Exhibit 10.2

Executed

PREPAID CASH-SETTLED AGREEMENT

PREPAID CASH-SETTLED AGREEMENT (this “Agreement”) dated as of March 24, 2008
between Thornburg Mortgage, Inc. (the “Payor”) and MP TMA LLC and MP TMA
(Cayman) LLC (collectively, the “Payout Recipient”).

1. Definitions.

1.1. As used herein, the following terms shall have the following respective
meanings:

“Asset” means any asset described in Schedule 1 and all the Payor’s rights under
any repurchase agreements, reverse repurchase agreements, swaps and other
agreements to which the Payor is a Party that relate to any such asset

“Business Day” means any day that is not (a) a Saturday, (b) a Sunday or (c) any
other day on which commercial banks are authorized or required by law to be
closed in the City of New York.

“Credit Documents” means all notes, applications, guarantees, security
agreements, mortgages, deeds of trust, agreements, waivers, amendments,
modifications, supplements and all agreements, instruments and other documents
executed and delivered in connection therewith that relate to the Principal of
the Loans.

“Effective Date” means the later of (a) the date specified in Schedule 2 and
(b) the date on which the conditions precedent set forth in Section 3 shall have
been satisfied.

“Obligors” means, collectively, each maker, guarantor, pledgor, subordinator or
other Person directly or indirectly obligated in respect of the Principal of the
Loans.

“Override Agreement” dated as of March 17, 2008, among Payor and certain
financial institutions).

“Payout Recipient’s Account” has the meaning given to it in Schedule 2.

“Payout Recipient’s Percentage” has the meaning given to it in Schedule 2.

“Payout Recipient’s Share” means, with respect to any payment, an amount equal
to the Payout Recipient’s Percentage of the principal amount of such payment, as
applicable.

“Party” means the Payout Recipient or the Payor, as applicable.

“Person” means any individual, corporation, estate, trust, business trust, joint
venture, association, partnership, limited liability company, government,
government agency or political subdivision or other legal entity.

“Principal of the Loans” means, collectively, as of any date of determination,
the then unpaid principal amount of the Assets.

“Purchase Price” has the meaning given to it in Schedule 2.

“Trigger Event” has the meaning assigned in the term sheet dated the date hereof
between Payor and Payout Recipient.

1.2. The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. This Agreement includes the Schedules
attached hereto and any documents attached as

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exhibits to the Agreement. The Schedules attached hereto may supplement, change,
or supersede other provisions of this Agreement; if there is any inconsistency
between the provisions of said Schedules and the other provisions of this
Agreement, said Schedules will prevail. The words “include”, “includes” and
“including” shall be deemed to be followed by the phrase “without limitation”.
The word “will” shall be construed to have the same meaning and effect as the
word “shall”. Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein or any statute,
law, order, rule or regulation shall be construed as referring to such
agreement, instrument, other document, statute, law, order, rule or regulation
as from time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person’s successors and assigns, (c) the words “herein”, “hereof” and
“hereunder”, and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof and (d) all
references herein to Sections and Schedules shall be construed to refer to
Sections of, and Schedules to, this Agreement. Section, Schedule and other
headings and captions are included solely for convenience of reference and are
not intended to affect the interpretation of any provisions of this Agreement.
This Agreement shall be deemed to have been jointly drafted and no provision of
it shall be interpreted or construed for or against any Party because such Party
purportedly prepared or requested such provision, any other provision or this
Agreement as a whole.

2. Payment by Payout Recipient. Subject to the terms and conditions set forth in
this Agreement, the Payout Recipient shall pay the Purchase Price to Payor on
the Effective Date.

3. Conditions Precedent.

3.1. The Payout Recipient’s obligations to pay the Purchase Price to the Payor
on the Effective Date shall be subject to the conditions that (a) the Payor’s
representations and warranties in this Agreement shall have been true and
correct on the date hereof and the Effective Date, (b) the Payor shall have
complied in all material respects with all covenants required by this Agreement
to be complied with by it on or before the Effective Date and (c) the Payout
Recipient shall have received this Agreement duly executed on behalf of the
Payor.

3.2. The Payor’s obligations hereunder shall be subject to the conditions that
(a) the Payout Recipient’s representations and warranties in this Agreement
shall have been true and correct on the date hereof and the Effective Date,
(b) the Payout Recipient shall have complied in all material respects with all
covenants required by this Agreement to be complied with by it on or before the
Effective Date, (c) the Payor shall have received this Agreement duly executed
on behalf of the Payout Recipient and (d) the Payor shall have received payment
of the Purchase Price from the Payout Recipient.

4. Payments to Payout Recipient. On the last Business Day of each calendar
month, commencing April 2009, until ended in accordance with Section 8 hereof,
after deducting amounts required to be paid in respect of repurchase agreements
or similar financings to which the Assets are subject on the date hereof, the
Payor shall remit to the Payout Recipient the Payout Recipient’s Share of all
payments or other monetary recoveries received during such month on account of
the Principal of the Loans included in the Assets (such payment is hereinafter
referred to collectively as the “Payout”).

5. Representations and Warranties. Each Party represents and warrants to the
other Party (as of the date hereof and as of the Effective Date) that:

(a) such Party (i) is duly organized and validly existing under the laws of its
jurisdiction of organization or incorporation, (ii) is in good standing under
such laws and (iii) has full power and authority to execute, deliver and perform
its obligations under this Agreement;

(b) such Party’s execution, delivery, and performance of this Agreement have not
resulted, and will not result, in a breach of any provision of (i) such Party’s
organizational documents, (ii) any statute, law, writ, order, rule or regulation
of any governmental authority applicable to such Party, (iii) any judgment,
injunction, decree or determination applicable to such Party or (iv) any
contract, indenture, mortgage, loan agreement, note, lease or other instrument
by which such Party may be bound or to which any of the assets of such Party are
subject; and

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(c) (i) this Agreement (A) has been duly and validly authorized, executed, and
delivered by such Party and (B) constitutes the legal, valid, and binding
obligation of such Party, enforceable against such Party in accordance with its
terms, except that such enforceability may be limited by bankruptcy, insolvency,
or other similar laws of general applicability affecting the enforcement of
creditors’ rights generally and by the court’s discretion in relation to
equitable remedies; and (ii) no notice to, registration with, consent or
approval of, or any other action by, any relevant governmental authority or
other Person is or will be required for such Party to execute, deliver, and
perform its obligations under this Agreement.

6. Reliance; Discretion. (a) The Payout Recipient represents to and agrees with
the Payor that the Payout Recipient is a sophisticated investor and has made,
independently and without reliance on the Payor, its own analysis of the Assets
and the Payor, and it has received such additional documents and information
(including any syndicate confidential information) as it has deemed necessary
for such purpose, and it shall continue to make its own decisions with respect
to this transaction without such reliance.

(b) The Payout Recipient agrees that the Payor may, in its sole discretion,
exercise or refrain from exercising any right, or take or refrain from taking
any action, which the Payor may be entitled to take or assert under any of the
Credit Documents and, without limiting the generality of the foregoing, the
Payor may take legal action to enforce the Payor’s interests with respect to any
Asset or any of the Credit Documents.

(c) In managing the Assets, the Payor shall exercise the same care as it has
historically exercised with respect to its assets generally. The Payor shall
allocate payments received with respect to the Assets, as between Principal of
the Loans and other amounts owing on the Assets, in accordance with the Credit
Documents and applicable law and otherwise in good faith and consistent with
past practice.

7. Cost Allocation. (a) The Payout Recipient’s Percentage of any costs,
expenses, and disbursements, including legal fees, which may be incurred or made
by the Payor in connection with any action which may be taken by the Payor to
collect the Principal of the Loans or for the preservation or enforcement of any
rights conferred by any of the Credit Documents, for which the Payor is not
reimbursed by or on behalf of the Borrower, shall be deducted from distributions
made to Payout Recipient.

(b) In the event that, after the Payor has made any payment to the Payout
Recipient hereunder, any such payment or application is rescinded or must
otherwise be returned or paid over by the Payor for any reason, the Payout
Recipient’s Percentage of the amount to be returned shall be deducted from
subsequent distributions to be made to the Payout Recipient.

8. Termination; Terminal Payment. (a) On the occurrence of a Trigger Event;
provided that the Payor shall have issued Payout Recipient warrants as required
by the term sheet dated the date hereof between Payor and Payout Recipient, the
Payout shall expire and all obligations of either Party to the other, whether or
not accrued, shall be canceled and of no force or effect without any liability
of either to the other.

(b) On the seventh anniversary of the Effective Date, the Payout shall expire.
Within five Business Days of such expiration, the Payor shall pay to the Payout
Recipient the fair market value, as of such anniversary date, of the Payout
Recipient’s Percentage of the remaining unpaid Principal of the Loans after
deducting amounts required to be paid in respect of repurchase agreements or
similar financings to which the Assets are subject on the date hereof. If the
parties are unable to agree on the fair market value thereof by that payment
date, they shall each obtain a bid quotation for the Principal of the Loans as
of such anniversary date from a generally recognized source for bids for assets
of the same type as the Assets. If such bids are within 10% of each other, the
fair market value shall be the average of such bids. Otherwise, the parties
shall jointly select a nationally recognized certified public accountant or
valuation firm to deliver its opinion concerning the fair market value of the
Principal of the Loans, which opinion shall be binding upon them, absent
manifest error. During the period in which the fair market value is being
determined, Payor shall deposit and maintain in escrow with a nationally
recognized bank or trust company the Payout Recipient’s estimate of the payment
due under this Section.

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9. Payments. All payments by the Payor to the Payout Recipient hereunder shall
be made to the Payout Recipient’s Account in like funds and currency as received
by the Payor, without set-off, counterclaim or deduction of any kind. If the
applicable payment is received by the Payor not later than 12:00 noon (New York
City time) on any day, the corresponding payment shall be made to the Payout
Recipient not later than 5:00 p.m. (New York City time) on such day, and
otherwise not later than 5:00 p.m. (New York City time) on the immediately
succeeding Business Day.

10 Nature of Interest. The Payout Recipient shall not, by reason of this
Agreement and the transactions contemplated hereby, be deemed to have an
interest in any property taken as security for the Principal of the Loans or any
other extension of credit by the Payor, or in any property now or hereafter in
the Payor’s possession or control, or in any deposit held or other indebtedness
owing by it which may be or become security for the Principal of the Loans, or
by reason of the general description contained in any general loan or collateral
agreement, or by reason of any right of setoff, counterclaim, banker’s lien or
otherwise.

11. No Transfer of Assets Below Par. Without the prior written consent of the
Payout Recipient, Payor may not assign, sell, convey, transfer or otherwise
dispose of the Assets other than for cash at least equal to, and paid on account
of, the unpaid principal balance of the Assets so sold, or grant any other
participation in the Assets; provided that (x) Payor may continue to finance the
Assets in the ordinary course of business consistent with past practice and the
Override Agreement and the Financing Agreements referenced therein and (y) the
transactions contemplated by the term sheet between Payor and Payout Recipient
dated the date hereof (“Term Sheet”) shall be consummated.

12. Reports. Payor shall provide Payout Recipients reports in form and substance
satisfactory to Payout Recipient at intervals to be agreed but no less than
monthly.

13. Miscellaneous.

(a) Entire Agreement; Amendments; Exercise of Rights. This Agreement constitutes
the entire agreement of the Parties with respect to the respective subject
matters hereof and supersedes all previous and contemporaneous negotiations,
promises, covenants, agreements, understandings and representations on such
subjects, all of which have become merged and finally integrated into this
Agreement. No amendment of any provision of this Agreement shall be effective
unless it is in writing and signed by the Parties and no waiver of any provision
of this Agreement, nor consent to any departure by either Party from it, shall
be effective unless it is in writing and signed by the affected Party, and then
such waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given. No failure on the part of a Party to
exercise, and no delay in exercising, any right under this Agreement shall
operate as a waiver hereof by such Party, nor shall any single or partial
exercise of any right under this Agreement preclude any other or further
exercise thereof or the exercise of any other right. The rights and remedies of
each Party provided herein (a) are cumulative and are in addition to, and are
not exclusive of, any rights or remedies provided by law (except as otherwise
expressly set forth in this Agreement) and (b) are not conditional or contingent
on any attempt by such Party to exercise any of its rights under any other
related document against the other Party or any other Person.

(b) Survival; Successors and Assigns. All representations, warranties,
covenants, indemnities and other provisions made by the Parties shall be
considered to have been relied upon by the Parties, shall be true and correct as
of the date hereof and the Effective Date, and shall survive the execution,
delivery, and performance of this Agreement. This Agreement, including the
representations, warranties, covenants and indemnities contained in this
Agreement, shall inure to the benefit of, be binding upon and be enforceable by
and against the Parties and their respective successors and permitted assigns.
The Payout may be sold, pledged, assigned, sub-participated, or otherwise
transferred without the Payor’s consent.

(c) Further Assurances. Each Party agrees (i) to execute and deliver, or to
cause to be executed and delivered, all such instruments and (ii) to take all
such actions as the other Party may

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reasonably request to effectuate the intent and purposes, and to carry out the
terms, of this Agreement, including the procurement of any third-party consents.
The Parties recognize that this Agreement was prepared and negotiated under
exigent circumstances; concurrently with the preparation of definitive
documentation to cover the other transactions in the Term Sheet, they will
consider reasonably and in good faith any modifications that may be requested to
this Agreement to address oversights, mistakes or unforeseen consequences that
may have occurred in the course of such exigency.

(d) Counterparts. This Agreement may be executed in counterparts (and by
different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a
single contract. Delivery of an executed counterpart of a signature page to this
Agreement by telecopy shall be effective as delivery of a manually executed
counterpart of this Agreement.

(e) Relationship Between the Payor and the Payout Recipient. The relationship
between the Payor and the Payout Recipient shall be that of payor and payee.
Neither Party is a trustee or agent for the other Party, nor does either Party
have fiduciary obligations to the other Party. This Agreement shall not be
construed to create a partnership or joint venture between the Parties.

(f) Severability. The illegality, invalidity, or unenforceability of any
provision of this Agreement under the law of any jurisdiction shall not affect
its legality, validity or enforceability under the law of any other jurisdiction
nor the legality, validity or enforceability of any other provision.

(g) Governing Law. This Agreement shall be governed by, and construed in
accordance with, the law of the State of New York.

(h) Waiver of Trial by Jury. THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT THAT THEY
MAY HAVE TO TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION, OR IN ANY LEGAL
PROCEEDING DIRECTLY OR INDIRECTLY BASED UPON OR ARISING OUT OF THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT (WHETHER BASED ON CONTRACT, TORT
OR ANY OTHER THEORY). EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR
ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING
WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTY HAVE BEEN INDUCED TO
ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND
CERTIFICATIONS IN THIS CLAUSE (J).

(i) Jurisdiction. Each Party irrevocably and unconditionally submits to and
accepts the nonexclusive jurisdiction of any New York State or United States
Federal court sitting in New York County for any action, suit, or proceeding
arising out of or based upon this Agreement or any matter relating to it, and
waives any objection that it may have to the laying of venue in any such court
or that such court is an inconvenient forum or does not have personal
jurisdiction over it. The Parties irrevocably agree that, should either Party
institute any legal action or proceeding in any jurisdiction (whether for an
injunction, specific performance, damages or otherwise) in relation to this
Agreement, no immunity (to the extent that it may at any time exist, whether on
the grounds of sovereignty or otherwise) from such action or proceeding shall be
claimed by it or on its behalf, any such immunity being hereby irrevocably
waived, and each Party irrevocably agrees that it and its assets are, and shall
be, subject to such legal action or proceeding in respect of its obligations
under this Agreement.

(j) Expenses. Except to the extent expressly provided in Section 16(b), each
Party agrees to bear its own expenses in connection with this Agreement.

(k) Interest. If either Party fails to pay any amount (including interest, to
the fullest extent permitted by applicable law) payable by it hereunder when
due, then interest shall accrue and be payable immediately upon demand on such
unpaid amount at a per annum rate equal to 17.5% from and including the date on
which such amount became due to but excluding the date the same is paid in full.

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(l) Notices. All communications between the Parties or notices or other
information sent under this Agreement shall be in writing, hand delivered or
sent by overnight courier or telecopier, addressed to the relevant Party at its
address or facsimile number specified in Schedule 1 or at such other address or
facsimile number as such Party may request in writing. All such communications
and notices shall be effective upon receipt.

IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed
and delivered as of the date first above stated.

 

PAYOR THORNBURG MORTGAGE, INC. By:  

/s/ Larry A. Goldstone

Name:   Larry A. Goldstone Title:   President & Chief Executive Officer PAYOUT
RECIPIENT MP TMA LLC By:  

/s/ Robert H. Weiss

Name:   Robert H. Weiss Title:   Authorized Person(s) MP TMA (Cayman) LLC By:  

/s/ Robert H. Weiss

Name:   Robert H. Weiss Title:   Authorized Person(s)