary of the REIT is a party;
 
7.2.18           subject to Section 7.1, all expenses relating to any office or
office facilities maintained by the REIT or any subsidiary of the REIT
(exclusive of the office of the Manager and/or Affiliates of the Manager),
including, without limitation, rent, telephone, utilities, office furniture,
equipment, machinery and other office expenses for the REIT’s chief financial
officer and any other persons the Board of Directors (if and when any of the
stock of the REIT becomes publicly traded) authorizes the REIT to hire;
 
7.2.19           all costs and expenses related to the design and maintenance of
the REIT’s web site or sites and associated with any computer software or
hardware that is used solely for the REIT;
 
7.2.20           other than for the Manager Obligations, all other costs and
expenses relating to the REIT’s business and investment operations, including,
without limitation, the costs and expenses of acquiring, owning, protecting,
maintaining, developing and disposing of Mortgage Assets, including, without
limitation, appraisal, reporting, audit and legal fees;
 
7.2.21           other than for the Manager Obligations, and subject to a line
item budget approved in advance by the Board of Directors (if and when any of
the stock of the REIT becomes publicly traded), all other expenses actually
incurred by the Manager, its Affiliates (as may be approved by the REIT pursuant
to the terms of this Agreement) or their respective officers, employees,
representatives or agents, or any Affiliates thereof (as may be approved by the
REIT pursuant to the terms of this Agreement) which are reasonably necessary for
the performance by the Manager of its duties and functions under this Agreement
(including, without limitation, any fees or expenses relating to the REIT’s
compliance with all governmental and regulatory matters); and
 
7.2.22           all other expenses of the REIT or any subsidiary of the REIT
that are not the responsibility of the Manager under Section 7.1 of this
Agreement.
 
7.3           Expense Reimbursement to the Manager. Costs and expenses incurred
by the Manager on behalf of the REIT or its subsidiaries shall be reimbursed in
cash monthly to the Manager within five (5) Business Days of receipt by the REIT
from the Manager of a statement of such costs and expenses. Cost and expense
reimbursement to the Manager shall be subject to adjustment at the end of each
calendar year in connection with the annual audit of the REIT.
 
8.             Limits of Manager Responsibility: Indemnity.
 
8.1           Limits of Manager Responsibility. The Manager shall have the
responsibility under this Agreement to render the services specifically called
for under this Agreement and shall not be responsible for any action of the
Board of Directors (if and when any of the stock of the REIT becomes publicly
traded) in following or declining to follow any advice or recommendations of the
Manager, including, without limitation, as set forth in Section 2.2.2 of this
Agreement. The Manager and its Affiliates, directors, officers, stockholders,
equity holders, employees, representatives and agents, and any Affiliates
thereof, shall not be liable to the REIT (including, without limitation, any
stockholder thereof), any issuer of mortgage securities, any subsidiary of the
REIT, its subsidiary’s stockholders, the Board of Directors (if and when any of
the stock of the REIT becomes publicly traded), any credit-party, any
counter-party under any agreement or any other person whatsoever for any acts or
omissions, errors of judgment or mistakes of law by the Manager or its
Affiliates, directors, officers, employees, representatives or agents, or any
Affiliates thereof, under or in connection with this Agreement, except in the
event that the Manager was grossly negligent, acted with reckless disregard or
engaged in willful misconduct or fraud while discharging its duties under this
Agreement.
 
 
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8.2           Indemnification. The REIT and its subsidiaries shall reimburse,
indemnify and hold harmless the Manager and its Affiliates, directors, officers,
stockholders, equity holders, employees, representatives and agents, and any
Affiliates thereof from and against any and all expenses, losses, costs,
damages, liabilities, demands, charges and claims of any nature whatsoever,
actual or threatened (including, without limitation, reasonable attorneys’
fees), arising from or in respect of any acts or omissions, errors of judgment
or mistakes of law (or any alleged acts or omissions, errors of judgment or
mistakes of law) performed or made while acting in any capacity contemplated
under this Agreement or pursuant to any underwriting agreement or similar
agreement to which Manager is a party that is related to the REIT’s activities.
Notwithstanding the foregoing, the REIT shall have no indemnification obligation
under this Section 8.2 in the event that the Manager was grossly negligent,
acted with reckless disregard or engaged in willful misconduct or fraud while
discharging its duties under this Agreement.
 
9.           No Joint Venture. The REIT and the Manager are not partners or
joint venturers with each other, and nothing in this Agreement shall be
construed to make them such partners or joint venturers or impose any liability
as such on any of them. The Manager is an independent contractor and, except as
expressly provided or authorized in this Agreement, shall have no authority to
act for or represent the REIT.
 
10.           Effectiveness; Termination.
 
10.1         Effectiveness. This Agreement shall commence on the Effective Date
and shall continue in effect thereafter for an initial term of five (5) years
(the “Initial Term”). Following the Initial Term, this Agreement shall
automatically extend for successive one (1)-year terms (each, a “Renewal Term”),
unless either party gives 180 days’ written notice prior to the expiration of
the Initial Term or any Renewal Term to the respective other party of such first
party’s intent not to renew the then-current term (any such notice, a
“Non-Renewal Notice”); provided, however, that if the REIT pays the Final
Payment (as such term is defined in the Sub-Management Agreement) to Staton Bell
pursuant to the terms of the Sub-Management Agreement, the then-current Renewal
Term shall automatically be extended as necessary so that it expires one (1)
year from the date on which such Final Payment was made; provided, further, that
the REIT may give a Non-Renewal Notice to the Manager only if, if and when any
of the stock of the REIT becomes publicly traded, at least two-thirds of all of
the Independent Directors or the holders of a majority of the outstanding shares
of common stock of the REIT (other than those shares held by the Manager or its
Affiliates) agree that (i) there has been unsatisfactory performance by the
Manager that is materially detrimental to the REIT and its subsidiaries or (ii)
the compensation payable to the Manager hereunder is unfair; provided further,
however, that in the event that the REIT gives a Non-Renewal Notice to the
Manager under clause (ii) above, such Non-Renewal Notice, and its effectiveness,
shall be subject to Section 10.5. This Agreement may be terminated during the
Initial Term or any Renewal Term only in accordance with the provisions of
Sections 10.2, 10.3 and 10.4 or 13.1 (as applicable).
 
10.2         Early Termination without Cause.
 
10.2.1           The REIT may not terminate the Agreement during the Initial
Term, except for Cause. After the Initial Term, the REIT may terminate the
agreement without Cause upon 180 days’ prior written notice to the Manager and
subject to payment of the Termination Fee pursuant to Section 10.4 (except as
otherwise provided in Section 13.1).
 
10.2.2           The Manager may terminate the agreement at any time and for any
reason upon 180 days’ prior written notice to the REIT.
 
10.3         Early Termination for Cause. Notwithstanding the provisions of
Section 10.2.1, or any other provision of this Agreement to the contrary, the
REIT may terminate the agreement for Cause at any time and without paying any
Termination Fee, effective immediately upon written notice.
 
 
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10.4         Payments In Connection With Termination.
 
10.4.1      Payments By the REIT. Following any termination of this Agreement by
the REIT or the Manager, the REIT shall pay the following amounts to the Manager
(by wire transfer of immediately available funds to such bank account as is
designated by the Manager to the REIT in writing) not later than five (5)
Business Days after the effective date of such termination:
 
(i)           all reimbursable costs and expenses permitted under the Agreement
(to the extent not previously reimbursed to the Manager), if any, as of the date
of the effectiveness of such termination of this Agreement; and
 
(ii)          either (a) if this Agreement was terminated by the REIT for Cause
pursuant to Section 10.3, any Base Management Fee due and not yet paid to the
Manager, (as pro-rated pursuant to Section 6.1 through the date of the
effectiveness of such termination of this Agreement) or (b) if this Agreement
was terminated by the REIT without Cause pursuant to Section 10.2.1, and subject
to the provisions of Section 13.1, the Termination Fee (as calculated through
the effective date of such termination of the Agreement).
 
10.4.2      Payments By the Manager. For the avoidance of doubt, following any
termination of this Agreement by the Manager, no fees or other payment shall be
due from the Manager to the REIT except as otherwise expressly provided in this
Agreement.
 
10.5          Renegotiation of Compensation. In the event that a Non-Renewal
Notice is given by the REIT to the Manager in connection with a determination
pursuant to clause (ii) of Section 10.1 that the compensation payable to the
Manager is unfair, the Manager shall have the right to renegotiate such
compensation by delivering to the REIT, no fewer than 45 days prior to the
prospective expiration of the Initial Term or Renewal Term then in effect, as
applicable, written notice (any such notice, a “Notice of Proposal to
Negotiate”) of its intent to renegotiate its compensation under this Agreement.
Thereupon, the REIT (represented by the Independent Directors, if and when any
of the stock of the REIT becomes publicly traded) and the Manager shall endeavor
to negotiate the revised compensation payable to the Manager under this
Agreement. In the event that the Manager and the REIT, including, if and when
any of the stock of the REIT becomes publicly traded, at least two-thirds of all
of the Independent Directors, agree to the terms of the revised compensation to
be payable to the Manager within 45 days following the receipt of the Notice of
Proposal to Negotiate, the Non-Renewal Notice shall be deemed of no force and
effect and this Agreement shall continue in full force and effect on the terms
stated in this Agreement, except that the compensation payable to the Manager
hereunder shall be the revised compensation then agreed upon by the parties to
this Agreement. The REIT and the Manager agree to execute and deliver an
amendment to this Agreement setting forth such revised compensation promptly
upon reaching an agreement regarding same. In the event that the REIT and the
Manager are unable to agree to the terms of the revised compensation to be
payable to the Manager during such 45-day period, this Agreement shall
terminate, such termination to be effective on the expiration of the Initial
Term or Renewal Term then in effect, as applicable.
 
11.           Action Upon Termination. In connection with any termination of
this Agreement, the Manager shall promptly:
 
11.1.1           pay over to the REIT or any subsidiary of the REIT all money
collected and held for the account of the REIT or any subsidiary of the REIT by
the Manager pursuant to this Agreement;
 
11.1.2           deliver to the Board of Directors (if and when any of the stock
of the REIT becomes publicly traded) an accounting, including a statement
showing all payments collected by it and a statement of all money held by it,
covering the period following the date of the last accounting furnished to the
Board of Directors (if and when any of the stock of the REIT becomes publicly
traded) with respect to the REIT or any subsidiary of the REIT;
 
11.1.3           deliver to the Board of Directors (if and when any of the stock
of the REIT becomes publicly traded) all property and documents of the REIT or
any subsidiary of the REIT then in the custody of the Manager;
 
11.1.4           assign to the REIT any authorized agreements the Manager
executed in its name on behalf of the REIT (and obtain the counter-parties’
consent thereto); and
 
11.1.5           assign to the REIT all proprietary information with respect to
the REIT, including, without limitation, software, models, intellectual
property, licenses, tradenames and trademarks (but subject to the limitations
set forth in Section 28 hereof).
 
 
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12.           Survival of Obligations. The REIT’s obligation to make payments
hereunder and the limitations set forth herein shall survive the termination of
this Agreement. The covenants and agreements of the Manager contained herein
(for expenses through the effective date of termination) shall survive the
termination of this Agreement.
 
13.           Assignments.
 
13.1         Assignment by the Manager. This Agreement shall terminate
automatically in the event that the Manager assigns all or any part of this
Agreement (including, without limitation, any transfer or assignment by
operation of law), unless such assignment is consented to in advance in writing
by the REIT, including, if and when any of the stock of the REIT becomes
publicly traded, the Board of Directors. In the event an assignment by the
Manager is consented to by the REIT, including, if and when any of the stock of
the REIT becomes publicly traded, the Board of Directors in accordance with this
Section 13.1, such assignment shall bind the assignee under this Agreement in
the same manner as the Manager is bound, and the Manager shall be released from
all of its obligations, duties and responsibilities under this Agreement and all
liability therefore and in respect hereof accruing on or after that date. In
addition, the assignee shall execute and deliver to the REIT a counterpart of
this Agreement naming such assignee as Manager, and the REIT shall deliver to
the assigning Manager a duly executed instrument evidencing the release of the
assigning Manager from such obligations, duties and responsibilities as
aforesaid. Notwithstanding the provisions of Section 10.2.1, or any other
provision of this Agreement to the contrary, in the event that the REIT
terminates this Agreement, whether for Cause or without Cause, following its
assignment by the Manager to a successor Manager, the REIT shall not have any
payment obligations to such successor Manager other than to pay unpaid
reimbursable costs and expenses pursuant to Section 10.4.1(i) and earned but
unpaid Base Management Fee payments pursuant to Section 10.4.1(ii)(a).
 
14.           Release of Money or Other Property Upon Written Request. The
Manager agrees that any money or other property of the REIT or any subsidiary of
the REIT held by the Manager under this Agreement shall be held by the Manager
as custodian for the REIT or such subsidiary, and the Manager’s records shall be
appropriately marked clearly to reflect the ownership of such money or other
property by the REIT or such subsidiary.
 
14.1         Procedures. Upon the receipt by the Manager of a written request
signed by a duly authorized officer of the REIT or an authorized member of the
Board of Directors (if and when any of the stock of the REIT becomes publicly
traded) requesting the Manager to release to the REIT or any subsidiary of the
REIT any money or other property then held by the Manager for the account of the
REIT or any subsidiary of the REIT under this Agreement, the Manager shall
release such money or other property to the REIT or such subsidiary of the REIT
within a reasonable period of time, but in no event later than the earlier to
occur of (i) thirty (30) days following such request, or (ii) the date of the
termination of this Agreement.
 
14.2         Limitations. The Manager and its Affiliates, directors, officers,
stockholders, equity holders, employees, representatives and agents, and any
Affiliates thereof, shall not be liable to the REIT, any subsidiaries of the
REIT, the Board of Directors (if and when any of the stock of the REIT becomes
publicly traded) or the REIT’s or its subsidiaries’ stockholders for any acts
performed or omissions to act by the REIT or any subsidiary of the REIT in
connection with the money or other property released to the REIT or any
subsidiary of the REIT in accordance with this Section 14, except in the event
that the Manager was grossly negligent, acted with reckless disregard or engaged
in willful misconduct or fraud while discharging its duties under this
Agreement.
 
14.3         Indemnification. The REIT and any subsidiary of the REIT shall
indemnify the Manager and its Affiliates, directors, officers, stockholders,
equity holders, employees, representatives and agents, and any Affiliates
thereof, against any and all expenses, costs, losses, damages, liabilities,
demands, charges and claims of any nature whatsoever, which arise in connection
with the Manager’s release of such money or other property to the REIT or any
subsidiary of the REIT in accordance with the terms of this Section 14, except
in the event that the Manager was grossly negligent, acted with reckless
disregard or engaged in willful misconduct or fraud while discharging its duties
under this Agreement. Indemnification pursuant to this provision shall be in
addition to any right of the Manager and its Affiliates, directors, officers,
stockholders, equity holders, employees, representatives and agents, and any
Affiliates thereof, to indemnification under Section 8 of this Agreement.
 
15.           Representations, Warranties and Covenants.
 
 
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15.1         REIT in Favor of the Manager. The REIT hereby represents and
warrants to the Manager as follows:
 
15.1.1           Due Formation. The REIT is duly organized, validly existing and
in good standing under the laws of Maryland, has the power to own its assets and
to transact the business in which it is now engaged and is duly qualified to do
business and is in good standing under the laws of each jurisdiction where its
ownership or lease of property or the conduct of its business requires such
qualification, except for failures to be so qualified, authorized or licensed
that could not in the aggregate have a material adverse effect on the business
operations, assets or financial condition of the REIT and its subsidiaries,
taken as a whole. The REIT does not do business under any fictitious business
name.
 
15.1.2           Power and Authority. The REIT has the power and authority to
execute, deliver and perform this Agreement and all obligations required under
this Agreement and has taken all necessary  action to authorize this Agreement
on the terms and conditions hereof and the execution, delivery and performance
of this Agreement and all obligations required under this Agreement. Except as
shall have been obtained, no consent of any other person, including, without
limitation, stockholders and creditors of the REIT, and no license, permit,
approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental authority is required
by the REIT in connection with this Agreement or the execution, delivery,
performance, validity or enforceability of this Agreement and all obligations
required under this Agreement. This Agreement has been, and each instrument or
document required under this Agreement will be, executed and delivered by a duly
authorized officer of the REIT, and this Agreement constitutes, and each
instrument or document required under this Agreement when executed and delivered
under this Agreement will constitute, the legally valid and binding obligation
of the REIT enforceable against the REIT in accordance with its terms.
 
15.1.3           Execution, Delivery and Performance. The execution, delivery
and performance of this Agreement and the documents or instruments required
under this Agreement will not violate any provision of any existing law or
regulation binding on the REIT, or any order, judgment, award or decree of any
court, arbitrator or governmental authority binding on the REIT, or the
Governing Instruments of, or any securities issued by, the REIT or of any
mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which the REIT is a party or by which the REIT or any of its
assets may be bound, the violation of which would have a material adverse effect
on the business operations, assets or financial condition of the REIT and its
subsidiaries, taken as a whole, and will not result in, or require, the creation
or imposition of any lien on any of its property, assets or revenues pursuant to
the provisions of any such mortgage, indenture, lease, contract or other
agreement, instrument or undertaking (other than the pledge of amounts payable
to the Manager under this Agreement to secure the Manager’s obligations to its
lenders).
 
15.2         Manager in Favor of the REIT. The Manager hereby represents and
warrants to the REIT as follows:
 
15.2.1           Due Formation. The Manager is duly organized, validly existing
and in good standing under the laws of Delaware, has the power to own its assets
and to transact the business in which it is now engaged and is duly qualified to
do business and is in good standing under the laws of each jurisdiction where
its ownership or lease of property or the conduct of its business requires such
qualification, except for failures to be so qualified, authorized or licensed
that could not in the aggregate have a material adverse effect on the business
operations, assets or financial condition of the Manager and its subsidiaries,
taken as a whole. The Manager does not do business under any fictitious business
name.
 
15.2.2           Power and Authority. The Manager has the power and authority to
execute, deliver and perform this Agreement and all obligations required under
this Agreement and has taken all necessary corporate action to authorize this
Agreement on the terms and conditions hereof and the execution, delivery and
performance of this Agreement and all obligations required under this Agreement.
Except as shall have been obtained, no consent of any other person including,
without limitation, stockholders and creditors of the Manager, and no license,
permit, approval or authorization of, exemption by, notice or report to, or
registration, filing or declaration with, any governmental authority is required
by the Manager in connection with this Agreement or the execution, delivery,
performance, validity or enforceability of this Agreement and all obligations
required under this Agreement. This Agreement has been and each instrument or
document required under this Agreement will be executed and delivered by a duly
authorized officer of the Manager, and this Agreement constitutes, and each
instrument or document required under this Agreement when executed and delivered
under this Agreement will constitute, the legally valid and binding obligation
of the Manager enforceable against the Manager in accordance with its terms.
 
 
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15.2.3           Execution, Delivery and Performance. The execution, delivery
and performance of this Agreement and the documents or instruments required
under this Agreement will not violate any provision of any existing law or
regulation binding on the Manager, or any order, judgment, award or decree of
any court, arbitrator or governmental authority binding on the Manager, or the
governing instruments of, or any securities issued by, the Manager or of any
mortgage, indenture, lease, contract or other agreement, instrument or
undertaking to which the Manager is a party or by which the Manager or any of
its assets may be bound, the violation of which would have a material adverse
effect on the business operations, assets or financial condition of the Manager
and its subsidiaries, taken as a whole, and will not result in, or  require, the
creation or imposition of any lien on any of its property, assets or revenues
pursuant to the provisions of any such mortgage indenture, lease, contract or
other agreement, instrument or undertaking.
 
15.2.4           No Limitations. The personnel of the Manager providing services
to the REIT on the Manager’s behalf pursuant to this Agreement will be free of
legal and contractual impediments to their provision of services pursuant to the
terms of this Agreement.
 
16.           Notices. Unless expressly provided otherwise in this Agreement,
all notices, requests, demands and other communications required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly
given, made and received when (1) delivered by hand, (2) otherwise delivered by
reputable overnight courier against receipt therefor, or (3) upon actual receipt
of registered or certified mail, postage prepaid, return receipt requested. The
parties may deliver to each other notice by electronically transmitted facsimile
copies or electronically transmitted mail (i.e., e-mail), provided that such
facsimile or e-mail notice is followed within 24 hours by any type of notice
otherwise provided for in this Section 16. Any party may alter the address or
other contact information to which communications or copies are to be sent by
giving notice of such change of address or other contact information in
conformity with the provisions of this Section 16 for the giving of notice. Any
notice shall be duly addressed to the parties as follows:
 
16.1         If to the REIT:
 
Jeffrey Zimmer
JAVELIN Mortgage Investment Corp.
3001 Ocean Drive, Suite 201
Vero Beach, FL 32963
Telecopy: (561) 348-2408
E-mail: jz@armourllc.com
 
with a copy given in the manner prescribed above, to:
 
Akerman Senterfitt
One Southeast Third Avenue, 25th Floor
SunTrust International Center
Miami, FL 33131
Telecopy: (305) 374-5095
Attn.: Bradley Houser, Esq.
E-mail: bradley.houser@akerman.com
 
16.2         If to the Manager:
 
Jeffrey Zimmer
ARMOUR Residential Management, LLC
3001 Ocean Drive, Suite 201
Vero Beach, FL 32963
Telecopy: (561) 348-2408
E-mail: jz@armourllc.com
 
 
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17.           Binding Nature of Agreement: Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors and assigns as
provided in this Agreement.
 
18.           Entire Agreement. This Agreement and the Sub-Management Agreement
contain the entire agreement and understanding among the parties hereto with
respect to the subject matter of this Agreement and the Sub-Management
Agreement, and supersede all prior and contemporaneous agreements,
understandings, inducements and conditions, express or implied, oral or written,
of any nature whatsoever with respect to the subject matter of this Agreement
and the Sub-Management Agreement. The express terms of this Agreement and the
Sub-Management Agreement control and supersede any course of performance and/or
usage of the trade inconsistent with any of the terms of this Agreement or the
Sub-Management Agreement. This Agreement may not be modified or amended other
than in accordance with Section 27.
 
19.           GOVERNING LAW. THIS AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF
THE PARTIES UNDER THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF FLORIDA WITHOUT REGARD
TO CONFLICTS OF LAW PRINCIPLES TO THE CONTRARY.
 
20.           Jurisdiction; Waiver of Jury Trial. Any proceeding or action based
upon, arising out of or related to this Agreement or the transactions
contemplated hereby shall be brought in any state court of the State of Florida
or, in the case of claims to which the federal courts have subject matter
jurisdiction, any federal court of the United States of America, in either case,
located in the State of Florida, and each of the parties irrevocably submits to
the exclusive jurisdiction of each such court in any such proceeding or action,
waives any objection it may now or hereafter have to personal jurisdiction,
venue or to convenience of forum, agrees that all claims in respect of the
proceeding or action shall be heard and determined only in any such court, and
agrees not to bring any proceeding or action arising out of or relating to this
Agreement or the transactions contemplated hereby in any other court. Nothing
herein contained shall be deemed to affect the right of any party to serve
process in any manner permitted by law or to commence legal proceedings or
otherwise proceed against any other party in any other jurisdiction, in each
case, to enforce judgments obtained in any action, suit or proceeding brought
pursuant to this Section 20. EACH PARTY HERETO HEREBY IRREVOCABLY AND
UNCONDITIONALLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY
RIGHT THAT SUCH PARTY MAY HAVE TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF
ACTION DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF THIS AGREEMENT.
 
21.           No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of any party hereto, any right, remedy, power
or privilege hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right, remedy, power or privilege hereunder preclude
any other or further exercise thereof or the exercise of any other right,
remedy, power or privilege. Except as otherwise provided in this Agreement, the
rights, remedies, powers and privileges herein provided are cumulative and not
exclusive of any rights, remedies, powers and privileges provided by law. No
waiver of any provision hereunder shall be effective unless it is in writing and
is signed by the party asserted to have granted such waiver.
 
22.           Headings. The headings of the sections of this Agreement have been
inserted for convenience of reference only and shall not be deemed part of this
Agreement.
 
23.           Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original as against any
party whose signature appears thereon, and all of which shall together
constitute one and the same instrument. This Agreement shall become binding when
one or more counterparts of this Agreement, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.
 
24.           Severability. Any provision of this Agreement that is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
 
 
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25.           Gender. Words used herein regardless of the number and gender
specifically used shall be deemed and construed to include any other number,
singular or plural, and any other gender, masculine, feminine or neuter, as the
context requires.
 
26.           Attorneys’ Fees. Should any action or other proceeding be
necessary to enforce any of the provisions of this Agreement or the various
transactions contemplated hereby, the prevailing party will be entitled to
recover its actual reasonable attorneys’ fees and expenses from the
non-prevailing party.
 
27.           Amendments. This Agreement may not be amended, modified or changed
(in whole or in part), except by a formal, definitive written agreement
expressly referring to this Agreement, which agreement is executed by all of the
parties and, in the case of the REIT, if and when any of the stock of the REIT
becomes publicly traded, approved by the Board of Directors. The parties hereto
expressly acknowledge that no consent or approval of the REIT’s stockholders is
required in connection with any amendment, modification or change to this
Agreement.
 
28.           Authority. Each signatory to this Agreement warrants and
represents that such signatory is authorized to sign this Agreement on behalf of
and to bind the party on whose behalf such signatory is signing this Agreement.
 
[Signature page follows.]
 
 
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first written above.
 

 
“REIT”
     
JAVELIN MORTGAGE INVESTMENT CORP.,
 
a Maryland corporation
     
By: /s/ Jeffrey J. Zimmer                                                  
 
Name: Jeffrey J. Zimmer
 
Title: Co-Chief Executive Officer, Co-Vice Chairman and President
     
“MANAGER”
     
ARMOUR RESIDENTIAL MANAGEMENT LLC,
 
a Delaware limited liability company
     
By: /s/ Jeffrey J. Zimmer                                                  
 
Name: Jeffrey J. Zimmer
 
Title: Co-Managing Member

 
 
 
[Signature page to JAVELIN Management Agreement]