Exhibit 10.5



Exhibit 10.5

MANAGEMENT AGREEMENT

This
MANAGEMENT AGREEMENT is entered into as of November 6,
2009 by and between (i) ARMOUR RESIDENTIAL REIT, INC., 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 premises and of the mutual covenants and
agreement contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby 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

“Annual
Minimum Fee” means $900,000 for each fiscal year of this Agreement.

1.4

“Base
Management Fee” shall have the meaning set forth in Section 6.1 of this
Agreement.

1.5

“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.

1.6

“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.

1.7

“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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1.8

“Code”
means the Internal Revenue Code of 1986, as amended.

1.9

“Effective
Date” means the date of the consummation of the Merger.

1.10

“Governing
Instruments” means the articles of incorporation 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.

1.11

“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 Merger, plus (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.

1.12

“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.

1.13

“Initial
Term” shall have the meaning set forth in Section 10.1 of this
Agreement.

1.14

“Investment
Company Act” shall mean the Investment Company Act of 1940, as amended.

1.15

“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).

1.16

“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.

1.17

“Manager
Shareholders” shall have the meaning set forth in Section 2.5 of this
Agreement.

1.18

“Merger”
means the merger contemplated pursuant to the Merger Agreement. 

1.19

“Merger
Agreement” means that Agreement and Plan of Merger, dated as of July 29,
2009, among the REIT, ARMOUR Merger Sub Corp., a Delaware corporation, and
Enterprise Acquisition Corp., a Delaware corporation.

1.20

“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, and (e) 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.

1.21

“Non-Renewal
Notice” shall have the meaning set forth in Section 10.1 of this
Agreement.

1.22

“Notice of
Proposal to Negotiate” shall have the meaning set Forth in Section 10.5 of
this Agreement.

1.23

“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.

1.24

“Real
Estate Investment Trust” means a “real estate investment trust” as defined
under the Code.





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1.25

“REIT”
shall have the meaning set forth in the Preamble of this Agreement and shall
include any subsidiary and any successor thereto.

1.26

“REIT
Provisions of the Code” means Sections 856 through 860 of the Code.

1.27

“Renewal
Term” shall have the meaning set forth in Section 10.1 of this
Agreement.

1.28

“Staton
Bell” shall have the meaning set forth in Section 2.5 of this Agreement.

1.29

“Sub-Management
Agreement” shall have the meaning set forth in Section 2.5 of this
Agreement.

1.30

“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;

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 Director, 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;





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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);

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);





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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.

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 





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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.

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 7.3 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 





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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.  

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) 0.75% 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; provided, however, that the Base
Management Fee shall not ever be less than 1/12th of the Annual
Minimum Fee.  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.

7.1

Expenses of
the Manager.  The Manager shall be responsible for the following
expenses:





7









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;





8









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;

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;





9









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.

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 





10






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.

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
(b)(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. 





11






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).

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 





12






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.

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.





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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.

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

ARMOUR Residential REIT, Inc.

3005 Hammock Way

Vero Beach, FL 32963

Telecopy: (772) 388-4758

E-mail:
jz@armourreit.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.: Martin Burkett, Esq., and
Bradley Houser, Esq.

E-mail:
martin.burkett@akerman.com and bradley.houser@akerman.com





14









16.2

If to the
Manager:

Jeffrey
Zimmer

ARMOUR
Residential Management, LLC

3005 Hammock
Way

Vero Beach, FL
32963

Telecopy: (772)
388-4758

E-mail:
jz@armourreit.com

with a copy
given in the manner prescribed above, to:

Cahill Wink LLP

5 Penn Plaza, 23rd Floor

New York, NY 10001

Telecopy: (518) 584-1962

Attn: David G. Nichols, Jr. PLLC

E-mail:
david.nichols@cahillwink.com

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.





15









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.

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.]





16












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

“REIT”

ARMOUR RESIDENTIAL REIT,
INC.,

a Maryland
corporation




By:

/s/ Jeffrey J. Zimmer                         

Name: Jeffrey J. Zimmer

Title:
Chairman, CEO & President




“MANAGER”

ARMOUR RESIDENTIAL
MANAGEMENT LLC,

a Delaware
limited liability company




By:

/s/ Jeffrey J. Zimmer                         

Name: Jeffrey J. Zimmer

Title:
Managing Partner





[Signature page to Management
Agreement]