Document:

THE
SECURITIES REPRESENTED BY THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR AN EXEMPTION FROM REGISTRATION
THEREUNDER.

       

      PURE
BIOFUELS CORP.

       

      STOCK
PURCHASE WARRANT

       

      
        	
                Date
      of Issuance:  June 4, 2010

              	
                Certificate
      No. E-2

              

      

       

      
        FOR VALUE
RECEIVED, Pure Biofuels Corp., a corporation organized and existing under the
laws of the State of Nevada (the “Company”), hereby
grants to Plainfield Peru I LLC or its registered assigns (the “Holder”) the right to
purchase from the Company, 173,684,211 shares of the
Company’s Common Stock (the “Warrant Shares”) at a
price per share equal to the Exercise Price (as adjusted from time to time in
accordance herewith).  Certain capitalized terms used herein are
defined in Section
6 hereof.  The amount and kind of securities obtainable
pursuant to the rights granted hereunder and the purchase price for such
securities are subject to adjustment pursuant to the provisions contained in
this Warrant.

      

        

      
        1.   Exercise of
Warrant.

      

       

      1.1 Exercise
Period.  The Holder may exercise, in whole or in part the
purchase rights represented by this Warrant at any time and from time to time
the Date of Issuance and for seven years thereafter (the “Exercise
Period”).

      

      1.2 Exercise.

      

      (a) The Warrant
may be exercised in full by the Holder hereof by delivery of an original or
facsimile copy of the form of subscription attached as Exhibit A hereto (the
“Subscription
Form”) duly executed by such Holder and surrender of the original Warrant
to the Company at its principal office and upon payment of the Exercise Price by
wire transfer or cashier’s check drawn on a United States bank or by means of a
cashless exercise pursuant to Section 1.2 (c).

      

      (b) This Warrant
shall be deemed to have been exercised and such certificate or certificates
representing the Warrant Shares to be issued in connection with such exercise
shall be deemed to have been issued, and the Holder or any other person so
designated to be named therein shall be deemed to have become the Holder of
record of such Warrant Shares for all purposes, as of the date the Warrant has
been exercised in accordance with the terms hereof, notwithstanding that the
stock transfer books of the Company shall then be closed or that certificates
representing such Warrant Shares shall not then be physically delivered to the
Holder.  No deduction shall be made from the amount paid by the Holder
for any commissions, discounts or other expenses incurred by the Company for any
underwriting of the issue or otherwise in connection therewith.

      
        
           

        

        
           

          
            

          

        

        
           

        

      

      

      (c) This Warrant
may be exercised by means of a “cashless exercise” in which the Holder shall be
entitled to receive a certificate for the number of Warrant Shares equal to the
quotient obtained by dividing [(A-B) (X)] by (A), where:

      

      (A) = the
Market Price on the date of such election;

      

      (B) = the
Exercise Price of the Warrants, as adjusted; and

       

      
        (X) = the
number of Warrant Shares issuable upon exercise of the Warrants in accordance
with the terms of this Warrant.

      

      

      (d) The Company
shall pay all documentary stamp taxes attributable to the issuance of Warrant
Shares underlying this Warrant upon the exercise as provided herein; provided, however, that the
Company shall not be required to pay any tax which may be payable in respect of
any transfer involved in the registration of any certificate for Warrant Shares
underlying this Warrant in a name other that of the Holder.  The
Holder is responsible for all other tax liability that may arise as a result of
holding or transferring this Warrant or receiving shares of Common Stock
underlying this Warrant upon exercise hereof.

      

      1.3 Partial
Exercise.  The Warrant may be exercised in part (but not for a
fractional share) by surrender of this Warrant in the manner and at the place
provided in subsection 1.2 except that the amount payable by the Holder on such
partial exercise shall be the amount obtained by multiplying (a) the number of
whole Warrant Shares designated by the Holder in the Subscription Form by (b)
the Exercise Price then in effect.  On any such partial exercise, the
Company, at its expense, will forthwith issue and deliver to or on the order of
the Holder hereof a new Warrant of like tenor, in the name of the Holder hereof
or as such Holder (upon payment by such Holder of any applicable transfer taxes)
may request, the whole number of Warrant Shares for which such Warrant may still
be exercised.

      

      1.4 Delivery of Stock
Certificates on Exercise.  The Company agrees that the Warrant
Shares purchased upon exercise of this Warrant shall be deemed to be issued to
the Holder hereof as the record owner of such shares as of the close of business
on the date on which this Warrant shall have been surrendered and payment made
for such shares as provided herein. The Company shall deliver the Warrant Shares
within three (3) Trading Days after exercise of this Warrant (or, in the event
that payment and the surrendered Warrant is received after 12:00 Noon, New York
City time, within four (4) Trading Days).  If the Holder fails to
receive a certificate or certificates representing the Warrant Shares pursuant
to this Section 1.4 within the time period required above, then the Holder will
have the right to rescind such exercise.

      

      2.   Adjustment of Exercise Price
and Number of Warrant Shares.  The Exercise Price in effect and
the number and kind of securities purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the happening of certain
events as provided in this Section 2.

      
        
           

        

        
          2

          
            

          

        

        
           

        

      

      

      2.1 Dividends, Splits,
Reclassifications Etc.  (a)   If after the Issue
Date, the Company: (1) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock; (2) subdivides its outstanding shares of
Common Stock into a greater number of shares; or (3)  combines its
outstanding shares of Common Stock into a smaller number of shares; then the
Exercise Price in effect immediately prior to such action shall be adjusted to
the number obtained by multiplying the Exercise Price by a fraction, the
numerator which shall be the number of shares of Common Stock outstanding
immediately prior to such action, and the denominator of which shall be the
number of shares of Common Stock outstanding immediately following such
action.

      

      (b) If the
Company issues any shares of its Common Stock (or is deemed to have issued
shares of Common Stock) at a price below the Exercise Price, the Exercise Price
shall be adjusted as follows:

      

      
        	
                X 
      

              	
                 =

              	
                Number
      of shares of Common Stock (i) outstanding immediately prior to the
      issuance, and (ii) then issuable upon exercise of any of the Company’s
      outstanding securities including, options, warrants and the
      Notes

              

      

      
        	
                YA 
      

              	
                 =

              	
                Exercise
      Price immediately prior to the announcement of the
  issuance

              

      

      
        	
                ZB 
      

              	
                 =

              	
                Aggregate
      consideration received by the
Corporation

              

      

      
        	
                Y 
      

              	
                 =

              	
                Number
      of shares of Common Stock issued (or deemed issued) in the new
      issuance

              

      

      
        	
                YAB 
      

              	
                 =

              	
                New
      Exercise Price

              

      

      
        
        

      

      

      
        
          
            
              
                	
                        YAB

                      	
                        =

                      	
                        YA (
      (X + ZB/YA )
      / (X + Y) )

                      

              

            

          

        

      

      

      (c) If the
Company issues any shares of its Common Stock (or is deemed to have issued
shares of Common Stock) at a price below the Market Price, the Exercise Price
shall be adjusted as follows:

      

      
        	
                X 
      

              	
                 =

              	
                Number
      of shares of Common Stock (i) outstanding immediately prior to the
      issuance, and (ii) then issuable upon exercise of any of the Company’s
      outstanding securities including, options, warrants and the
      Notes

              

      

      
        	
                YA 
      

              	
                 =

              	
                Exercise
      Price immediately prior to the announcement of the
  issuance

              

      

      
        	
                ZB 
      

              	
                 =

              	
                Aggregate
      consideration received by the
Corporation

              

      

      
        	
                M 
      

              	
                 =

              	
                Market
      Price immediately prior to the announcement of the
  issuance

              

      

      
        	
                Y 
      

              	
                 =

              	
                Number
      of shares of Common Stock issued (or deemed issued) in the new
      issuance

              

      

      
        
        

      

      
        	
                YAB 
      

              	
                 =

              	
                New
      Exercise Price

              

      
        
          	
                  YAB

                	
                  =

                	
                  YA (
      (X + ZB/M ) / (X + Y)
      )

                

        

      

      

      (d) If the
Company makes any distribution payable in securities or assets of the Company
(other than shares of Common Stock), then and in each such event provision shall
be made so that the Holder of this Warrant shall receive upon exercise, in
addition to the number of shares of Common Stock receivable hereupon, the amount
of securities or assets of the Company which the Holder would have received had
this Warrant been converted into Common Stock on  the date of such
event and had the Holder thereafter, during the period from the date of such
event to and including the date of exercise, retained such securities or assets
receivable by them as aforesaid during such period, subject to all other
adjustment called for during such period under this Section 2.

      
        
           

        

        
          3

          
            

          

        

        
           

        

      

      (e) The
adjustment shall become effective immediately after the record date in the case
of a dividend or distribution and immediately after the effective date in the
case of a subdivision, combination or reclassification.  If after an
adjustment, a Holder of a share of this Warrant upon conversion of such Warrant
may receive shares of two or more classes of Capital Stock of the Company, the
Exercise Price will thereafter be subject to adjustment upon the occurrence of
an action taken with respect to any such class of Capital Stock with respect to
the Common Stock on terms comparable to those applicable to Common Stock
described herein.

       

      (f) Only one
adjustment shall be made with respect to any event causing an
adjustment.  If an adjustment is required by Section 2.1(b) and (c)
hereof, only the adjustment resulting in the greatest decrease in the Exercise
Price shall be made.

       

      (g) For purposes
of Section 2.1(b) and (c):

      

      (i)   
  If the Company issues any options, warrants or other securities
convertible into or exchangeable or exercisable for Common Stock (“Convertible
Securities”), then the number of shares of Common Stock issuable upon the
exercise, exchange or conversion of such Convertible Securities, shall be deemed
to be the issuance of Common Stock;

       

      (ii)    
The consideration receivable by the Company for Common Stock deemed issued
pursuant to the preceding clause (i), shall be the total amount, if any,
received by the Company as consideration for the issuance of such Convertible
Securities, plus the aggregate amount of additional consideration payable to the
Company upon the exercise, exchange or conversion of such Convertible
Securities; and

       

      (iii)  
 Upon the expiration or termination of any Convertible Securities, the
Conversion Price, to the extent in any way affected by or computed using such
Convertible Securities, shall then be recomputed to reflect the issuance of only
the number of shares of Common Stock (and Convertible Securities which remain in
effect) that were actually issued upon the exercise, exchange or conversion of
such Convertible Securities.

       

      (h) No adjustment
in the Exercise Price need be made unless the adjustment would require an
increase or decrease of at least $0.01 in the Exercise Price.  Any
adjustments that are not made shall be carried forward and taken into account in
any subsequent adjustment.  All calculations relating to anti-dilution
adjustments shall be made to the nearest cent.

       

      (i) No adjustment
need be made for rights to purchase Common Stock except upon the exercise
thereof.  In addition, no adjustment need be made for a change in the
par value  or no par value of the Common Stock.  No
adjustment shall be made to the Exercise Price for the issuance of any Excluded
Stock.

      
        
           

        

        
          4

          
            

          

        

        
           

        

      

      (j) If the
Company is a party to a transaction involving a sale of substantially all of the
assets of the Company or a merger or binding share exchange which reclassifies
or changes its outstanding Common Stock, the person obligated to deliver
securities, cash or other assets upon conversion of this Warrant will be
required to assume the obligations of the Company with respect to this
Warrant.  In addition, if the Company in connection with any such
transaction makes a distribution to all holders of its Common Stock of any of
its assets, or debt securities or any rights, warrants or options to purchase
securities of the Company, then, from and after the record date for determining
the holders of Common Stock entitled to receive the distribution, a holder of a
share of this Warrant that exercises this Warrant would, upon such conversion,
be entitled to receive, in addition to the shares of Common Stock into which
such Warrant is exercisable, the kind and amount of securities, cash or other
assets comprising the distribution that such holder would have received if such
holder had exercised the Warrant immediately prior to the record date for
determining the holders of Common Stock entitled to receive the
distribution.

       

      (k) Whenever the
Exercise Price is adjusted in accordance with this Section 2, the Company shall:
(1) forthwith compute the Exercise Price in accordance with this Section 2 and
prepare and transmit to the Transfer Agent a certificate form an Officer setting
forth the Exercise Price, the method of calculation thereof in reasonable
detail, and the facts requiring such adjustment and upon which such adjustment
is based; and (2) as soon as practicable following the occurrence of an event
that requires an adjustment to the Exercise Price pursuant to Section 2 (or if
the Company is not aware of such occurrence, as soon as practicable after
becoming so aware), provide a written notice to the holder of the Warrant of the
occurrence of such event and a statement setting forth in reasonable detail the
method by which the adjustment to the Exercise Price was determined and setting
forth the adjusted Exercise Price.

       

      (l) After an
adjustment to the Exercise Price, any subsequent event requiring an adjustment
will cause a subsequent adjustment to the Exercise Price as so
adjusted.

       

      (m) In
connection with the exercise of this Warrant, no fractions of shares of Common
Stock shall be issued, but the Company shall, with respect to any fractional
interest:  (i) pay cash with respect to the Market Price of such
fractional share; or (ii) round up to the next whole share of Common
Stock.

       

      3.   Right to Exchange
Warrants. The Holder may at its option exchange all or any portion of
this Warrant at any time after June 4, 2010 and on or prior to June 4, 2017 for
a number of shares of Common Stock equal to the number of Warrant Shares that
would have been issued upon the exercise of this Warrant or portion thereof
pursuant to Section 1 hereof which is being exchanged divided by
1.2.  In connection with the immediately preceding sentence, no
fractions of shares of Common Stock shall be issued, but the Company shall, with
respect to any fractional interest:  (x) pay cash with respect to the
Market Price of such fractional share; or (y) round up to the next whole share
of Common Stock.

       

      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

       

      4.   Certificate as to
Adjustments.  In each case of any adjustment or readjustment in
the Warrant Shares issuable on the exercise of the Warrants, the Company will
cause an Officer or other appropriate designee to compute such adjustment
or  readjustment in accordance with the terms of the Warrant and
prepare a certificate setting forth such adjustment or readjustment and showing
in detail the facts upon which such adjustment or readjustment is based,
including the number of Warrant Shares to be received upon exercise of this
Warrant, in effect immediately prior to such adjustment or readjustment and as
adjusted or readjusted as provided in this Warrant. The Company will mail a copy
of each such certificate to the Holder of the Warrant and to the Transfer
Agent.

      5.   Reservation of Stock, etc.
Issuable on Exercise of Warrant.   The Company will at all
times reserve and keep available, solely for issuance and delivery on the
exercise of the Warrants, a sufficient number of shares of Common Stock from
time to time issuable on the exercise of the Warrant.

       

      6.   Definitions.  As
used herein, capitalized terms, in addition to the terms defined elsewhere
herein and unless the context otherwise requires, have the following respective
meanings:

       

      (a) “Business Day” means
any day except Saturday, Sunday and any day which shall be in New York, New
York, a legal holiday or a day on which banking institutions are authorized or
required by law or other government action to close.

       

      (b) “Capital
Stock”  means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock and (ii) with respect to any
other Person, any and all partnership or other equity interests of such
Person.

       

      (c) “Commission” shall
mean the United States Securities and Exchange Commission or any other federal
agency at the time administering the Securities Act.

       

      (d) “Common Stock” means
(i) the Company’s common stock, $0.001 par value per share , and (ii) any other
securities into which or for which any of the securities described in clause (i)
may be converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.

       

      (e) “Exercise Price” mean
$0.076, as adjusted in accordance with Section 2 hereof.

       

      (f) “Excluded Stock” means
(i) shares of Common Stock issued upon conversion of the Notes; (ii) shares of
Common Stock issued by the Company in transactions that are described in Section
2.1(a) hereof; (iii) any shares of Common Stock or warrants issued by the
Company in connection with the Binding Letter of Intent (as defined in the
Securities Purchase Agreement); (iv) all options, warrants, and any other type
of securities and any securities to be issued upon exercise or conversion
thereof issued by the Company and outstanding as of the date hereof; and (v)
shares of Common Stock issued upon exercise of this Warrant.

      
        
           

        

        
          6

          
            

          

        

        
           

        

      

      (g)  “Market Price” as of
any date (the “Reference Date”)
means the price determined by the first of the following clauses that applies:
(a) if the Common Stock is then listed or quoted on the American Stock Exchange,
the New York Stock Exchange, the NASDAQ Global Select Market, the NASDAQ Global
Market or the NASDAQ Capital Market, whichever  is at the time the
principal trading exchange or market for the Common Stock (a “Principal Market”),
the volume weighted average price of the Common Stock on the Principal Market on
which the Common Stock is then listed or quoted for the 10 Trading Days
immediately preceding the Reference Date; (b) if the Common Stock is not then
listed or quoted on a Principal Market and if prices for the Common Stock are
then quoted on the Over-The-Counter Bulletin Board, the volume weighted average
price of the Common Stock on the Over-The-Counter Bulletin Board for the 10
Trading Days immediately preceding the Reference Date; (c) if the Common Stock
is not then listed or quoted on the Over-The-Counter Bulletin Board and if
prices for the Common Stock are then reported in the “Pink Sheets” published by
Pink Sheets LLC (or a similar organization or agency succeeding to its functions
of reporting prices), the average of the closing bid and ask price per share of
the Common Stock so reported for the 10 Trading Days immediately preceding the
Reference Date; or (d) in all other cases, the fair market value of a share of
Common Stock as determined by the Company’s Board of Directors acting reasonably
and in good faith and evidenced by a resolution of such Board of
Directors.

       

      (h) “Notes” means the
10%/12% Senior Convertible PIK Election Notes due 2012 issued by the
Company.

       

      (i)  “Officer” means the
Chairman, any Vice Chairman, the Chief Executive Officer, the President, the
Chief Operating Officer, any Vice President, the Chief Financial Officer, the
Treasurer, or the Secretary of the Company.

       

      (j) “Securities Act” means
the Securities Act of 1933, as amended, and the rules and regulations of the
Commission promulgated thereunder.

       

      (k) “Securities Purchase
Agreement” shall mean the agreement, dated September 12, 2007, among
Plainfield Peru I LLC, Plainfield Peru II LLC and the Company, as amended by
amendments dated as of March 26, 2008, as of November 4, 2008, as of March 10,
2009, as of March 27, 2009 and as of June 18, 2009.

       

      (l) “Trading Day” means a
day on which the Common Stock traded on the Company’s principal national
securities exchange or quotation system or in the over-the-counter market and
was not suspended from trading on any national securities exchange or quotation
system or over-the-counter market at the close of business on such
day.

       

      (m)“Transfer Agent” means
Pacific Stock Transfer Company.

       

      7.   Assignment; Exchange of
Warrant.  Subject to compliance with all applicable securities
laws, this Warrant, and all rights hereunder are assignable or transferable upon
the surrender for exchange of this Warrant with endorsement of the holder of
this Warrant proposing to effect the assignment (a “Transferor”) in the
form of Exhibit
B attached hereto (the “Transferor Endorsement
Form”) and together with an opinion of counsel reasonably satisfactory to
the Company that the transfer of this Warrant will be in compliance with all
applicable securities laws.  The Company at its expense, but with
payment by the Transferor of any applicable transfer taxes, will issue and
deliver to or on the order of the Transferor thereof a new Warrant or Warrants
of like tenor, in the name of the Transferor and/or the transferee(s) specified
in such Transferor Endorsement Form (each, a “Transferee”), calling
in the aggregate on the face or  faces thereof for the number of
shares of Common Stock called for on the face or faces of the Warrant so
surrendered by the Transferor.  No such transfers shall result in a
public distribution of the Warrant.

      
        
           

        

        
          7

          
            

          

        

        
           

        

      

      8.   Replacement of
Warrant.  If this Warrant shall be mutilated, lost, stolen or
destroyed, the Company shall issue, in exchange and in substitution for and upon
cancellation of the mutilated Warrant, or in lieu of and substitution for the
Warrant lost, stolen or destroyed, a new Warrant of like tenor, but only upon
receipt of evidence of such loss, theft or destruction of such Warrant and
indemnity, if requested, satisfactory to the Company and the Transfer
Agent.

      

      9.   No Shareholder
Rights.  This Warrant shall not entitle the Holder hereof to
any voting rights or other rights as a stockholder of the Company.

       

      10. Transfer on the Company’s
Books.  Until this Warrant is transferred on the books of the
Company, the Company may treat the Holder hereof as the absolute owner hereof
for all purposes, notwithstanding any notice to the contrary.

       

      11. Representations and
Covenants of Holder.  The Holder represents and warrants that
it is acquiring the Warrant and the Warrant Shares solely for its account for
its own account and not with a view to or for sale or distribution of said
Warrant or Warrant Shares or any part thereof. The Holder also represents that
the entire legal and beneficial interests of the Warrant and Warrant Shares the
Holder is acquiring are being acquired for, and will be held for, the Holder’s
account only.

       

      12. Notices.   All
notices, demands, requests, consents, approvals or other communications
(collectively, “Notices”) required or
permitted to be given hereunder or which are given with respect to this Warrant
shall be in writing and shall be personally served, delivered by reputable air
courier service with charges prepaid, or transmitted by hand delivery, telegram,
telex or facsimile, addressed as set forth below, or to such other address as
such party shall have specified most recently by written
notice.  Notice shall be deemed given on the date of service or
transmission if personally served or transmitted by telegram, telex or
facsimile.  Notice otherwise sent as provided herein shall be deemed
given on the next Business Day following delivery of such notice to a reputable
air courier service.  Notices shall be delivered as
follows:

      

      
        
          
            
              	
                      If
      to the Company:

                    	
                      Pure
      Biofuels Corp.

                    
	 
      	
                      Av.
      Canaval y Moreyra 380 of 402

                    
	 
      	
                      San
      Isidro, Lima

                    
	 
      	
                      Peru

                    
	 
      	
                      Attention:       Carlos
      Alberto Pinto

                    
	 
      	
                      Telephone:     +511-616-9292

                    
	 
      	
                      Facsimile:      +511-616
      9293

                    

            

          

        

      

      
        
           

        

        
          8

          
            

          

        

        
           

        

      

      
        
          
             

          

        

      

      
        
          
            	
                    with
      a copy to:

                  	
                    Pure
      Biofuels Corp.

                  
	 
      	
                    1250
      Connecticut Avenue, Suite 200

                  
	 
      	
                    Washington
      DC, 20036

                  
	 
      	
                    Attention:
      Brian Alperstein

                  
	 
      	
                    Telephone:
           202-261-3520

                  
	 
      	
                    Facsimile:
            202-261 3523

                  
	 
      	 
      
	
                    And
      to:

                  	
                    DLA
      Piper LLP (US)

                  
	 
      	
                    1251
      Avenue of the Americas

                  
	 
      	
                    New
      York, NY 10020-1104

                  
	 
      	
                    Attn:
      Daniel I. Goldberg, Esq.

                  
	 
      	
                    Telephone:
      212-335-4966

                  
	 
      	
                    Facsimile:
      212-884-8466

                  
	 
      	 
      
	
                    if
      to the Holder:

                  	
                    to
      its most recent address as set forth in the books and

                  
	 
      	
                    records
      of the Company

                  
	 
      	 
      
	
                    with
      a copy to:

                  	
                    Plainfield
      Asset Management LLC

                  
	 
      	
                    333
      Ludlow Street

                  
	 
      	
                    Stamford,
      CT 06902

                  
	 
      	
                    Attention:
      General Counsel

                  
	 
      	
                    Telephone:
      203-302-1700

                  
	 
      	
                    Facsimile:
      203-302-1779

                  
	 
      	 
      
	
                    And
      to:

                  	
                    White
      & Case LLP

                  
	 
      	
                    1155
      Avenue of the Americas

                  
	 
      	
                    New
      York, New York 10036

                  
	 
      	
                    Attn:
      Thomas P. Higgins, Esq.

                  
	 
      	
                    Telephone:
      212-819-8813

                  
	 
      	
                    Facsimile:
      212-354-8113

                  

          

        

      13. Headings Descriptive.
The headings of the several sections and subsections of this Warrant are
inserted for convenience only and shall not in any way affect the meaning or
construction of any term of this Warrant.

      
        
           

        

        
          9

          
            

          

        

        
           

        

      

      

      14. Governing Law; Submission to
Jurisdiction; Venue; Waiver of Jury Trial.  (a)  THIS
WARRANT AND THE RIGHTS OF THE HOLDER AND THE OBLIGATIONS OF THE COMPANY
HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND BE GOVERNED BY THE LAW OF
THE STATE OF NEW YORK (WITHOUT REGARD TO CONFLICTS OF LAW
PRINCIPLES).  ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS
WARRANT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED
STATES FOR THE SOUTHERN DISTRICT OF NEW YORK, IN EACH CASE WHICH ARE LOCATED IN
THE COUNTY OF NEW YORK AND, BY EXECUTION AND DELIVERY OF THIS WARRANT, THE
COMPANY HEREBY IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS. THE
COMPANY HEREBY FURTHER IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH COURTS LACK
PERSONAL JURISDICTION OVER IT, AND AGREES NOT TO PLEAD OR CLAIM, IN ANY LEGAL
ACTION OR PROCEEDING WITH RESPECT TO THIS WARRANT BROUGHT IN ANY OF THE
AFOREMENTIONED COURTS, THAT SUCH COURTS LACK PERSONAL JURISDICTION OVER
IT.  THE COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF
PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO IT AT ITS ADDRESS SET FORTH IN SECTION 12, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY
OBJECTION TO SUCH SERVICE OF PROCESS AND FURTHER IRREVOCABLY WAIVES AND AGREES
NOT TO PLEAD OR CLAIM IN ANY ACTION OR PROCEEDING COMMENCED HEREUNDER THAT
SERVICE OF PROCESS WAS IN ANY WAY INVALID OR INEFFECTIVE.  NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE HOLDER OF THIS WARRANT TO SERVE PROCESS IN
ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.

      

      (b) THE
COMPANY HEREBY IRREVOCABLY WAIVES ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF VENUE OF ANY OF THE AFORESAID ACTIONS OR PROCEEDINGS
ARISING OUT OF OR IN CONNECTION WITH THIS WARRANT BROUGHT IN THE COURTS REFERRED
TO IN CLAUSE (a) ABOVE AND HEREBY FURTHER IRREVOCABLY WAIVES AND AGREES NOT TO
PLEAD OR CLAIM IN ANY SUCH COURT THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN
ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

      

      (c)  THE
COMPANY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION,
PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
WARRANT.

      

      15. Miscellaneous.  This Warrant
and any term hereof may be changed, waived, discharged or terminated only by an
instrument in writing by the Company and the Holder. The invalidity or
unenforceability of any provision hereof shall in no way affect the validity or
enforceability of any other provision.

      

      *  *  *  *  *  *  *

      
        
           

        

        
          10

          
            

          

        

        
           

        

      

      

      IN
WITNESS WHEREOF, the Company has executed this Warrant as of the date first
written above.

      

      
        
          
            	 	
                    PURE
      BIOFUELS CORP.

                  
	 	 
      	 
      
	 	
                    By: 

                  	
                    /s/ Carlos Alberto Pinto

                  
	 	
                    Name: Carlos
      Alberto Pinto

                  
	 	
                    Title:   CEO

                  

          

        

      

      

      Signature Page to
Warrant

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      Exhibit
A

       

      FORM OF
SUBSCRIPTION

      (to be
signed only on exercise of Warrant)

      

      TO:  PURE
BIOFUELS CORP.

       

      (1)                        Payment.  The
undersigned, pursuant to the provisions set forth in the attached Warrant (No.
____), hereby irrevocably elects to purchase _________ shares of Common Stock of
PURE BIOFUELS CORP. (the “Company”) covered by
such Warrant.  Payment shall take the form of (check applicable
box):

       

       ̈ in
lawful money of the United States;

       

       ̈ the
cancellation of such number of Warrant Shares as is necessary, in accordance
with the formula set forth in subsection 1.2(c), to exercise this Warrant with
respect to the maximum number of Warrant Shares purchasable pursuant to the
cashless exercise procedure set forth in subsection 1.2(c);

       

       ̈ the
exchange of this Warrant or portion thereof for a number of shares of Common
Stock equal to the number of Warrant Shares that would have been issued upon the
exercise of the attached Warrant or portion thereof pursuant to Section 1
thereof which is being exchanged divided by 1.2 as set forth in Section 3 of the
attached Warrant.

       

      (2)            The
undersigned requests that the certificates for said shares of Common Stock be
issued in the name of, and delivered to
_______________________________________________________________________________
whose address
is_______________________________________________________________________________

       

       

      
        

      

       

      The
undersigned represents and warrants that all offers and sales by the undersigned
of the securities issuable upon exercise of the within Warrant shall be made
pursuant to registration of the Common Stock under the Securities Act of 1933,
as amended (the “Securities Act”), or
pursuant to an exemption from registration under the Securities
Act.

       

      
        
          	
                  Dated: 

                	
                    

                

        

      

      

      
        
          
            	 
      	
                      

                  
	 
      	
                      

                  
	 
      	
                      

                  
	 
      	
                    (Signature
      must conform to name of holder as

                  
	 
      	
                    specified
      on the face of the Warrant)

                  
	 
      	 
      
	 
      	
                      

                  
	 
      	
                      

                  
	 
      	
                      

                  
	 
      	
                      

                  
	 
      	
                      

                  
	 
      	
                    (Address)

                  

          

        

      

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      Exhibit
B

       

      FORM OF
TRANSFEROR ENDORSEMENT

      (To be
signed only on transfer of Warrant)

       

      For value
received, the undersigned hereby sells, assigns, and transfers unto the
person(s) named below under the heading “Transferees” the right represented by
the within Warrant to purchase the percentage and number of shares of Common
Stock of PURE BIOFUELS CORP. to which the within Warrant relates specified under
the headings “Percentage Transferred” and “Number Transferred,” respectively,
opposite the name(s) of such person(s) and appoints each such person Attorney to
transfer its respective right on the books of PURE BIOFUELS CORP. with full
power of substitution in the premises.

      

      
        
          	
                  Transferees

                	 
      	
                  Percentage Transferred

                	 
      	
                  Number Transferred

                
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      
	 
      	 
      	 
      	 
      	 
      

        

      

      

      
        
          
            
              
                
                  	
                          Dated:__________________,
      ________

                        	
                            

                        
	 
      	 
      	
                            

                        
	 
      	 
      	
                          (Signature
      must conform to name of holder as

                        
	 
      	 
      	
                          specified
      on the face of the warrant)

                        
	
                          Signed
      in the presence of:

                        	 
      
	 
      	 
      	 
      
	 
      	 
      
	
                          (Name)

                        	 
      
	 
      	 
      	 
      
	
                          ACCEPTED
      AND AGREED:

                        	 
      
	
                          [TRANSFEREE]

                        	 
      	
                            

                        
	 
      	 
      	
                            

                        
	 
      	 
      	
                            

                        
	 
      	 
      	
                          (address)

                        
	 
      	 
      	 
      
	 
      	 
      	
                            

                        
	 
      	 
      	
                            

                        
	 
      	 
      	
                            

                        
	 
      	 
      	
                          (address)EXHIBIT
10.1

     

    SECOND
AMENDED AND RESTATED

    EMPLOYMENT
AGREEMENT

     

    THIS
SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this "Agreement") is entered into as
of the 7th day of
June, 2010 by and between MFA
FINANCIAL, INC., a Maryland corporation ("MFA"), and STEWART ZIMMERMAN, an individual
residing at the address set forth on the signature page hereof (the
"Executive").

     

    WITNESSETH:

     

    WHEREAS, MFA and the Executive entered
into an amended and restated employment agreement, effective as of April 16,
2006 and amended as of December 10, 2008 (the "Employment
Agreement");

     

    WHEREAS, MFA and the Executive desire to
amend the terms of the Executive's employment and extend the period of
employment set forth in the Employment Agreement to December 31, 2012 on the
terms and conditions set forth in this Agreement; and

     

    WHEREAS, the Executive wishes to
continue serving MFA and MFA wishes to secure the continued exclusive services
of the Executive under the terms and conditions described
below.

     

    NOW THEREFORE, in consideration of the
foregoing premises and the mutual agreements herein contained, the parties
hereto agree to amend and restate the Employment Agreement in its entirety to
read as follows:

     

    
      	
               
      

            	
              1.

            	
              Term
      of Employment.

            

    

     

    (a)  MFA hereby employs the Executive, and
the Executive hereby accepts employment with MFA, in the positions and with the
duties and responsibilities as set forth in Paragraph 2 below for the Term of
Employment, subject to the terms and conditions of this
Agreement.

     

    (b)  The term of employment (the
"Term of
Employment") under this
Agreement, which commenced on April 16, 2006, shall continue until December 31,
2012, unless terminated earlier in accordance with Paragraph 5
hereof.

     

    
      	
               
      

            	
              2.

            	
              Position;
      Duties and Responsibilities.

            

    

     

    (a)  The Executive shall be employed as the
Chairman and CEO, reporting directly to the Board of Directors of MFA (the
“Board
of Directors”), with such
duties and day-to-day management responsibilities as are customarily performed
by persons holding such offices at similarly situated mortgage REITs and such
other duties as may be mutually agreed upon between the Executive and the Board
of Directors

     

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

    
      
         

      

      
         

        
          

        

      

      
         

      

    

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

     

    
      	
               
      

            	
              3.

            	
              Compensation.

            

    

     

    (a)  Base
Salary.  During
the Term of Employment, the Executive shall be entitled to receive an annualized
base salary (the "Base
Salary") of not less than
nine hundred thousand dollars ($900,000).  In addition to Base Salary,
the Executive shall receive the following annual grants of common stock of the
Company (the fair market value of such stock at the time of grant (i.e.,
$100,000), together with the Base Salary for such year, "Base
Compensation"), subject to
the Executive’s continuing employment with the Company on the date of
grant:

     

    
      	
               
      

            	
              (i)

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

            

    

     

    
      	
               
      

            	
              (ii)

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

            

    

     

    (b)  Performance
Bonus.  The
Executive, President and Executive Vice President shall be eligible to
participate in a Performance Bonus Pool for Senior Executives (the “Bonus
Pool”) each year during the
Term of Employment.  The aggregate Bonus Pool shall be determined by
reference to MFA’s Return on Average Equity (“ROAE”) as more fully described in Exhibit A
to this Agreement.  Subject to the right of the Compensation Committee
of the Board of Directors (the “Compensation
Committee”) to determine
the portion of the Bonus Pool to be allocated to the Executive, allocations as
between the President and Executive Vice President, if any, shall be made by the
Compensation Committee together with the Executive based upon each participant’s performance during the applicable
period.  The Compensation Committee, in its discretion, can adjust the
aggregate Bonus Pool upward or downward in any year by as much as thirty percent
(30%) depending upon the Compensation Committee’s assessment of MFA’s leverage
strategy, share price performance relative to the S&P financial index or
other relevant indices, share price relative to peer group, total return (share
price change plus dividend), and its other asset management activities, as well
as the Executive’s individual performance, among other considerations, as
determined by the Compensation Committee.

    
      
         

      

      
        - 2 -

        
          

        

      

      
         

      

    

     

    The
amount allocated to the Executive from the Bonus Pool (the "Performance
Bonus") shall
be paid in a combination of cash and restricted stock based on the total Bonus
Pool (after any reduction or increase referred in the immediately-preceding
paragraph), as follows:  (i) Bonus Pool (as adjusted) up to
$2,700,000:  seventy-five percent (75%) will be paid in cash and
twenty-five (25%) percent will be paid in restricted stock; (ii) the incremental
total Bonus Pool (as adjusted) between $2,700,000 and
$4,050,000:  sixty-five percent (65%) will be paid in cash and
thirty-five percent (35%) will be paid in restricted stock; (iii)  the
incremental total Bonus Pool (as adjusted) in excess of
$4,050,000:  fifty percent (50%) will be paid in cash and fifty
percent (50%) will be paid in restricted stock.  In each case referred
to above, the period of restriction with respect to the applicable shares of
restricted stock shall lapse with respect to six and one quarter percent (6.25%)
of the shares on the last business day of each quarter commencing with the
quarter beginning with the first calendar quarter following the end of the
fiscal year to which the Bonus Pool relates, with the lapse of all restrictions
occurring four years following the date of grant.  Notwithstanding the
foregoing, any unvested shares of restricted stock shall immediately vest in
full on
December 31, 2012;
provided, that, the Executive remains in
continuous employment with MFA through December 31, 2012 or has terminated
employment with MFA prior to such date under circumstances described in Section
5(a), (b) or (d) hereof.  Under
the terms of the definitive award agreement, the Executive shall be entitled to
receive any dividends payable with respect to any shares subject to restriction
at such time as such shares are no longer subject to
restrictions.  Vested shares of such restricted stock cannot be
transferred or sold during the Executive’s employment by MFA until the value of
the Executive’s stock holdings in MFA (including shares of restricted stock)
exceeds five times the Executive’s Base Salary; and, following the termination
of Executive’s employment with the Company, vested shares of such restricted
stock may not be sold or transferred to the extent the value of the Executive’s
stock holdings does not exceed five times the Executive’s Base Salary as of the
date of the Executive’s termination of employment (provided,
however, that
(i) this sentence shall no longer apply following the six-month anniversary of
the Executive’s termination of employment, and (ii) the Executive shall be
permitted to sell vested shares of restricted stock, notwithstanding such
transfer restriction, to satisfy his
income and
employment tax
obligations related to the vesting of such shares).  Cash payments
from the Bonus Pool will be made as soon as practicable after such portion of
the Bonus Pool is vested and nonforfeitable, and in no event later than January
16th of the next following calendar
year.

     

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

     

    (d)  Discretion
to Increase Compensation.  Nothing in this Agreement
shall preclude the Board of Directors or the Compensation Committee from
increasing or considering increasing the Executive's compensation during the
Term of the Employment.  The Base Salary as adjusted to reflect any
increase shall be the Base Salary for all purposes of this
Agreement.

     

    
      	
               
      

            	
              4.

            	
              Employee
      Benefit Programs and Fringe Benefits.

            

    

     

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

     

    
      
         

      

      
        - 3 -

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              5.

            	
              Termination
      of Employment.

            

    

     

    (a)  Termination
Due to Death or Disability.  If the Executive's
employment is terminated during the Term of Employment by reason of the
Executive's death or Disability, the Executive's Term of Employment shall
terminate automatically without further obligations to the Executive, his legal
representative or his estate, as the case may be, under this Agreement except
for (i) any compensation earned but not yet paid, including and without
limitation, any amount of Base Compensation accrued or earned but unpaid and any
other payments payable to the Executive pursuant to Paragraph 5(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 two (2) times the Executive’s then current Base Compensation,
which shall be paid to the Executive, his legal representative or his estate, as
the case may be, as soon as possible (without undue delay), but in no event
later than March 15th following the calendar year in which such termination
occurs.  In the event of such termination due to his Disability,
Executive's health insurance coverage shall be continued at MFA's expense for
the duration of such Disability; provided, that, if such coverage cannot be
provided under MFA's health insurance policy for the duration of such
Disability, such coverage or the cost of comparable coverage shall be provided
by MFA until the Executive's attainment of age 70 or such later date through
which coverage is permissible under MFA's health insurance
policy.

     

    (b)  Termination
Without Cause or for Good Reason.  In the event the
Executive's employment is terminated by MFA without Cause or by the Executive
for Good Reason, MFA shall pay the Executive an amount (the "Severance
Amount") equal to three (3)
times the greater of (i) the Executive's combined Base Compensation and actual
Performance Bonus for the preceding fiscal year or (ii) the average for the
three preceding years of the Executive's combined actual Base Compensation and
Performance Bonus.  Fifty percent of the Severance Amount shall be
paid within five (5) days after the date the Executive terminates for Good
Reason or is terminated by the Company for any reason other than Cause, and the
remaining 50% of the Severance Amount shall be paid in three equal monthly
installments beginning on the first business day of the month following the
month of such termination; provided, however, in no event shall any portion of
the Severance Amount be payable after March 15th of the year following the year
in which such termination occurs.  For the avoidance of doubt,
expiration of the Term of Employment as set forth in Paragraph 1(b) shall not be
considered a termination of the Executive's employment by MFA without Cause or
give rise to a right of termination of employment by the Executive for Good
Reason or otherwise give rise to any payments under this Paragraph
5(b).  It is further agreed that the execution of this Agreement shall
not give rise to a right of termination of employment by the Executive for Good
Reason.

     

    (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, the Executive
shall be entitled to any compensation earned but not yet paid, including and
without limitation, any amount of Base Compensation accrued or earned but unpaid
and any other payments payable to the Executive pursuant to Paragraph 5(e)
below, as of the date of termination.

    
      
         

      

      
        - 4 -

        
          

        

      

      
         

      

    

    (d)  Termination
Related to Change in Control.  In the event of (1) the
termination of the Executive's employment by MFA without Cause that occurs both
within two months before a Change in Control and following the occurrence of a
Pre-Change-in-Control Event, (2) the resignation of his employment by the
Executive for any reason within six months following a Change in Control, or (3)
the termination of the Executive's employment by MFA other than for Cause or the
Employee's resignation of his employment for Good Reason within twenty-four
months following a Change in Control,

     

    
      	
               
      

            	
              (i)

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

            

    

     

    
      	
               
      

            	
              (ii)

            	
              all of the Executive's outstanding
      restricted stock, phantom shares and stock options shall immediately vest
      in full and such options shall remain exercisable, and any dividend
      equivalents associated therewith shall continue to be payable, until the
      earlier of (a) 90 days following the date of such termination and (b) the
      date on which each such option would have expired had the Executive's
      employment not terminated;
and

            

    

     

    
      	
               
      

            	
              (iii)

            	
              the Executive shall continue to
      participate in all health, life insurance, retirement and other benefit
      programs at MFA's expense for the balance of the Term of Employment, to
      the same extent as though the Executive's employment had not
      terminated.

            

    

     

    To the extent necessary to avoid
imposition of the excise tax under Section 4999 of the Internal Revenue Code of
1986, as amended (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

            

    

     

    
      
         

      

      
        - 5 -

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (v)

            	
              upon the termination of the
      Executive's employment pursuant to Paragraphs 5(a) or 5(b), 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, 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.

     

    (h)  Mutual
Release.  MFA's
obligation to make any payment or provide any benefit pursuant to this Paragraph
5 shall be contingent upon, and is the consideration for, the Executive
executing and delivering to MFA a general release (the "Release"), substantially in the form annexed
hereto as Exhibit B, releasing MFA, and all current and former members, officers
and employees of MFA, from any claims relating to the Executive's employment
hereunder, other than claims relating to continuing obligations under, or
preserved by, (x) this Agreement or (y) any compensation or benefit plan,
program or arrangement in which the Executive was participating as of the date
of termination of his employment, and no such amounts shall be provided until
the Executive executes and delivers to MFA a letter which provides that the
Executive had not revoked such Release after seven days following the date of
the Release.  In all events, the Release shall be executed by the
Executive within 60 days of termination of employment in order for the Executive
to receive any severance benefits hereunder.  The Release shall also
be executed by MFA and delivered to the Executive as part of the consideration
for the Executive's execution and delivery of the Release, and, except as
otherwise provided under the terms of the Release, shall release the Executive
from any and all claims MFA may have against the
Executive.

    
      
         

      

      
        - 6 -

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              6.

            	
              Definitions.

            

    

     

    For purposes of this Agreement, the
following terms shall be defined as set forth below:

     

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

     

    (b)  Change in
Control.  A
"Change
in Control" shall mean the
occurrence of any one of the following events:

     

    
      	
               
      

            	
              (i)

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

            

    

     

    
      
         

      

      
        - 7 -

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              (ii)

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

            

    

     

    
      	
               
      

            	
              (iii)

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

            

    

     

    Notwithstanding the foregoing, a "Change
in Control" shall not be deemed to have occurred for purposes of the foregoing
clause (i) solely as the result of an acquisition of securities by MFA which, by
reducing the number of Shares or other voting securities outstanding, increases
(x) the proportionate number of Shares beneficially owned by any person to 30%
or more of the Shares then outstanding or (y) the proportionate voting power
represented by the voting securities beneficially owned by any person to 30% or
more of the combined voting power of all then outstanding voting securities;
provided, however, that, if any person referred to in
clause (x) or (y) of this sentence shall thereafter become the beneficial owner
of any additional Shares or other voting securities (other than pursuant to a
stock split, stock dividend, or similar transaction), then a "Change in Control"
shall be deemed to have occurred for purposes of this Paragraph
6(b).

     

    (c)  Disability.  "Disability" shall mean the Executive's inability
for a period of six consecutive months, to render substantially the services
provided for in this Agreement by reason of mental or physical disability,
whether resulting from illness, accident or otherwise, other than by reason of
chronic or persistent abuse of any substance (such as narcotics or alcohol).
Notwithstanding the foregoing, no circumstances or condition shall constitute a
Disability to the extent that, if it were, a 20% tax would be imposed under
Section 409A of the Code; provided that, in such a case, the event or condition
shall continue to constitute a Disability to the maximum extent possible (e.g.,
if applicable, in respect of vesting without an acceleration of distribution)
without causing the imposition of such 20% tax.  In addition, nothing
herein shall limit or restrict the payment of any amount subject to Section 409A
of the Code upon an otherwise permitted payment event under Section 409A of the
Code, including upon a separation from service.

     

    
      
         

      

      
        - 8 -

        
          

        

      

      
         

      

    

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

     

    
      	
               
      

            	
              (i)

            	
              except as otherwise provided in
      Section 2(a), a material diminution in the Executive's title, duties or
      responsibilities;

            

    

     

    
      	
               
      

            	
              (ii)

            	
              relocation of the Executive's
      place of employment without his consent outside the New York City
      metropolitan area;

            

    

     

    
      	
               
      

            	
              (iii)

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

            

    

     

    
      	
               
      

            	
              (iv)

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

            

    

     

    
      	
               
      

            	
              (v)

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

            

    

     

    (e)  Non Cash
Items and Merger Expenses.  "Non Cash Items and
Merger Expenses" shall mean
depreciation, merger expenses, gains/losses on asset sales, and impairment
charges; provided that these items and expenses shall
allow for adjustment to exclude events pursuant to changes in GAAP and certain
non-cash items at the discretion of MFA’s independent
directors.

     

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

     

    
      	
               
      

            	
              (i)

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

            

    

     

    
      	
               
      

            	
              (ii)

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

            

    

     

    
      	
               
      

            	
              (iii)

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

            

    

     

    
      	
               
      

            	
              (iv)

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

            

    

     

    
      	
               
      

            	
              (v)

            	
              any other meeting, writing or
      written communication with, by or to the Board of Directors or any officer
      or executive of MFA, that is held, made or undertaken in good faith in
      anticipation of a Change in
Control.

            

    

     

    
      
         

      

      
        - 9 -

        
          

        

      

      
         

      

    

     

    (g)  Return on
Average Equity.  "Return on Average
Equity" shall mean twelve
months GAAP net income plus (minus) certain Non Cash Items and Merger Expenses
divided by average Tangible Net Worth, for the period ending November
30th.

     

    (h)  Tangible Net
Worth.  "Tangible Net
Worth" shall mean
stockholder equity less (i) goodwill and (ii) preferred stockholder
equity.

     

    7.           Covenant Not
To Compete.

     

    The
Executive and MFA recognize that, due
to the nature of Executive’s 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:

     

    (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; (ii) was rightfully known by
the Executive without confidentiality restriction before disclosure to the
Executive by MFA; or (iii) 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.

     

    
      
         

      

      
        - 10 -

        
          

        

      

      
         

      

    

     

    (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, 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 months following termination of his employment with MFA, or
      (B) any mortgage REIT for a period of six months following termination of
      his employment with MFA; provided, however, in the event that either (x)
      the Executive
      continues as Chairman of the Board past December 31, 2012 and voluntarily
      resigns as Chairman of the Board of Directors prior to the date of the
      Company's 2013 annual meeting or (y) the Executive remains the Chairman of
      the Board of Directors through the date of the Company's 2013 annual
      meeting, the restrictions set forth in clauses (A) and (B) shall extend
      for an additional five months, and six months, respectively, following the
      date of such voluntary
      resignation in the case of clause (x) or following the date of such
      annual meeting in
      the case of clause (y), as applicable.  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.

            

    

     

    
      
         

      

      
        - 11 -

        
          

        

      

      
         

      

    

    
      	
               
      

            	
              (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 relating
to the business of MFA which were 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.

     

    (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 or
otherwise engage in a business enterprise, such
cooperation will not materially interfere with the Executive’s then current
employment or
business activity.

     

    
      
         

      

      
        - 12 -

        
          

        

      

      
         

      

    

     

    (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 (and, to
the extent applicable, such duties performed pursuant to Section 2(b)
hereof), 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.

     

    
      
         

      

      
        - 13 -

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              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.

    
      
         

      

      
        - 14
-

        
          

        

      

      
         

      

    

     

    
      	
               
      

            	
              17.

            	
              Dispute
      Resolution.

            

    

     

    In the
event of any dispute, controversy or claim arising out of or relating to this
Agreement or Executive's employment or termination thereof (other than a
controversy or claim arising under Paragraph 7, to the extent necessary for MFA
(or its affiliates where applicable) to enforce the provisions thereof), the
parties hereby agree to settle such dispute, controversy or claim in a binding
arbitration by a single arbitrator in accordance with the Commercial Arbitration
Rules of the American Arbitration Association, which arbitration shall be
conducted in New York, New York.  The parties agree that the arbitral
award shall be final and non-appealable and shall be the sole and exclusive
remedy between the parties hereunder.  The parties agree that judgment
on the arbitral award may be entered in any court having competent jurisdiction
over the parties or their assets.  All reasonable fees and expenses
related to any such arbitration (including reasonable attorneys' fees and
related disbursements) shall be paid by MFA.

     

    
      	
               
      

            	
              18.

            	
              Legal
      Fees.

            

    

     

    MFA shall
pay directly all reasonable legal fees incurred by the Executive in connection
with the negotiation, preparation and execution of this Agreement.

     

    
      	
               
      

            	
              19.

            	
              Notices.

            

    

     

    Any
notice given to either party shall be in writing and shall be deemed to have
been given when delivered personally or sent by certified or registered mail,
postage prepaid, return receipt requested, duly addressed to the party
concerned, if to MFA, at its principal office, and if to the Executive, at the
address of the Executive shown on MFA's records or at such other address as such
party may give notice of.

     

    
      	
               
      

            	
              20.

            	
              Headings.

            

    

     

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

     

    
      	
               
      

            	
              21.

            	
              Counterparts.

            

    

     

    This
Agreement may be executed in two or more counterparts.

    
      
         

      

      
        - 15
-

        
          

        

      

      
         

      

    

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

     

    
      
        
          	
                  MFA
      Financial, Inc.

                
	 
      
	
                  By: 

                	
                  /s/ James A. Brodsky

                
	
                  Name:  James
      A. Brodsky

                
	
                  Title:  Lead
      Director of the Board

                
	 
      
	
                  /s/ Stewart Zimmerman

                
	
                  Stewart
      Zimmerman

                

        

      

    

    

    
      Executive's
address:

    

    

    
      3063
Wynsum Avenue

    

    
      Merrick,
NY 11566

    
 

    
      
         

      

      
        - 16
-

        
          

        

      

      
         

      

    

    EXHIBIT
A

     

    AGGREGATE
PERFORMANCE BONUS POOL FOR SENIOR EXECUTIVES

     

    Aggregate
bonus pool can be adjusted upward or downward in any year by as much as 30%,
dependent upon the Compensation Committee’s assessment of MFA’s leverage
strategy, share price performance relative to the S&P financial index or
other relevant indices, share price relative to peer group, total return (share
price change plus dividend), and its other asset management activities, as well
as the Executive’s individual performance, among other considerations, as
determined by the Compensation Committee.

     

    
      
        
          
            
              	
                      MFA
      ROAE

                    	 
      	
                      Range

                    
	
                      Less
      than 4.5%

                    	 
      	
                      $750,000

                    	 
      	 
      
	
                      4.5%
      - 5%

                    	 
      	
                      $750,000

                    	 
      	
                      $950,000

                    
	
                      5%
      - 6%

                    	 
      	
                      $950,000

                    	 
      	
                      $1,150,000

                    
	
                      6%
      - 7%

                    	 
      	
                      $1,150,000

                    	 
      	
                      $1,350,000

                    
	
                      7%
      - 8%

                    	 
      	
                      $1,350,000

                    	 
      	
                      $1,800,000

                    
	
                      8%
      - 9%

                    	 
      	
                      $1,800,000

                    	 
      	
                      $2,250,000

                    
	
                      9%
      - 10%

                    	 
      	
                      $2,250,000

                    	 
      	
                      $2,700,000

                    
	
                      10%
      - 11%

                    	 
      	
                      $2,700,000

                    	 
      	
                      $3,150,000

                    
	
                      11%
      - 12%

                    	 
      	
                      $3,150,000

                    	 
      	
                      $3,600,000

                    
	
                      12%
      - 13%

                    	 
      	
                      $3,600,000

                    	 
      	
                      $4,050,000

                    
	
                      13%
      - 14%

                    	 
      	
                      $4,050,000

                    	 
      	
                      $4,500,000

                    
	
                      14%
      - 15%

                    	 
      	
                      $4,500,000

                    	 
      	
                      $4,950,000

                    
	
                      15%
      - 16%

                    	 
      	
                      $4,950,000

                    	 
      	
                      $5,400,000

                    
	
                      16%
      - 17%

                    	 
      	
                      $5,400,000

                    	 
      	
                      $5,850,000

                    
	
                      17%
      - 18%

                    	 
      	
                      $5,850,000

                    	 
      	
                      $6,300,000

                    
	
                      18%
      - 19%

                    	 
      	
                      Minimum
      of $6,300,000 (subject, in all events to 

                      discretion
      of the Compensation
      Committee to increase

                       or
      decrease such amount
      as described above)

                    
	
                      19%
      - 20%

                    	 
      
	
                      20%
      - 21%+

                    	 
      

            

          

        

      

    
 

    
      
         

      

      
        - 17
-

        
          

        

      

      
         

      

    

    EXHIBIT
B

     

    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 second amended
and restated employment agreement with the Company dated June __, 2010 (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.

    
      
         

      

      
        - 18
-

        
          

        

      

      
         

      

    

    
 

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

    
      	
               
      

            	
              2.

            	
              Release by the
      Executive.

            

    

     

    (a)  The
Executive, on behalf of himself, his agents, heirs, successors, assigns,
executors and administrators, in consideration for the termination payments and
other consideration provided for under the Employment Agreement, hereby forever
releases and discharges the Company, and its successors, its affiliated
entities, and, in such capacities, its past and present directors, employees,
agents, attorneys, accountants, representatives, plan fiduciaries, successors
and assigns from any and all known and unknown causes of action, actions,
judgments, liens, indebtedness, damages, losses, claims, liabilities, and
demands of whatsoever kind and character in any manner whatsoever arising on or
prior to the date of this Release, including but not limited to (i) any claim
for breach of contract, breach of implied covenant, breach of oral or written
promise, wrongful termination, intentional infliction of emotional distress,
defamation, interference with contract relations or prospective economic
advantage, negligence, misrepresentation or employment discrimination, and
including without limitation alleged violations of Title VII of the Civil Rights
Act of 1964, as amended, prohibiting discrimination based on race, color,
religion, sex or national origin; the Family and Medical Leave Act; the
Americans With Disabilities Act; the Age Discrimination in Employment Act; other
federal, state and local laws, ordinances and regulations; and any unemployment
or workers' compensation law, excepting only those obligations of the Company
pursuant to Paragraph 5 of the Employment Agreement or otherwise continuing
under the Employment Agreement and any claims to benefits under any compensation
or benefit plan, program or arrangement in which the Executive was participating
as of the date of termination of his employment; (ii) any and all liability that
was or may have been alleged against or imputed to the Company by the Executive
or by anyone acting on his behalf; (iii) all claims for wages, monetary or
equitable relief, employment or reemployment with the Company in any position,
and any punitive, compensatory or liquidated damages; and (iv) all rights to and
claims for attorneys' fees and costs except as otherwise provided in the
Employment Agreement.

    
      
         

      

      
        - 19
-

        
          

        

      

      
         

      

    

    
 

    (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.

    
      
         

      

      
        - 20
-

        
          

        

      

      
         

      

    

    
 

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

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

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

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

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

    (5)  THIS
RELEASE WILL BE FINAL AND BINDING AFTER THE EXPIRATION OF THE REVOCATION PERIOD
REFERRED TO IN SECTION 2(d)(3).  HE AGREES NOT TO CHALLENGE ITS
ENFORCEABILITY;

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

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

    
      
         

      

      
        - 21
-

        
          

        

      

      
         

      

    

    
 

    (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.

    
      
         

      

      
        - 22
-

        
          

        

      

      
         

      

    

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

    

    
      
        
          
            
              
                
                  
                    
                      	 
      
	
                              Executive

                            
	 
	
                              MFA
      FINANCIAL, INC.

                            
	 
	
                              By:

                            	 
      

                    

                  

                

              

            

          

        

      

    
 

    
      
         

      

      
        - 23
-

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