Document:

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EXHIBIT 10.3

                              AMENDED AND RESTATED

                              EMPLOYMENT AGREEMENT

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

         WHEREAS, the Company and the Executive entered into an employment
agreement, effective as of November 1, 1997 (the "Employment Agreement"); and

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

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

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

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

         2. Term of Agreement. The term ("Term") of this Agreement shall
commence as of the date of the closing under the Offering (the "Effective Date")
and shall continue through December 31, 1999. From and after December 31, 1999,
and each anniversary thereafter, the Term of the Agreement shall automatically
be extended for successive one-year periods unless, not later than three months
prior to December 31, 1999 or any such anniversary, as applicable, either party
shall have given written notice to the other that it does not wish to extend the
Term of the Agreement.

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         3. Compensation.

                  (a) Base Salary. The Company shall pay the Executive, and the
Executive agrees to accept from the Company, in payment for her services to the
Company a base salary at the rate determined below ("Base Salary"), payable in
equal biweekly installments or at such other time or times as the Executive and
Company shall agree. Base Salary shall (i) equal a per annum amount of 0.10%
times the book value (as defined below) of the Company, (ii) be reviewed
quarterly and upon the raising of additional equity through the placement of
securities, and (iii) be subject to a maximum per annum amount of $350,000
("Salary Cap"). The Salary Cap can be raised at any time by the Board of
Directors of the Company in its sole discretion. In determining the Base Salary,
the "book value" of the Company shall be the aggregate amounts reported on the
Company's balance sheet prepared in accordance with generally accepted
accounting principles as Stockholders' Equity but excluding any adjustments for
valuation reserves (i.e., changes in the value of the Company's portfolio of
investments as a result of mark-to-market valuation changes), all determined as
of the close of business on the Effective Date and thereafter on the closing
date of any placements of securities resulting in additional equity and on the
last day of each fiscal quarter. In consideration of the cash flow needs of the
Company, the Base Salary can be lowered at management's discretion.

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

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

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

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

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

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

         6. Termination of Executive's Employment.

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

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

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

                  (d) Termination by the Executive. The Executive may at any
time during the Term of this Agreement terminate her employment hereunder for
any reason or no reason by giving the Company notice in writing not less than
one hundred twenty (120) days in advance of such termination. The Executive
shall have no further obligations to the Company after the effective date of
termination, as set forth in the notice. In the event of a termination by the
Executive under this paragraph, the Company will pay only the portion of Base
Salary or previously awarded Bonus unpaid as of the termination date. Benefits
which have accrued and/or vested on the termination date will continue in effect
according to their terms, but no additional accrual or vesting will take place.

         7. Compensation Upon Termination by the Company Other Than for Cause.
If the Executive's employment shall be terminated by the Company other than for
Cause, the Executive shall be entitled to the following benefits:

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

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

                  (c) Immediate Vesting of Stock Options. The Company shall take
all appropriate action to ensure that all stock options on the Company's stock
owned by the Executive as of the Effective Date and which have not been
exercised prior to the termination date become immediately exercisable by the
Executive, whether or not the right to exercise such stock options would
otherwise then be vested in the Executive, provided, however, an option that is
an incentive stock option (within the meaning of Code Section 422(b)) shall not
be exercisable

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for the first time in a calendar year to the extent that the aggregate fair
market value of stock (as deter mined under Code Section 422(b)(3)) with respect
to which ISO's are exercisable by the Executive during such calendar year
exceeds $100,000. The provisions of this Section 7(c) shall constitute an
amendment to any existing stock option agreements (including award certificates)
of the Company as of the Effective Date. All other stock options owned by the
Executive as of the termination date shall be exercisable in accordance with the
Company's stock option plan and the applicable stock option agreements.

         8. Noncompetition Provisions.

                  (a) Noncompetition. The Executive agrees that during the Term
of this Agreement prior to any termination of her employment hereunder and, in
the event of termination of the Executive's employment by the Company for Cause
or voluntary termination of employment by the Executive, for a period of one
year following such termination, she will not, directly or indirectly, without
the prior written consent of the Company, manage, operate, join, control,
participate in, or be connected as a stockholder (other than as a holder of
shares publicly traded on a stock exchange or the NASDAQ National Market
System), partner, or other equity holder with, or as an officer, director or
employee of, any real estate investment trust whose business strategy is
competitive with that of the Company, as determined by a majority of the
Company's Independent Directors ("Competing REIT"). It is further expressly
agreed that the Company will or would suffer irreparable injury of the Company
in violation of the preceding sentence of this Agreement and that the Company
would by reason of such competition be entitled to injunctive relief in a court
of appropriate jurisdiction, and the Executive further consents and stipulates
to the entry of such injunctive relief in such a court prohibiting the Executive
from competing with the Company or any subsidiary or affiliate of the Company,
in the areas of business set forth above, in violation of this Agreement.

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

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

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

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

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

                  If to the Executive:   Kathryn F. Fagan
                                         Treasurer and Chief Financial Officer
                                         Annaly Mortgage Management, Inc.
                                         1500 Harbor Blvd.
                                         Weehawken, NJ  07087
                                         Phone: (201) 223-1900
                                         Fax:  (201) 223-1230

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

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

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

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

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

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

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

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

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

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

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

         20. Arbitration. Any dispute, claim or controversy arising out of or in
relation to this Agreement, which the Executive and the Company are unable to
resolve shall be determined by the decision of a board of arbitration consisting
of three (3) members (the "Board of Arbitration") selected by the American
Arbitration Association upon application made to it for such purpose by either
the Company or the Executive. The arbitration proceedings shall take place in
New York, New York or such other place as shall be agreed to by the parties. The
Board of Arbitration shall reach and render a decision in writing. In connection
with rendering its decision, the Board of Arbitration shall adopt and follow
such rules and procedures as a majority of the members of the Board of
Arbitration deems necessary or appropriate. Any award shall be rendered on the
basis of the substantive law governing this Agreement and shall be concurred in
by a majority of the arbitrators. To the extent practical, decisions of the
arbitrators shall be rendered no more than thirty (30) calendar days following
commencement of the arbitration proceedings with respect thereto.

         Any decision made by the Board of Arbitration (either prior to or after
the expiration of such thirty (30) calendar day period) shall be final, binding
and conclusive on the Executive and

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the Company and entitled to be enforced to the fullest extent permitted by law
and entered in any court of competent jurisdiction. Each party to the
arbitration shall bear its own expense in relation thereto, including but not
limited to such party's attorneys' fees, if any, and the expenses and fees of
the member of the Board of Arbitration appointed by such party; provided,
however, that the expenses and fees of the third member of the Board of
Arbitration and any other expenses of the Board of Arbitration not capable of
being attributed to any one member shall be borne in equal parts by Executive
and the Company.

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

                                  ANNALY MORTGAGE MANAGEMENT, INC.

                                  By: /s/ Wellington St. Claire
                                      ------------------------------------
                                      Wellington St. Claire

                                  By: /s/ Kathryn F. Fagan
                                      ------------------------------------
                                      Kathryn F. Fagan

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EXHIBIT 10.4

                              AMENDED AND RESTATED

                              EMPLOYMENT AGREEMENT

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

         WHEREAS, the Company and the Executive entered into an employment
agreement, effective as of January 3, 2001 (the "Employment Agreement"); and

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

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

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

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

         2. Term of Agreement. The term ("Term") of this Agreement shall
commence as of January 3, 2001 and shall continue through December 31, 2001.
From and after December 31, 2001, and each anniversary thereafter, the Term of
the Agreement shall be automatically extended for successive one-year period
unless, not later than three months prior to December 31, 2001 or any such
anniversary, as applicable, either party shall have given written notice to the
other that it does not wish to extend the Term of the Agreement.

         3. Compensation.

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                  (a) Base Salary. The Company shall pay the Executive, and the
Executive agrees to accept from the Company, in payment for her services to the
Company a base salary at the rate determined below ("Base Salary"), payable in
equal biweekly installments or at such time or times as the Executive and
Company shall agree. Base Salary shall (I) equal a per annum amount of 0.10%
times the book value (as defined below) of the Company, (ii) be reviewed
quarterly and upon the raising of additional equity through the placement of
securities, and (iii) be subject to a maximum per annum amount of $300,000. The
Salary Cap can be raised at any time by the Board of Directors of the Company in
its sole discretion. In determining the Base Salary, the "book value" of the
Company shall be the aggregate amounts reported on the Company's balance sheet
prepared in accordance with generally accepted accounting principles as
Stockholder's Equity but excluding and adjustments for valuation reserves (i.e.,
changes in the value of the Company's portfolio of investments as a result of
mark-to-market valuation changes), all determined as of the close of business on
the Effective Date and thereafter on the closing date of any placements of
securities resulting in additional equity and on the last day of each fiscal
quarter. In consideration of the cash flow needs of the Company, the Base Salary
can be lowered at management's discretion.

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

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

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

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

                  (b) Vacation. The Executive shall be entitled to (i) four (4)
weeks of paid vacation per calendar year for the first two years of service to
the Company and (ii) five (5) weeks of paid vacation per calendar year for the
next two years of service to the Company, with such vacation to be scheduled and
taken in accordance with the Company's standard vacation policies. After four
years of service to the Company, the executive shall be entitled to such

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number of weeks of paid vacation per calendar year as determine by the Board of
Directors of the Company after review of industry standards, but shall in no
event be entitled to fewer than five weeks of paid vacation per calendar year.

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

         6. Termination of Executive's employment.

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

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

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

                  (d) Termination by the Executive. The Executive may at any
time during the Term of this Agreement terminate her employment hereunder for
any reason or no reason by giving the Company notice in writing not less than
one hundred twenty (120) days in advance of such termination. The Executive
shall have no further obligations to the Company after the effective date of
termination, as set forth in the notice. In the event of termination by the
Executive under this paragraph, the Company will pay only the portion of Base
Salary or

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previously awarded Bonus unpaid as of the termination date. Benefits which have
accrued and/or vested on the termination date will continue in effect according
to their terms, but no additional accrual or vesting will take place.

         7. Compensation Upon Termination by the Company Other Than for Cause.
If the Executive's employment shall be terminated by the Company other than for
Cause, the Executive shall be entitles to the following benefits:

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

                  (b) Severance Payment. The Company shall pay the Executive an
amount (the "Severance Amount") equal to three times the higher of (i) the
Executives combined Salary Cap and actual bonus compensation for the preceding
fiscal year or (ii) the average for three preceding years of the Executive's
combined actual Base Salary and bonus compensation; provided however, that the
Severance Amount shall not be less than $250,000, nor more than 1% of book value
(as defined in section 3(a)) to the extent of the Severance Amount is greater
than $250,000. The Severance Amount shall be payable 50% within five (5) days
after the termination date and the remaining 50% shall be payable in twelve (12)
consecutive monthly installments beginning on the first day of the month
following the termination date.

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

                  8. Noncompetition Provisions. (a) Noncompetition. The
Executive agrees that during the Term of this Agreement prior to any termination
of her employment hereunder and, in the event of termination of the Executive's
employment by the Company for Cause or voluntary termination of employment by
the Executive, for a period of one year following such termination, she will
not, directly or indirectly, without prior written consent of the Company,
manage, operate, join, control, participate in, or be connected as a stockholder
(other than as a holder of shares publicly traded on a stock exchange or the
NASDAQ National Market System), partner, or other equity holder with, or as an
officer, director or employee of any real estate investment trust whose business
strategy is competitive with that of the Company, as determined be a majority of
the Company's Independent Directors ("Competing REIT"). It is further expressly
agreed that the Company will or would suffer irreparable injury of the Company
in

                                       4
<PAGE>

violation of the preceding sentence of this Agreement and that the Company would
by reason of such competition be entitled to injunctive relief in a court of
appropriate jurisdiction, and the Executive further consents and stipulates to
the entry of such injunctive relief in such a court prohibiting the Executive
form competing with the Company or any subsidiary or affiliate of the Company,
in the areas of business set forth above in violation of this Agreement.

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

                  If to the Company:     Michael A. J. Farrell
                                         Chairman and Chief Executive Officer
                                         Annaly Mortgage Management, Inc.
                                         12 East 41st Street
                                         7th Floor
                                         New York, New York 10017

                  If to the Executive:   Jennifer Stephens
                                         Senior Vice President and Secretary
                                         Annaly Mortgage Management, Inc.
                                         12 East 41st Street
                                         7th Floor
                                         New York, New York 10017

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

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

         12. Assignment: Successors. This Agreement is personal in its nature
and neither of the parties hereto shall, without the consent of the other,
assign or transfer this Agreement or any rights or obligations hereunder;
provided that, in the event of the merger, consolidation, transfer, or sale of
all or substantially all of the assets of the Company with or to any other
individual entity, this Agreement shall, subject to the provisions hereof, be
binding upon and inure to the benefit of such successor and such successor shall
discharge and perform all the promises, covenants, duties, and obligations of
the Company hereunder.

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

                                       5
<PAGE>

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

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

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

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

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

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

         20. Arbitration. Any dispute, claim or controversy arising out of or in
relation to this Agreement, which the Executive and the Company are unable to
resolve shall be determined by the decision of a board of arbitration consisting
of three (3) members (the "Board of Arbitration") selected by the American
Arbitration Association upon application made to it for such purpose by other
the Company or the Executive. The arbitration proceedings shall take place in
New York, New York or such other place as shall be agreed to by the parties. The
Board of Arbitration shall reach and render a decision in writing. In connection
with rendering its decision, the Board of Arbitration shall adopt and follow
such rules and procedures as a majority of the members of the Board of
Arbitration deems necessary or appropriate. Any award shall be rendered on the
basis of substantive law governing this Agreement and shall be concurred in by a
majority of the arbitrators. To the extent practical, decisions of the
arbitrators shall be rendered no more than thirty (30) calendar days following
commencement of the arbitration proceedings with respect thereto. Any decision
made by the Board of Arbitration (either prior to or after the expiration of
such thirty (30) calendar day period) shall be final, binding and conclusive on
the Executive and the Company and entitled to be enforced to the fullest extent
permitted by the law and entered in relation thereto, including but not limited
to such party's attorneys' fees, if any,

                                       6
<PAGE>

and the expenses and fees of the member of the Board of Arbitration appointed by
such party; provided, however, that the expenses and the fees of the third
member of the Board of Arbitration and any other expenses of the Board of
Arbitration not capable of being attributed to any one member shall be borne in
equal parts by the Executive and the Company.

                                       7
<PAGE>

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

                                     ANNALY MORTGAGE MANAGEMENT, INC.

                                      By: /s/ Wellington St. Claire
                                          ------------------------------------
                                          Wellington St. Claire

                                     By: /s/ Jennifer Stephens
                                         -------------------------------------
                                         Jennifer Stephens

                                       8

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