Document:

FORM OF COMMON STOCK CERTIFICATE

 EXHIBIT 4.1 
  

[Form of certificate representing common stock] 
  

			
	 Number
	 	 Shares of
 Common Stock, par value
 $0.01 per share

  
 [LOGO] 
  
 SAXON REIT, INC. 
  
 Incorporated Under the Laws of the State of Maryland 
  
 See Reverse for Important Notice on     
 Transfer Restrictions and Other Information 
  
 This is to certify that
                                        
         is the owner of
                                        
             fully paid and non-assessable shares of the common stock, $0.01 par value, of Saxon REIT, Inc. (the “Corporation”), transferable on the books of the Corporation by
the holder hereof in person or by duly authorized attorney, upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are issued and shall be held subject to all the provisions of the Articles of
Incorporation and the Bylaws of the Corporation and all amendments thereto (copies of which are on file at the office of the Corporation), to all of which the holder of this Certificate by acceptance hereof assents. This Certificate is not valid
unless countersigned by the Transfer Agent and registered by the Registrar. 
  
 WITNESS, the facsimile seal of the Corporation and the facsimile signatures of its duly authorized officers. 
  
 Dated: 
  

					
	 /s/ Richard D. Shepherd

	 	 [SEAL]
	 	 /s/ Michael L. Sawyer

	 Secretary
	 	 	 	 Chief Executive Officer and President

  
 COUNTERSIGNED AND REGISTERED:

 AMERICAN STOCK TRANSFER & 
 TRUST COMPANY (New York, NY) 
 TRANSFER AGENT AND REGISTRAR 
  
 By: 

 THE CORPORATION IS AUTHORIZED TO ISSUE SHARES OF CAPITAL STOCK OF MORE THAN ONE CLASS, CONSISTING OF
COMMON STOCK AND ONE OR MORE CLASSES OF PREFERRED STOCK. THE BOARD OF DIRECTORS IS AUTHORIZED TO DETERMINE THE PREFERENCES, LIMITATIONS AND RELATIVE RIGHTS OF ANY CLASS OF THE PREFERRED STOCK BEFORE THE ISSUANCE OF SHARES OF SUCH CLASS OF PREFERRED
STOCK. THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER OF THE CORPORATION UPON WRITTEN REQUEST AND WITHOUT CHARGE A COPY OF THE CORPORATION’S ARTICLES OF INCORPORATION, AS AMENDED, AND A FULL STATEMENT OF (1) THE DESIGNATIONS AND ANY
REFERENCES, CONVERSION AND OTHER RIGHTS, VOTING POWERS, RESTRICTIONS, LIMITATIONS AS TO DIVIDENDS, QUALIFICATIONS AND TERMS AND CONDITIONS OF REDEMPTION OF THE SHARES OF EACH CLASS WHICH THE CORPORATION IS AUTHORIZED TO ISSUE; AND (2) IF THE
CORPORATION IS AUTHORIZED TO ISSUE ANY PREFERRED OR SPECIAL CLASS IN SERIES, A FULL STATEMENT OF (A) THE DIFFERENCES IN THE RELATIVE RIGHTS AND PREFERENCES BETWEEN THE SHARES OF EACH SERIES TO THE EXTENT THEY HAVE BEEN SET; AND (B) THE AUTHORITY OF
THE BOARD OF DIRECTORS TO SET THE RELATIVE RIGHTS AND PREFERENCES OF SUBSEQUENT SERIES. REQUESTS FOR SUCH WRITTEN STATEMENT MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL OFFICE. 
  
 THE SHARES OF CAPITAL STOCK REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
RESTRICTIONS ON TRANSFER FOR THE PURPOSE OF THE CORPORATION’S MAINTENANCE OF ITS STATUS AS A REAL ESTATE INVESTMENT TRUST UNDER THE INTERNAL REVENUE CODE OF 1986, AS AMENDED. THESE RESTRICTIONS ARE SET FORTH IN THE CORPORATION’S ARTICLES
OF INCORPORATION, AS AMENDED, AND BYLAWS, AS AMENDED, COPIES OF WHICH WILL BE FURNISHED TO EACH STOCKHOLDER ON REQUEST AND WITHOUT CHARGE. REQUESTS FOR SUCH WRITTEN STATEMENT MAY BE DIRECTED TO THE SECRETARY OF THE CORPORATION AT ITS PRINCIPAL
OFFICE. 
  
 The following abbreviations, when used in the
inscription on the face of this Certificate, shall be construed as though they were written out in full according to applicable laws or regulations: 
  

			
	TEN COM – as tenants in common	 	UNIF GIFTS MIN ACT
		
	TEN ENT – as tenants by their entireties	 	 Custodian

 (Cust)                        (Minor)

	 JT TEN – as joint tenants with right of
 survivorship and not as tenants
 in common
	 	Under Uniform Gifts to Minors Act
		
	 	 	  

	 	 	(State)

  
 Additional
abbreviations may also be used though not in the above list. 
  
 FOR VALUE RECEIVED,
                                        
                             hereby sell, assign and transfer unto 
  
 PLEASE INSERT SOCIAL SECURITY OR OTHER 
 IDENTIFYING NUMBER OF ASSIGNEE 

	
	
	

	 

	
	  

	 (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)

	  

	
	                                      
                                   Shares of the Common Stock represented by
the within Certificate, and do hereby irrevocably constitute and appoint
                                     Attorney to transfer the
said stock on the books of the within-named Corporation with full power of substitution in the premises.
	
	 Dated:

  

	
	  

	NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE
WHATEVER.

  

	
	Signature(s) Guaranteed:
	  

	THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED SIGNATURE
GUARANTEE MEDALLION PROGRAM) PURSUANT TO S.E.C. RULE 17Ad-15.FORM OF EMPLOYMENT AGREEMENT OF MICHAEL SAWYER

 EXHIBIT 10.7 
  
 FORM OF EMPLOYMENT AGREEMENT 
  

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of the      day of June, 2004, by and
among SAXON REIT, INC., a Maryland corporation (the “Company”), SAXON CAPITAL, INC., a Delaware corporation, and MICHAEL L. SAWYER (“Executive”). 
  
 RECITALS 
  
 WHEREAS, the Company is intended to be the successor to Saxon Capital, Inc, a Virginia corporation (“Saxon Capital”), following the merger of
Saxon Capital with and into Saxon Merger Corporation, a wholly owned subsidiary of the Company (the “Merger”); 
  
 WHEREAS, Executive and Saxon Capital have entered into an Employment Agreement dated as of May 31, 2001 (the “Existing Agreement”), whereby
Executive is engaged and employed by Saxon Capital as its Chief Executive Officer; 
  
 WHEREAS, the Company and Executive desire to enter into this Agreement which provides for the terms and conditions of Executive’s employment with the Company as of, and effective upon, the closing date of the
Merger (the “Effective Date”); and 
  
 WHEREAS, upon the
Effective Date, this Agreement shall supersede and replace the Existing Agreement in its entirety and the Existing Agreement shall be of no further force or effect; 
  
 NOW, THEREFORE, in consideration of the mutual agreements set forth herein, the parties hereto agree as follows: 

 
 AGREEMENT 
  
 ARTICLE I. 
  
 EMPLOYMENT 
  
 1.1. Term. This Agreement shall be effective from the Effective Date
and shall remain in effect until midnight on the second anniversary of the Effective Date (the “Initial Term”), and will automatically be renewed for successive one-year terms (each an “Additional Term” and referred to herein
together with the Initial Term as the “Term”), unless either the Company or Executive notifies the other in writing of its intention to terminate the Agreement as of the end of the then current Initial Term or Additional Term, as
applicable, at least ninety (90) days prior to the end thereof. 
  
 1.2. Position and Duties. The Company hereby engages and employs Executive as Chief Executive Officer of the Company. It is the intention of the Company that Executive shall also serve as a Director of the Company’s Board of
Directors (the “Board”). The Board may 

 provide such additional designations of title to Executive as the Board, in its discretion, may deem appropriate.
Executive shall perform the executive duties and functions related to the above positions, subject to the limitations of authority set forth from time to time in any resolution of the Board or applicable law. 
  
 1.3. Best Efforts. Executive agrees to devote his full time and
attention to the Company, to use his best efforts to advance the business and welfare of the Company, to render his services under this Agreement fully, faithfully, diligently, competently and to the best of his ability, and not to engage in any
other employment activities. Notwithstanding anything herein to the contrary, Executive shall not be precluded from: (i) engaging in charitable activities and community affairs and managing his personal investments and affairs; provided, that
such activities do not materially interfere with the proper performance of his duties and responsibilities under this Agreement; or (ii) owning up to 1% of a publicly-held company engaged in the same or similar business as the Company. 

 
 ARTICLE II. 
  
 COMPENSATION AND BENEFITS 
  
 2.1. Base Salary. For all services to be rendered by Executive under
this Agreement, the Company agrees to pay Executive an annual base salary (“Base Salary”) of $450,000 (subject to adjustment upward as recommended by the Compensation Committee of the Board (the “Compensation Committee”)), less
deductions required by law, payable in accordance with the normal payroll practices of the Company. 
  
 2.2. Annual Performance Bonus. 
  
 (a) Payment of Performance Bonus. The Company shall pay to Executive an annual cash bonus with a target opportunity equal to 100% of
Executive’s Base Salary (“Target Bonus”) and a maximum opportunity equal to 200% of Executive’s Base Salary, as determined by the Board, or the Compensation Committee, based on Executive’s performance and the performance of
the Company during the prior fiscal year (“Bonus”). On or before March 1 of each year, the Company shall pay to Executive the estimated amount of such Bonus (the “Estimated Bonus”) based on the unaudited financial statements of
the Company for the prior fiscal year. On or before April 15 on each year, the Estimated Bonus shall be adjusted in accordance with the audited financial statements of the Company for the prior fiscal year. The Board, or the Compensation Committee,
shall promptly notify Executive in writing of the amount of adjustment, if any. If the Bonus is greater than the Estimated Bonus, the Company shall pay to Executive and additional cash payment equal to the amount by which the Bonus exceeds the
Estimated Bonus. If the Bonus is less that the Estimated Bonus, Executive shall pay to the Company a cash payment equal to the amount by which the Estimated Bonus exceeds the Bonus. Any amount required to be paid pursuant to the preceding two
sentences shall be made by the responsible party within ten (10) business days of the delivery of notice of adjustment to executive. Except as provided in Section 2.2(b), the Company shall not be obligated to pay Executive any Bonus for his
performance or the Company’s performance during any year, unless Executive is employed through December 31 of such year. 
  

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 (b) Pro-Rated Bonus Upon Change in Control or Death. Within fifteen (15) days following (i)
the consummation of a Change in Control (as defined below), (ii) Executive’s death, or (iii) termination of Executive’s employment due to disability, the Company shall pay to Executive or to his estate or heirs an amount equal to 100% of
Executive’s annual Base Salary, pro-rated from January 1 of the year in which such Change in Control or death or termination of employment due to disability occurs through and including the date of such Change in Control or death or termination
of employment due to disability (the “Pro-Rated Bonus”). 
  
 2.3. Other Benefits. The Company will further provide to Executive, at the Company’s expense, the following other benefits (“Other Benefits”): 
  
 (a) An annual vacation leave of a minimum of five (5) weeks per calendar year at full pay; 
  
 (b) Full participation, on a basis commensurate with his position with
the Company, in all plans of life, accident, disability and health insurance that generally are made available to senior executives of the Company; and 
  
 (c) Restricted Stock Units (“RSUs”) for 225,000 shares of the Common Stock, par value $0.01 per share, of the Company, which are to be
granted pursuant to the terms of the 2004 Incentive Compensation Plan (the “Plan”). All RSUs shall vest 100% on the fifth anniversary of the Effective Date, unless the vesting of such RSUs accelerate pursuant to Sections 3.1(b) or 3.2(b)
hereof or such RSUs terminate or accelerate pursuant to the Plan or action of the Compensation Committee. The RSUs shall be governed by the Plan and the RSU Agreement between the Company and Executive; provided, however, that to the
extent any terms of the Plan or the RSU Agreement are inconsistent with the terms of this Agreement (including, but not limited to, the provisions regarding the vesting of the RSUs), the terms of this Agreement shall govern and shall constitute an
amendment to the RSU Agreement. The Company agrees to execute such documents and take any other action reasonably required to cause such RSUs to be granted in accordance with the terms of this Agreement. Executive acknowledges that such RSU grant is
intended to cover the Initial Term and thereafter, and that the Company has no commitment to issue additional RSUs or any other equity-based compensation to Executive during the Initial Term, any Additional Term or thereafter. 
  
 2.4. Expense Reimbursement. The Company shall promptly reimburse
Executive for all reasonable business expenses incurred by Executive in promoting the business of the Company, including expenditures for entertainment, travel, or other expenses; provided, that (i) such expenditures are of a nature
qualifying them as legitimate business expenses and (ii) Executive furnishes to the Company adequate records and other documentary evidence reasonably required by the Company to substantiate such expenditures in accordance with the Company’s
policies and procedures. 
  

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 ARTICLE III. 
  
 TERMINATION, SEVERANCE PAY AND CHANGE IN CONTROL 
  
 3.1. Termination by the Company. 
  
 (a) Severance Pay. 
  
 (i) In the event that Executive’s employment with the Company is terminated by the Company for Cause (as defined below), Executive shall not
be entitled to any Severance Pay (as defined below) or employee benefits (including Other Benefits). 
  
 (ii) In the event that Executive’s employment with the Company is terminated by the Company other than for Cause, or Executive becomes
entitled to Severance Pay pursuant to Section 3.1(a)(ii), then, subject to Section 3.5 and in consideration of Executive’s compliance with his obligations under Articles IV and V and Executive’s execution of a general release in favor of
the Company and its affiliates, Executive shall be entitled to severance pay in the form of monthly payments to Executive in an amount equal to 1/12th of the sum of (A) Executive’s annual Base Salary plus (B) 100% of the Target Bonus for the
fiscal year in which termination occurs, less deductions required by law (“Severance Pay”) payable in accordance with the normal payroll practices of the Company, for twenty-four (24) months following such termination (the “Severance
Payout Period”). Alternatively, provided that Executive executes and delivers the said general release within fifteen (15) days following such a termination of employment by the Company other than for Cause, at Executive’s sole election
Executive’s Severance Pay shall be payable at the time of such delivery of the general release and shall consist of a lump sum equal to 200 percent (200%) of the sum of the amounts described in clauses (A) and (B) of this subsection. Executive
acknowledges and agrees that in the event Executive breaches any provision of Articles IV or V or the general release, his right to receive Severance Pay under this Section 3.1(a)(ii) shall automatically terminate and Executive shall repay all
Severance Pay received. 
  
 (b) Benefits. Following the
effective date of termination, Executive shall cease to be a Company employee and shall not be entitled to any employee benefits (including Other Benefits), except as set forth in this Section 3.1(b). In the event that the Company terminates
Executive’s employment other than for Cause (or, as provided in Section 3.2(b)(ii), Executive voluntarily terminates his employment for Good Reason (as defined below), for the longer or (A) twelve (12) months after Executive’s date of
termination, or (B) the Severance Payout Period in the event Executive has not elected a the lump sum payment described in Section 3.1(a)(ii), Company shall continue to provide benefits to Executive and/or Executive’s family at least equal to
those which would have been provided to them in accordance with the plans, programs, practices and policies described in Section 2.3(b) of this Agreement if Executive’s employment had not been terminated or, if more favorable to Executive, as
in effect generally at any time thereafter with respect to other peer executives of the Company and its affiliated companies, PROVIDED, HOWEVER, that if Executive becomes reemployed with another employer and is eligible to receive medical or other
welfare benefits under another employer-provided plan, the medical and other welfare benefits described herein shall be secondary to those provided under such other plan. Notwithstanding anything herein to the contrary, Executive’s termination
shall not preclude Executive from exercising his rights under COBRA to pay for the continuation of benefits previously provided by the Company. In the event that the Company terminates 
  

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 Executive’s employment other than for Cause (or, as provided in Section 3.2(b)(ii), Executive voluntarily terminates
his employment for Good Reason (as defined below)), all RSUs granted pursuant to Section 2.3(c) shall vest as of the effective date of such termination and the underlying shares shall be delivered in accordance with the terms of the RSU Agreement.

  
 (c) Cause. For purposes of this Agreement,
“Cause” shall mean (i) an act or acts of personal dishonesty by Executive that were intended to result in substantial personal enrichment of Executive at the expense of the Company; (ii) Executive’s conviction of any felony; or (iii)
Executive’s gross negligence, willful insubordination or misconduct, intentional or persistent failure to perform stated duties or abide by the Company’s policies, or material breach of any provision of this Agreement, including without
limitation any representation or covenant contained in Articles IV or V. 
  
 3.2. Termination by Executive. 
  
 (a) Notice. Executive shall have the right to voluntarily terminate his employment with the Company for whatever reason by providing the Company with at least sixty (60) days prior written notice. 
  
 (b) Severance Pay. 
  
 (i) In the event Executive voluntarily terminates his employment
with the Company without Good Reason, Executive shall not be entitled to any Severance Pay or employee benefits (including Other Benefits). 
  
 (ii) In the event Executive voluntarily terminates his employment with the Company for Good Reason, Executive shall be entitled, subject to
Section 3.5, to Severance Pay and all RSUs granted pursuant to Section 2.3(c) shall vest as of the effective date of such termination to the same extent as if Executive’s employment with the Company had been terminated other than for Cause as
provided in Sections 3.1(a) and 3.1(b); provided, that (i) Executive gives written notice of his resignation within thirty (30) days of the occurrence of such Good Reason and advises, as part of such resignation, that he is resigning because
of the Good Reason, and (ii) the occurrence of the Good Reason was not based on Cause. Executive acknowledges and agrees that in the event Executive breaches any provision of Articles IV or V or the general release, his right to receive Severance
Pay under this Section 3.2(b)(ii) shall automatically terminate and Executive shall repay all Severance Pay received. 
  
 (iii) For purposes of this Agreement, a resignation tendered by Executive pursuant to a direct request of the Board or another officer with higher
executive status shall, for purposes of this Agreement, be treated as an involuntary termination, entitling Executive to Severance Pay and RSU vesting in accordance with the provisions of Sections 3.1(a) and 3.1(b) so long as the request was not
based on Cause. 
  
 (b) Good Reason. For purposes of this
Agreement, “Good Reason” shall include (i) the material reduction or material adverse modification without Executive’s prior written consent of Executive’s authority or duties (i.e., the substantial diminution or adverse

  

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 modification in Executive’s title, status, overall position, responsibilities, reporting relationship or general
working environment); (ii) any reduction in Executive’s Base Salary or Bonus calculation or any material reduction in employee benefits; (iii) any requirement to move Executive’s principal place of employment to a location that is more
than a 50 mile radius from its current location; or (iv) any material breach of this Agreement by the Company that is not cured within thirty (30) days following demand for the cure thereof. 
  
 3.3. Death. In the event of Executive’s death, this Agreement
shall automatically terminate and shall be of no further force and effect. Termination of Executive’s employment as a result of his death shall not result in any obligation by the Company to pay to Executive’s estate or heirs any Severance
Pay or employee benefits (including Other Benefits) except as set forth in Section 2.2(b). To the extent not inconsistent with the terms of the Plan described in Section 2.3(c), Executive’s RSUs shall vest pro rata as of the date of his death
and the underlying shares of such vested portion shall be delivered in accordance with the terms of the RSU Agreement 
  
 3.4. Disability. In the event of Executive’s Disability (as defined below) during the Term for any period of at least three (3) consecutive
months, the Company shall have the right, which may be exercised in its sole discretion, to terminate this Agreement. In the event the Company elects to terminate this Agreement due to Executive’s Disability, Executive shall not be entitled to
any Severance Pay or employee benefits (including Other Benefits) at any time, but Executive shall be entitled to disability benefits to the extent provided in accordance with the policies and plans described in Section 2.3(c) of this Agreement as
established from time to time by the Company. To the extent not inconsistent with the terms of the Plan described in Section 2.3(c), Executive’s RSUs shall vest pro rata as of the date of the termination of his employment and the underlying
shares of such vested portion shall be delivered in accordance with the terms of the RSU Agreement. For purposes of this Agreement, “Executive’s Disability” shall mean the inability of Executive to perform his employment services
hereunder by reason of physical or mental illness or incapacity as determined by a physician chosen by the Company and reasonably satisfactory to Executive or his legal representative. 
  
 3.5. Change in Control. 
  
 (a) Upon the consummation of a Change in Control, Executive shall be entitled to pay in the form of monthly payments to Executive in an amount
equal to 1/12th of the sum of (A) Executive’s annual Base Salary plus (B) the Target Bonus for the fiscal year in which the consummation of a Change in Control occurs, less deductions required by law, payable in accordance with the normal
payroll practices of the Company, for twenty-four (24) months following consummation of such Change in Control (“Change in Control Payment”). Alternatively, at Executive’s sole election, Executive’s Change in Control Payment
shall consist of a lump sum equal to 200 percent (200%) of the sum of the amounts described in clauses (A) and (B) of this subsection. The Change in Control Payment shall be in addition to, and not in lieu of, Executive’s Base Salary and Bonus,
if any, payable in accordance with the terms of this Agreement. In addition, upon the consummation of a Change in Control, all of the RSUs shall immediately vest and the underlying shares shall be delivered in accordance with the terms of the RSU
Agreement. Following the consummation of a Change in Control, Executive shall not be entitled to receive, and hereby waives all right to, Severance Pay pursuant to Section 3.1 or 3.2 in 
  

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 the event Executive’s employment with the Company is terminated for any reason. For purposes of this Section 3.5,
“Change in Control” shall mean an acquisition, merger or consolidation of the Company or the sale of voting control or all or substantially all of the assets of the Company with, by or to any person or entity in which the stockholders of
the Company immediately prior to the effective date of such Change in Control do not own a majority of the outstanding shares of the capital stock of the surviving entity after such Change in Control; provided, however, that
“Change in Control” shall not be deemed to have occurred as a result of the consummation of the transactions provided for in the Stock Purchase Agreement or the resale of any securities under the Registration Statement. If Executive’s
employment with the Company is terminated by the Company other than for Cause at any time following the public announcement of a prospective Change in Control, then, notwithstanding such termination, the Company shall pay to Executive, the Change in
Control Payment based on Executive’s Base Salary in effect on the date of such termination; provided, however, that such Change in Control Payment shall be reduced by the total amount of any Severance Pay received by Executive,
and Executive thereafter shall not be entitled to any further payments of Severance Pay. 
  
 (b) In the event that any payments, distributions or benefits provided or to be provided to Executive, whether pursuant to this Agreement or from other plans or arrangements maintained by the Company or any of
the Consolidated Subsidiaries (excluding the Gross Up Payment and Additional Gross Up Payment (as such terms are hereinafter defined)) (collectively, the “Payment”) would be subject to excise tax under Section 4999 of the Code (such excise
tax and any penalties and interest collectively, the “Penalty Tax”), the Company shall pay to Executive in cash an additional amount equal to the Gross Up Payment. The “Gross Up Payment” shall be an amount such that after payment
by Executive of all federal, state, local, employment and Medicare taxes thereon (and any penalties and interest with respect thereto), Executive retains on an after tax basis an amount equal to the amount that Executive would have retained if he
had not been subject to the Penalty Tax at all. 
  
 (i)
For purposes of determining the amount of the Gross Up Payment, the value of any non-cash benefits and deferred payments or benefits subject to the Penalty Tax shall be determined by the Company’s tax and financial advisors in accordance with
the principles of Section 280G(d)(3) and (4) of the Code. In the event that, after the Gross Up Payment is made, Executive becomes entitled to receive a refund of any portion of the Penalty Tax, Executive shall promptly pay to the Company 100% of
such Penalty Tax refund attributable to the Payment (together with 100% of any interest paid or credited thereon by the Internal Revenue Service) and 100% of the Penalty Tax refund attributable to the Gross Up Payment (together with 100% of any
interest paid or credited thereon by the Internal Revenue Service). 
  
 (ii) As a result of the uncertainty regarding the application of Section 4999 of the Code, it is possible that the Internal Revenue Service may assert that the Penalty Tax due is in excess of the amount of the anticipated Penalty Tax
used in calculating the Gross Up Payment (such excess amount is hereafter referred to as the “Underpayment”). In such event, the Company shall pay to Executive, in immediately available funds, at the time the Underpayment is assessed or
otherwise determined, an additional amount equal to the Additional Gross Up Payment. The “Additional Gross Up Payment” shall be an amount such that after payment by Executive of the Underpayment plus all federal, state, local, employment
and Medicare taxes thereon (and any penalties and interest with respect thereto), Executive retains on an after tax basis an amount equal to $1.00. 
  

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 3.6. Waiver of Change in Control Payment Under Existing Agreement. The parties acknowledge that
the Merger may be construed to be a Change in Control as defined in the Existing Agreement that may in the absence of this Section 3.6 give rise to rights to a Change in Control Payment under Section 3.5 of the Existing Agreement. As additional
consideration for this Agreement, Executive agrees to waive and does hereby waive, effective as of the Effective Date, any rights to such Change in Control Payment that may otherwise have arisen pursuant to Section 3.5 of the Existing Agreement as a
result of consummation of the Merger. 
  
 ARTICLE IV.

  
 NONDISCLOSURE OF INFORMATION 
  
 4.1. Nondisclosure of Proprietary Information. At all times during and
after Executive’s employment with the Company (whether or not such termination is voluntary or involuntary, with or without Cause or Good Reason or by Executive’s Disability), Executive agrees to keep in strict confidence and trust all
Proprietary Information (as defined below) and not to use or disclose (or induce or assist in the use or disclosure of) any Proprietary Information without the prior express written consent of the Company, except as may be necessary in the ordinary
course of performing Executive’s duties as an officer of the Company. Executive acknowledges that irreparable injury will result to the Company from Executive’s violation or continued violation of the terms of this Article IV, and
Executive expressly agrees that the Company shall be entitled, in addition to damages and any other remedies provided by law, to an injunction or other equitable remedy respecting such violation or continued violation. For purposes of this
Agreement, “Proprietary Information” shall mean information generally unavailable to the public that has been created, discovered, developed or otherwise become known to the Company or in which property rights have been assigned or
otherwise conveyed to the Company, including any modifications or enhancements thereto, which information has material economic value or potential material economic value to the Company or the business in which the Company is or will be engaged.
Proprietary Information shall include, but not be limited to, financial, sales and distribution information; business plans, strategies and forecasts; lists of employees, contractors, customers, agents and independent brokers; trade secrets;
processes; formulas; data; know-how; negative know-how; improvements; discoveries; developments; designs; inventions; techniques; proposals; reports; client information; and software programs and information (whether or not expressed in written
form). Such restrictions on the use or disclosure of Proprietary Information do not extend to any item of information which (i) is publicly known immediately prior to the time of its disclosure, (ii) is lawfully received from a third party not bound
in a confidential relationship to the Company or (iii) is published or otherwise made known to the public by the Company. 
  
 4.2. Return of Proprietary Information and Property. Upon termination of Executive’s employment for any reason, Executive will deliver to the
Company all Proprietary Information and any equipment, supplies, facilities and other tangible property owned, leased or contracted for by the Company which property is in Executive’s possession as of the date of such termination. 

 

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 ARTICLE V. 
  

NON-COMPETITION AND NON-SOLICITATION 
  
 5.1 Non-Competition. Executive agrees that, so long as he is employed by the Company and for a period of one (1) year after termination of his
employment for any reason except termination by the Company for Cause, he shall not, without the prior written consent of the Company, either directly or indirectly, including, without limitation, through a partnership, joint venture, corporation or
other entity or as a consultant, director or employee, engage in any activity which the Company shall determine in good faith to be in competition with the Company, including, without limitation, any business activities conducted by the Company as
of the date hereof within those geographic areas in which the Company conducts active business operations. The parties hereto agree that both the scope and nature of the covenant and the duration and area for which the covenant not to compete set
forth in this Article V is to be effective are reasonable in light of all facts and circumstances. 
  
 5.2 Non-Solicitation. Executive agrees that, so long as he is employed by the Company and for a period of one (1) year after termination of his
employment for any reason except termination by the Company for Cause, he shall not (i) directly or indirectly solicit, induce or attempt to solicit or induce any Company employee to discontinue his or her employment with the Company, (ii) usurp any
opportunity of the Company that Executive became aware of during his tenure at the Company or which is made available to him on the basis of the belief that Executive is still employed by the Company, or (iii) directly or indirectly solicit or
induce or attempt to influence any person or business that is an account, customer or client of the Company to restrict or cancel the business of any such account, customer or client with the Company. 
  
 5.3 Specific Performance. Because of the difficulty of measuring
economic losses to the Company as a result of a breach of the foregoing covenants, and because of the immediate and irreparable damage that could be caused to the Company for which it would have no other adequate remedy, Executive agrees that the
foregoing covenants, in addition to and not in limitation of any other rights, remedies or damages available to the Company at law, in equity or under this Agreement, may be enforced by the Company in the event of the breach or threatened breach by
Executive, by injunctions and/or restraining orders. If the Company is involved in court or other legal proceedings to enforce the covenants contained in this Article V, then, in the event the Company prevails in such proceedings, Executive shall be
liable for the payment of reasonable attorneys’ fees, costs and ancillary expenses incurred by the Company in enforcing its rights hereunder. 
  

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 ARTICLE VI. 
  
 MISCELLANEOUS 
  
 6.1. Successors and Assigns; Binding Agreement. This Agreement shall inure to the benefit of and shall be binding upon the Company, its successors
and assigns. The obligations and duties of Executive hereunder are personal and otherwise not assignable. This Agreement shall inure to the benefit of and be enforceable by Executive’s legal representatives. This Agreement shall not be
terminated by the voluntary or involuntary dissolution of the Company or by any Change in Control. In the event of any such Change in Control, the provisions of this Agreement shall bind and inure to the benefit of the surviving or resulting entity,
or the entity to which such assets shall have been transferred, as the case may be; provided, however, that the Company will require any successor to all or substantially all of the business and/or assets of the Company, by agreement
in form and substance satisfactory to Executive, to expressly assume and agree to perform under this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.

  
 6.2. Arbitration. Other than with respect to Articles
IV and V hereof, any and all disputes arising out of the interpretation, application or breach of this Agreement shall be subject to arbitration pursuant to the Company’s Mutual Agreement to Arbitrate Claims, a copy of which is attached hereto
as Exhibit A and incorporated herein by this reference. 
  
 6.3. No Waiver. The waiver by either party of a breach of any provision of this Agreement shall not operate as or be construed as a waiver of any subsequent breach thereof. 
  
 6.4. Governing Law. This Agreement shall be construed and enforced in
accordance with the laws and decisions of the Commonwealth of Virginia (regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof). 
  
 6.5. Notice. All notices and other communications under this Agreement shall be in writing and shall be given
by hand delivery, or first-class mail, certified or registered with return receipt requested, or by commercial overnight courier or by fax and shall be deemed to have been duly given upon hand delivery, receipt if mailed, the first business day
following delivery to a commercial overnight courier or upon receipt of a fax, and addressed, if to the Company, to its then principal office, attention Chairman of the Board; and if to Executive, at Executive’s address appearing below on the
signature page hereto or at such other address as Executive may designate from time to time in accordance with the terms of this Section 6.5. 
  
 6.6. Amendments. No amendment or modification of the terms of this Agreement shall be valid unless made by written agreement executed by the
parties hereto or their respective successors and legal representative. 
  
 6.7. Severability. In the event that any provision of this Agreement, including without limitation any provision of Article IV or Article V, shall to any extent be held invalid, unreasonable or unenforceable, in any circumstances,
the parties hereto agree that the remainder of this Agreement and the application of such provision of this Agreement to other circumstances shall be valid and enforceable to the fullest extent permitted by law, but only to the extent that such
enforceability is in accordance with the intent of the parties as evidenced by this Agreement. If any provision, or any part thereof, is held to be unenforceable because of the scope or duration of or the area covered by such provision, the parties
hereto agree that the court 
  

 10 

 making such determination shall have the power, and is hereby asked by the parties, to reduce the scope, duration and/or
area of such provisions (and to substitute appropriate provisions for any such unenforceable provisions) in order to make such provisions enforceable to the fullest extent permitted by law, and/or to delete specific words and phrases, and such
modified provisions shall then be enforceable and shall be enforced. 
  
 6.8. Entire Agreement. This Agreement constitutes the entire agreement between the parties regarding the subject matter hereof, and supersedes all prior or contemporaneous negotiations, understandings or agreements of the parties,
whether written or oral, with respect to such subject matter. 
  
 6.9. Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which shall constitute one and the same agreement. 
  

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

			
	 SAXON REIT, INC.:

		
	 By:
	 	  

	 Name:
	 	  

	 Its:
	 	  

	
	 SAXON CAPITAL, INC.:

		
	 By:
	 	  

	 Name:
	 	  

	 Its:
	 	  

	
	 EXECUTIVE:

	
	  

	 Michael L. Sawyer

	 Address:

	  

	  

	  

 EXHIBIT A 
  
 MUTUAL AGREEMENT TO ARBITRATE CLAIMS 
  
 Executive recognizes that differences may arise between the Company and Executive during or following Executive’s
employment with the Company, and that those differences may or may not be related to Executive’s employment. Executive understands and agrees that by entering into the Employment Agreement (the “Employment Agreement”) with the Company
into which this Mutual Agreement to Arbitrate Claims is incorporated by reference (this “Arbitration Agreement”), Executive anticipates gaining the benefits of a speedy, impartial dispute-resolution procedure. 
  
 Executive understands that any capitalized terms used but not defined in this
Arbitration Agreement shall have the meanings ascribed thereto in the Employment Agreement, provided that any reference in this Arbitration Agreement to the Company will also be a reference to all subsidiary and affiliated entities; all benefit
plans; the benefit plans’ sponsors, fiduciaries, administrators, affiliates; and all successors and assigns of any of them. 
  
 Claims Covered by this Arbitration Agreement 
  
 The Company and Executive mutually consent to the resolution by arbitration of all claims (“claims”), whether or not arising out of
Executive’s employment (or its termination), that the Company may have against Executive or that Executive may have against the Company or against its officers, directors, employees or agents in their capacity as such or otherwise. The claims
covered by this Arbitration Agreement include, but are not limited to, claims for wages or other compensation due; claims for breach of any contract or covenant (express or implied); tort claims; claims for discrimination (including, but not limited
to, race, sex, religion, national origin, age, marital status, medical condition, or disability); claims for benefits (except where an employee benefit or pension plan specifies that its claims procedure shall culminate in an arbitration procedure
different from this one), and claims for violation of any federal, state, or other governmental law, statute, regulation, or ordinance, except claims excluded in the Claims Not Covered section below. 
  
 Except as otherwise provided in this Arbitration Agreement, both the Company
and Executive agree that neither shall initiate or prosecute any lawsuit or administrative action (other than an administrative charge of discrimination) in any way related to any claim covered by this Arbitration Agreement. 
  
 Claims Not Covered by this Arbitration Agreement 
  
 Claims Executive may have for workers’ compensation or unemployment
compensation benefits are not covered by this Arbitration Agreement. 

 Also not covered are claims by the Company for injunctive and/or other equitable relief for unfair
competition and/or the use and/or unauthorized disclosure of trade secrets or confidential information, as to which Executive understands and agrees that the Company may seek and obtain relief from a court of competent jurisdiction. 
  
 Required Notice of All Claims and Statutes of Limitations 

 
 The Company and Executive agree that the aggrieved party must give
written notice of any claim to the other party within one (1) year of the date the aggrieved party first has knowledge of the event giving rise to the claim; otherwise the claim shall be void and deemed waived even if there is a federal or state
statute of limitations which would have given more time to pursue the claim. 
  
 Written notice to the Company, or its officers, directors, employees or agents, shall be sent to its General Counsel at the Company’s then-current address. Executive will be given written notice at the last
address recorded in Executive’s personnel file. 
  
 The
written notice shall identify and describe the nature of all claims asserted and the facts upon which such claims are based. The notice shall be sent to the other party by certified or registered mail, return receipt requested. 
  
 Discovery 
  
 Each party shall have the right to take the deposition of one individual and
any expert witness designated by another party. Each party also shall have the right to propound requests for production of documents to any party. The subpoena right specified below shall be applicable to discovery pursuant to this paragraph.
Additional discovery may be had only where the Arbitrator selected pursuant to this Agreement so orders, upon a showing of substantial need. 
  
 Designation of Witnesses 
  
 At least thirty (30) days before the arbitration, the parties must exchange lists of witnesses, including any expert, and copies of all exhibits intended
to be used at the arbitration. 
  
 Subpoenas 
  
 Each party shall have the right to subpoena witnesses and documents for the
arbitration. 
  
 Arbitration Procedures 
  
 The Company and Executive agree that, except as provided in this Arbitration
Agreement, any arbitration shall be in accordance with the then-current Model Employment Arbitration Procedures of the American Arbitration Association (“AAA”) before an Arbitrator who is licensed to practice law in the Commonwealth of
Virginia (“Arbitrator”). The arbitration shall take place at the Company’s headquarters in Richmond, Virginia. 
  

 14 

 The Arbitrator shall be selected as follows. The AAA shall give each party a list of eleven (11)
arbitrators drawn from its panel of labor-management dispute arbitrators. Each party may strike all names on the list it deems unacceptable. If only one common name remains on the lists of all parties, that individual shall be designated as the
Arbitrator. If more than one common name remains on the lists of all parties, the parties shall strike names alternately until only one remains. The party who did not initiate the claim shall strike first. If no common name remains on the lists of
all parties, the AAA shall furnish an additional list or lists until the Arbitrator is selected. 
  
 The Arbitrator shall apply the substantive law (and the law of remedies, if applicable) of the state in which the claim arose, or federal law, or both, as
applicable to the claim(s) asserted. The Federal Rules of Evidence shall apply. The Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation,
applicability, enforceability or formation of this Agreement, including but not limited to any claim that all or any part of this Agreement is void or voidable. The arbitration shall be final and binding upon the parties. 
  
 The Arbitrator shall have jurisdiction to hear and rule on pre-hearing
disputes and is authorized to hold pre-hearing conferences by telephone or in person as the Arbitrator deems necessary. The Arbitrator shall have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and
shall apply the standards governing such motions under the Federal Rules of Civil Procedure. 
  
 Either party, at its expense, may arrange for and pay the cost of a court reporter to provide a stenographic record of proceedings. 
  
 Either party, upon request at the close of hearing, shall be given leave to file a post-hearing brief. The time for filing
such a brief shall be set by the Arbitrator. 
  
 The Arbitrator
shall render an award and opinion in the form typically rendered in labor arbitrations. 
  
 Arbitration Fees and Costs 
  
 The Company and Executive shall equally share the fees and costs of the Arbitrator. Each party will deposit funds or post other appropriate security for its share of the Arbitrator’s fee, in an amount and manner determined by the
Arbitrator, 10 days before the first day of hearing. Each party shall pay for its own costs and attorneys’ fees, if any. However, if any party prevails on a statutory claim which affords the prevailing party attorneys’ fees, or if there is
a written agreement providing for fees, the Arbitrator may award reasonable fees to the prevailing party. 
  
 Judicial Review 
  
 Either party may bring an action in any court of competent jurisdiction to compel arbitration under this Agreement and to enforce an arbitration award. A
party opposing 
  

 15 

 enforcement of an award may not do so in an enforcement proceeding, but must bring a separate action in any court of
competent jurisdiction to set aside the award, where the standard of review will be the same as that applied by an appellate court reviewing a decision of a trial court sitting without a jury. 
  
 Interstate Commerce 
  
 Executive understands and agrees that the Company is engaged in transactions
involving interstate commerce and that Executive’s employment involves such commerce. 
  
 Requirements for Modification or Revocation 
  
 This Arbitration Agreement shall survive the termination of Executive’s employment. It can only be revoked or modified by a writing signed by the parties which specifically states an intent to revoke or modify
this Arbitration Agreement. 
  
 Sole and Entire Agreement

  
 This is the complete agreement of the parties on the subject
of arbitration of disputes, except for any arbitration agreement in connection with any pension or benefit plan. This Agreement supersedes any prior or contemporaneous oral or written understanding on the subject. No party is relying on any
representations, oral or written, on the subject of the effect, enforceability or meaning of this Arbitration Agreement, except as specifically set forth in this Arbitration Agreement. 
  
 Construction 
  
 If any provision of this Arbitration Agreement is adjudged to be void or otherwise unenforceable, in whole or in part, such adjudication shall not affect
the validity of the remainder of this Arbitration Agreement. 
  
 Consideration 
  
 The promises by the Company and
by Executive to arbitrate differences, rather than litigate them before courts or other bodies, provide consideration for each other. 
  
 Employment Agreement 
  
 This Arbitration Agreement is not, and shall not be construed to create, any contract of employment, express or implied. 
  
 Voluntary Agreement 
  
 EXECUTIVE ACKNOWLEDGES THAT EXECUTIVE HAS CAREFULLY READ THIS ARBITRATION
AGREEMENT, THAT EXECUTIVE UNDERSTANDS ITS TERMS, THAT ALL UNDERSTANDINGS AND AGREEMENTS BETWEEN THE COMPANY AND 
  

 16 

 EXECUTIVE RELATING TO THE SUBJECTS COVERED IN THIS ARBITRATION AGREEMENT ARE CONTAINED IN IT, AND THAT EXECUTIVE HAS
ENTERED INTO THIS ARBITRATION AGREEMENT VOLUNTARILY AND NOT IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS BY THE COMPANY OTHER THAN THOSE CONTAINED IN THIS ARBITRATION AGREEMENT ITSELF. 
  
 EXECUTIVE FURTHER ACKNOWLEDGES THAT EXECUTIVE HAS BEEN GIVEN THE OPPORTUNITY TO DISCUSS THIS ARBITRATION AGREEMENT WITH
EXECUTIVE’S PRIVATE LEGAL COUNSEL AND HAS AVAILED HIM/HERSELF OF THAT OPPORTUNITY TO THE EXTENT EXECUTIVE WISHES TO DO SO. 
  

 17

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