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EXHIBIT 10.1


                              AMENDED AND RESTATED


                              EMPLOYMENT AGREEMENT


         THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement"), dated
August 23, 2001, and effective the May 1, 2001, is entered into by and between
Michael A.J. Farrell (the "Executive") and Annaly Mortgage Management, Inc., a
Maryland corporation (the "Company").

         WHEREAS, the Company and the Executive entered into an employment
agreement, effective as of January 27,1997 (the "Employment Agreement");

         WHEREAS, the Company offered shares of Common Stock as set forth in an
offering memorandum dated January 27, 1997 (the "Offering"); and

         WHEREAS, the Company desires to establish its right to the continued
services of the Executive, in the capacity described below, on the terms and
conditions and subject to the rights of termination hereinafter set forth, and
the Executive is willing to accept such employment on such terms and conditions.

         NOW, THEREFORE, in consideration of the mutual promises and agreements
herein made and intending to be legally bound hereby, the parties agree to amend
and restate the Employment Agreement in its entirety to read as follows:

         In consideration of the mutual agreements hereinafter set forth, the
Executive and the Company have agreed and do hereby agree as follows:

         1. Employment as Chairman of the Board and Chief Executive Officer of
the Company. The Company does hereby employ, engage and hire the Executive as
Chairman of the Board and Chief Executive Officer of the Company, and the
Executive does hereby accept and agree to such hiring, engagement, and
employment. The Executive's duties as Chairman of the Board and Chief Executive
Officer shall be such executive and managerial duties as the Board of Directors
of the Company shall from time to time prescribe and as provided in the Bylaws
of the Company. The Executive shall devote such time, energy and skill to the
performance of his duties for the Company and for the benefit of the Company as
may be necessary or required for the effective conduct and operation of the
Company's business. Furthermore, the Executive shall exercise due diligence and
care in the performance of his duties to the Company under this Agreement.

         2. Term of Agreement. The term ("Term") of this Agreement shall
commence as of the date of the closing under the Offering (the "Effective Date")
and shall continue through December 31, 1999. From and after December 31, 1999,
and each anniversary thereafter, the Term of the Agreement shall automatically
be extended for additional successive one-year

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periods unless, not later than three months prior to December 31, 1999 or any
such anniversary, as applicable, either party shall have given written notice to
the other that it does not wish to extend the Term of the Agreement.

         3. Compensation.

                  (a) Base Salary. The Company shall pay the Executive, and the
Executive agrees to accept from the Company, in payment for his services to the
Company a base salary at the rate determined below ("Base Salary"), payable in
equal biweekly installments or at such other time or times as the Executive and
Company shall agree. Base Salary shall (i) equal a per annum amount of 0.25%
times the book value (as defined below) of the Company, (ii) be reviewed
quarterly and upon the raising of additional equity through the placement of
securities, and (iii) be subject to a maximum per annum amount of $1,000,000
("Salary Cap"). The Salary Cap can be raised at any time by the Board of
Directors of the Company in its sole discretion. In determining the Base Salary,
the "book value" of the Company shall be the aggregate amounts reported on the
Company's balance sheet prepared in accordance with generally accepted
accounting principles as Stockholders' Equity but excluding any adjustments for
valuation reserves (i.e., changes in the value of the Company's portfolio of
investments as a result of mark-to-market valuation changes), all determined as
of the close of business on the Effective Date and thereafter on the closing
date of any placements of securities resulting in additional equity and on the
last day of each fiscal quarter. In consideration of the cash flow needs of the
Company, the Base Salary can be lowered at management's discretion.

                  (b) Performance Bonus - Board of Directors Discretion. The
Executive shall be eligible to receive an incentive performance bonus based upon
a percentage of his Base Salary. Except as provided in Section 7, any such bonus
awarded to the Executive shall be payable in the amount, in the manner, and at
the time determined by the Company's Board of Directors in its sole and absolute
discretion.

                  (c) Annual Review. The Board of Directors of the Company
shall, at least annually, review the Executive's entire compensation package to
determine whether it continues to meet the Company's compensation objectives.
Such annual review will include a determination of (i) whether to increase the
Salary Cap in accordance with Section 3(a) and (ii) the incentive performance
bonus to be awarded in accordance with Section 3(b).

         4. Fringe Benefits. The Executive shall be entitled to participate in
any benefit programs adopted from time to time by the Company for the benefit of
its executive employees, and the Executive shall be entitled to receive such
other fringe benefits as may be granted to him from time to time by the
Company's Board of Directors.

                  (a) Benefit Plans. The Executive shall be entitled to
participate in any benefit plans relating to stock options, stock purchases,
awards, pension, thrift, profit sharing, life insurance, medical coverage,
education, or other retirement or employee benefits available to other executive
employees of the Company, subject to any restrictions (including waiting
periods) specified in such plans. The Company shall make commercially reasonable
efforts to


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obtain medical and disability insurance, and such other forms of insurance as
the Board of Directors shall from time to time determine, for its employees.

                  (b) Vacation. The Executive shall be entitled to (i) four (4)
weeks of paid vacation per calendar year for the first two years of service to
the Company, and (ii) five (5) weeks of paid vacation per calendar year for the
next two years of service to the Company, with such vacation to be scheduled and
taken in accordance with the Company's standard vacation policies. After four
years of service to the Company, the Executive shall be entitled to such number
of weeks of paid vacation per calendar year as determined by the Board of
Directors of the Company after review of industry standards, but shall in no
event be entitled to fewer than five weeks of paid vacation per calendar year.

         5. Business Expenses. The Company shall reimburse the Executive for any
and all necessary, customary and usual expenses, properly receipted in
accordance with Company policies, incurred by Executive on behalf of the
Company.

         6. Termination of Employment.

                  (a) Death. If the Executive dies while employed by the
Company, his employment shall immediately terminate. The Company's obligation to
pay the Executive's Base Salary shall cease as of the date of Executive's death.
Thereafter, Executive's beneficiaries or his estate shall receive benefits in
accordance with the Company's retirement, insurance and other applicable
programs and plans then in effect.

                  (b) Disability.

                  (i)      If, as a result of the Executive's incapacity due to
                           physical or mental illness ("Disability"), Executive
                           shall have been absent from the full-time performance
                           of his duties with the Company for six (6)
                           consecutive months, and, within thirty (30) days
                           after written notice is provided to him by the
                           Company, he shall not have returned to the full-time
                           performance of his duties, the Executive's employment
                           under this Agreement may be terminated by the Company
                           for Disability. During any period prior to such
                           termination during which the Executive is absent from
                           the full-time performance of his duties with the
                           Company due to Disability, the Company shall continue
                           to pay the Executive his Base Salary at the rate in
                           effect at the commencement of such period of
                           Disability. Subsequent to such termination, the
                           Executive's benefits shall be determined under the
                           Company's retirement, insurance and other
                           compensation programs then in effect in accordance
                           with the terms of such programs.

                  (ii)     If, however, as a result of the Executive's partial
                           incapacity due to physical or mental illness in which
                           Executive shall not have been absent from his duties
                           for six consecutive months and shall have returned to
                           work on a full-time basis but is not able to perform
                           at the same level as when hired and/or is not able to
                           perform the same functions originally hired for


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                           ("Partial Disability"), the Company shall make
                           reasonable efforts to accommodate the Executive's
                           Partial Disability by modifying his job description
                           appropriately, together with a commensurate
                           adjustment in compensation; provided, however, the
                           Company shall be required to so continue the
                           employment of the Executive in the event of a Partial
                           Disability of the Executive only if the Company
                           determines, in its sole discretion, that it can
                           create a position for which the Executive would be
                           suited and that would be economically advantageous to
                           the Company.


                  (c) Termination by the Company for Cause. The Company may
terminate the Executive's employment under this Agreement for "Cause," at any
time prior to expiration of the Term of the Agreement, only in the event of (i)
the Executive's material breach of this Agreement, including without limitation
the failure to substantially perform the reasonable and lawful duties of his
position for the Company, which breach shall continue for 60 days after notice
thereof by the Company to the Executive, which notice shall specify in detail
the Executive's breach, (ii) acts or omissions constituting recklessness or
willful misconduct on the part of the Executive in respect of his fiduciary
obligations or otherwise relating to the business of the Company, or (iii) the
Executive's conviction for fraud, misappropriation or embezzlement. In the case
of clauses (ii) and (iii), the Executive's employment under this Agreement may
be terminated immediately without any advance written notice, and the Company's
obligation to pay the Executive's Base Salary, any bonus and benefits shall
cease as of the termination date.

                  (d) Termination by the Executive for Good Reason. The
Executive shall have the right to terminate this Agreement for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean the occurrence, without the
Executive's express written consent, of any one or more of the following events:

                  (i)      A reduction in title and/or compensation of the
                           Executive by the Board of Directors or the assignment
                           of duties to the Executive not consistent with those
                           of a senior executive of the Company, except in
                           connection with the Company's termination of the
                           Executive's employment for Cause pursuant to Section
                           6(c) or as otherwise expressly contemplated herein;

                  (ii)     The Company's material breach of any of the
                           provisions of this Agreement, including, but not
                           limited to, a reduction by the Company in the
                           Executive's Base Salary in effect as of the Effective
                           Date, or as the same may be increased as provided
                           herein; or a change in the conditions of the
                           Executive's employment (e.g., including, without
                           limitation, a failure by the Company to provide the
                           Executive with incentive compensation and benefits
                           plans that provide benefits and the opportunity to
                           obtain incentive compensation, in each case
                           comparable to those available under benefits programs
                           in effect as of the Effective Date, etc.);

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                  (iii)    The relocation of the Company's principal executive
                           offices to a location more than 50 miles from its
                           location as of Effective Date or the Company's
                           requiring the Executive to be based anywhere other
                           than the Company's principal executive offices,
                           except for required travel on the Company's business
                           to the extent necessary to meet the standard set
                           forth in the last two sentences of Section 1; or

                  (iv)     A Change in Control as defined in Section 8 below.
                           The Executive agrees to provide the Company with
                           thirty (30) days' prior written notice of any
                           termination for Good Reason.

                  (e) Termination by the Executive without Good Reason. The
Executive may at any time during the Term of this Agreement terminate his
employment hereunder for any reason or no reason by giving the Company notice in
writing not less than one hundred twenty (120) days in advance of such
termination. The Executive shall have no further obligations to the Company
after the effective date of termination, as set forth in the notice.
Notwithstanding the foregoing, in the event any "person" (as defined in Section
8 below) begins a tender or exchange offer, circulates a proxy to shareholders
or takes other steps to effect a Change of Control, the Executive agrees that he
will not voluntarily leave the employ of the Company, and will render services
to the Company commensurate with his position, until such "person" has abandoned
or terminated efforts to effect a Change of Control or until a Change of Control
has occurred. In the event of a termination by the Executive under this
paragraph, the Company will pay only the portion of Base Salary or previously
awarded Bonus unpaid as of the termination date. Benefits which have accrued
and/or vested on the termination date will continue in effect according to their
terms, but no additional accrual or vesting will take place.

         7. Compensation upon Termination by the Company other than for Cause,
or by the Executive for Good Reason. If the Executive's employment shall be
terminated (i) by the Company other than for Cause, or (ii) by the Executive for
Good Reason, the Executive shall be entitled to the following benefits:

                  (a) Payment of Unpaid Base Salary. The Company shall
immediately pay the Executive any portion of the Executive's Base Salary or
previously awarded bonus not paid prior to the termination date.

                  (b) Severance Payment. The Company shall pay the Executive an
amount (the "Severance Amount") equal to three times the higher of (i) the
Executive's combined Salary Cap and actual bonus compensation for the preceding
fiscal year or (ii) the average for the three preceding years of the Executive's
combined actual Base Salary and bonus compensation; provided, however, that the
Severance Amount shall not be less than $250,000, nor more than 1.0% of book
value (as defined in Section 3(a)) to the extent the Severance amount is greater
than $250,000. The Severance Amount shall be payable 50% within five (5) days
after the termination date and the remaining 50% shall be payable in twelve (12)
equal consecutive monthly installments beginning on the first day of the month
following the termination date.

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                  (c) Immediate Vesting of Stock Options. The Company shall take
all propriate action to ensure that all stock options on the Company's stock
owned by the Executive as of the Effective Date and which have not been
exercised prior to the termination date become immediately exercisable by the
Executive, whether or not the right to exercise such stock options would
otherwise then be vested in the Executive, provided, however, an option that is
an incentive stock option (within the meaning of Code Section 422(b)) shall not
be exercisable for the first time in a calendar year to the extent that the
aggregate fair market value of stock (as determined under Code Section
422(b)(3)) with respect to which ISO's are exercisable by the Executive during
such calendar year exceeds $100,000. The provisions of this Section 7(c) shall
constitute an amendment to any existing stock option agreements (including award
certificates) of the Company as of the Effective Date. All other stock options
owned by the Executive as of the termination date shall be exercisable in
accordance with the Company's stock option plan and the applicable stock option
agreements.

                  (d) Continuation of Fringe Benefits. From and after
termination of the Executive's employment, the Company shall continue to provide
the Executive with all life insurance and medical coverage Fringe Benefits set
forth in Section 4 as if the Executive's employment under the Agreement had not
been terminated until the earlier to occur of (i) such time as the Executive
finds full-time employment or (ii) this Agreement terminates. Notwithstanding
the immediately preceding sentence, if, as the result of the termination of the
Executive's employment, the Executive and/or his otherwise eligible dependents
or beneficiaries shall become ineligible for benefits under any one or more of
the Company's benefit plans or the cost of providing such benefits exceeds 200%
of the cost of providing such benefits to other members of senior management,
the Company, at the Company's option, shall (i) continue to provide the
Executive and his eligible dependents or beneficiaries with benefits at a level
at least equivalent to the level of benefits for which the Executive and his
dependents and beneficiaries were eligible under such plans immediately prior to
the termination date or (ii) for any Fringe Benefit not so provided, the Company
shall pay the Executive 200% of the cost of providing such Fringe Benefit to
other members of senior management.

                  (e) Excise Tax Gross-Up. In the event that (i) the Executive
becomes entitled to the benefit payments provided under subparagraphs (a)-(d) of
this Section 7 ("Benefit Payments"), and (ii) any of the Benefit Payments will
be subject to any excise tax imposed under Section 4999 of the Internal Revenue
Code of 1986, as amended from time to time ("Code"), or successor sections
thereto ("Excise Tax"), the Company shall pay to the Executive an additional
amount (the "Gross-Up Payment") such that the net amount retained by the
Executive, after deduction of any Excise Tax on the Benefit Payments and any
federal, state and local income tax and Excise Tax upon the payments provided
for under this Section 7, shall be equal to the amount of the Benefit Payments.
For purposes of determining whether any of the Benefit Payments will be subject
to the Excise Tax and the amount of such Excise Tax, (i) any other payments or
benefits received or to be received by the Executive in connection with a Change
in Control (defined below) or the termination of Executive's employment (whether
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any person whose actions result in a Change in
Control or any person affiliated with the Company or such person) shall be
treated as "parachute payments" within the meaning of section 280G(b)(2)


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of the Code, and all "excess parachute payments" within the meaning of section
280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in
the opinion of tax advisors selected by the Company and reasonably acceptable to
the Executive such other payments or benefits (in whole or in part) do not
constitute parachute payments, including by reason of section 280G(b)(4)(A) of
the Code, or such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered, within the meaning of
section 280G(b)(4)(B) of the Code, in excess of the Base Amount (as defined in
section 280G(b)(3) of the Code) allocable to such reasonable compensation, or
are otherwise not subject to the Excise Tax, (ii) the amount of the Benefit
payments which shall be treated as subject to the Excise Tax shall be equal to
the lesser of (A) the total amount of the Benefit Payments or (B) the amount of
excess parachute payments within the meaning of section 280G(b)(1) of the Code
(after applying clause (i), above), and (iii) the value of any non-cash benefits
or any deferred payment or benefit shall be determined by the Company's
independent auditors in accordance with the principles of section 280G(d)(3) and
(4) of the Code. For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of the Executive's residence
on the termination date of employment, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes based on the marginal rate referenced above. In the event that the Excise
Tax is subsequently determined to be less than the amount taken into account
hereunder at the termination date, the Executive shall repay to the Company, at
the time that the amount of such reduction in Excise Tax is finally determined,
the portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income tax imposed on the Gross-Up Payment being repaid by the
Executive to the extent that such repayment results in a reduction in Excise Tax
and/or a federal, state or local income tax deduction) plus interest on the
amount of such repayment at the rate provided in section 1274(b)(2)(B) of the
Code. In the event that the Excise Tax is determined to exceed the amount taken
into account hereunder at the time of the termination of the Executive's
employment (including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company shall
make an additional Gross-Up Payment in respect of such excess (plus any
interest, penalties or additions payable by the Executive with respect to such
excess but only to the extent that such interest, penalties or additions would
not have been reduced by prompt payment by the Executive to the appropriate tax
authority of the Gross-Up Payments previously received) at the time that the
amount of such excess is finally determined. The Executive and the Company shall
each reasonably cooperate with the other in connection with any administrative
or judicial proceedings concerning the existence or amount of liability for
Excise Tax with respect to the Benefit Payments.

                  (f) No Mitigation Required; No Other Entitlement to Benefits
Under Agreement. The Executive shall not be required in any way to mitigate the
amount of any payment provided for in this Section 7, including, but not limited
to, by seeking other employment, nor shall the amount of any payment provided
for in this Section 7 be reduced by any compensation earned by the Executive as
the result of employment with another employer after the termination date of
employment, or otherwise. Except as set forth in this Section 7, following a
termination governed by this Section 7, the Executive shall not be entitled to
any


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other compensation or benefits set forth in this Agreement, except as may be
separately negotiated by the parties and approved by the Board of Directors of
the Company in writing in conjunction with the termination of Executive's
employment under this Section 7.

         8. Change in Control. A "Change in Control" shall be deemed to have
occurred if the conditions set forth in any one of the following paragraphs
shall have been satisfied:

                  (a) Any "Person" (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act") (other than
the Company any trustee or other fiduciary holding securities under an Executive
benefit plan of the Company; or any company owned, directly or indirectly, by
the stockholders of the Company in substantially the same proportions as their
ownership of the stock of the Company) is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company (not including in the securities beneficially owned by
such Person any securities acquired directly from the Company or from a
transferor in a transaction expressly approved or consented to by the Board of
Directors) representing more than 9.8% of the combined voting power of the
Company's then outstanding securities; or

                  (b) During any period of two consecutive years (not including
any period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board of Directors and any new director
(other than a director designated by a person who has entered into an agreement
with the Company to effect a transaction described in clause (a), (c) or (d) of
this section), (i) whose election by the Board of Directors or nomination for
election by the Company's stockholders was approved by a vote of at lest
two-thirds (2/3) of the directors then still in office who either were directors
at the beginning of the period or whose election or nomination for election was
previously so approved or (ii) whose election is to replace a person who ceases
to be a director due to death, disability or age, cease for any reason to
constitute a majority thereof; or

                  (c) The shareholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (i) a merger
or consolidation which would result in the voting securities of the Company
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity), in combination with the ownership of any trustee or other
fiduciary holding securities under an Executive benefit plan of the Company, at
least 75% of the combined voting power of the voting securities of the Company
or such surviving entity outstanding immediately after such merger or
consolidation, or (ii) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquires more than 50% of the combined voting power of the Company's then
outstanding securities; or

                  (d) The shareholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition by the
Company of all or substantially all of the Company's assets.

         9. Dispute Relating to Executive's Termination of Employment for Good
Reason. If the Executive resigns his employment with the Company alleging in
good faith as the basis for


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such resignation any of the "Good Reasons" specified in Section 6(d), and if the
Company then disputes the Executive's right to the payment of benefits under
Section 7, the Company shall continue to pay the Executive the full compensation
(including, but not limited to, his Base Salary) in effect at the date the
Executive provided notice of such resignation, and the Company shall continue
the Executive as a participant in all compensation, benefit and insurance plans
in which the Executive was then a participant, until the earlier of (i) the
expiration of the Term of the Agreement or (ii) the date the dispute is finally
resolved, either by mutual written agreement of the parties or by arbitration in
accordance with Section 22. For the purposes of this Section, the Company shall
bear the burden of proving that the grounds for the Executive's resignation do
not fall within the scope of Section 6(d), and there shall be a rebuttable
presumption that the Executive alleged such grounds in good faith.

         10. Noncompetition Provisions.

                  (a) Noncompetition. The Executive agrees that during the Term
of this Agreement prior to any termination of his employment hereunder and for a
period of one year following the occurrence of any event entitling the Executive
to Benefit Payments, provided the Company makes all such payments when due
according to the provisions of Section 7, he will not, directly or indirectly,
without the prior written consent of the Company, manage, operate, join,
control, participate in, 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), partner, or other equity holder with, or as an officer, director
or employee of, any real estate investment trust whose business strategy is
competitive with that of the Company, as determined by a majority of the
Company's Independent Directors ("Competing REIT"). It is further expressly
agreed that the Company will would suffer irreparable injury of the Company in
violation of the preceding sentence of this Agreement and that the Company would
by reason of such competition be entitled to injunctive relief in a court of
appropriate jurisdiction, and the Executive further consents and stipulates to
the entry of such injunctive relief in such a court prohibiting the Executive
from competing with the Company or any subsidiary or affiliate of the Company,
in the areas of business set forth above, in violation of this Agreement. It is
further expressly agreed that the Executive's interest in and employment by
Fixed Income Discount Advisory Company or eNTR shall not be deemed to violate
any provisions of this Section, regardless of the scope of the Executive's
activities with such firm; provided, however, that the Executive shall not in
such capacity provide services to any Competing REIT.

                  (b) Right to Company Materials. The Executive agrees that all
styles, designs, lists, materials, books, files, reports, correspondence,
records, and other documents ("Company Materials") used, prepared, or made
available to the Executive in connection with his employment by the Company
shall be and shall remain the property of the Company. Upon the termination of
employment or the expiration of this Agreement, all Company Materials shall be
returned immediately to the Company, and the Executive shall not make or retain
any copies thereof.

                  (c) Soliciting Executives. The Executive promises and agrees
that he will not directly or indirectly solicit any of the Company Executives to
work for any Competing REIT.

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<PAGE>

                  (d) Maryland Law. The Executive agrees, in accordance with
Maryland law, to first offer to the Company corporate opportunities learned of
solely as a result of his service as an officer and director of the Company.

         11. Notices. All notices and other communications under this Agreement
shall be in writing and shall be given by fax or first class mail, certified or
registered with return receipt requested, and shall be deemed to have been duly
given three (3) days after mailing or twenty-four (24) hours after transmission
of a fax to the respective persons named below:

          If to the Company:        Timothy J. Guba
                                    President
                                    Annaly Mortgage Management, Inc.
                                    1500 Harbor Blvd.
                                    Weehawken, NJ 07087
                                    Phone: (201) 223-1900
                                    Fax: (201) 223-1230

          If to the Executive:      Michael A. J. Farrell
                                    Chief Executive Officer
                                    Annaly Mortgage Management, Inc.
                                    1500 Harbor Blvd.
                                    Weehawken, NJ  07087
                                    Phone: (201) 223-1900
                                    Fax:  (201) 223-1230

A copy of any notice pursuant to this Agreement shall be sent to Morgan, Lewis &
Bockius, 101 Park Avenue, New York, New York 10178, Attn: Robert C. Mendelson.
Either party may change such party's address for notices by notice duly given
pursuant hereto.

         12. Attorneys' Fees. In the event judicial determination is necessary
of any dispute arising as to the parties' rights and obligations hereunder, each
party shall have the right, in addition to any other relief granted by the
court, to attorneys' fees based on a determination by the court of the extent to
which each party has prevailed as to the material issues raised in determination
of the dispute.

         13. Termination of Prior Agreements. This Agreement terminates and
supersedes any and all prior agreements and understandings between the parties
with respect to employment or with respect to the compensation of the Executive
by the Company.

         14. Assignment; Successors. This Agreement is personal in its nature
and neither of the parties hereto shall, without the consent of the other,
assign or transfer this Agreement or any rights or obligations hereunder;
provided that, in the event of the merger, consolidation, transfer, or sale of
all or substantially all of the assets of the Company with or to any other
individual or entity, this Agreement shall, subject to the provisions hereof, be
binding


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upon and inure to the benefit of such successor and such successor shall
discharge and perform all the promises, covenants, duties, and obligations of
the Company hereunder.

         15. Governing Law. This Agreement and the legal relations thus created
between the parties hereto shall be governed by and construed under and in
accordance with the laws of the State of New Jersey.

         16. Entire Agreement; Headings. This Agreement embodies the entire
agreement of the parties respecting the matters within its scope and may be
modified only in writing. Section headings in this Agreement are included herein
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.

         17. Waiver; Modification. Failure to insist upon strict compliance with
any of the terms, covenants, or conditions hereof shall not be deemed a waiver
of such term, covenant, or condition, nor shall any waiver or relinquishment of,
or failure to insist upon strict compliance with, any right or power hereunder
at any one or more times be deemed a waiver or relinquishment of such right or
power at any other time or times. This Agreement shall not be modified in any
respect except by a writing executed by each party hereto.

         18. Severability. In the event that a court of competent jurisdiction
determines that any portion of this Agreement is in violation of any statute or
public policy, only the portions of this Agreement that violate such statute or
public policy shall be stricken. All portions of this Agreement that do not
violate any statute or public policy shall continue in full force and effect.
Further, any court order striking any portion of this Agreement shall modify the
stricken terms as narrowly as possible to give as much effect as possible to the
intentions of the parties under this Agreement.

         19. Indemnification. The Company shall indemnify and hold Executive
harmless to the maximum extent permitted by Section 2-418 of the Maryland
General Corporations Law or its successor statute.

         20. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.

         21. Successor Sections. References herein to sections or rules of the
Code or Exchange Act shall be deemed to include any successor sections or rules.

         22. Arbitration. Any dispute, claim or controversy arising out of or in
relation to this Agreement, which the Executive and the Company are unable to
resolve shall be determined by the decision of a board of arbitration consisting
of three (3) members (the "Board of Arbitration") selected by the American
Arbitration Association upon application made to it for such purpose by either
the Company or the Executive. The arbitration proceedings shall take place in
New York, New York or such other place as shall be agreed to by the parties. The
Board of Arbitration shall reach and render a decision in writing. In connection
with rendering its decision, the Board of Arbitration shall adopt and follow
such rules and procedures as a majority


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of the members of the Board of Arbitration deems necessary or appropriate. Any
award shall be rendered on the basis of the substantive law governing this
Agreement and shall be concurred in by a majority of the arbitrators. To the
extent practical, decisions of the arbitrators shall be rendered no more than
thirty (30) calendar days following commencement of the arbitration proceedings
with respect thereto. Any decision made by the Board of Arbitration (either
prior to or after the expiration of such thirty (30) calendar day period) shall
be final, binding and conclusive on the Executive and the Company and entitled
to be enforced to the fullest extent permitted by law and entered in any court
of competent jurisdiction. Each party to the arbitration shall bear its own
expense in relation thereto, including but not limited to such party's
attorneys' fees, if any, and the expenses and fees of the member of the Board of
Arbitration appointed by such party; provided, however, that the expenses and
fees of the third member of the Board of Arbitration and any other expenses of
the Board of Arbitration not capable of being attributed to any one member shall
be borne in equal parts by Executive and the Company.

















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          IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by its duly authorized officer, and the Executive has hereunto signed
this Agreement, as of the date first above written.

                                       ANNALY MORTGAGE MANAGEMENT, INC.


                                       By: /s/ Wellington St. Claire
                                       ------------------------------
                                       Name:  Wellington St. Claire
                                       Title: Vice Chairman and Chief
                                              Investment Officer


                                       /s/ Michael A. J. Farrell
                                       ------------------------------
                                       Michael A. J. Farrell


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