EXHIBIT A
CALIFORNIA INVESTMENT FUND, LLC
550 West C Street, 10th Floor
San Diego, CA 92101
CONFIDENTIAL
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September 29, 2000
The Board of Directors of Dynex Capital, Inc.
c/o Thomas H. Potts
President
Dynex Capital, Inc.
4551 Cox Road, Suite 300
Glen Allen, VA 23060
Re: Dynex Capital, Inc.
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Gentlemen:
California Investment Fund, LLC ("CIF") is pleased to provide this
Letter of Intent to confirm our mutual understanding regarding the proposed
acquisition by CIF of Dynex Capital, Inc. ("Dynex") through a merger
transaction (the "Merger"), as set forth in Sections 1 and 3 of the letter
from CIF to Dynex dated September 12, 2000.
To consummate the Merger, CIF will be required to devote a substantial
amount of time, effort and resources. To induce CIF to do so, Dynex agrees
as follows:
1. Exclusivity and No Shop: Dynex and each of its subsidiaries and
affiliates, and their respective directors, officers, employees, agents and
representatives (collectively, the "Dynex Parties") will immediately
terminate any and all existing discussions or negotiations with any person,
corporation, partnership, limited liability company or other entity or
group other than CIF and its affiliates (each, a "Third Party") with
respect to the sale of Dynex or any of its subsidiaries, or any of their
respective assets or businesses (except for those assets that relate to the
tax-exempt bonds), whether through direct sale, merger, consolidation or
other business combination or sale of securities or options or warrants to
purchase any securities of Dynex or any of its subsidiaries, or any similar
transaction involving Dynex, any of its subsidiaries or any division of
Dynex or any of its subsidiaries (each an "Alternative Transaction"). In
addition, for the three week period beginning on the date of your execution
of this Letter of Intent (the "No-Shop Period"), Dynex and the other Dynex
Parties will not, directly or indirectly, encourage, solicit, cooperate
with, provide information for or otherwise engage in or facilitate
discussions or negotiations with any Third Party concerning an Alternative
Transaction. During the No-Shop Period CIF will use its best efforts to
obtain the necessary financing commitments on terms reasonably satisfactory
to CIF to consummate the Merger, complete its due diligence and obtain any
consents that it believes are necessary or advisable to complete the
Merger.
2. Definitive Documentation: Promptly after the execution of this
Letter of Intent, CIF and Dynex shall commence the negotiation of
definitive agreements and documents related to the Merger, and CIF and
Dynex agree to negotiate such documents in good faith.
3. Inspection and Access to Information: From and after the date of
execution of this Letter of Intent by the parties hereto, Dynex shall
permit access to, and shall make available to CIF and its representatives
and professional advisors for inspection and review, the properties, books,
records, accounts, and documents of or relating to Dynex and its
subsidiaries. Dynex shall also make its officers and employees available to
CIF at reasonable times to discuss with CIF and its representatives and
professional advisors the business and affairs of Dynex and its
subsidiaries.
4. Governing Law: This Letter of Intent shall be governed by the
internal laws of the Commonwealth of Virginia.
5. Counterparts: This Letter of Intent may be executed in
counterparts, each of which shall be deemed to constitute an original but
all of which together shall constitute one and the same instrument.
6. Non-Binding: Except for the parties' obligations under Section 1
above, this Letter of Intent is not intended to create a binding obligation
on either party.
<PAGE>
Please execute this Letter of Intent in the space provided below to
indicate your acceptance of, and (to the extent set forth in Section 6
above) agreement to be bound by, this Letter of Intent and return an
executed original to me by September 29, 2000. We look forward to working
with you on this transaction.
Very truly yours,
CALIFORNIA INVESTMENT FUND, LLC
By:/s/ Michael Kelly
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Name: Michael Kelly
Agreed to and Accepted this
29th day of September, 2000
DYNEX CAPITAL, INC.
By:/s/ Thomas H. Potts
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Name: Thomas H. Potts
Title: President
