INDEMNIFICATION
AGREEMENT 

     THIS
INDEMNIFICATION AGREEMENT (“Agreement”) is made and entered into
as of the 7th day of February, 2013, by and between ZAIS Financial
Corp., a Maryland corporation (the “Company”), and Daniel Mudge
(“Indemnitee”). 

    
WHEREAS, at the request of the Company, Indemnitee currently serves as a
director and/or officer of the Company and may, therefore, be subjected to
claims, suits or proceedings arising as a result of his service; and 

    
WHEREAS, as an inducement to Indemnitee to continue to serve as such
director and/or officer, the Company has agreed to indemnify and to advance
expenses and costs incurred by Indemnitee in connection with any such claims,
suits or proceedings, to the maximum extent permitted by law; and 

    
WHEREAS, the parties by this Agreement desire to set forth their
agreement regarding indemnification and advance of expenses; and 

    
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows: 

    
Section 1. Definitions. For purposes of this
Agreement: 

    
(a) “Change in Control” means a change in control of the Company occurring after the
Effective Date of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A (or in response to any similar item
on any similar schedule or form) promulgated under the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), whether or not the Company is
then subject to such reporting requirement; provided, however, that, without
limitation, such a Change in Control shall be deemed to have occurred if, after
the Effective Date (i) any “person” (as such term is used in Sections 13(d) and
14(d) of the Exchange Act) is or becomes the “beneficial owner” (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the
Company representing 15% or more of the combined voting power of all of the
Company’s then-outstanding securities entitled to vote generally in the election
of directors without the prior approval of at least two-thirds of the members of
the Board of Directors in office immediately prior to such person’s attaining
such percentage interest; (ii) the Company is a party to a merger,
consolidation, sale of assets, plan of liquidation or other reorganization not
approved by at least two-thirds of the members of the Board of Directors then in
office, as a consequence of which members of the Board of Directors in office
immediately prior to such transaction or event constitute less than a majority
of the Board of Directors thereafter; or (iii) at any time, a majority of the
members of the Board of Directors are not individuals (A) who were directors as
of the Effective Date or (B) whose election by the Board of Directors or
nomination for election by the Company’s stockholders was approved by the
affirmative vote of at least two-thirds of the directors then in office who were
directors as of the Effective Date or whose election or nomination for election
was previously so approved. 







     (b) “Corporate Status” means the status of
a person as a present or former director, officer, employee or agent of the
Company or as a director, trustee, officer, partner, manager, managing member,
fiduciary, employee or agent of any other foreign or domestic corporation,
partnership, limited liability company, joint venture, trust, employee benefit
plan or other enterprise that such person is or was serving in such capacity at
the request of the Company. As a clarification and without limiting the
circumstances in which Indemnitee may be serving at the request of the Company,
service by Indemnitee shall be deemed to be at the request of the Company if
Indemnitee serves or served as a director, trustee, officer, partner, manager,
managing member, fiduciary, employee or agent of any corporation, partnership,
limited liability company, joint venture, trust, employee benefit plan or other
enterprise (i) of which a majority of the voting power or equity interest is
owned directly or indirectly by the Company or (ii) the management of which is
controlled directly or indirectly by the Company. 

    
(c) “Disinterested Director” means a director of the Company who is not and was not a
party to the Proceeding in respect of which indemnification and/or advance of
Expenses is sought by Indemnitee. 

    
(d) “Effective Date” means the date set forth in the first paragraph of this
Agreement. 

    
(e) “Expenses” means any and all reasonable and out-of-pocket attorneys’ fees and
costs, retainers, court costs, transcript costs, fees of experts, witness fees,
travel expenses, duplicating costs, printing and binding costs, telephone
charges, postage, delivery service fees, federal, state, local or foreign taxes
imposed on Indemnitee as a result of the actual or deemed receipt of any
payments under this Agreement, ERISA excise taxes and penalties and any other
disbursements or expenses incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, being or preparing to be a
witness in or otherwise participating in a Proceeding. Expenses shall also
include Expenses incurred in connection with any appeal resulting from any
Proceeding including, without limitation, the premium, security for and other
costs relating to any cost bond, supersedes bond or other appeal bond or its
equivalent.

    
(f) “Independent Counsel” means a law firm, or a member of a law firm, that is
experienced in matters of corporation law and neither is, nor in the past five
years has been, retained to represent: (i) the Company or Indemnitee in any
matter material to either such party (other than with respect to matters
concerning Indemnitee under this Agreement or of other indemnitees under similar
indemnification agreements), or (ii) any other party to or participant or
witness in the Proceeding giving rise to a claim for indemnification or advance
of Expenses hereunder. Notwithstanding the foregoing, the term “Independent
Counsel” shall not include any person who, under the applicable standards of
professional conduct then prevailing, would have a conflict of interest in
representing either the Company or Indemnitee in an action to determine
Indemnitee’s rights under this Agreement.

    
(g) “Proceeding” means any threatened, pending or completed action, suit, arbitration,
alternate dispute resolution mechanism, investigation, inquiry, administrative
hearing or any other proceeding, whether brought by or in the right of the
Company or otherwise and whether of a civil (including intentional or
unintentional tort claims), criminal, administrative or investigative (formal or
informal) nature, including any appeal therefrom, except one pending or
completed on or before the Effective Date, unless
otherwise specifically agreed in writing by the Company and Indemnitee. If
Indemnitee reasonably believes that a given situation may lead to or culminate
in the institution of a Proceeding, such situation shall also be considered a
Proceeding. 

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     Section
2. Services by
Indemnitee. Indemnitee will serve as a
director and/or officer of the Company. However, this Agreement shall not impose
any independent obligation on Indemnitee or the Company to continue Indemnitee’s
service to the Company. This Agreement shall not be deemed an employment
contract between the Company (or any other entity) and Indemnitee. 

    
Section 3. General. The Company shall indemnify,
and advance Expenses to, Indemnitee (a) as provided in this Agreement and (b)
otherwise to the maximum extent permitted by the laws of the State of Maryland
in effect on the Effective Date and as amended from time to time; provided,
however, that no change in the laws of the State of Maryland shall have the
effect of reducing the benefits available to Indemnitee hereunder based on the
laws of the State of Maryland as in effect on the Effective Date. The rights of
Indemnitee provided in this Section 3 shall include, without limitation, the
rights set forth in the other sections of this Agreement, including any
additional indemnification permitted by Section 2-418(g) of the Maryland General
Corporation Law (the “MGCL”). 

    
Section 4. Standard for Indemnification. If, by
reason of Indemnitee’s Corporate Status, Indemnitee is, or is threatened to be,
made a party to any Proceeding, Indemnitee shall be indemnified against all
judgments, penalties, fines and amounts paid in settlement and all Expenses
actually and reasonably incurred by him or on his behalf in connection with any
such Proceeding unless it is established that (a) the act or omission of
Indemnitee was material to the matter giving rise to the Proceeding and (i) was
committed in bad faith or (ii) was the result of active and deliberate
dishonesty, (b) Indemnitee actually received an improper personal benefit in
money, property or services or (c) in the case of any criminal Proceeding,
Indemnitee had reasonable cause to believe that his conduct was unlawful.


    
Section 5. Certain Limits on Indemnification. Notwithstanding any other provision of this Agreement (other than Section
6), Indemnitee shall not be entitled to: 

    
(a) indemnification hereunder if the Proceeding was one by or in the right of
the Company and Indemnitee is adjudged to be liable to the Company;

    
(b) indemnification hereunder if Indemnitee is adjudged to be liable on the
basis that personal benefit was improperly received in any Proceeding charging
improper personal benefit to Indemnitee, whether or not involving action in the
Indemnitee’s Corporate Status; or 

    
(c) indemnification or advance of Expenses hereunder if the Proceeding was
brought by Indemnitee unless: (i) the Proceeding was brought to enforce
indemnification under this Agreement, and then only to the extent in accordance
with and as authorized by Section 12 of this Agreement, or (ii) the Company’s
charter or Bylaws, a resolution of the stockholders entitled to vote generally
in the election of directors or of the Board of Directors or an agreement approved by the Board of Directors to which the Company is a
party expressly provide otherwise. 

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     Section
6. Court-Ordered Indemnification.
Notwithstanding any other provision of this Agreement, a court of appropriate
jurisdiction, upon application of Indemnitee and such notice as the court shall
require, may order indemnification in the following circumstances: 

    
(a) if it
determines Indemnitee is entitled to reimbursement under Section 2-418(d)(1) of
the MGCL, the court shall order indemnification, in which case Indemnitee shall
be entitled to recover the Expenses of securing such reimbursement; or


    
(b) if it
determines that Indemnitee is fairly and reasonably entitled to indemnification
in view of all the relevant circumstances, whether or not Indemnitee (i) has met
the standards of conduct set forth in Section 2-418(b) of the MGCL or (ii) has
been adjudged liable for receipt of an improper personal benefit under Section
2-418(c) of the MGCL, the court may order such indemnification as the court
shall deem proper. However, indemnification with respect to any Proceeding by or
in the right of the Company or in which liability shall have been adjudged in
the circumstances described in Section 2-418(c) of the MGCL shall be limited to
Expenses. 

    
Section 7. Indemnification for Expenses of a Party Who is Wholly or Partly
Successful. Notwithstanding any other provision of this Agreement, and without
limiting any such provision, to the extent that Indemnitee was or is, by reason
of his Corporate Status, made a party to (or otherwise becomes a participant in)
any Proceeding and is successful, on the merits or otherwise, in the defense of
such Proceeding, Indemnitee shall be indemnified for all Expenses actually and
reasonably incurred by him or on his behalf in connection therewith. If
Indemnitee is not wholly successful in such Proceeding but is successful, on the
merits or otherwise, as to one or more but less than all claims, issues or
matters in such Proceeding, the Company shall indemnify Indemnitee under this
Section 7 for all Expenses actually and reasonably incurred by him or on his
behalf in connection with each such claim, issue or matter, allocated on a
reasonable and proportionate basis. For purposes of this Section 7 and, without
limitation, the termination of any claim, issue or matter in such a Proceeding
by dismissal, with or without prejudice, shall be deemed to be a successful
result as to such claim, issue or matter. 

    
Section 8. Advance of Expenses for a Party. If,
by reason of Indemnitee’s Corporate Status, Indemnitee is, or is threatened to
be, made a party to any Proceeding, the Company shall, without requiring a
preliminary determination of Indemnitee’s ultimate entitlement to
indemnification hereunder, advance all reasonable Expenses incurred by or on
behalf of Indemnitee in connection with such Proceeding within ten days after
the receipt by the Company of a statement or statements requesting such advance
or advances from time to time, whether prior to or after final disposition of
such Proceeding. Such statement or statements shall reasonably evidence the
Expenses incurred by Indemnitee and shall include or be preceded or accompanied
by a written affirmation by Indemnitee of Indemnitee’s good faith belief that
the standard of conduct necessary for indemnification by the Company as
authorized by law and by this Agreement has been met and a written undertaking
by or on behalf of Indemnitee, in substantially the form attached hereto as
Exhibit A
or in such form as may be required under applicable law as in effect at the time
of the execution thereof, to reimburse the portion of any Expenses advanced to Indemnitee relating to claims, issues or matters in
the Proceeding as to which it shall ultimately be established that the standard
of conduct has not been met by Indemnitee and which have not been successfully
resolved as described in Section 7 of this Agreement. To the extent that
Expenses advanced to Indemnitee do not relate to a specific claim, issue or
matter in the Proceeding, such Expenses shall be allocated on a reasonable and
proportionate basis. The undertaking required by this Section 8 shall be an
unlimited general obligation by or on behalf of Indemnitee and shall be accepted
without reference to Indemnitee’s financial ability to repay such advanced
Expenses and without any requirement to post security therefor.


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     Section
9. Indemnification and Advance of Expenses of a Witness. Notwithstanding any other provision of this Agreement, to
the extent that Indemnitee is or may be, by reason of his Corporate Status, made
a witness or otherwise asked to participate in any Proceeding, whether
instituted by the Company or any other party, and to which Indemnitee is not a
party, he shall be advanced all reasonable Expenses and indemnified against all
Expenses actually and reasonably incurred by him or on his behalf in connection
therewith within ten days after the receipt by the Company of a statement or
statements requesting such advance or advances from time to time, whether prior
to or after final disposition of such Proceeding. Such statement or statements
shall reasonably evidence the Expenses incurred by Indemnitee. 

    
Section 10. Procedure for Determination of Entitlement to
Indemnification. 

    
(a) To
obtain indemnification under this Agreement, Indemnitee shall submit to the
Company a written request, including therein or therewith such documentation and
information as is reasonably available to Indemnitee and is reasonably necessary
to determine whether and to what extent Indemnitee is entitled to
indemnification. Indemnitee may submit one or more such requests from time to
time and at such time(s) as Indemnitee deems appropriate in his sole discretion.
The officer of the Company receiving any such request from Indemnitee shall,
promptly upon receipt of such a request for indemnification, advise the Board of
Directors in writing that Indemnitee has requested indemnification. 

    
(b) Upon
written request by Indemnitee for indemnification pursuant to Section 10(a)
above, a determination, if required by applicable law, with respect to
Indemnitee’s entitlement thereto shall promptly be made in the specific case:
(i) if a Change in Control shall have occurred, by Independent Counsel, in a
written opinion to the Board of Directors, a copy of which shall be delivered to
Indemnitee, which Independent Counsel shall be selected by the Indemnitee and
approved by the Board of Directors in accordance with Section 2-418(e)(2)(ii) of
the MGCL, which approval will not be unreasonably withheld; or (ii) if a Change
in Control shall not have occurred, (A) by the Board of Directors by a majority
vote of a quorum consisting of Disinterested Directors or, if such a quorum
cannot be obtained, then by a majority vote of a duly authorized committee of
the Board of Directors consisting solely of one or more Disinterested Directors,
(B) if Independent Counsel has been selected by the Board of Directors in
accordance with Section 2-418(e)(2)(ii) of the MGCL and approved by the
Indemnitee, which approval shall not be unreasonably withheld, by Independent
Counsel, in a written opinion to the Board of Directors, a copy of which shall
be delivered to Indemnitee or (C) if so directed by a majority of the members of
the Board of Directors, by the stockholders of the Company. If it is so
determined that Indemnitee is entitled to indemnification, payment to Indemnitee
shall be made within ten days after such determination.
Indemnitee shall cooperate with the person, persons or entity making such
determination with respect to Indemnitee’s entitlement to indemnification,
including providing to such person, persons or entity upon reasonable advance
request any documentation or information which is not privileged or otherwise
protected from disclosure and which is reasonably available to Indemnitee and
reasonably necessary to such determination in the discretion of the Board of
Directors or Independent Counsel if retained pursuant to clause (ii)(B) of this
Section 10(b). Any Expenses incurred by Indemnitee in so cooperating with the
person, persons or entity making such determination shall be borne by the
Company (irrespective of the determination as to Indemnitee’s entitlement to
indemnification) and the Company shall indemnify and hold Indemnitee harmless
therefrom. 

- 5 - 







     (c) The Company shall pay the
reasonable fees and expenses of Independent Counsel, if one is appointed.


    
Section 11. Presumptions and Effect of Certain Proceedings. 

    
(a) In
making any determination with respect to entitlement to indemnification
hereunder, the person or persons or entity making such determination shall
presume that Indemnitee is entitled to indemnification under this Agreement if
Indemnitee has submitted a request for indemnification in accordance with
Section 10(a) of this Agreement, and the Company shall have the burden of proof
to overcome that presumption in connection with the making of any determination
contrary to that presumption.

    
(b) The
termination of any Proceeding or of any claim, issue or matter therein, by
judgment, order, settlement or conviction, upon a plea of nolo contendere or its
equivalent, or entry of an order of probation prior to judgment, does not create
a presumption that Indemnitee did not meet the requisite standard of conduct
described herein for indemnification. 

    
(c) The
knowledge and/or actions, or failure to act, of any other director, officer,
employee or agent of the Company or any other director, trustee, officer,
partner, manager, managing member, fiduciary, employee or agent of any other
foreign or domestic corporation, partnership, limited liability company, joint
venture, trust, employee benefit plan or other enterprise shall not be imputed
to Indemnitee for purposes of determining any other right to indemnification
under this Agreement. 

    
Section 12. Remedies of Indemnitee. 

    
(a) If (i)
a determination is made pursuant to Section 10(b) of this Agreement that
Indemnitee is not entitled to indemnification under this Agreement, (ii) advance
of Expenses is not timely made pursuant to Section 8 of this Agreement, (iii) no
determination of entitlement to indemnification shall have been made pursuant to
Section 10(b) of this Agreement within 60 days after receipt by the Company of
the request for indemnification, (iv) payment of indemnification is not made
pursuant to Section 7 of this Agreement within ten days after receipt by the
Company of a written request therefor, or (v) payment of indemnification
pursuant to any other section of this Agreement or the charter or Bylaws of the
Company is not made within ten days after a determination has been made that
Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an
adjudication in an appropriate court located in the State of Maryland, or in any other court of competent jurisdiction, of his
entitlement to such indemnification or advance of Expenses. Alternatively,
Indemnitee, at his option, may seek an award in arbitration to be conducted by a
single arbitrator pursuant to the Commercial Arbitration Rules of the American
Arbitration Association. Indemnitee shall commence a proceeding seeking an
adjudication or an award in arbitration within 180 days following the date on
which Indemnitee first has the right to commence such proceeding pursuant to
this Section 12(a); provided, however, that the foregoing clause shall not apply
to a proceeding brought by Indemnitee to enforce his rights under Section 7 of
this Agreement. Except as set forth herein, the provisions of the laws of the
State of Maryland (without regard to its conflicts of laws rules) shall apply to
any such arbitration. The Company shall not oppose Indemnitee’s right to seek
any such adjudication or award in arbitration.

- 6 - 







     (b) In any judicial proceeding or
arbitration commenced pursuant to this Section 12, Indemnitee shall be presumed
to be entitled to indemnification or advance of Expenses, as the case may be,
under this Agreement and the Company shall have the burden of proving that
Indemnitee is not entitled to indemnification or advance of Expenses, as the
case may be. If Indemnitee commences a judicial proceeding or arbitration
pursuant to this Section 12, Indemnitee shall not be required to reimburse the
Company for any advances pursuant to Section 8 of this Agreement until a final
determination is made with respect to Indemnitee’s entitlement to
indemnification (as to which all rights of appeal have been exhausted or
lapsed). The Company shall, to the fullest extent not prohibited by law, be
precluded from asserting in any judicial proceeding or arbitration commenced
pursuant to this Section 12 that the procedures and presumptions of this
Agreement are not valid, binding and enforceable and shall stipulate in any such
court or before any such arbitrator that the Company is bound by all of the
provisions of this Agreement. 

    
(c) If a
determination shall have been made pursuant to Section 10(b) of this Agreement
that Indemnitee is entitled to indemnification, the Company shall be bound by
such determination in any judicial proceeding or arbitration commenced pursuant
to this Section 12, absent a misstatement by Indemnitee of a material fact, or
an omission of a material fact necessary to make Indemnitee’s statement not
materially misleading, in connection with the request for indemnification.


    
(d) In the
event that Indemnitee, pursuant to this Section 12, seeks a judicial
adjudication of or an award in arbitration to enforce his rights under, or to
recover damages for breach of, this Agreement, Indemnitee shall be entitled to
recover from the Company, and shall be indemnified by the Company for, any and
all Expenses actually and reasonably incurred by him in such judicial
adjudication or arbitration. If it shall be determined in such judicial
adjudication or arbitration that Indemnitee is entitled to receive part but not
all of the indemnification or advance of Expenses sought, the Expenses incurred
by Indemnitee in connection with such judicial adjudication or arbitration shall
be appropriately prorated.

    
(e) Interest shall be paid by the Company to Indemnitee at the maximum rate
allowed to be charged for judgments under the Courts and Judicial Proceedings
Article of the Annotated Code of Maryland for amounts which the Company pays or
is obligated to pay for the period commencing with the date on which the Company
was requested to advance expenses in accordance with Section 8 of this Agreement
or to make the determination of entitlement to indemnification under Section 12(a) above. Indemnitee requests
indemnification, reimbursement or advance of any Expenses and ending on the date
such payment is made to Indemnitee by the Company. 

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     Section
13. Defense of
the Underlying Proceeding. 

    
(a) Indemnitee shall notify the Company promptly in writing upon being served
with any summons, citation, subpoena, complaint, indictment, request or other
document relating to any Proceeding which may result in the right to
indemnification or the advance of Expenses hereunder and shall include with such
notice a description of the nature of the Proceeding and a summary of the facts
underlying the Proceeding. The failure to give any such notice shall not
disqualify Indemnitee from the right, or otherwise affect in any manner any
right of Indemnitee, to indemnification or the advance of Expenses under this
Agreement unless the Company’s ability to defend in such Proceeding or to obtain
proceeds under any insurance policy is materially and adversely prejudiced
thereby, and then only to the extent the Company is thereby actually so
prejudiced. 

    
(b) Subject
to the provisions of the last sentence of this Section 13(b) and of Section
13(c) below, the Company shall have the right to defend Indemnitee in any
Proceeding which may give rise to indemnification hereunder; provided, however,
that the Company shall notify Indemnitee of any such decision to defend within
15 calendar days following receipt of notice of any such Proceeding under
Section 13(a) above. The Company shall not, without the prior written consent of
Indemnitee, which shall not be unreasonably withheld or delayed, consent to the
entry of any judgment against Indemnitee or enter into any settlement or
compromise which (i) includes an admission of fault of Indemnitee, (ii) does not
include, as an unconditional term thereof, the full release of Indemnitee from
all liability in respect of such Proceeding, which release shall be in form and
substance reasonably satisfactory to Indemnitee or (iii) would impose any
Expense, judgment, fine, penalty or limitation on Indemnitee. This Section 13(b)
shall not apply to a Proceeding brought by Indemnitee under Section 12 of this
Agreement. 

    
(c) Notwithstanding the provisions of Section 13(b) above, if in a Proceeding
to which Indemnitee is a party by reason of Indemnitee’s Corporate Status, (i)
Indemnitee reasonably concludes, based upon an opinion of counsel approved by
the Company, which approval shall not be unreasonably withheld, that he may have
separate defenses or counterclaims to assert with respect to any issue which may
not be consistent with other defendants in such Proceeding, (ii) Indemnitee
reasonably concludes, based upon an opinion of counsel approved by the Company,
which approval shall not be unreasonably withheld, that an actual or apparent
conflict of interest or potential conflict of interest exists between Indemnitee
and the Company, or (iii) if the Company fails to assume the defense of such
Proceeding in a timely manner, Indemnitee shall be entitled to be represented by
separate legal counsel of Indemnitee’s choice, subject to the prior approval of
the Company, which shall not be unreasonably withheld, at the expense of the
Company. In addition, if the Company fails to comply with any of its obligations
under this Agreement or in the event that the Company or any other person takes
any action to declare this Agreement void or unenforceable, or institutes any
Proceeding to deny or to recover from Indemnitee the benefits intended to be
provided to Indemnitee hereunder, Indemnitee shall have the right to retain
counsel of Indemnitee’s choice, subject to the prior
approval of the Company, which shall not be unreasonably withheld, at the
expense of the Company (subject to Section 12(d) of this Agreement), to
represent Indemnitee in connection with any such matter. 

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     Section
14. Non-Exclusivity; Survival of Rights; Subrogation. 

    
(a) The
rights of indemnification and advance of Expenses as provided by this Agreement
shall not be deemed exclusive of any other rights to which Indemnitee may at any
time be entitled under applicable law, the charter or Bylaws of the Company, any
agreement or a resolution of the stockholders entitled to vote generally in the
election of directors or of the Board of Directors, or otherwise. Unless
consented to in writing by Indemnitee, no amendment, alteration or repeal of
this Agreement or of any provision hereof shall limit or restrict any right of
Indemnitee under this Agreement in respect of any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal, regardless of whether a claim with respect to such action or inaction is
raised prior or subsequent to such amendment, alteration or repeal. No right or
remedy herein conferred is intended to be exclusive of any other right or
remedy, and every other right or remedy shall be cumulative and in addition to
every other right or remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion of any right or remedy hereunder, or
otherwise, shall not prohibit the concurrent assertion or employment of any
other right or remedy. 

    
(b) In the
event of any payment under this Agreement, the Company shall be subrogated to
the extent of such payment to all of the rights of recovery of Indemnitee, who
shall execute all papers required and take all action necessary to secure such
rights, including execution of such documents as are necessary to enable the
Company to bring suit to enforce such rights. 

    
Section 15. Insurance. The Company will use its
reasonable best efforts to acquire directors and officers liability insurance,
on terms and conditions deemed appropriate by the Board of Directors, with the
advice of counsel, covering Indemnitee or any claim made against Indemnitee by
reason of his Corporate Status and covering the Company for any indemnification
or advance of Expenses made by the Company to Indemnitee for any claims made
against Indemnitee by reason of his Corporate Status. Without in any way
limiting any other obligation under this Agreement, the Company shall indemnify
Indemnitee for any payment by Indemnitee arising out of the amount of any
deductible or retention and the amount of any excess of the aggregate of all
judgments, penalties, fines, settlements and Expenses incurred by Indemnitee in
connection with a Proceeding over the coverage of any insurance referred to in
the previous sentence. The purchase, establishment and maintenance of any such
insurance shall not in any way limit or affect the rights or obligations of the
Company or Indemnitee under this Agreement except as expressly provided herein,
and the execution and delivery of this Agreement by the Company and the
Indemnitee shall not in any way limit or affect the rights or obligations of the
Company under any such insurance policies. If, at the time the Company receives
notice from any source of a Proceeding to which Indemnitee is a party or a
participant (as a witness or otherwise) the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of such
Proceeding to the insurers in accordance with the procedures set forth in the
respective policies. 

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     Section
16. Coordination of Payments. The Company
shall not be liable under this Agreement to make any payment of amounts
otherwise indemnifiable or payable or reimbursable as Expenses hereunder if and
to the extent that Indemnitee has otherwise actually received such payment under
any insurance policy, contract, agreement or otherwise. 

    
Section 17. Reports to Stockholders. To the extent
required by the MGCL, the Company shall report in writing to its stockholders
the payment of any amounts for indemnification of, or advance of Expenses to,
Indemnitee under this Agreement arising out of a Proceeding by or in the right
of the Company with the notice of the meeting of stockholders of the Company
next following the date of the payment of any such indemnification or advance of
Expenses or prior to such meeting. 

    
Section 18. Duration of Agreement; Binding Effect.


    
(a) This
Agreement shall continue until and terminate on the later of (i) ten years after
the date that Indemnitee shall have ceased to serve as a director, officer,
employee or agent of the Company or as a director, trustee, officer, partner,
manager, managing member, fiduciary, employee or agent of any other foreign or
domestic corporation, real estate investment trust, partnership, limited
liability company, joint venture, trust, employee benefit plan or other
enterprise that such person is or was serving in such capacity at the request of
the Company and (ii) the date that Indemnitee is no longer subject to any actual
or possible Proceeding due to the lapse of all applicable statutes of
limitations or otherwise (including any rights of appeal thereto and any
Proceeding commenced by Indemnitee pursuant to Section 12 of this
Agreement).

    
(b) The
indemnification and advance of Expenses provided by, or granted pursuant to,
this Agreement shall be binding upon and be enforceable by the parties hereto
and their respective successors and assigns (including any direct or indirect
successor by purchase, merger, consolidation or otherwise to all or
substantially all of the business or assets of the Company), shall continue as
to an Indemnitee who has ceased to be a director, officer, employee or agent of
the Company or a director, trustee, officer, partner, manager, managing member,
fiduciary, employee or agent of any other foreign or domestic corporation,
partnership, limited liability company, joint venture, trust, employee benefit
plan or other enterprise that such person is or was serving in such capacity at
the request of the Company, and shall inure to the benefit of Indemnitee and his
spouse, assigns, heirs, devisees, executors and administrators and other legal
representatives. 

    
(c) The
Company shall require and cause any successor (whether direct or indirect by
purchase, merger, consolidation or otherwise) to all, substantially all or a
substantial part, of the business and/or assets of the Company, by written
agreement in form and substance satisfactory to Indemnitee, expressly to assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if no such succession had taken
place. 

    
(d) The
Company and Indemnitee agree herein that a monetary remedy for breach of this
Agreement, at some later date, may be inadequate, impracticable and difficult of
proof, and further agree that such breach may cause Indemnitee irreparable harm.
Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement
by seeking injunctive relief and/or specific performance
hereof, without any necessity of showing actual damage or irreparable harm and
that by seeking injunctive relief and/or specific performance, Indemnitee shall
not be precluded from seeking or obtaining any other relief to which he may be
entitled. Indemnitee shall further be entitled to such specific performance and
injunctive relief, including temporary restraining orders, preliminary
injunctions and permanent injunctions, without the necessity of posting bonds or
other undertakings in connection therewith. The Company acknowledges that, in
the absence of a waiver, a bond or undertaking may be required of Indemnitee by
a court, and the Company hereby waives any such requirement of such a bond or
undertaking. 

- 10 - 







     Section
19. Severability. If any provision or
provisions of this Agreement shall be held to be invalid, illegal or
unenforceable for any reason whatsoever: (a) the validity, legality and
enforceability of the remaining provisions of this Agreement (including, without
limitation, each portion of any Section, paragraph or sentence of this Agreement
containing any such provision held to be invalid, illegal or unenforceable that
is not itself invalid, illegal or unenforceable) shall not in any way be
affected or impaired thereby and shall remain enforceable to the fullest extent
permitted by law; (b) such provision or provisions shall be deemed reformed to
the extent necessary to conform to applicable law and to give the maximum effect
to the intent of the parties hereto; and (c) to the fullest extent possible, the
provisions of this Agreement (including, without limitation, each portion of any
Section, paragraph or sentence of this Agreement containing any such provision
held to be invalid, illegal or unenforceable, that is not itself invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested thereby. 

    
Section 20. Identical Counterparts. This Agreement
may be executed in one or more counterparts, each of which shall for all
purposes be deemed to be an original but all of which together shall constitute
one and the same Agreement. One such counterpart signed by the party against
whom enforceability is sought shall be sufficient to evidence the existence of
this Agreement. 

    
Section 21. Headings. The headings of the
paragraphs of this Agreement are inserted for convenience only and shall not be
deemed to constitute part of this Agreement or to affect the construction
thereof. 

    
Section 22. Modification and Waiver. No
supplement, modification or amendment of this Agreement shall be binding unless
executed in writing by both of the parties hereto. No waiver of any of the
provisions of this Agreement shall be deemed or shall constitute a waiver of any
other provisions hereof (whether or not similar) nor shall such waiver
constitute a continuing waiver. 

    
Section 23. Notices. All notices, requests,
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given if (i) delivered by hand and receipted for by the
party to whom said notice or other communication shall have been directed or
(ii) mailed by certified or registered mail with postage prepaid, on the third
business day after the date on which it is so mailed: 

    
(a) If to
Indemnitee, to the address set forth on the signature page hereto. 

- 11 - 







     (b) If to the Company, to:


                   
General Counsel 
                   
Two Bridge Avenue, Suite 322
                   
Red Bank, New Jersey 07701-1106
                   
Facsimile: (732) 978-7507 

or to such other address as may have been
furnished in writing to Indemnitee by the Company or to the Company by
Indemnitee, as the case may be. 

    
Section 24. Governing Law. The parties agree that
this Agreement shall be governed by, and construed and enforced in accordance
with, the laws of the State of Maryland, without regard to its conflicts of laws
rules. 

    
Section 25. Miscellaneous. Use of the masculine
pronoun shall be deemed to include usage of the feminine pronoun where
appropriate. 

[SIGNATURE PAGE FOLLOWS] 

- 12 - 







     IN WITNESS
WHEREOF, the parties hereto have executed this Agreement as of the day and year
first above written. 


	
      ZAIS FINANCIAL
      CORP.

		 
		 
	By:  	   /s/ Michael Szymanski
	Name:     	Michael Szymanski
	Title:	Chief Executive Officer and President	
		 	
		 	
	
      INDEMNITEE

		 	
		 	
	          /s/
      Daniel Mudge
	
      Name:
	
      Daniel
    Mudge
	
	Address:     	
      





[Signature Page to Daniel Mudge Indemnification Agreement] 







EXHIBIT A 

FORM OF UNDERTAKING TO REPAY EXPENSES
ADVANCED 

The Board of Directors of ZAIS Financial
Corp. 

Re: Undertaking to Repay Expenses Advanced


Ladies and Gentlemen: 

     This undertaking
is being provided pursuant to that certain Indemnification Agreement dated the
7th day of February, 2013, by and between ZAIS Financial Corp., a Maryland
corporation (the “Company”), and the undersigned Indemnitee (the
“Indemnification Agreement”), pursuant to
which I am entitled to advance of Expenses in connection with [Description of Proceeding]
(the “Proceeding”). 

    
Terms used herein and not otherwise defined shall have the meanings
specified in the Indemnification Agreement. 

    
I am subject to the Proceeding by reason of my Corporate Status or by
reason of alleged actions or omissions by me in such capacity. I hereby affirm
my good belief that at all times, insofar as I was involved as [a director]
[an officer] of the Company, in any of the facts or events giving rise to the
Proceeding, I (1) did not act with bad faith or active or deliberate dishonesty,
(2) did not receive any improper personal benefit in money, property or services
and (3) in the case of any criminal proceeding, had no reasonable cause to
believe that any act or omission by me was unlawful. 

    
In consideration of the advance of Expenses by the Company for reasonable
attorneys’ fees and related Expenses incurred by me in connection with the
Proceeding (the “Advanced Expenses”), I hereby agree
that if, in connection with the Proceeding, it is established that (1) an act or
omission by me was material to the matter giving rise to the Proceeding and (a)
was committed in bad faith or (b) was the result of active and deliberate
dishonesty or (2) I actually received an improper personal benefit in money,
property or services or (3) in the case of any criminal proceeding, I had
reasonable cause to believe that the act or omission was unlawful, then I shall
promptly reimburse the portion of the Advanced Expenses relating to the claims,
issues or matters in the Proceeding as to which the foregoing findings have been
established.

     IN WITNESS WHEREOF, I have
executed this Affirmation and Undertaking on this ___ day of
____________________, 20____. 



	 	



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