exv10w9



 



Exhibit 10.9



THORNBURG MORTGAGE, INC.


AMENDED AND RESTATED


2002 LONG-TERM INCENTIVE PLAN


JANUARY 21, 2003


ARTICLE I


PURPOSES


     The purposes of the Plan are to enable the Company to provide competitive
long-term incentives that will help attract, retain, motivate and reward
directors, officers, key employees and consultants of the Company and its
subsidiaries as well as managing directors and key employees of the Manager and
to afford additional incentives to others to increase their efforts in
providing key services for the Company or the Manager.


ARTICLE II


DEFINITIONS


     2.1 Act: shall mean the Securities Act of 1933, as amended, 15 U.S.C. §77a
et seq.


     2.2 Affiliate: shall mean, with respect to any person, any other person
controlled by, controlling or under common control with such person.


     2.3 Agreement: shall mean an agreement that, at the determination of the
Committee, may be entered into between the Company and each Participant who
receives a Grant hereunder evidencing the terms and conditions of the Grant.


     2.4 Advisory Board: shall mean a committee composed of former directors and
executive officers of the Company who meet periodically to advise the Board and
the Manager on matters of policy, strategy and operations.


     2.5 Board: shall mean the Board of Directors of the Company.



     2.6 Cause: shall include, but not be limited to (a) conviction of, or
confession of guilt of, a felony, (b) the commission of a willful act that is
materially injurious to the Company, including but not limited to, theft,
fraud, or misrepresentation, (c) becoming employed by (whether as an employee
or independent contractor), or the owner of more than 5% of, a competitor of
the Company or the Manager, or (d) willful insubordination, refusal or
inability to perform duties in a competent manner. Cause, based on the
foregoing factors, shall be determined by the Committee in its sole discretion.


 






 


     2.7 Change in Control: shall have the meaning set forth in Section
6.6.


     2.8 Code: shall mean the Internal Revenue Code of 1986, as amended from
time to time.


     2.9 Committee: shall mean the Compensation Committee of the Company
appointed by the Board to administer the Plan, or, if no such committee has
been appointed, the Board. The Committee shall consist only of two or more
“outside directors” as defined in Section 1.162-27(e)(3) of the Treasury
Regulations who are “non-employee directors” as defined in Rule 16b-3(b) under
the Exchange Act.


     2.10 Common Stock: shall mean the common stock, par value of $0.01, of
the Company.


     2.11 Company: shall mean Thornburg Mortgage, Inc., a Maryland
corporation.


     2.12 DER: shall mean a dividend equivalent right consisting of the right to
receive, as specified in the applicable Agreement, either (i) cash or (ii)
PSRs, in an amount equal to the dividend distributions paid on a Share.


     2.13 Director: shall mean a member of the Board.


     2.14 DRP: shall mean the Dividend Reinvestment and Stock Purchase Plan of
the Company, or any successor program.


     2.15 Effective Date: shall mean September 29, 2002, the original
Effective Date of the Plan. All Grants shall be effective on the date awarded
by the Committee. Grants awarded under the Prior Plan shall not be subject to
the terms of the Plan and shall be awarded in accordance with the Prior Plan.


     2.16 Eligible Person: shall mean an officer, employee or director of the
Company or a Subsidiary, an officer, employee or managing director of the
Manager and such other persons expected to provide significant services to the
Company, the Manager or a Subsidiary and any other persons as are selected from
time to time by the Committee to participate in the Plan. An Eligible Person
includes a consultant, vendor, customer or other provider of significant
services to the Company, the Manager or a Subsidiary as designated by the
Committee in its discretion.


     2.17 Employee: shall mean an individual, including any officer, who is
employed (within the meaning of Code Section 3401 and the regulations
thereunder) by the Company, a Subsidiary, or the Manager.


     2.18 Exchange Act: shall mean the Securities Exchange Act of 1934, as
amended, 15 U.S.C. §78a et seq.


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     2.19 Fair Market Value: shall mean (i) with respect to a Share, the closing
price of a Share on the New York Stock Exchange on the valuation date, and (ii)
with respect to a Notional Option, as determined through the Black-Scholes
method or any other method that is considered acceptable by the Company’s
independent accountants.


     2.20 Formula Grants: shall mean the award of PSRs (or other Grant) under
Section 3.2 and of DERs under Section 3.3 on a quarterly basis calculated
according to the number of shares of Common Stock or preferred stock sold by
the Company during the quarter just ended or at such other periods or intervals
as the Committee may determine. Formula Grants shall not be awarded based on
Shares sold under the dividend reinvestment or the non-waiver optional cash
purchase provisions of the DRP but shall be awarded based on Shares sold under
the waiver provisions of the optional cash purchase feature of the DRP.


     2.21 Grant: shall mean the issuance of PSRs, SARs and/or DERs to an
Eligible Person.


     2.22 Manager: shall mean Thornburg Mortgage Advisory Corporation, a
Delaware corporation.


     2.23 Minimum Combination of Years: shall mean a total of years of service to
the Company (including a minimum of nine years of service; ten years effective
on and after April 1, 2003) and age that equals 65.


     2.24 Notional Option: shall mean, for purposes of calculating the PSR Total,
the Formula Grants and the initial award under Section 3.4, a hypothetical
option to purchase a Share that shall be deemed to have a term of ten years and
an exercise price equal to the issue price of a Share on the date of the public
offering or private or direct placement, except that the exercise price of an
initial award granted pursuant to Section 3.4 shall equal the Fair Market Value
of a Share on the date of Grant of such award. The Fair Market Value of a
Notional Option shall be determined under the Black Scholes or other reasonable
method based on those hypothetical terms. If the offering or placement is for
preferred stock, the Notional Options shall be deemed to apply to Shares of
Common Stock. In making such calculation, the issue price of Shares sold in a
continuous offering shall be based on the weighted average of the gross sales
price of all Shares sold under such continuous offering during the month.


     2.25 Participant: shall mean an Eligible Person who is selected to
receive Grants under the Plan.


     2.26 Permanent Disability: shall mean a physical or mental disability or
infirmity that permanently prevents the performance of a Participant’s duties
as a director, officer or employee of the Company, the Manager or a Subsidiary.


     2.27 Plan: shall mean this Amended and Restated 2002 Long-Term Incentive
Plan, as the same may be further amended from time to time.


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     2.28 Plan Year: shall mean the calendar year or such shorter period as
shall be determined by the Committee.


     2.29 Prior Plan: shall mean the Thornburg Mortgage, Inc. Amended and Restated
1992 Stock Option and Incentive Plan, as amended.


     2.30 PSR: shall mean a phantom stock right, consisting of (i) the
unfunded deferred obligation of the Company to pay the recipient of a PSR, upon
exercise, an amount of cash equal to the Fair Market Value of a Share at the
time of exercise, and (ii) the recipient’s right to receive distributions,
either in the form of cash or additional PSRs, in an amount equal to the value
of the cash dividends that are paid on a Share.


     2.31 PSR Total: shall mean that number of PSRs determined by dividing (a)
the Fair Market Value of that number of Notional Options equaling three percent
(3%) of the total number of shares sold by the Company in any public offering
or direct or private placement of Common Stock or preferred stock (including
Shares sold under the waiver provisions of the optional cash purchase feature
of the DRP) by (b) the Fair Market Value of a Share on such date. In the case
of a continuous offering, the PSR Total shall be calculated by accumulating the
Shares issued pursuant to the continuous offering in each month during a
calendar quarter and shall be awarded by the Committee after the end of such
calendar quarter.


     2.32 Retire or Retirement: shall mean the later to occur of (a) a
Participant’s voluntary or involuntary separation from service as a Director of
the Company or as a managing director of the Manager or (b) a Participant’s
voluntary or involuntary termination of service on the Advisory Board.


     2.33 SAR: shall mean a stock appreciation right, consisting of the
unfunded deferred obligation of the Company, to pay the recipient of the SAR,
upon exercise, an amount of cash equal to the excess, if any, of the Fair
Market Value of a Share over the stated amount of the SAR.


     2.34 Share: shall mean one (1) share of Common Stock, adjusted in
accordance with Article VI of the Plan (if applicable).


     2.35 Subsidiary: shall mean any corporation, partnership, or other entity
at least fifty percent (50%) of the economic interest in the equity of which is
owned by the Company or by another Subsidiary.


     2.36 Termination of Employment: shall mean the time when the employee-employer
relationship or directorship between the Participant and the Company, the
Manager or a Subsidiary is terminated for any reason, with or without Cause,
including but not limited to any termination by resignation, discharge, death
or retirement; provided, however, Termination of Employment shall not include a
termination where there is a simultaneous reemployment of the Participant by
the Company, the Manager or a Subsidiary or continued service on the Advisory
Board. The Committee, in its absolute discretion, shall determine the effect
of all matters and questions relating to Termination of Employment, including
but not


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limited to the question of whether any Termination of Employment was for Cause
and all questions of whether particular leaves of absence constitute
Terminations of Employment.


ARTICLE III


ELIGIBILITY AND PARTICIPATION


     3.1 Participation in Plan by an Eligible Person. Subject to Section 3.6
for a member of the Advisory Board, any Eligible Person may participate in and
receive Grants under the Plan. The Committee shall have the authority to award
individual Grants to Eligible Persons from time to time in addition to the
Formula Grants prescribed in Sections 3.2 and 3.3 below.


     3.2 Formula Grants for PSRs: Formula Grants for PSRs shall be made to the
Eligible Persons specified in this Section 3.2 as follows:



	 	a)	 	Each non-employee Director and the Company’s
corporate secretary shall receive individual Grants in the
form of PSRs having the Fair Market Value of Notional Options
to purchase 0.2% of the total number of shares of Common Stock
and preferred stock sold by the Company in any public offering
or private or direct placement.
	 
	 	b)	 	Employees shall receive, in the aggregate, Grants
in the amount of the PSR Total which shall be allocated in
individual Grants by the Committee among employee Directors,
managing directors of the Manager and other Employees and
Eligible Persons who are selected by the Committee in its
discretion.
	 
	 	c)	 	The Committee shall have the discretion to change
the form of the Formula Grant awards under this Section 3.2 at
any time and award Grants in other forms of incentive awards,
but the Formula Grant provisions of Section 3.2 and 3.3 and
the initial award provisions of Section 3.4 may otherwise be
suspended, modified or terminated only upon the joint approval
of the Committee and the Board.



     3.3 Formula Grants for DERs. Formula Grants for DERs shall be made to the
applicable Eligible Persons at the same time as PSRs are granted pursuant to
this Article III at the rate of 0.75 DER multiplied by the number of Notional
Options used to determine the PSRs granted pursuant to this Article III.


     3.4 Initial Awards. Whenever an outside Director is initially appointed
to the Committee, such outside Director shall automatically be granted (i) PSRs
having the Fair Market Value of Notional Options to purchase 13,333 Shares and
(ii) DERs in accordance with the DER formula set forth in Section 3.3.


     3.5 Form of Payment. Unless the Participant elects before a dividend
distribution is declared to receive distributions on his or her PSRs or DERs in
the form of cash payments, the distributions will be payable in additional PSRs.


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     3.6 Participation in Plan by members of the Advisory Board.


         3.6.1 Participation on Advisory Board. A former Director or a former
managing director of the Manager, the Company’s corporate secretary and such
other persons as may be designated from time to time by the Committee, will be
eligible to serve on the Advisory Board after reaching the Minimum Combination
of Years. While serving on the Advisory Board, he or she shall not be eligible
to receive new Grants; however, such Participant shall continue to receive the
benefits on existing vested and unvested Grants pursuant to subsection 3.6.2
below until such time as the Participant enters Retirement or otherwise
terminates service for the Company or the Manager.


         3.6.2 Level of Participation. While serving on the Advisory Board an
Eligible Person shall participate solely by receiving distributions, either in
cash or in PSRs, on his or her PSRs or DERs in an amount determined with
respect to each cash dividend distribution that is paid on a Share as follows:
A Minimum Combination of Years (totaling 65 years) qualifies for an 80%
participation, increasing by 4% for each year of combined service and age over
the Minimum Combination of Years to 100% participation for a Participant with a
combination of years of service and age equaling or exceeding 75.


ARTICLE IV


TERMS OF GRANTS


     4.1 Grants. Grants may be issued to Eligible Persons at such time or
times as shall be determined by the Committee. Each Grant granted to a
Participant shall be evidenced by an Agreement that shall specify the terms and
conditions consistent with the Plan as the Committee shall determine.
Consistent with the Company’s intention for the Committee to exercise the
greatest flexibility under Rule 16b-3 under the Exchange Act in awarding
Grants, the Committee shall have the power:



		
	 	     (a) To determine from time to time the Grants to be awarded
to Eligible Persons under the Plan and to prescribe the terms and
provisions (which need not be identical) of Grants awarded under
the Plan to such persons;




		
	 	     (b) To construe and interpret the Plan and Grants thereunder
and to establish, amend, and revoke rules and regulations for
administration of the Plan. In this connection, the Committee may
correct any defect or supply any omission, or reconcile any
inconsistency in the Plan, in any Agreement, or in any related
agreements, in the manner and to the extent it shall deem necessary
or expedient to make the Plan fully effective. All decisions and
determinations by the Committee in the exercise of this power shall
be final and binding upon the Company and the Participant;



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	 	     (c) To amend any outstanding Grant, subject to Sections 4.7
and 8.2 hereof, and to accelerate or extend the vesting or
exercisability of any Grant and to waive conditions or restrictions
on any Grants, to the extent it shall deem appropriate; and




		
	 	     (d) Generally, to exercise such powers and to perform such
acts as are deemed necessary or expedient to promote the best
interests of the Company with respect to the Plan.



         4.1.1 In the event the Company determines that it is required to withhold
taxes as a result of the exercise of a Grant, as a condition to the exercise
thereof, an Employee may be required to make arrangements satisfactory to the
Company to enable it to satisfy such withholding requirements in accordance
with Article VII hereof.


     4.2 Term, Nontransferability and Vesting of Grants. Each Grant shall
state the time or times at which all or part thereof becomes exercisable,
subject to the following restrictions:


    4.2.1 No Grant shall be exercisable except by the recipient.



         4.2.2 No Grant shall be assignable or transferable, except pursuant to a
qualified domestic relations order as defined in Code Section 414(p) or, in the
event of the Participant’s death, by will or the laws of descent and
distribution.


         4.2.3 Grants shall vest in accordance with the terms of the Agreements
pursuant to which they are made.


     4.3 Termination of Employment, Except by Death or Permanent Disability.
Upon any Termination of Employment for any reason other than his or her death
or Permanent Disability, a recipient of a Grant shall have the right to
exercise his or her Grant at any time within three (3) months after Termination
of Employment, but only to the extent that, at the date of Termination of
Employment, the recipient’s right to exercise such Grant had vested pursuant to
the terms of the applicable Agreement and had not previously been exercised;
provided, however, that if the recipient was terminated as an Employee or
removed as a member of the Board for Cause (as determined by the Committee) any
Grant not exercised in full prior to such termination shall be canceled; and
further provided that no DERs, SARs or PSRs shall vest for such Participant
after the date of his or her Termination of Employment and no additional
dividends or credits shall accrue with respect to DERs or PSRs after the
Termination of Employment of the Participant. For this purpose, the employment
relationship shall be treated as continuing intact while the recipient is on
military leave, sick leave or other bona fide leave of absence (to be
determined in the sole discretion of the Committee).


     4.4 Death of Recipient. If the recipient of a Grant dies while an
Eligible Person or within three (3) months after any Termination of Employment
other than for Cause, and has not fully exercised the Grant, then the Grant may
be exercised in full at any time


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 within twelve (12) months after the recipient’s death, by the executors or
administrators of his or her estate or by any person or persons who have
acquired the Grant directly from the recipient by bequest or inheritance, but
only to the extent that, at the date of death, the recipient’s right to
exercise such Grant had vested and had not been forfeited pursuant to the terms
of the applicable Agreement and had not previously been exercised.


     4.5 Permanent Disability of Grant Recipient. Upon Termination of
Employment for reason of Permanent Disability, such Grant recipient shall have
the right to exercise the Grant at any time within twelve (12) months after
Termination of Employment, but only to the extent that, at the date of
Termination of Employment, the recipient’s right to exercise such Grant had
vested pursuant to the terms of the applicable Agreement and had not previously
been exercised.


     4.6 Rights as a Shareholder. The recipient of a Grant shall have no
rights as a shareholder.


     4.7 Modification, Extension and Renewal of Grant. Within the limitations
of the Plan, the Committee may modify, extend or renew outstanding Grants or
accept the cancellation of outstanding Grants (to the extent not previously
exercised) for the awarding of new Grants in substitution therefor. The
Committee may not modify, extend or renew any Grants awarded to any Participant
unless such modification, extension or renewal shall satisfy the requirements
of Rule 16b-3 under the Exchange Act. The foregoing notwithstanding, no
modification of Grant shall, without the consent of the Participant, alter or
impair any rights or obligations under any Grant previously awarded.


     4.8 Other Provisions. The Agreements authorized under the Plan may
contain such other provisions not inconsistent with the terms of the Plan
(including, without limitation, restrictions upon the exercise of the Grant) as
the Committee shall deem advisable.


     4.9 Grants to Committee Members. No Director who is a member of the
Committee may vote on or participate in the award, modification, extension or
renewal of a Grant to himself or herself, except that the Committee may
collectively approve the Formula Grants under Section 3.2(a).


     4.10 Term of Plan. Grants may be awarded pursuant to the Plan until the
expiration of ten (10) years from the effective date of the Plan.


ARTICLE V


ADMINISTRATION


     5.1 Membership on Committee. The Plan shall be administered by the
Committee which shall consist of two or more members of the Board, each of whom
shall qualify as a Non-Employee Director as defined in Rule 16b-3(b)(3)(i)
under the Exchange Act and as an outside director within the meaning of
Treasury Regulation Section 1.162-27(e)(3). The Board shall appoint one of the
members of the Committee as Chairman of the Committee.


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     5.2 Committee Meetings. The Committee shall hold meetings at such times
and places as it may determine. Acts of a majority of the Committee, or acts
approved in writing by a majority of the members of the Committee, shall be the
valid acts of the Committee.


     5.3 Authority of the Committee. The Committee shall be responsible for
the administration of the Plan and shall have full authority to exercise its
duties and powers under the Plan in its sole discretion. Subject to the terms
of the Plan, the Committee is authorized to prescribe, amend and rescind rules
and regulations relating to the administration of the Plan, to provide for
conditions and assurances deemed necessary or advisable to protect the
interests of the Company and the Manager, and to make all other determinations
necessary or advisable for the administration and interpretation of the Plan or
to carry out its provisions and purposes.


     5.4 Delegation by the Committee. The Committee may delegate its
non-discretionary ministerial duties and responsibilities under the Plan by
appointment in writing, and has delegated such duties and responsibilities to
the Manager. The Committee may employ consultants, advisors and administrators
to render advice with regard to any of the duties or responsibilities of the
Committee under the Plan.


     5.5 Expenses. The Company shall be responsible for all of the expenses of
the Plan or the administration thereof.


     5.6 Reliance. Each member of the Committee and the Board shall be
entitled to rely upon all determinations, certificates and reports made by any
financial officer of the Company, or any actuary or independent public
accountant and upon all opinions of law given by any counsel selected by it
(who may be counsel to the Company or the Manager), and shall be fully
protected in respect of any act done or omitted to be done or any determination
made in good faith in reliance upon any such determination, certificate, report
or opinion. No member of the Committee or the Board shall be liable for any
act done or omitted to be done or determination made in the performance of its
duties under this Plan or for any act done or omitted to be done by any agent
or representative of such Committee so long as such person acted in good faith.


     5.7 Indemnification. Each person who is or shall have been a member of
the Committee, the Board, the Advisory Board or otherwise delegated any
administrative duties or responsibilities hereunder shall be indemnified and
held harmless by the Company to the fullest extent permitted by law from and
against any and all losses, costs, liabilities and expenses (including any
reasonable related attorneys’ fees and advances thereof) in connection with,
based upon or arising or resulting from any claim, action, suit or proceeding
to which such person may be made a party or in which such person may be
involved by reason of any action taken or failure to act under or in connection
with the Plan and from and against any and all amounts paid by such person in
settlement thereof, with the Company’s approval, or paid by such person in
satisfaction of any judgment in any such action, suit or proceeding against him
or her, provided, that such person shall give the Company an opportunity, at
its own expense, to defend the same before such person undertakes to defend it


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 on his or her own behalf. The foregoing right of indemnification shall
not be exclusive and shall be independent of any other rights of
indemnification to which such persons may be entitled under the Company’s
Articles of Incorporation or By-laws, by contract, as a matter of law or
otherwise.


ARTICLE VI


RECAPITALIZATION AND CHANGES IN CONTROL


     6.1 Adjustment to Grants. Subject to any required action by shareholders,
and provided that all requirements of Rule 16b-3 under the Exchange Act are
satisfied, as applicable, the number of DERs, PSRs or SARs subject to a Grant
shall be proportionately adjusted for any increase or decrease in the number of
issued Shares resulting from a subdivision or consolidation of Shares or the
payment of a stock dividend (but only of Common Stock) or any other increase or
decrease in the number of issued Shares effected without receipt of
consideration by the Company.


     6.2 Merger or Acquisition. Subject to any required action by shareholders,
if the Company is the surviving corporation in any merger or consolidation, the
rights under a Grant shall pertain and apply to the securities to which a
recipient of the Grant would have been entitled. In the event of a merger or
consolidation in which the Company is not the surviving corporation, the date
of vesting and exercisability of each outstanding Grant shall be accelerated to
a date prior to such merger or consolidation, unless the agreement of merger or
consolidation provides for the assumption of the Grant by the successor to the
Company. To the extent that the foregoing adjustments relate to securities of
the Company, such adjustments shall be made by the Committee, whose
determination shall be conclusive and binding on all persons.


     6.3 Certain Reorganizations Not Change In Control. Except as expressly
provided in this Article VI, the recipient of a Grant shall have no rights by
reason of subdivision or consolidation of shares of stock of any class, the
payment of any stock dividend or any other increase or decrease in the number
of shares of stock of any class or by reason of any dissolution, liquidation,
merger or consolidation or spin-off of assets or stock of the Company or any
other corporation, and any issue by the Company of shares of stock of any
class, or securities convertible into shares of stock of any class, shall not
affect, and no adjustment by reason thereof shall be made with respect to, the
number of PSRs, DERs or SARs subject to a Grant.


     6.4 Plan Not to Affect Company’s Right to Reorganization. Grants made
pursuant to the Plan shall not affect in any way the right or power of the
Company to make adjustments, reclassifications, reorganizations or changes of
its capital or business structure, to merge or consolidate or to dissolve,
liquidate, sell or transfer all or any part of its business assets.


     6.5 Effect of Change of Control. Upon the occurrence of a Change of
Control as defined in this Article VI—


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         6.5.1 Each outstanding Grant shall automatically become fully exercisable.


         6.5.2 All restrictions and conditions on each Grant shall automatically
lapse and all Grants under the Plan shall be deemed fully vested.


     6.6 Change of Control. Change of Control shall mean the occurrence of any
one of the following events:


         6.6.1 any “person,” as such term is used in Sections 13(d) and 14(d) of
the Act (other than the Company, any of its Affiliates or any trustee,
fiduciary or other person or entity holding securities under any employee
benefit plan or trust of the Company or any of its Affiliates) together with
all “affiliates” and “associates” (as such terms are defined in Rule 12b-2
under the Exchange Act) of such person, shall become the “beneficial owner” (as
such term is defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 20% or more of either (A)
the combined voting power of the Company’s then outstanding securities having
the right to vote in an election of the Board (“voting securities”) or (B) the
then outstanding Shares (in either such case other than as a result of an
acquisition of securities directly from the Company); or


         6.6.2 persons who, as of the effective date of the amendment and restatement of
the Plan, constitute the Board (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, provided that any person becoming a Director 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
Plan, be considered an Incumbent Director; or


         6.6.3 the shareholders of the Company shall approve or the Company shall
otherwise engage in (A) any consolidation or merger of the Company or any
Subsidiary where the shareholders of the Company 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
Exchange Act), directly or indirectly, shares representing in the aggregate 80%
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 the Company or (C) any plan or proposal
for the liquidation or dissolution of the Company.


         6.6.4 Notwithstanding the foregoing, a “Change of Control” shall not be deemed
to have occurred for purposes of the foregoing Section 6.6.3 solely as the
result of an acquisition of securities by the Company 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 20% or more
of the Shares then outstanding or (y) the proportionate voting power
represented by the voting securities beneficially owned by any person to 20% or
more of the combined voting power of all then outstanding voting securities;
provided,


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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 of Control” shall be deemed to have
occurred for purposes of this Section 6.6.


ARTICLE VIII


TAX WITHHOLDING


     7.1 Each recipient of a Grant shall, no later than the date as of which
the value of any Grant first becomes includable in the gross income of the
recipient for federal income tax purposes, pay to the Company, or make
arrangements satisfactory to the Company regarding payment of any federal,
state or local taxes of any kind that are required by law to be withheld with
respect to such income.


     7.2 A recipient may elect to have such tax withholding satisfied, in whole
or in part, by (1) transferring to the Company Shares owned by the recipient
with a Fair Market Value equal to the amount of the required withholding tax,
or (2) in the case of a recipient who is an employee of the Company at the time
such withholding is effected, by withholding from the recipient’s cash
compensation.


     7.3 A recipient who is an employee of the Manager or another Affiliate of the
Company shall also reimburse his employer, if an Affiliate of the Company, for
the tax on any additional amount of compensation income deemed recognized by
such recipient’s employer from the Company, reduced by the amount of the
compensation deduction permitted such recipient’s employer as a result of such
employee’s receipt or exercise of the Grant.


ARTICLE VIII


GENERAL PROVISIONS


     8.1 Nontransferability of Grants. No Grant issued under the Plan may be
sold, transferred, pledged, assigned, encumbered or otherwise alienated or
hypothecated and any purported action to that effect shall be void.


     8.2 Amendment or Termination. The Plan may be amended, modified or
terminated by the Board including a majority of the non-employee Directors at
any time or from time to time, provided that no such amendment, modification or
termination shall, without the consent of the affected Participant, adversely
affect the vested rights of a Participant.


     8.3 Term of Plan. Following its approval by the Board, the Plan will
become effective as of the Effective Date. The Plan shall continue in effect,
unless sooner terminated pursuant to Section 8.2, until the tenth anniversary
of the Effective Date. The provisions of the Plan, however, shall continue
thereafter to govern all outstanding Grants theretofore made.


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     8.4 Limitation on Participants’ Rights. The Plan shall not be construed
as creating any contract of employment or otherwise conferring upon any
Participant any legal right to continuation of employment, nor as limiting or
qualifying the right of the Company, a Subsidiary or the Manager to discharge
any Employee without regard to the effect that such discharge might have upon
such Employee’s rights under the Plan. Selection for participation in the Plan
shall not entitle any Participant to remain as a Director of the Company, as a
managing director of the Manager or an employee of the Company or a Subsidiary
or the Manager for any period or to receive or be eligible to receive any
subsequent or additional Grants.


     8.5 Facility of Payments. In the event that the Committee shall find that
any Participant to whom an amount is payable under the Plan is unable to care
for his or her affairs because of illness, accident or otherwise, the Committee
may direct that any payment due shall be paid to the duly appointed legal
representative of such person, or if there is no duly appointed legal
representative, to the Participant’s spouse or child of majority age, and any
such payments shall be in complete discharge of the liabilities of the Company
under the Plan.


     8.6 Beneficiary Designation. Each Participant under the Plan may from
time to time name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom any cash amount payable under the Plan is
to be paid. Each designation shall revoke all prior designations by the same
Participant, shall be in a form prescribed by the Committee (which form may be
the form used generally for other benefit plan purposes) and shall be effective
only when filed by the Participant in writing with the Committee during his or
her lifetime. In the absence of any such designation, cash amounts payable
remaining unpaid or outstanding at the Participant’s death shall be paid to the
Participant’s surviving spouse, if any, or otherwise to his or her estate.


     8.7 No Limitation on Compensation. Nothing in the Plan shall be construed
as limiting the right of the Company, the Manager or any Subsidiary to
establish other plans or to pay compensation to employees in cash or property,
in a manner that is not expressly authorized under the Plan.


     8.8 Requirements of Law, Etc. The awarding of Grants and the satisfaction
thereof, including, but not limited to, the payment of cash to a Participant
shall be subject to all applicable laws, rules and regulations, and to such
approvals by any governmental agencies or national or foreign securities
exchanges as may be appropriate or required, as reasonably interpreted and
determined by the Committee.


     8.9 Notices. Each Participant shall be responsible for furnishing the
Committee with the current and proper address for the mailing of notices and
payment of cash. Any notices required or permitted to be given shall be deemed
given if directed to the person to whom addressed at such address, mailed by
regular United States mail, first-class, and prepaid. If any item mailed to
such address is returned as undeliverable to the addressee, mailing will be
suspended until the Participant furnishes the proper address.


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     8.10 Severability of Provisions. If any provision of the Plan shall be
held invalid or unenforceable, such invalidity or unenforceability shall not
affect any other provisions hereof, and the Plan shall be construed and
enforced as if such provision had not been included.


     8.11 Applicable Law. The Plan in all respects shall be construed and
interpreted in accordance with the laws of the State of New Mexico. Any
dispute arising under the Plan shall be resolved by binding arbitration before
the American Arbitration Association under its Commercial Arbitration Rules,
before a single arbitrator in Santa Fe County, New Mexico. The parties will
mutually determine the arbitrator from a list of arbitrators obtained from the
American Arbitration Association office located in Santa Fe County, New Mexico.
If the parties are unable to agree on the arbitrator, the arbitrator will be
selected by the American Arbitration Association with a preference for
selecting a retired federal district judge or state district court judge as the
arbitrator.


     8.12 Number and Gender. To the extent appropriate in the context, each
term used in the Plan in either the singular or the plural shall include the
singular and the plural, and pronouns stated in either the masculine, feminine
or neuter gender shall include the masculine, feminine and neuter.


     8.13 Headings and Captions. Headings and captions in the Plan are
inserted for convenience of reference only and the Plan is not to be construed
by the interpretation thereof.


This Plan, originally approved by the Board of Directors of Thornburg Mortgage,
Inc. on July 23, 2002, is hereby amended and restated in its entirety on
January 21, 2003.


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