Exhibit 10.5
 
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
 
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is entered
into as of the 10th day of December, 2008 by and between MFA MORTGAGE
INVESTMENTS, INC., a Maryland corporation (“MFA”), and WILLIAM S. GORIN (the
“Executive”).
 
W I T N E S S E T H:
 
WHEREAS, MFA and the Executive entered into an amended and restated employment
agreement, effective as of July 1, 2008 (the “Employment Agreement”);
 
WHEREAS, MFA and the Executive desire to amend the terms of the Executive’s
employment to comply with the documentary requirements of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”); and
 
WHEREAS, the Executive wishes to continue serving MFA and MFA wishes to secure
the continued exclusive services of the Executive under the terms and conditions
described below.
 
NOW THEREFORE, in consideration of the foregoing premises and the mutual
agreements herein contained, the parties hereto agree to amend and restate the
Employment Agreement in its entirety to read as follows:
 
1.           Term of Employment.
 
(a)           MFA hereby employs the Executive, and the Executive hereby accepts
employment with MFA, in the positions and with the duties and responsibilities
as set forth in Paragraph 2 below for the Term of Employment, subject to the
terms and conditions of this Agreement.
 
(b)           The term of employment (the “Term of Employment”) under this
Agreement shall include the Initial Term and each Renewal Term.  The Initial
Term, which commenced on July 1, 2008, shall continue until December 31,
2011.  The Term of Employment shall automatically renew for a one-year period
(each such renewal, a “Renewal Term”) at the end of the Initial Term and each
Renewal Term, unless either party shall give notice to the other not less than
six months prior to the end of the Initial Term or any Renewal Term, as the case
may be, of his or its intent not to renew such Initial Term or Renewal Term, as
the case may be.  Notwithstanding the foregoing sentences of this
Paragraph 1(b), the Term of Employment may be terminated before the expiration
of the Initial Term or any Renewal Term in accordance with Paragraph 5 hereof.
 
2.           Position; Duties and Responsibilities.
 
(a)           During the Term of Employment, the Executive shall be employed as
President and Chief Financial Officer of MFA, reporting to the Chairman and
Chief Executive Officer of MFA (the “CEO”), with such duties and day-to-day
management responsibilities as are customarily performed by persons holding such
offices at similarly situated mortgage REITs and such other duties as may be
mutually agreed upon between the Executive and the CEO.
 
(b)           During the Term of Employment, the Executive shall, without
additional compensation, also (i) serve on the board of directors of, serve as
an officer of, and/or perform such executive and consulting services for, or on
behalf of, such subsidiaries or affiliates of MFA as the CEO and/or the Board of
Directors of MFA (the “Board of Directors”) may, from time to time,
request.  MFA and such subsidiaries and affiliates are hereinafter referred to,
collectively, as the “Company.”  For purposes of this Agreement, the term
“affiliate” shall have the meaning ascribed thereto in Rule 12b-2 under the
Securities Exchange Act of 1934, as amended (the “Act”).
 

--------------------------------------------------------------------------------

 
(c)           During the Term of Employment, the Executive shall serve MFA
faithfully, diligently and to the best of his ability and shall devote
substantially all of his time and efforts to his employment and the performance
of his duties under this Agreement.  Nothing herein shall preclude the Executive
from engaging in charitable and community affairs and managing his personal,
financial and legal affairs, so long as such activities do not materially
interfere with his carrying out his duties and responsibilities under this
Agreement.
 
3.           Compensation.
 
(a)           Base Salary.  During the Term of Employment, the Executive shall
be entitled to receive an annualized base salary (the “Base Salary”) of not less
than eight hundred thousand dollars ($800,000).
 
(b)           Restricted Stock Award.  In connection with the Executive’s new
duties and responsibilities, the Executive shall receive an award of 100,000
shares of restricted stock on the date hereof.  The period of restriction with
respect to such award shall begin on the date hereof and shall lapse with
respect to 6,250 shares on the last business day of each quarter ending after
the date hereof (with all restrictions having lapsed on June 30, 2012).  Under
the terms of the definitive award agreement, the Executive shall be entitled to
receive any dividends payable with respect to any shares subject to restriction
at such time as such shares are no longer subject to restrictions.  Vested
shares of such restricted stock cannot be transferred or sold during the
Executive’s employment by MFA until the value of the Executive’s stock holdings
in MFA (including shares of restricted stock) exceeds four times the Executive’s
Base Salary; and, following the termination of Executive’s employment with the
Company, vested shares of such restricted stock may not be sold or transferred
to the extent the value of the Executive’s stock holdings does not exceed four
times the Executive’s Base Salary as of the date of the Executive’s termination
of employment (provided, however, that this sentence shall no longer apply
following the six-month anniversary of the Executive’s termination of
employment).
 
(c)           Performance Bonus.  The CEO, President and Executive Vice
President shall be eligible to participate in a Performance Bonus Pool for
Senior Executives (the “Bonus Pool”) each year during the Term of
Employment.  The aggregate Bonus Pool shall be determined by reference to MFA’s
Return on Average Equity (“ROAE”) as more fully described in Exhibit A to this
Agreement.  Subject to the right of the Compensation Committee of the Board of
Directors (the “Compensation Committee”) to determine the portion of the Bonus
Pool to be allocated to the CEO, allocations as between the President and
Executive Vice President, if any, shall be made by the Compensation Committee
together with the CEO based upon each participants performance during the
applicable period.  The Compensation Committee, in its discretion, can adjust
the aggregate Bonus Pool upward or downward in any year by as much as thirty
percent (30%) depending upon the Compensation Committee’s assessment of MFA’s
leverage strategy, share price performance relative to the S&P financial index
or other relevant indices, share price relative to peer group, total return
(share price change plus dividend), and its other asset management activities,
as well as the Executive’s individual performance, among other considerations,
as determined by the Compensation Committee.
 
- 2 -

--------------------------------------------------------------------------------

 
The amount allocated to the Executive from the Bonus Pool shall be paid in a
combination of cash and restricted stock based on the total Bonus Pool (after
any reduction or increase referred in the immediately-preceding paragraph), as
follows:  (i) Bonus Pool (as adjusted) up to $2,700,000:  seventy-five
percent (75%) will be paid in cash and twenty-five (25%) percent will be paid in
restricted stock; (ii) the incremental total Bonus Pool (as adjusted) between
$2,700,000 and $4,050,000:  sixty-five percent (65%) will be paid in cash and
thirty-five percent (35%) will be paid in restricted stock; (iii)  the
incremental total Bonus Pool (as adjusted) in excess of $4,050,000:  fifty
percent (50%) will be paid in cash and fifty percent (50%) will be paid in
restricted stock.  In each case referred to above, the period of restriction
with respect to the applicable shares of restricted stock shall lapse with
respect to six and one quarter percent (6.25%) of the shares on the last
business day of each quarter commencing with the quarter beginning with the
first calendar quarter following the end of the fiscal year to which the Bonus
Pool relates, with the lapse of all restrictions occurring four years following
the date of grant.  Under the terms of the definitive award agreement, the
Executive shall be entitled to receive any dividends payable with respect to any
shares subject to restriction at such time as such shares  are no longer subject
to restrictions.  Vested shares of such restricted stock cannot be transferred
or sold during the Executive’s employment by MFA until the value of the
Executive’s stock holdings in MFA (including shares of restricted stock) exceeds
four times the Executive’s Base Salary; and, following the termination of
Executive’s employment with the Company, vested shares of such restricted stock
may not be sold or transferred to the extent the value of the Executive’s stock
holdings does not exceed four times the Executive’s Base Salary as of the date
of the Executive’s termination of employment (provided, however, that this
sentence shall no longer apply following the six-month anniversary of the
Executive’s termination of employment). Cash payments from the Bonus Pool will
be made as soon as practicable after such portion of the Bonus Pool is vested
and nonforfeitable, and in no event later than January 16th of the next
following calendar year.
 
(d)           Equity Compensation.  The Executive shall be eligible to receive
such stock option, restricted stock, phantom share or dividend equivalent rights
grants or other equity awards as the Compensation Committee or the Board of
Directors, as the case may be, shall deem appropriate.
 
(e)           Discretion to Increase Compensation.  Nothing in this Agreement
shall preclude the Board of Directors or the Compensation Committee from
increasing or considering increasing the Executive’s compensation during the
Term of Employment.  The Base Salary as adjusted to reflect any increase shall
be the Base Salary for all purposes of this Agreement.
 
4.           Employee Benefit Programs and Fringe Benefits.  During the Term of
Employment, the Executive shall be entitled to five weeks of vacation each
calendar year and to participate in all executive incentive and employee benefit
programs of MFA now or hereafter made available to MFA’s senior executives or
salaried employees generally, as such programs may be in effect from time to
time.  MFA shall reimburse the Executive for any and all necessary, customary
and usual business expenses, properly receipted in accordance with MFA’s
policies, incurred by Executive in connection with his employment.
 
5.           Termination of Employment.
 
(a)           Termination Due to Death or Disability.  If the Executive’s
employment is terminated during the Term of Employment by reason of the
Executive’s death or Disability, the Executive’s Term of Employment shall
terminate automatically without further obligations to the Executive, his legal
representative or his estate, as the case may be, under this Agreement except
for (i) any compensation earned but not yet paid, including and without
limitation, any amount of Base Salary accrued or earned but unpaid and any other
payments payable to the Executive pursuant to Paragraph 5(e) below, which
amounts shall be promptly paid in a lump sum to the Executive, his legal
representative or his estate, as the case may be, and (ii) a lump sum payment in
an amount equal to the Executive’s Base Salary which shall be paid to the
Executive, his legal representative or his estate, as the case may be, as soon
as possible (without undue delay), but in no event later than March
15th  following the calendar year in which such termination occurs.  In the
event of such termination due to his Disability, Executive’s health insurance
coverage shall be continued at MFA’s expense for the duration of such
Disability; provided, that, if such coverage cannot be provided under MFA’s
health insurance policy for the duration of such Disability, such coverage or
the cost of comparable coverage shall be provided by MFA until the Executive’s
attainment of age 65 or such later date through which coverage is permissible
under MFA’s health insurance policy.
 
- 3 -

--------------------------------------------------------------------------------

 
(b)           Termination Without Cause or for Good Reason.  In the event the
Executive’s employment is terminated by MFA without Cause (including by notice
of MFA’s determination not to renew the Initial Term or any Renewal Term
pursuant to Paragraph 1(b)) or by the Executive for Good Reason, unless any such
termination is preceded by the Executive’s giving notice of his determination
not to renew the Initial Term or any Renewal Term pursuant to Paragraph 1(b),
the Executive shall be entitled to both (i) a payment (referred to below as the
“Severance Amount”) equal to the amount of his then current Base Salary that
would be payable from the date of such termination through the later of (A) the
expiration of the Term of Employment and (B) the first anniversary of such
termination of employment (the period with respect to which the Severance Amount
is payable, the “Severance Period”) and (ii) continued health insurance coverage
at MFA’s expense, for the Severance Period.  Fifty percent of the Severance
Amount shall be paid within five (5) days after the date the Executive’s
employment is terminated as described above, and the remaining 50% of the
Severance Amount shall be paid in three equal monthly installments beginning on
the first business day of the month following the month of such termination;
provided, however, in no event shall any portion of the Severance Amount be
payable after March 15th of the year following the year in which such
termination occurs.
 
(c)           Termination by MFA for Cause or Voluntary Termination by the
Executive.  In the event the Executive’s employment is terminated by MFA for
Cause, or is terminated by the Executive on his own initiative for other than a
Good Reason (including pursuant to Paragraph 1(b)), the Executive shall be
entitled to any compensation earned but not yet paid, including and without
limitation, any amount of Base Salary accrued or earned but unpaid and any other
payments payable to the Executive pursuant to Paragraph 5(e) below, as of the
date of termination.
 
(d)           Termination Related to Change in Control.  In the event of (1) the
termination of the Executive’s employment by MFA without Cause that occurs both
within two months before a Change in Control and following the occurrence of a
Pre-Change-in-Control Event, (2) the resignation of his employment by the
Executive for any reason within two and one half months following a Change in
Control, or (3) the termination of the Executive’s employment by MFA other than
for Cause or the Executive’s resignation of his employment for Good Reason
within twelve months following a Change in Control,
 
(i)           MFA shall immediately pay to Executive in a lump sum, but in all
events within two and one half months following the calendar year in which such
termination of employment occurs, an amount equal to 300% of the sum of (a) the
Executive’s then current Base Salary and (b) the Executive’s highest bonus for
the two preceding years;
 
(ii)          all of the Executive’s outstanding restricted stock, phantom
shares and stock options shall immediately vest in full and such options shall
remain exercisable, and any dividend equivalents associated therewith shall
continue to be payable, until the earlier of (a) 90 days following the date of
such termination and (b) the date on which each such option would have expired
had the Executive’s employment not terminated; and
 
(iii)         the Executive shall continue to participate in all health, life
insurance, retirement and other benefit programs at MFA’s expense for the
balance of the Term of Employment, to the same extent as though the Executive’s
employment had not terminated.
 
- 4 -

--------------------------------------------------------------------------------

 
To the extent necessary to avoid imposition of the excise tax under Section 4999
of the Code in connection with a Change in Control, the amounts payable or
benefits to be provided to the Executive shall be reduced such that the
reduction of compensation to be provided to the Executive is minimized.  In
applying this principle, the reduction shall be made in a manner consistent with
the requirements of Section 409A of the Code, and where two economically
equivalent amounts are subject to reduction but payable at different times, such
amounts shall be reduced on a pro rata basis (but not below zero).
 
(e)           Other Payments.  Upon the termination of the Executive’s
employment, in addition to the amounts payable under any Paragraph above, the
Executive shall be entitled to receive the following:
 
(i)           any annual bonus earned during one or more preceding years but not
paid;
 
(ii)          any vested deferred compensation (including any interest accrued
on or appreciation in value of such deferred amounts) in accordance with the
applicable plan documents;
 
(iii)         reimbursement for reasonable business expenses incurred but not
yet reimbursed by MFA;
 
(iv)         any other benefits to which the Executive or his legal
representative may be entitled under the 2004 Equity Compensation Plan and under
all other applicable plans and programs of MFA, as provided in Paragraph 4
above; and
 
(v)          upon the termination of the Executive’s employment pursuant to
Paragraphs 5(a) or 5(b) above, all of the Executive’s outstanding restricted
stock, phantom shares and stock options shall immediately vest in full and such
options shall remain exercisable, and any dividend equivalents associated
therewith shall continue to be payable until the earlier of (a) 90 days
following the date of such termination and (b) the date on which each such
option would have expired had the Executive’s employment not terminated.
 
(f)           No Mitigation; No Offset.  In the event of any termination of the
Executive’s employment under this Agreement, he shall be under no obligation to
seek other employment or otherwise in any way to mitigate the amount of any
payment provided for in this Paragraph 5, and there shall be no offset against
amounts due him under this Agreement on account of any remuneration attributable
to any subsequent employment that he may obtain.
 
(g)           Payments Subject to Section 409A.  Notwithstanding anything herein
to the contrary, the Executive shall not be entitled to any payment pursuant to
this Paragraph 5 prior to the earliest date permitted under Section 409A of the
Code, and applicable Treasury regulations thereunder.  To the extent any payment
pursuant to this Paragraph 5 is required to be delayed six months pursuant to
the special rules of Section 409A of the Code related to “specified employees,”
each affected payment shall be delayed until six months after the Executive’s
termination of employment, and, unless provided otherwise, with the first such
payment being a lump sum equal to the aggregate payments the Executive would
have received during such six-month period if no payment delay had been
imposed.  Any payments or distributions delayed in accordance with the prior
sentence shall be paid to the Executive on the first day of the seventh month
following the Executive’s termination of employment.  Notwithstanding any other
provision contained herein, to the extent any payments or distributions due to
the Executive upon termination of his employment under this Agreement are
subject to Section 409A of the Code (i) a termination of the Executive’s
employment shall be interpreted in a manner that is consistent with the
definition of a “separation from service” under Section 409A of the Code and the
applicable Treasury regulations thereunder and (ii) as applicable, such payments
shall be treated as a series of separate payments for purposes of Section 409A
of the Code.
 
- 5 -

--------------------------------------------------------------------------------

 
(h)           Mutual Release.  MFA’s obligation to make any payment or provide
any benefit pursuant to this Paragraph 5 shall be contingent upon, and is the
consideration for, the Executive executing and delivering to MFA a general
release (the “Release”), substantially in the form annexed hereto as Exhibit B,
releasing MFA, and all current and former members, officers and employees of
MFA, from any claims relating to the Executive’s employment hereunder, other
than claims relating to continuing obligations under, or preserved by, (x) this
Agreement or (y) any compensation or benefit plan, program or arrangement in
which the Executive was participating as of the date of termination of his
employment, and no such amounts shall be provided until the Executive executes
and delivers to MFA a letter which provides that the Executive had not revoked
such Release after seven days following the date of the Release.  In all events,
the Release shall be executed by the Executive within 60 days of termination of
employment in order for the Executive to receive any severance benefits
hereunder.  The Release shall also be executed by MFA and delivered to the
Executive as part of the consideration for the Executive’s execution and
delivery of the Release, and, except as otherwise provided under the terms of
the Release, shall release the Executive from any and all claims MFA may have
against the Executive.
 
6.           Definitions.  For purposes of this Agreement, the following terms
shall be defined as set forth below:
 
(a)           Cause.  “Cause” shall mean the Executive’s (i) conviction, or
entry of a guilty plea or a plea of nolo contendre with respect to, a felony, a
crime of moral turpitude or any crime committed against MFA, other than traffic
violations; (ii) engagement in willful misconduct, willful or gross negligence,
or fraud, embezzlement or misappropriation relating to significant amounts, in
each case in connection with the performance of his duties under this Agreement;
(iii) failure to adhere to the lawful directions of the CEO and/or the Board of
Directors that are reasonably consistent with his duties and position provided
for herein; (iv) breach in any material respect of any of the provisions of
Paragraph 7 of this Agreement resulting in material and demonstrable economic
injury to MFA; (v) chronic or persistent substance abuse that materially and
adversely affects his performance of his duties under this Agreement or
(vi) breach in any material respect of the terms and provisions of this
Agreement resulting in material and demonstrable economic injury to
MFA.  Notwithstanding the foregoing, (i) the Executive shall be given written
notice of any action or failure to act that is alleged to constitute Cause (a
“Default”), and an opportunity for 20 business days from the date of such notice
in which to cure such Default, such period to be subject to extension in the
discretion of the CEO or, in his absence, the Board of Directors and
(ii) regardless of whether the Executive is able to cure any Default, the
Executive shall not be deemed to have been terminated for Cause without
(x) reasonable prior written notice to the Executive setting forth the reasons
for the decision to terminate the Executive for Cause, (y) an opportunity for
the Executive, together with his counsel, to be heard by the CEO or, in his
absence, the Board of Directors and (z) delivery to the Executive of a notice of
termination approved by said CEO or, in his absence, the Board of Directors,
stating his or its good faith opinion that the Executive has engaged in actions
or conduct described in the preceding sentence, which notice specifies the
particulars of such action or conduct in reasonable detail; provided, however,
MFA may suspend the Executive with pay until such time as his right to appear
before the CEO or the Board of Directors, as the case may be, has been
exercised, so long as such appearance is within two (2) weeks of the date of
suspension.
 
- 6 -

--------------------------------------------------------------------------------

 
(b)           Change in Control.  A “Change in Control” shall mean the
occurrence of any one of the following events:
 
(i)           any “person,” as such term is used in Sections 13(d) and 14(d) of
the Act (other than MFA, any of its affiliates or any trustee, fiduciary or
other person or entity holding securities under any employee benefit plan or
trust of MFA or any of its affiliates) together with all affiliates and
“associates” (as such term is defined in Rule 12b-2 under the Act) of such
person, shall become the “beneficial owner” (as such term is defined in
Rule 13d-3 under the Act), directly or indirectly, of securities of MFA
representing 30% or more of either (A) the combined voting power of MFA’s then
outstanding securities having the right to vote in an election of the Board of
Directors (“voting securities”), or (B) the then outstanding shares of common
stock of MFA (“Shares”) (in either such case other than as a result of an
acquisition of securities directly from MFA); or
 
(ii)          persons who, as of the effective date of this Agreement,
constitute MFA’s Board of Directors (the “Incumbent Directors”) cease for any
reason, including, without limitation, as a result of a tender offer, proxy
contest, merger or similar transaction, to constitute at least a majority of the
Board of Directors, provided that any person becoming a Director of MFA
subsequent to the effective date whose election or nomination for election was
approved by a vote of at least a majority of the Incumbent Directors shall, for
purposes of this Agreement, be considered an Incumbent Director; or
 
(iii)         there shall occur (A) any consolidation or merger of MFA or any
subsidiary where the stockholders of MFA, immediately prior to the consolidation
or merger, would not, immediately after the consolidation or merger,
beneficially own (as such term is defined in Rule 13d-3 under the Act), directly
or indirectly, shares representing in the aggregate 60% or more of the voting
securities of the corporation issuing cash or securities in the consolidation or
merger (or of its ultimate parent corporation, if any), (B) any sale, lease,
exchange or other transfer (in one transaction or a series of transactions
contemplated or arranged by any party as a single plan) of all or substantially
all of the assets of MFA or (C) any plan or proposal for the liquidation or
dissolution of MFA.
 
Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have
occurred for purposes of the foregoing clause (i) solely as the result of an
acquisition of securities by MFA which, by reducing the number of Shares or
other voting securities outstanding, increases (x) the proportionate number of
Shares beneficially owned by any person to 30% or more of the Shares then
outstanding or (y) the proportionate voting power represented by the voting
securities beneficially owned by any person to 30% or more of the combined
voting power of all then outstanding voting securities; provided, however, that,
if any person referred to in clause (x) or (y) of this sentence shall thereafter
become the beneficial owner of any additional Shares or other voting securities
(other than pursuant to a stock split, stock dividend, or similar transaction),
then a “Change in Control” shall be deemed to have occurred for purposes of this
Paragraph 6(b).
 
(c)           Disability.  “Disability” shall mean the Executive’s inability for
a period of six consecutive months, to render substantially the services
provided for in this Agreement by reason of mental or physical disability,
whether resulting from illness, accident or otherwise, other than by reason of
chronic or persistent abuse of any substance (such as narcotics or
alcohol).  Notwithstanding the foregoing, no circumstances or condition shall
constitute a Disability to the extent that, if it were, a 20% tax would be
imposed under Section 409A of the Code; provided that, in such a case, the event
or condition shall continue to constitute a Disability to the maximum extent
possible (e.g., if applicable, in respect of vesting without an acceleration of
distribution) without causing the imposition of such 20% tax.  In addition,
nothing herein shall limit or restrict the payment of any amount subject to
Section 409A of the Code upon an otherwise permitted payment event under Section
409A of the Code, including upon a separation from service.
 
- 7 -

--------------------------------------------------------------------------------

 
(d)           Good Reason.  “Good Reason” shall mean:
 
(i)           a material diminution in the Executive’s title, duties or
responsibilities;
 
(ii)          relocation of the Executive’s place of employment without his
consent outside the New York City metropolitan area;
 
(iii)         the failure of MFA to pay within thirty (30) business days any
material payment due from MFA;
 
(iv)         the failure of MFA to pay within a reasonable period after the date
when amounts are required to be paid to the Executive under any benefit programs
or plans; or
 
(v)          the failure by MFA to honor any of its material obligations herein.
 
(e)           Non Cash Items and Merger Expenses.  “Non Cash Items and Merger
Expenses” shall mean depreciation, merger expenses, gains/losses on asset sales,
and impairment charges; provided that these items and expenses shall allow for
adjustment to exclude events pursuant to changes in GAAP and certain non-cash
items at the discretion of MFA’s independent directors.
 
(f)           Pre-Change-in-Control Event.  A “Pre-Change-in-Control Event”
shall mean the occurrence of any one of the following events:
 
(i)           the Board shall adopt a resolution to the effect that any person
has taken actions which, if consummated, would result in such person acquiring
effective control of the business and affairs of MFA;
 
(ii)          there shall commence a tender offer or proxy contest resulting in
any of the transactions specified in subparagraphs (i)-(iii) of Paragraph 6(b);
 
(iii)         MFA shall make any agreement resulting in any of the transactions
specified in subparagraphs (i)-(iii) of Paragraph 6(b);
 
(iv)         there shall be a public announcement of a transaction of the kind
specified in subparagraphs (i)-(iii) of Paragraph 6(b); or
 
(v)          any other meeting, writing or written communication with, by or to
the Board of Directors or any officer or executive of MFA, that is held, made or
undertaken in good faith in anticipation of a Change in Control.
 
(g)           Return on Average Equity.  “Return on Average Equity” shall mean
twelve months GAAP net income plus (minus) certain Non Cash Items and Merger
Expenses divided by average Tangible Net Worth, for the period ending November
30th.
 
(h)           Tangible Net Worth.  “Tangible Net Worth” shall mean stockholder
equity less (i) goodwill and (ii) preferred stockholder equity.
 
- 8 -

--------------------------------------------------------------------------------

 
7.           Covenant Not To Compete.  In the event of the termination of the
Executive’s employment with MFA other than upon notification by the Executive of
the nonrenewal of the Term of Employment, the Executive will not, without the
prior written consent of MFA, manage, operate, control or be connected as a
stockholder (other than as a holder of shares publicly traded on a stock
exchange or the NASDAQ National Market System, provided that the Executive shall
not own more than five percent of the outstanding shares of any publicly traded
company) or partner with, or as an officer, director, employee or consultant of,
any mortgage REIT for a period of one year following termination of his
employment with MFA.  For a period of one year following the termination of his
employment by MFA for any reason, the Executive shall not solicit any employees
of MFA to work for any mortgage REIT.  Except as otherwise required by law, the
Executive shall keep confidential all materials, files, reports, correspondence,
records and other documents (collectively the “Company Materials”) used,
prepared or made available to him in connection with his employment by MFA and
which have not otherwise been made available to the public, and upon termination
of his employment shall return such Company Materials to MFA.  The Executive
acknowledges that MFA may seek injunctive relief or other specific enforcement
of its rights under this Paragraph.
 
8.           Indemnification.  MFA shall indemnify the Executive to the fullest
extent permitted by Maryland law as amended from time to time in connection with
the Executive’s duties with MFA, against all costs, expenses, liabilities and
losses (including, without limitation, attorneys’ fees, judgments, fines,
penalties, ERISA excise taxes and amounts paid in settlement) actually and
reasonably incurred by the Executive in connection with an action, suit or
proceeding.  During the Term of Employment and for six years following the date
of the Executive’s termination as an officer of MFA, MFA (or any successor
thereto) shall provide comprehensive coverage under its officers and directors
insurance policy (or policies) on substantially the same terms and levels that
it provides to its senior executive officers, at MFA’s sole cost.
 
9.           Assignability; Binding Nature.  This Agreement shall inure to the
benefit of MFA and the Executive and their respective successors, heirs (in the
case of the Executive) and assigns.  No rights or obligations of MFA under this
Agreement may be assigned or transferred by MFA except that any such rights or
obligations may be assigned or transferred pursuant to a merger or consolidation
in which MFA is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of MFA, provided that the assignee or transferee
is the successor to all or substantially all of the assets of MFA and such
assignee or transferee assumes the liabilities, obligations and duties of MFA,
as contained in this Agreement, either contractually or as a matter of
law.  This Agreement shall not be assignable by the Executive.
 
10.           Representation.  MFA represents and warrants that it is fully
authorized and empowered to enter into this Agreement and that its entering into
this Agreement and the performance of its obligations under this Agreement will
not violate any agreement between MFA and any other person, firm or organization
or any law or governmental regulation.
 
11.           Entire Agreement.  This Agreement contains the entire agreement
between MFA and the Executive concerning the subject matter hereof and
supersedes all prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between them with respect thereto.
 
12.           Amendment or Waiver.  This Agreement cannot be changed, modified
or amended without the consent in writing of both the Executive and MFA.  No
waiver by either MFA or the Executive at any time of any breach by the other
party of any condition or provision of this Agreement shall be deemed a waiver
of a similar or dissimilar condition or provision at the same or at any prior or
subsequent time.  Any waiver must be in writing and signed by the Executive or
an authorized officer of MFA, as the case may be.
 
13.           Severability.  In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, in
whole or in part, the remaining provisions of this Agreement shall be unaffected
thereby and shall remain in full force and effect to the fullest extent
permitted by law.
 
- 9 -

--------------------------------------------------------------------------------

 
14.           Reasonableness.  To the extent that any provision or portion of
this Agreement is determined to be unenforceable by a court of law or equity,
that provision or portion of this Agreement shall nevertheless be enforceable to
the extent that such court determines is reasonable.
 
15.           Survivorship.  The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
 
16.           Governing Law.  This Agreement and all rights thereunder, and any
controversies or disputes arising with respect thereto, shall be governed by and
construed and interpreted in accordance with the laws of the State of New York,
applicable to agreements made and to be performed entirely within such State,
without regard to conflict of laws provisions thereof that would apply the law
of any other jurisdiction.
 
17.           Dispute Resolution.  In the event of any dispute, controversy or
claim arising out of or relating to this Agreement or Executive’s employment or
termination thereof (other than a controversy or claim arising under Paragraph
7, to the extent necessary for MFA (or its affiliates, where applicable) to
enforce the provisions thereof), the parties hereby agree to settle such
dispute, controversy or claim in a binding arbitration by a single arbitrator in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, which arbitration shall be conducted in New York, New York.  The
parties agree that the arbitral award shall be final and non-appealable and
shall be the sole and exclusive remedy between the parties hereunder.  The
parties agree that judgment on the arbitral award may be entered in any court
having competent jurisdiction over the parties or their assets.  All reasonable
fees and expenses related to any such arbitration (including reasonable
attorneys’ fees and related disbursements) shall be paid by MFA.
 
18.           Legal Fees.  MFA shall pay directly all reasonable legal fees
incurred by the Executive in connection with the negotiation, preparation and
execution of this Agreement.
 
19.           Notices.  Any notice given to either party shall be in writing and
shall be deemed to have been given when delivered personally or sent by
certified or registered mail, postage prepaid, return receipt requested, duly
addressed to the party concerned, if to MFA, at its principal office, and if to
the Executive, at the address of the Executive shown on MFA’s records or at such
other address as such party may give notice of.
 
20.           Headings.  The headings of the paragraphs contained in this
Agreement are for convenience only and shall not be deemed to control or affect
the meaning or construction of any provision of this Agreement.
 
21.           Counterparts.  This Agreement may be executed in two or more
counterparts.
 
- 10 -

--------------------------------------------------------------------------------

 
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.
 
MFA MORTGAGE INVESTMENTS, INC.
 
 
By:
/s/ Stewart Zimmerman  

 
Name:  Stewart Zimmerman

 
Title:    Chairman and Chief Executive Officer

 
 
 
By:
/s/ William S. Gorin  

 
Name:  William S. Gorin

 
Title:    President and Chief Financial Officer

 
- 11 -

--------------------------------------------------------------------------------

 
Exhibit A
 
Aggregate Performance Bonus Pool for Senior Executives
 
Aggregate bonus pool can be adjusted upward or downward in any year by as much
as 30%, dependent upon the Compensation Committee’s assessment of MFA’s leverage
strategy, share price performance relative to the S&P financial index or other
relevant indices, share price relative to peer group, total return (share price
change plus dividend), and its other asset management activities, as well as the
Executive’s individual performance, among other considerations, as determined by
the Compensation Committee.
 
MFA ROAE
Range
Less than 4.5%
$750,000
 
4.5% - 5%
$750,000
$950,000
5% - 6%
$950,000
$1,150,000
6% - 7%
$1,150,000
$1,350,000
7% - 8%
$1,350,000
$1,800,000
8% - 9%
$1,800,000
$2,250,000
9% - 10%
$2,250,000
$2,700,000
10% - 11%
$2,700,000
$3,150,000
11% - 12%
$3,150,000
$3,600,000
12% - 13%
$3,600,000
$4,050,000
13% - 14%
$4,050,000
$4,500,000
14% - 15%
$4,500,000
$4,950,000
15% - 16%
$4,950,000
$5,400,000
16% - 17%
$5,400,000
$5,850,000
17% - 18%
$5,850,000
$6,300,000
18% - 19%
Minimum of $6,300,000 (subject, in all events to discretion of the Compensation
Committee to increase or decrease such amount as described above)
19% - 20%
20% - 21%+

 
Exh. A-1

--------------------------------------------------------------------------------

 
Exhibit B
 
Mutual Release
 
This Mutual Release of Claims (this “Release”) is made as of _______________, by
and between MFA MORTGAGE INVESTMENTS, INC. (the “Company”) and
_____________________ (the “Executive”).
 
 
1.
Release by the Company.

 
(a)           The Company on behalf of itself, its agents, successors,
affiliated entities and assigns, in consideration for the Executive’s execution
and delivery of this Release, hereby forever releases and discharges the
Executive, and his agents, heirs, successors, assigns, executors and
administrators, from any and all known and unknown causes of action, actions,
judgments, liens, indebtedness, damages, losses, claims, liabilities, and
demands of whatsoever kind and character in any manner whatsoever arising on or
prior to the date of this Release, including but not limited to (i) any claim
for breach of contract, breach of implied covenant, breach of oral or written
promise, defamation, interference with contract relations or prospective
economic advantage, negligence, misrepresentation; (ii) any and all liability
that was or may have been alleged against or imputed to the Executive by the
Company or by anyone acting on its behalf; (iii) any punitive, compensatory or
liquidated damages and (iv) all rights to and claims for attorneys’ fees and
costs except as otherwise provided in his amended and restated employment
agreement with the Company dated December [__], 2008 (the “Employment
Agreement”).
 
(b)           The Company shall not file or cause to be filed any action, suit,
claim, charge or proceeding with any federal, state or local court or agency
relating to any claim within the scope of this Release.  In the event there is
presently pending any action, suit, claim, charge or proceeding within the scope
of this Release, or if such a proceeding is commenced in the future, the Company
shall promptly withdraw it, with prejudice, to the extent it has the power to do
so.  The Company represents and warrants that its has not assigned any claim
released herein, or authorized any other person to assert any claim on its
behalf.
 
(c)           Anything to the contrary notwithstanding in this Release or the
Employment Agreement, this Release shall not apply to claims or damages based on
(i) any right or claim that arises after the date on which the Company executes
this Release, including any right to enforce the Employment Agreement with
respect to provisions pertaining to matters that arise after the date of the
Release and that survive termination of employment or (ii) any act of willful
misconduct, gross negligence, fraud or misappropriation of funds.
 
Exh. B-1

--------------------------------------------------------------------------------

 
 
2.
Release by the Executive.

 
(a)           The Executive, on behalf of himself, his agents, heirs,
successors, assigns, executors and administrators, in consideration for the
termination payments and other consideration provided for under the Employment
Agreement, hereby forever releases and discharges the Company, and its
successors, its affiliated entities, and, in such capacities, its past and
present directors, employees, agents, attorneys, accountants, representatives,
plan fiduciaries, successors and assigns from any and all known and unknown
causes of action, actions, judgments, liens, indebtedness, damages, losses,
claims, liabilities, and demands of whatsoever kind and character in any manner
whatsoever arising on or prior to the date of this Release, including but not
limited to (i) any claim for breach of contract, breach of implied covenant,
breach of oral or written promise, wrongful termination, intentional infliction
of emotional distress, defamation, interference with contract relations or
prospective economic advantage, negligence, misrepresentation or employment
discrimination, and including without limitation alleged violations of Title VII
of the Civil Rights Act of 1964, as amended, prohibiting discrimination based on
race, color, religion, sex or national origin; the Family and Medical Leave Act;
the Americans With Disabilities Act; the Age Discrimination in Employment Act;
other federal, state and local laws, ordinances and regulations; and any
unemployment or workers’ compensation law, excepting only those obligations of
the Company pursuant to Paragraph 5 of the Employment Agreement or otherwise
continuing under the Employment Agreement and any claims to benefits under any
compensation or benefit plan, program or arrangement in which the Executive was
participating as of the date of termination of his employment; (ii) any and all
liability that was or may have been alleged against or imputed to the Company by
the Executive or by anyone acting on his behalf; (iii) all claims for wages,
monetary or equitable relief, employment or reemployment with the Company in any
position, and any punitive, compensatory or liquidated damages; and (iv) all
rights to and claims for attorneys’ fees and costs except as otherwise provided
in the Employment Agreement.
 
(b)           The Executive shall not file or cause to be filed any action,
suit, claim, charge or proceeding with any federal, state or local court or
agency relating to any claim within the scope of this Release.  In the event
there is presently pending any action, suit, claim, charge or proceeding within
the scope of this Release, or if such a proceeding is commenced in the future,
the Executive shall promptly withdraw it, with prejudice, to the extent he has
the power to do so.  The Executive represents and warrants that he has not
assigned any claim released herein, or authorized any other person to assert any
claim on his behalf.
 
(c)           In the event any action, suit, claim, charge or proceeding within
the scope of this Release is brought by any government agency, putative class
representative or other third party to vindicate any alleged rights of the
Executive, (i) the Executive shall, except to the extent required or compelled
by law, legal process or subpoena, refrain from participating, testifying or
producing documents therein and (ii) all damages, inclusive of attorneys’ fees,
if any, required to be paid to the Executive by the Company as a consequence of
such action, suit, claim, charge or proceeding shall be repaid to the Company by
the Executive within ten (10) days of his receipt thereof.
 
(d)           BY HIS SIGNATURE BELOW, THE EXECUTIVE ACKNOWLEDGES THAT:
 
(1)           HE HAS RECEIVED A COPY OF THIS RELEASE AND WAS OFFERED A PERIOD OF
TWENTY-ONE (21) DAYS TO REVIEW AND CONSIDER IT;
 
(2)           IF HE SIGNS THIS RELEASE PRIOR TO THE EXPIRATION OF TWENTY-ONE
DAYS, HE KNOWINGLY AND VOLUNTARILY WAIVES AND GIVES UP THIS RIGHT OF REVIEW;
 
(3)           HE HAS THE RIGHT TO REVOKE THIS RELEASE FOR A PERIOD OF SEVEN
(7) DAYS AFTER HE SIGNS IT BY MAILING OR DELIVERING A WRITTEN NOTICE OF
REVOCATION TO THE COMPANY’S GENERAL COUNSEL, NO LATER THAN THE CLOSE OF BUSINESS
ON THE SEVENTH DAY AFTER THE DAY ON WHICH HE SIGNED THIS RELEASE;
 
(4)           THIS RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE
SEVEN DAY REVOCATION PERIOD HAS EXPIRED WITHOUT THE RELEASE HAVING BEEN REVOKED
(THE “EFFECTIVE DATE”);
 
Exh. B-2

--------------------------------------------------------------------------------

 
(5)           THIS RELEASE WILL BE FINAL AND BINDING AFTER THE EXPIRATION OF THE
REVOCATION PERIOD REFERRED TO IN SECTION 2(d)(3).  HE AGREES NOT TO CHALLENGE
ITS ENFORCEABILITY;
 
(6)           HE IS AWARE OF HIS RIGHT TO CONSULT AN ATTORNEY, HAS BEEN ADVISED
IN WRITING TO CONSULT WITH AN ATTORNEY, AND HAS HAD THE OPPORTUNITY TO CONSULT
WITH AN ATTORNEY, IF DESIRED, PRIOR TO SIGNING THIS RELEASE;
 
(7)           NO PROMISE OR INDUCEMENT FOR THIS RELEASE HAS BEEN MADE EXCEPT AS
SET FORTH IN THIS RELEASE;
 
(8)           HE IS LEGALLY COMPETENT TO EXECUTE THIS RELEASE AND ACCEPT FULL
RESPONSIBILITY FOR IT; AND
 
(9)           HE HAS CAREFULLY READ THIS RELEASE, ACKNOWLEDGES THAT HE HAS NOT
RELIED ON ANY REPRESENTATION OR STATEMENT, WRITTEN OR ORAL, NOT SET FORTH IN
THIS DOCUMENT, AND WARRANTS AND REPRESENTS THAT HE IS SIGNING THIS RELEASE
KNOWINGLY AND VOLUNTARILY.
 
Exh. B-3

--------------------------------------------------------------------------------

 
IN WITNESS WHEREOF, the parties have hereunto set their hands this _____ day of
___________________.
 
 
 
By:
   

 
Name:

 
Title:    Executive

 
 
MFA MORTGAGE INVESTMENTS, INC.
 
 
By:
   

 
Name:

 
Title:

 
 
Exh. B-4

--------------------------------------------------------------------------------