Unassociated Document


     

    
      
         Exhibit
10.4 

      

    

     

    
      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 STEWART ZIMMERMAN
(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 April 16, 2006 (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");

       

      WHEREAS,
MFA and the Executive have agreed that effective July 1, 2008, the Executive
shall no longer serve as President of MFA, but shall serve as Chairman and Chief
Executive Officer of MFA (the “CEO”); 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 April 16, 2006,
shall continue until December 31, 2010.  Subject to the Executive's
right to cause the Term of Employment to end at any time upon 12 months' prior
notice to MFA, 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 12 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) The
Executive shall be employed as Chairman, President and Chief Executive Officer
until June 30, 2008.  Effective July 1, 2008, and during the remainder
of the Term of Employment, the Executive shall be employed as the Chairman and
CEO, reporting directly to the Board of Directors of MFA (the “Board of Directors”), 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 Board of Directors.

       

      (b) During
the Term of Employment, the Executive shall, without additional compensation,
also 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 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
nine hundred thousand dollars ($900,000).  In addition to Base Salary,
the Executive shall receive the following annual grants of common stock of the
Company (the fair market value of such stock at the time of grant (i.e.,
$100,000), together with the Base Salary for such year, "Base Compensation"), subject
to the Executive’s continuing employment with the Company on the date of
grant:

       

      
        	
                (i)  

              	
                On
      April 16, 2006 and on January 1st (or the first business day thereafter)
      of each of the following four years, the Executive shall receive a grant
      of common stock with an aggregate fair market value on such date (or the
      first business day thereafter) of
$100,000;

              


      

       

      
        	
                (ii)  

              	
                Each
      such award shall be subject to definitive documentation, and such shares
      of stock shall be fully vested and non-forfeitable upon the date of grant,
      but in no event may be sold or transferred prior to the time the value of
      the Executive’s holdings in MFA exceeds five times his Base Compensation
      (and thereafter may be sold or transferred to the extent the value of the
      Executive’s stock holdings exceeds such
  multiple).

              


      

       

      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

       

      (b) Performance
Bonus.  The Executive, 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 Executive,
allocations as between the President and Executive Vice President, if any, shall
be made by the Compensation Committee together with the Executive 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.

       

      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 five 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 five
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.

       

      (c) 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.

       

      (d) 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 the
Employment.  The Base Salary as adjusted to reflect any increase shall
be the Base Salary for all purposes of this Agreement.

       

      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

       

      
        	
                4.  

              	
                Employee Benefit
      Programs and Fringe
Benefits.

              


      

       

      During
the Term of Employment, the Executive shall be entitled to six 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 Compensation
accrued or earned but unpaid and any other payments payable to the Executive
pursuant to Paragraph 5(f) 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 two (2) times the
Executive’s then current Base Compensation, 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 70 or
such later date through which coverage is permissible under MFA's health
insurance policy.

       

      (b) Termination Without Cause or
for Good Reason.  In the event the Executive's employment is
terminated by MFA without Cause (excluding 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), MFA shall pay the Executive an
amount (the "Severance
Amount") equal to three (3) times the greater of (i) the Executive's
combined Base Compensation and actual Performance Bonus for the preceding fiscal
year or (ii) the average for the three preceding years of the Executive's
combined actual Base Compensation and Performance Bonus.  Fifty
percent of the Severance Amount shall be paid within five (5) days after the
date the Executive terminates for Good Reason or is terminated by the Company
for any reason other than Cause, 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
Compensation accrued or earned but unpaid and any other payments payable to the
Executive pursuant to Paragraph 5(f) below, as of the date of
termination.

       

      
        
          
          

        

        
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      (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 six months following a Change in Control, or (3)
the termination of the Executive's employment by MFA other than for Cause or the
Employee's resignation of his employment for Good Reason within twenty-four
months following a Change in Control,

       

      
        	
                (i)  

              	
                MFA
      shall pay to Executive in a lump sum, within 30 days following the
      termination of employment, an amount equal to 300% of the sum of (a) the
      Executive's then current Base Compensation and (b) the Executive's bonus
      for the immediately preceding year;

              


      

       

      
        	
                (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.

              


      

       

              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) Non-Renewal of Term of
Employment  Notwithstanding any other term of this Agreement to
the contrary, (i) upon any notice by MFA to not renew the Initial Term or any
Renewal Term pursuant to Paragraph 1(b), the Executive shall be entitled to (x)
a payment in an amount equal to the Executive's Base Compensation which shall be
made as soon as practicable following the end of such Term of Employment, but in
no event later than March 15th of the following calendar year, and (y) any other
payments payable to the Executive pursuant to Paragraph 5(f) below and (ii) upon
any notice by the Executive to not renew the Initial Term or any Renewal Term
pursuant to Paragraph 1(b), the Executive shall be entitled to the payments
payable to the Executive pursuant to Paragraph 5(f) below; provided, however,
that, the benefits providing under Paragraph 5(f)(v) are subject in all events
to the Executive’s continued employment through the end of the Initial
Term.

       

      
        
          
          

        

        
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      (f) 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),
      5(b) or 5(e) 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.

              


      

       

      (g) 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.

       

      (h) 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, 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.  

       

      
        
          
          

        

        
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      (i) 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 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 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
Board of Directors, and (z) delivery to the Executive of a notice of termination
approved by said Board of Directors stating 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 Board of
Directors has been exercised, so long as such appearance is within two (2) weeks
of the date of suspension.

       

      
        
          
          

        

        
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      (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 shareholders 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).

       

      
        
          
          

        

        
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      (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.

       

      (d) Good
Reason.  "Good
Reason" shall mean:

       

      
        	
                (i)  

              	
                except
      as otherwise provided in Section 2(a), 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 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;

              


      

       

      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

       

      
        	
                (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.

       

      
        	
                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 the 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.

       

      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

       

      
        	
                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.

       

      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

       

      
        	
                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.

       

      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

       

      
        	
                21.  

              	
                Counterparts.

              


      

       

      This
Agreement may be executed in two or more counterparts.

       

      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

       

      IN WITNESS WHEREOF, the
undersigned have executed this Agreement as of the date first written
above.

       

      
        
          	 	 MFA
      Mortgage Investments,
      Inc. 	 
	 	 	 	 
	 	 	 	 
	
                   

                	
                   By: 

                	 /s/ James A.
      Brodsky 	   
	   	 Name:  	 James
      A. Brodsky 	   
	   	 Title: 	 Chairman,
      Compensation Committee 	   
	   	   	   	   
	   	 /s/
      Stewart Zimmerman 	   
	   	 Name:  	 Stewart
      Zimmerman  	   
	   	 Title:  	 Chairman
      and Chief Executive Officer  	 
	 	 	 	 


        

      

       

       

      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

       

      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%+

                


        

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

       

      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.

       

      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

       

      (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 and 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.

       

      
        	
                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.

       

      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

       

      (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");

       

      (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;

       

      
        
          
          

        

        
          19

          
            

          

        

        
          
          

        

      

       

      (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.

       

      
        
          
          

        

        
          20

          
            

          

        

        
          
          

        

      

       

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

       

      
         

        
          
            	 	 	 
	 	Executive	 
	 	 	 
	 	 	 
	 	MFA
      Mortgage Investments, Inc.	 
	 	 	 	 
	 	 	 	 
	
                     

                  	
                    By: 

                  	 	 
	 	 	 	 


          

        

         

         

      

      21