Unassociated Document


    EMPLOYMENT
AGREEMENT

     

    THIS
EMPLOYMENT AGREEMENT (this “Agreement”) is
entered into as of the 1st day of July, 2009 by and between MFA FINANCIAL, INC.,
a Maryland corporation (“MFA”), and CRAIG L.
KNUTSON (the “Executive”).

     

    W I T N E S S E T
H:

     

    WHEREAS,
MFA wishes to offer employment to, and secure the exclusive services of, the
Executive, and the Executive wishes to accept such offer, under the terms and
conditions described below.

     

    NOW
THEREFORE, in consideration of the premises and the mutual agreements herein
contained, the parties hereto agree 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 shall commence as of July 1, 2009, shall
continue until December 31, 2011.  The Term of Employment shall
automatically renew for a one-year period (each such renewal, a “Renewal Term”) at the
end of the Initial Term and each Renewal Term, unless either party shall give
notice to the other not less than six months prior to the end of the Initial
Term or any Renewal Term, as the case may be, of his or its intent not to renew
such Initial Term or Renewal Term, as the case may
be.  Notwithstanding the foregoing sentences of this
Paragraph 1(b), the Term of Employment may be terminated before the
expiration of the Initial Term or any Renewal Term in accordance with
Paragraph 5 hereof.

     

    2.           Position; Duties and
Responsibilities.

     

    (a)           During
the Term of Employment, the Executive shall be employed as Executive Vice
President of MFA, reporting to the Chief Executive Officer of MFA (the “CEO”), with such
duties and day-to-day management responsibilities as are customarily performed
by persons holding such offices at similarly situated mortgage REITs and such
other duties as may be mutually agreed upon between the Executive and the
CEO.

     

    (b)           During
the Term of Employment, the Executive shall, without additional compensation,
also (i) serve on the board of directors of, (ii) serve as an officer of, and/or
(iii) perform such executive and consulting services for, or on behalf of, such
subsidiaries or affiliates of MFA as the CEO and/or the Board of Directors of
MFA (the “Board of
Directors”) may, from time to time, request.  MFA and such
subsidiaries and affiliates are hereinafter referred to, collectively, as the
“Company.”  For
purposes of this Agreement, the term “affiliate” shall have the meaning ascribed
thereto in Rule 12b-2 under the Securities Exchange Act of 1934, as amended
(the “Act”).

     

    (c)           During
the Term of Employment, the Executive shall serve MFA faithfully, diligently and
to the best of his ability and shall devote substantially all of his time and
efforts to his employment and the performance of his duties under this
Agreement.  Nothing herein shall preclude the Executive from engaging
in charitable and community affairs and managing his personal, financial and
legal affairs, so long as such activities do not materially interfere with his
carrying out his duties and responsibilities under this Agreement.

     

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

     

    3.           Compensation.

     

    (a)           Base
Salary.  During the Term of Employment, unless otherwise agreed
to by the Executive, MFA shall pay to the Executive a base salary (the “Base
Salary”) equal to four hundred twenty-five thousand dollars ($425,000) per
annum.  The Base Salary shall be paid in accordance with MFA’s normal
payroll practices.

     

    (b)           Restricted Stock
Award.  In connection with the Executive’s new duties and
responsibilities, the Executive shall receive an award of 75,000 shares of
restricted stock on the date hereof.  The period of restriction with
respect to such award shall begin on the date hereof and shall lapse with
respect to 4,687 shares on the last business day of each quarter ending after
the date hereof (with 4,695 shares vesting on the final vesting date,
June 30, 2013).  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 three 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 three times the
Executive’s Base Salary as of the date of the Executive’s termination of
employment (provided,
however, that this
sentence shall no longer apply following the six-month anniversary of the
Executive’s termination of employment).

     

    (c)           Performance
Bonus.  The Executive shall be eligible to receive an annual
performance bonus (the “Performance Bonus”) in such amount as shall be
recommended by the CEO and approved by the Compensation Committee of the Board
of Directors (the "Compensation
Committee") or the Board of Directors, as the case may be.  The
Performance Bonus shall be paid as soon as practicable  after it is
vested and nonforfeitable, but in no event later than January 16th of the next
following calendar year.

     

    (d)           Equity
Compensation.  The Executive shall be eligible to receive such
stock option, restricted stock, phantom share or dividend equivalent rights
grants or other equity awards as the Compensation Committee or the Board of
Directors, as the case may be, shall deem appropriate.

     

    4.           Employee Benefit Programs
and Fringe Benefits.  During the Term of Employment, the
Executive shall be entitled to four weeks of vacation each calendar year and to
participate in all executive incentive and employee benefit programs of MFA now
or hereafter made available to MFA’s senior executives or salaried employees
generally, as such programs may be in effect from time to time.  MFA
shall reimburse the Executive for any and all necessary, customary and usual
business expenses, properly receipted in accordance with MFA’s policies,
incurred by Executive in connection with his employment.

     

    5.           Termination of
Employment.

     

    (a)           Termination Due to Death or
Disability.  If the Executive’s employment is terminated during
the Term of Employment by reason of the Executive’s death or Disability, the
Executive’s Term of Employment shall terminate automatically without further
obligations to the Executive, his legal representative or his estate, as the
case may be, under this Agreement except for (i) any compensation earned
but not yet paid, including and without limitation, any amount of Base Salary
accrued or earned but unpaid (the “Accrued
Obligations”), and any other payments payable to the Executive pursuant
to Paragraph 5(e) below, which amounts shall be promptly paid in a lump sum
to the Executive, his legal representative or his estate, as the case may be,
and (ii) a lump sum payment in an amount equal to the sum of (A) the
Executive’s Base Salary, and (B) the Average Performance Bonus, 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.

     

    
      
         

      

      
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    (b)           Termination Without Cause or
for Good Reason.  In the event the Executive’s employment is
terminated by MFA without Cause (which shall not include any non renewal of this
Agreement by MFA including by notice of MFA’s determination not to renew the
Initial Term or any Renewal Term pursuant to Paragraph 1(b)) or by the
Executive for Good Reason, unless any such termination is preceded by the
Executive’s giving notice of his determination not to renew the Initial Term or
any Renewal Term pursuant to Paragraph 1(b), then (i) the Executive shall
be entitled to (A) the Accrued Obligations and any other payments payable to the
Executive pursuant to Paragraph 5(e) below, which amounts shall be promptly
paid in a lump sum to the Executive, and (B) a payment (referred to below as the
“Severance
Amount”) equal to the sum of (1) the Executive’s Base Salary, and (2) the
Average Performance Bonus, and (ii) the Executive shall have no further rights
to any other compensation or benefits hereunder on or after termination of
employment.  Fifty percent of the Severance Amount shall be paid
within five (5) days after the date the Executive’s employment is terminated as
described above, and the remaining 50% of the Severance Amount shall be paid in
three equal monthly installments beginning on the first business day of the
month following the month of such termination; provided, however, in no event
shall any portion of the Severance Amount be payable after March 15th of the
year following the year in which such termination occurs.

     

    (c)           Termination by MFA for Cause
or Voluntary Termination by the Executive.  In the event the
Executive’s employment is terminated by MFA for Cause, or is terminated by the
Executive on his own initiative for other than a Good Reason (including pursuant
to Paragraph 1(b)), then (i) the Executive shall be entitled to the Accrued
Obligations and any other payments payable to the Executive pursuant to
Paragraph 5(e) below, which amounts shall be promptly paid in a lump sum to
the Executive, and (ii) the Executive shall have no further rights to any other
compensation or benefits hereunder on or after termination of
employment.

     

    (d)           Termination Related to
Change in Control.  In the event of (1) the termination of
the Executive’s employment by MFA without Cause (which shall include any non
renewal of this Agreement by MFA pursuant to Paragraph 1(b)) that occurs both
within two months before a Change in Control and following the occurrence of a
Pre-Change-in-Control Event, (2) the resignation of his employment by the
Executive for any reason within two and one half months following a Change in
Control, or (3) the termination of the Executive’s employment by MFA other
than for Cause (which shall include any non renewal of this Agreement by MFA
pursuant to Paragraph 1(b)) or the Executive’s resignation of his employment for
Good Reason within twelve months following a Change in Control,

     

    (i)           MFA
shall immediately pay to the Executive in a lump sum, any Accrued Obligations
and any other payments payable to the Executive pursuant to Paragraph 5(e)
below;

     

    (ii)          MFA
shall immediately pay to the Executive in a lump sum, but in all events within
two and one half months following the calendar year in which such termination of
employment occurs, an amount equal to one times the sum of (A) the
Executive’s then current Base Salary and (B) the Average Performance Bonus;
and

     

    (iii)         the
Executive shall have no further rights to any other compensation or benefits
hereunder on or after termination of employment.

     

    
      
         

      

      
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    To the extent necessary to avoid
imposition of the excise tax under Section 4999 of the Code in connection with a
Change in Control, the amounts payable or benefits to be provided to the
Executive shall be reduced such that the reduction of compensation to be
provided to the Executive is minimized.  In applying this principle,
the reduction shall be made in a manner consistent with the requirements of
Section 409A of the Code, and where two economically equivalent amounts are
subject to reduction but payable at different times, such amounts shall be
reduced on a pro rata basis (but not below zero).

     

    (e)           Other
Payments.  Upon the termination of the Executive’s employment,
in addition to the amounts payable under any Paragraph above, the Executive
shall be entitled to receive the following:

     

    (i)           any
annual bonus earned during one or more preceding years but not
paid;

     

    (ii)          any
vested deferred compensation (including any interest accrued on or appreciation
in value of such deferred amounts) in accordance with the applicable plan
documents;

     

    (iii)         
reimbursement for reasonable business expenses incurred but not yet reimbursed
by MFA;

     

    (iv)         any
other benefits to which the Executive or his legal representative may be
entitled under the 2004 Equity Compensation Plan and under all other applicable
plans and programs of MFA, as provided in Paragraph 4 above;
and

     

    (v)          upon
the termination of the Executive’s employment pursuant to Paragraphs 5(a),
5(b) or 5(d) above, all of the Executive’s outstanding restricted stock,
phantom shares and stock options shall immediately vest in full and such options
shall remain exercisable, and any dividend equivalents associated therewith
shall continue to be payable until the earlier of (A) 90 days following the
date of such termination and (B) the date on which each such option would
have expired had the Executive’s employment not terminated.

     

    (f)           No Mitigation; No
Offset.  In the event of any termination of the Executive’s
employment under this Agreement, he shall be under no obligation to seek other
employment or otherwise in any way to mitigate the amount of any payment
provided for in this Paragraph 5, and there shall be no offset against
amounts due him under this Agreement on account of any remuneration attributable
to any subsequent employment that he may obtain.

     

    (g)           Payments Subject to
Section 409A.  Notwithstanding anything herein to the
contrary, the Executive shall not be entitled to any payment pursuant to this
Paragraph 5 prior to the earliest date permitted under Section 409A of
the Code, and applicable Treasury regulations thereunder.  To the
extent any payment pursuant to this Paragraph 5 is required to be delayed
six months pursuant to the special rules of Section 409A of the Code
related to “specified employees,” each affected payment shall be delayed until
six months after the Executive’s termination of employment, and, unless provided
otherwise, with the first such payment being a lump sum equal to the aggregate
payments the Executive would have received during such six-month period if no
payment delay had been imposed.  Any payments or distributions delayed
in accordance with the prior sentence shall be paid to the Executive on the
first day of the seventh month following the Executive’s termination of
employment.  Notwithstanding any other provision contained herein, to
the extent any payments or distributions due to the Executive upon termination
of his employment under this Agreement are subject to Section 409A of the Code
(i) a termination of the Executive’s employment shall be interpreted in a manner
that is consistent with the definition of a “separation from service” under
Section 409A of the Code and the applicable Treasury regulations thereunder and
(ii) as applicable, such payments shall be treated as a series of separate
payments for purposes of Section 409A of the Code.

     

    
      
         

      

      
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    (h)           Mutual
Release.  MFA’s obligation to make any payment or provide any
benefit pursuant to this Paragraph 5 shall be contingent upon, and is the
consideration for, the Executive executing and delivering to MFA a general
release (the “Release”),
substantially in the form annexed hereto as Exhibit A, 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, (A) this Agreement or
(B) 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)           Average Performance
Bonus.  “Average Performance
Bonus” shall mean the average Performance Bonus (or, for years prior to
2009, the annual bonus) payable to the Executive with respect to the three years
preceding the year in which the Executive's termination of employment occurs;
provided that, if the Executive was not an employee of MFA during one or more of
such three preceding years, such year(s) shall not be taken into account in
calculating the Average Performance Bonus.  For purposes of
determining the Average Performance Bonus, if any portion of the Performance
Bonus (or annual bonus for years prior to 2009) was paid in the form of equity,
the full amount of such Performance Bonus (or annual bonus) shall be taken into
account as if paid entirely in cash.

     

    (b)           Cause.  “Cause” shall mean the
Executive’s (i) conviction, or entry of a guilty plea or a plea of nolo
contendre with respect to, a felony, a crime of moral turpitude or any crime
committed against MFA, other than traffic violations; (ii) engagement in
willful misconduct, willful or gross negligence, or fraud, embezzlement or
misappropriation relating to significant amounts, in each case in connection
with the performance of his duties under this Agreement; (iii) failure to
adhere to the lawful directions of the CEO and/or the Board of Directors that
are reasonably consistent with his duties and position provided for herein;
(iv) breach in any material respect of any of the provisions of
Paragraph 7 of this Agreement resulting in material and demonstrable
economic injury to MFA; (v) chronic or persistent substance abuse that
materially and adversely affects his performance of his duties under this
Agreement or (vi) breach in any material respect of the terms and
provisions of this Agreement resulting in material and demonstrable economic
injury to MFA.  Notwithstanding the foregoing, (i) the Executive
shall be given written notice of any action or failure to act that is alleged to
constitute Cause (a “Default”), and an
opportunity for 20 business days from the date of such notice in which to cure
such Default, such period to be subject to extension in the discretion of the
CEO or, in his absence, the Board of Directors and (ii) regardless of
whether the Executive is able to cure any Default, the Executive shall not be
deemed to have been terminated for Cause without (A) reasonable prior
written notice to the Executive setting forth the reasons for the decision to
terminate the Executive for Cause, (B) an opportunity for the Executive,
together with his counsel, to be heard by the CEO or, in his absence, the Board
of Directors and (C) delivery to the Executive of a notice of termination
approved by said CEO or, in his absence, the Board of Directors, stating his or
its good faith opinion that the Executive has engaged in actions or conduct
described in the preceding sentence, which notice specifies the particulars of
such action or conduct in reasonable detail; provided, however, MFA may suspend the
Executive with pay until such time as his right to appear before the CEO or the
Board of Directors, as the case may be, has been exercised, so long as such
appearance is within two (2) weeks of the date of suspension.

     

    
      
         

      

      
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    (c)           Change in
Control.  A “Change in Control”
shall mean the occurrence of any one of the following events:

     

    (i)           any
“person,” as such term is used in Sections 13(d) and 14(d) of the Act
(other than MFA, any of its affiliates or any trustee, fiduciary or other person
or entity holding securities under any employee benefit plan or trust of MFA or
any of its affiliates) together with all affiliates and “associates” (as such
term is defined in Rule 12b-2 under the Act) of such person, shall become
the “beneficial owner” (as such term is defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of MFA representing 30% or more of
either (A) the combined voting power of MFA’s then outstanding securities
having the right to vote in an election of the Board of Directors (“voting securities”),
or (B) the then outstanding shares of common stock of MFA (“Shares”) (in either
such case other than as a result of an acquisition of securities directly from
MFA); or

     

    (ii)           persons
who, as of the effective date of this Agreement, constitute MFA’s Board of
Directors (the “Incumbent Directors”)
cease for any reason, including, without limitation, as a result of a tender
offer, proxy contest, merger or similar transaction, to constitute at least a
majority of the Board of Directors, provided that any person
becoming a Director of MFA subsequent to the effective date whose election or
nomination for election was approved by a vote of at least a majority of the
Incumbent Directors shall, for purposes of this Agreement, be considered an
Incumbent Director; or

     

    (iii)           there
shall occur (A) any consolidation or merger of MFA or any subsidiary where
the stockholders of MFA, immediately prior to the consolidation or merger, would
not, immediately after the consolidation or merger, beneficially own (as such
term is defined in Rule 13d-3 under the Act), directly or indirectly,
shares representing in the aggregate 60% or more of the voting securities of the
corporation issuing cash or securities in the consolidation or merger (or of its
ultimate parent corporation, if any), (B) any sale, lease, exchange or
other transfer (in one transaction or a series of transactions contemplated or
arranged by any party as a single plan) of all or substantially all of the
assets of MFA or (C) any plan or proposal for the liquidation or
dissolution of MFA.

     

    Notwithstanding
the foregoing, a “Change in Control” shall not be deemed to have occurred for
purposes of the foregoing clause (i) solely as the result of an acquisition
of securities by MFA which, by reducing the number of Shares or other voting
securities outstanding, increases (A) the proportionate number of Shares
beneficially owned by any person to 30% or more of the Shares then outstanding
or (B) 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 (A) or (B) 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(c).

     

    
      
         

      

      
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    (d)           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.

     

    (e)           Good
Reason.  “Good Reason” shall
mean:

     

    (i)           a
material diminution in the Executive’s title, duties or
responsibilities;

     

    (ii)          relocation
of the Executive’s place of employment without his consent outside the New York
City metropolitan area;

     

    (iii)         the
failure of MFA to pay within thirty (30) business days any material payment
due from MFA;

     

    (iv)         the
failure of MFA to pay within a reasonable period after the date when amounts are
required to be paid to the Executive under any benefit programs or plans;
or

     

    (v)          the
failure by MFA to honor any of its material obligations herein.

     

    (f)           Pre-Change-in-Control
Event.  A “Pre-Change-in-Control
Event” shall mean the occurrence of any one of the following
events:

     

    (i)           
the Board shall adopt a resolution to the effect that any person has taken
actions which, if consummated, would result in such person acquiring effective
control of the business and affairs of MFA;

     

    (ii)           there
shall commence a tender offer or proxy contest resulting in any of the
transactions specified in subparagraphs (i)-(iii) of
Paragraph 6(c);

     

    (iii)          MFA
shall make any agreement resulting in any of the transactions specified in
subparagraphs (i)-(iii) of Paragraph 6(c);

     

    (iv)          there
shall be a public announcement of a transaction of the kind specified in
subparagraphs (i)-(iii) of Paragraph 6(c); 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.

     

    7.           Covenant Not To
Compete.  The Executive and MFA recognize that due to the
nature of his employment and relationship with MFA, the Executive has access to
and develops confidential business information, proprietary information, and
trade secrets relating to the business and operations of MFA.  The
Executive acknowledges that (i) such information is valuable to the business of
MFA,  (ii) disclosure to, or use for the benefit of, any person or
entity other than MFA, would cause irreparable damage to MFA, (iii) the
principal business of MFA is acquiring mortgage-backed securities (the “Business”), (iv) MFA
is one of the limited number of persons who have developed a business such as
the Business, and (v) the Business is national in scope.  The
Executive further acknowledges that his duties for MFA include the duty to
develop and maintain client, customer, employee and other business relationships
on behalf of MFA; and that access to and development of those close business
relationships for MFA render his services special and unique.  In
recognition that the goodwill and business relationships described herein are
valuable to MFA, and that loss of or damage to those relationships would destroy
or diminish the value of MFA, and in consideration of the compensation
arrangements (including any payments pursuant to Paragraph 5) hereunder, and
other good and valuable consideration the receipt and sufficiency of which are
hereby acknowledged by the Executive, the Executive agrees as
follows:

     

    
      
         

      

      
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    (a)           Confidentiality.  During
the Term of Employment, and at all times thereafter, the Executive shall
maintain the confidentiality of all confidential or proprietary information of
MFA and any of its subsidiaries or affiliates, if any, or of any other person or
entity with which the Executive has been involved as a direct or indirect result
of his employment by, or performance of consulting or other services (including,
without limitation, as a director, officer, advisor, agent, consultant or other
independent contractor) for, MFA or any of its subsidiaries or affiliates
(“Confidential
Information”), and, except in furtherance of the Business of MFA or as
specifically required by law or by court order, he shall not directly or
indirectly disclose any such information to any person or entity; nor shall he
use Confidential Information for any purpose except for the benefit of
MFA.  For purposes of this Agreement, “Confidential Information”
includes, without limitation:  client or customer lists, identities,
contacts, business and financial information; investment strategies; pricing
information or policies, fees or commission arrangements of MFA; marketing
plans, projections, presentations or strategies of MFA; financial and budget
information of MFA; personnel information, personnel lists, resumes, personnel
data, organizational structure, compensation and performance evaluations;
information regarding the existence or terms of any agreement or relationship
between MFA or any of its subsidiaries or affiliates and any other party; and
any other information of whatever nature, which gives to MFA or any of its
subsidiaries or affiliates an opportunity to obtain an advantage over its
competitors who or which do not have access to such information.  This
restriction shall apply regardless of whether such Confidential Information is
in written, graphic, recorded, photographic, data or any machine readable form
or is orally conveyed to, or memorized by, the Executive; provided, however,
that this Paragraph 7(a) shall not apply to Confidential Information that: (i)
is or becomes publicly known through no act or omission on the Executive's part;
(b) was rightfully known by the Executive without confidentiality restriction
before disclosure to the Executive by MFA; or (c) becomes rightfully known
by the Executive without confidentiality restriction from a source other than
MFA that does not owe a duty of confidentiality to MFA with respect
thereto.

     

    (b)           Prohibited
Activities.  Since the Executive’s services to MFA are
essential and because the Executive has access to MFA’s Confidential
Information, the Executive covenants and agrees that:

     

    (i)           in
the event of the termination of the Executive’s employment with MFA other than
upon 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 engaged in any element of the Business), or partner with, or as an
officer, director, employee or consultant with, (A) any entity or person (other
than a mortgage REIT described in clause (B) below) engaged in any element of
the Business, including any private or public investment firm or broker dealer
whose business strategy is based on or who engages in the trading, sales,
investment or management of mortgage-backed securities, for a period of five (5)
months following termination of his employment with MFA, or (B) any mortgage
REIT for a period of one (1) year following termination of his employment with
MFA; provided, however, that, clause (A) of this Paragraph 7(b)(i) shall not
apply if the Performance Bonus actually paid to the Executive in cash with
respect to the completed calendar year immediately preceding the year in which
the Executive's employment terminates is less than 33.33% of the Executive’s
Base Salary.  Notwithstanding the foregoing, nothing herein shall
prevent the Executive from providing services to or otherwise be associated with
a subsidiary, division or affiliate of an entity or person that is engaged in
the Business so long as (x) the Executive’s services are not provided, directly
or indirectly, within the division, subsidiary or business unit of the entity
that engages in the Business, and the Executive has no responsibilities
regarding the Business and (y) the Executive shall provide the Company with
advance written notice of his entering any such service relationship and shall
notify the Executive’s then-current employer (or other entity to which the
Executive provides services) of the Executive’s obligations under this
Agreement.

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

     

    (ii)           during
the Term of Employment, and during the one-year period following the termination
of the Executive’s employment with MFA for any reason, the Executive will not,
without the prior written consent of MFA, directly or indirectly (individually,
or through or on behalf of another entity as owner, partner, agent, employee,
consultant, or in any other capacity), (A) solicit, encourage, or engage in any
activity to induce any employee of MFA to terminate employment with MFA, or to
become employed by, or to enter into a business relationship with, any other
person or entity; or (B) engage in any activity intentionally to interfere with,
disrupt or damage the Business of MFA, or its relationships with any client,
supplier or other business relationship of MFA.

     

    (c)           MFA
Materials.  The Executive acknowledges that all originals and
copies of materials, records and documents generated by him or coming into his
possession during his employment by MFA are the sole property of MFA (“MFA
Materials”).  During his employment, and at all times
thereafter, the Executive shall not remove, or cause to be removed, from the
premises of MFA, copies of any record, file, memorandum, document, computer
related information or equipment, or any other item relating to the business of
MFA, except in furtherance of his duties under this Agreement.  When
the Executive terminates his employment with MFA, or upon request of MFA at any
time, the Executive shall promptly deliver to MFA all originals and copies of
MFA Materials in his possession or control and shall not retain any originals or
copies in any form.

     

    (d)           No
Disparagement.  Each of the Executive and MFA agrees that,
except as required by applicable law or compelled by process of law, during and
after the Term of Employment they shall not with willful intent to damage the
other, make any derogatory, disparaging or critical statement about the other
party hereto or, further in the case of statements by the Executive, about (i)
MFA, its parent, affiliates, or subsidiaries, if any; (ii) any product or
service provided by MFA and its parent, affiliates or subsidiaries, if any; or
(iii) MFA’s and its parent’s, affiliates’ or subsidiaries,’ if any, prospects
for the future.    Nothing in this Paragraph shall prohibit
either MFA or the Executive from testifying truthfully in any legal or
administrative proceeding or from truthfully responding to any untrue statement
by the other party.

     

    (e)           Transition.  Regardless
of the reason for his departure from MFA, the Executive agrees that at MFA’s
sole costs and expense, for a period of not more than 30 days after termination
of the Executive, he shall take all steps reasonably requested by MFA to effect
a successful transition of client and customer relationships to the person or
persons designated by MFA, subject to the Executive’s obligations to his new
employer.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

     

    (f)           Cooperation with Respect to
Litigation. During the Term of Employment and at all times thereafter,
the Executive agrees to give prompt written notice to MFA of any claim relating
to MFA and to cooperate fully, in good faith and to the best of his ability with
MFA in connection with any and all pending, potential or future claims,
investigations or actions which directly or indirectly relate to any action,
event or activity about which the Executive may have knowledge in connection
with or as a result of his employment by MFA hereunder. Such cooperation will
include all assistance that MFA, its counsel or its representatives may
reasonably request, including reviewing documents, meeting with counsel,
providing factual information and material, and appearing or testifying as a
witness; provided, however, that MFA will reimburse the Executive for all
reasonable expenses, including travel, lodging and meals, incurred by him in
fulfilling his obligations under this Paragraph 7(f) and, except as may be
required by law or by court order, should the Executive then be employed by an
entity other than MFA, such cooperation will not materially interfere with the
Executive’s then current employment.

     

    (g)           Remedies.  The
Executive declares that the foregoing limitations in Paragraphs 7(a) through
7(f) above are reasonable and necessary for the adequate protection of the
business and the goodwill of MFA.  If any restriction contained in
this Paragraph 7 shall be deemed to be invalid, illegal or unenforceable by
reason of the extent, duration or scope thereof, or otherwise, then the court
making such determination shall have the right to reduce such extent, duration,
scope, or other provisions hereof to make the restriction consistent with
applicable law, and in its reduced form such restriction shall then be
enforceable in the manner contemplated hereby.  In the event that the
Executive breaches any of the promises contained in this Paragraph 7, the
Executive acknowledges that MFA’s remedy at law for damages will be inadequate
and that MFA will be entitled to specific performance, a temporary restraining
order or preliminary injunction to prevent the Executive’s prospective or
continuing breach and to maintain the status quo.  The existence of
this right to injunctive relief, or other equitable relief, or MFA’s exercise of
any of these rights, shall not limit any other rights or remedies MFA may have
in law or in equity, including, without limitation, the right to arbitration
contained in Paragraph 17 hereof and the right to compensatory and monetary
damages.  The Executive hereby agrees to waive his right to a jury
trial with respect to any action commenced to enforce the terms of this
Agreement.

     

    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.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

     

    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.

     

    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.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

     

    20.           Headings.  The
headings of the paragraphs contained in this Agreement are for convenience only
and shall not be deemed to control or affect the meaning or construction of any
provision of this Agreement.

     

    21.           Counterparts.  This
Agreement may be executed in two or more counterparts.

     

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

     

    
      
        	 	MFA FINANCIAL,
      INC.	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Stewart
      Zimmerman	 
	 	 	      
                Name: Stewart
      Zimmerman

              	 
	 	 	      
                Title: Chairman
      and Chief Executive Officer

              	 
	 	 	 	 


      

      
        	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Craig
      L. Knutson	 
	 	 	      
                Name: Craig
      L. Knutson

              	 
	 	 	      
                Title:
      Executive Vice President

              	 
	 	 	 	 


      

       

    

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

     

    Exhibit
A

     

    


     

    Mutual
Release

     

    This
Mutual Release of Claims (this “Release”) is made as
of _______________, by and between MFA FINANCIAL, 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 employment agreement with the Company dated July 1,
2009 (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 it has not assigned any
claim released herein, or authorized any other person to assert any claim on its
behalf.

     

    (c)           Anything
to the contrary notwithstanding in this Release or the Employment Agreement,
this Release shall not apply to claims or damages based on (i) any right or
claim that arises after the date on which the Company executes this Release,
including any right to enforce the Employment Agreement with respect to
provisions pertaining to matters that arise after the date of the Release and
that survive termination of employment or (ii) any act of willful misconduct,
gross negligence, fraud or misappropriation of funds.

     

    
      	
               
      

            	
              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.

     

    
      
         

      

      
        Exh.
A-1

        
          

        

      

      
         

      

    

     

    (b)           The
Executive shall not file or cause to be filed any action, suit, claim, charge or
proceeding with any federal, state or local court or agency relating to any
claim within the scope of this Release.  In the event there is
presently pending any action, suit, claim, charge or proceeding within the scope
of this Release, or if such a proceeding is commenced in the future, the
Executive shall promptly withdraw it, with prejudice, to the extent he has the
power to do so.  The Executive represents and warrants that he has not
assigned any claim released herein, or authorized any other person to assert any
claim on his behalf.

     

    (c)           In
the event any action, suit, claim, charge or proceeding within the scope of this
Release is brought by any government agency, putative class representative or
other third party to vindicate any alleged rights of the Executive, (i) the
Executive shall, except to the extent required or compelled by law, legal
process or subpoena, refrain from participating, testifying or producing
documents therein and (ii) all damages, inclusive of attorneys’ fees, if
any, required to be paid to the Executive by the Company as a consequence of
such action, suit, claim, charge or proceeding shall be repaid to the Company by
the Executive within ten (10) days of his receipt thereof.

     

    (d)           BY
HIS SIGNATURE BELOW, THE EXECUTIVE ACKNOWLEDGES THAT:

     

    (1)           HE
HAS RECEIVED A COPY OF THIS RELEASE AND WAS OFFERED A PERIOD OF TWENTY-ONE
(21) DAYS TO REVIEW AND CONSIDER IT;

     

    (2)           IF
HE SIGNS THIS RELEASE PRIOR TO THE EXPIRATION OF TWENTY-ONE DAYS, HE KNOWINGLY
AND VOLUNTARILY WAIVES AND GIVES UP THIS RIGHT OF REVIEW;

     

    (3)           HE
HAS THE RIGHT TO REVOKE THIS RELEASE FOR A PERIOD OF SEVEN (7) DAYS AFTER
HE SIGNS IT BY MAILING OR DELIVERING A WRITTEN NOTICE OF REVOCATION TO THE
COMPANY’S GENERAL COUNSEL, NO LATER THAN THE CLOSE OF BUSINESS ON THE SEVENTH
DAY AFTER THE DAY ON WHICH HE SIGNED THIS RELEASE;

     

    (4)           THIS
RELEASE SHALL NOT BECOME EFFECTIVE OR ENFORCEABLE UNTIL THE SEVEN DAY REVOCATION
PERIOD HAS EXPIRED WITHOUT THE RELEASE HAVING BEEN REVOKED (THE “EFFECTIVE
DATE”);

     

    (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;

     

    
      
         

      

      
        Exh.
A-2

        
          

        

      

      
         

      

    

     

    (6)           HE
IS AWARE OF HIS RIGHT TO CONSULT AN ATTORNEY, HAS BEEN ADVISED IN WRITING TO
CONSULT WITH AN ATTORNEY, AND HAS HAD THE OPPORTUNITY TO CONSULT WITH AN
ATTORNEY, IF DESIRED, PRIOR TO SIGNING THIS RELEASE;

     

    (7)           NO
PROMISE OR INDUCEMENT FOR THIS RELEASE HAS BEEN MADE EXCEPT AS SET FORTH IN THIS
RELEASE;

     

    (8)           HE
IS LEGALLY COMPETENT TO EXECUTE THIS RELEASE AND ACCEPT FULL RESPONSIBILITY FOR
IT; AND

     

    (9)           HE
HAS CAREFULLY READ THIS RELEASE, ACKNOWLEDGES THAT HE HAS NOT RELIED ON ANY
REPRESENTATION OR STATEMENT, WRITTEN OR ORAL, NOT SET FORTH IN THIS DOCUMENT,
AND WARRANTS AND REPRESENTS THAT HE IS SIGNING THIS RELEASE KNOWINGLY AND
VOLUNTARILY.

     

    
      
         

      

      
        Exh.
A-3

        
          

        

      

      
         

      

    

     

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

     

    
      
        	 	 	 
	 	 	 	 
	
                 

              	
                By:
      

              	
              	 
	 	 	      
                Name: 

              	 
	 	 	      
                Title: Executive

              	 
	 	 	 	 


      

      
        	 	MFA
      FINANCIAL, INC.	 
	 	 	 	 
	 	 	 	 
	
                 

              	
                By:
      

              	
              	 
	 	 	      
                Name: 

              	 
	 	 	      
                Title:
      

              	 
	 	 	 	 


      

    

    

      Exh.
A-4