Document:

Unassociated Document

     

    
       Exhibit
10.5 

       

    

    AMENDED
AND RESTATED

    EMPLOYMENT
AGREEMENT

     

     THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is
entered into as of the 10th day of December, 2008 by and between MFA MORTGAGE
INVESTMENTS, INC., a Maryland corporation (“MFA”), and WILLIAM S.
GORIN (the “Executive”). 

     

    W I T N E S S E T
H:

     

    WHEREAS,
MFA and the Executive entered into an amended and restated employment agreement,
effective as of July 1, 2008 (the “Employment
Agreement”);

     

    WHEREAS,
MFA and the Executive desire to amend the terms of the Executive’s employment to
comply with the documentary requirements of Section 409A of the Internal Revenue
Code of 1986, as amended (the “Code”);
and

     

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

     

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

     

    1.           Term of
Employment.

     

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

     

    (b)           The
term of employment (the “Term of Employment”)
under this Agreement shall include the Initial Term and each Renewal
Term.  The Initial Term, which commenced on July 1, 2008, shall
continue until December 31, 2011.  The Term of Employment shall
automatically renew for a one-year period (each such renewal, a “Renewal Term”) at the
end of the Initial Term and each Renewal Term, unless either party shall give
notice to the other not less than six months prior to the end of the Initial
Term or any Renewal Term, as the case may be, of his or its intent not to renew
such Initial Term or Renewal Term, as the case may
be.  Notwithstanding the foregoing sentences of this
Paragraph 1(b), the Term of Employment may be terminated before the
expiration of the Initial Term or any Renewal Term in accordance with
Paragraph 5 hereof.

     

    2.           Position; Duties and
Responsibilities.

     

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

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

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

     

    3.           Compensation.

     

    (a)           Base
Salary.  During the Term of Employment, the Executive shall be
entitled to receive an annualized base salary (the “Base Salary”) of not
less than eight hundred thousand dollars ($800,000).

     

    (b)           Restricted Stock
Award.  In connection with the Executive’s new duties and
responsibilities, the Executive shall receive an award of 100,000 shares of
restricted stock on the date hereof.  The period of restriction with
respect to such award shall begin on the date hereof and shall lapse with
respect to 6,250 shares on the last business day of each quarter ending after
the date hereof (with all restrictions having lapsed on June 30,
2012).  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 four 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 four times the Executive’s Base Salary as of the
date of the Executive’s termination of employment (provided, however, that this sentence
shall no longer apply following the six-month anniversary of the Executive’s
termination of employment).

     

    (c)           Performance
Bonus.  The CEO, 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 CEO, allocations as between the President and Executive Vice President, if
any, shall be made by the Compensation Committee together with the CEO based
upon each participants performance during the applicable period.  The
Compensation Committee, in its discretion, can adjust the aggregate Bonus Pool
upward or downward in any year by as much as thirty percent (30%) depending
upon the Compensation Committee’s assessment of MFA’s leverage strategy, share
price performance relative to the S&P financial index or other relevant
indices, share price relative to peer group, total return (share price change
plus dividend), and its other asset management activities, as well as the
Executive’s individual performance, among other considerations, as determined by
the Compensation Committee.

     

    
      
        
        

      

      
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    The
amount allocated to the Executive from the Bonus Pool shall be paid in a
combination of cash and restricted stock based on the total Bonus Pool (after
any reduction or increase referred in the immediately-preceding paragraph), as
follows:  (i) Bonus Pool (as adjusted) up to
$2,700,000:  seventy-five percent (75%) will be paid in cash and
twenty-five (25%) percent will be paid in restricted stock; (ii) the
incremental total Bonus Pool (as adjusted) between $2,700,000 and
$4,050,000:  sixty-five percent (65%) will be paid in cash and
thirty-five percent (35%) will be paid in restricted stock; (iii)  the
incremental total Bonus Pool (as adjusted) in excess of
$4,050,000:  fifty percent (50%) will be paid in cash and fifty
percent (50%) will be paid in restricted stock.  In each case referred
to above, the period of restriction with respect to the applicable shares of
restricted stock shall lapse with respect to six and one quarter percent (6.25%)
of the shares on the last business day of each quarter commencing with the
quarter beginning with the first calendar quarter following the end of the
fiscal year to which the Bonus Pool relates, with the lapse of all restrictions
occurring four years following the date of grant.  Under the terms of
the definitive award agreement, the Executive shall be entitled to receive any
dividends payable with respect to any shares subject to restriction at such time
as such shares  are no longer subject to
restrictions.  Vested shares of such restricted stock cannot be
transferred or sold during the Executive’s employment by MFA until the value of
the Executive’s stock holdings in MFA (including shares of restricted stock)
exceeds four 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 four times the Executive’s Base Salary as of the
date of the Executive’s termination of employment (provided, however, that this sentence
shall no longer apply following the six-month anniversary of the Executive’s
termination of employment). Cash payments from the Bonus Pool will be made as
soon as practicable after such portion of the Bonus Pool is vested and
nonforfeitable, and in no event later than January 16th of the next following
calendar year.

     

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

     

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

     

    5.           Termination of
Employment.

     

    (a)           Termination Due to Death or
Disability.  If the Executive’s employment is terminated during
the Term of Employment by reason of the Executive’s death or Disability, the
Executive’s Term of Employment shall terminate automatically without further
obligations to the Executive, his legal representative or his estate, as the
case may be, under this Agreement except for (i) any compensation earned
but not yet paid, including and without limitation, any amount of Base Salary
accrued or earned but unpaid and any other payments payable to the Executive
pursuant to Paragraph 5(e) below, which amounts shall be promptly paid in a
lump sum to the Executive, his legal representative or his estate, as the case
may be, and (ii) a lump sum payment in an amount equal to the Executive’s
Base Salary 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 65 or such later date
through which coverage is permissible under MFA’s health insurance
policy.

     

    
      
        
        

      

      
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    (b)           Termination Without Cause or
for Good Reason.  In the event the Executive’s employment is
terminated by MFA without Cause (including by notice of MFA’s determination not
to renew the Initial Term or any Renewal Term pursuant to Paragraph 1(b))
or by the Executive for Good Reason, unless any such termination is preceded by
the Executive’s giving notice of his determination not to renew the Initial Term
or any Renewal Term pursuant to Paragraph 1(b), the Executive shall be
entitled to both (i) a payment (referred to below as the “Severance Amount”)
equal to the amount of his then current Base Salary that would be payable from
the date of such termination through the later of (A) the expiration of the Term
of Employment and (B) the first anniversary of such termination of employment
(the period with respect to which the Severance Amount is payable, the
“Severance Period”) and (ii) continued health insurance coverage at MFA’s
expense, for the Severance Period.  Fifty percent of the Severance
Amount shall be paid within five (5) days after the date the Executive’s
employment is terminated as described above, and the remaining 50% of the
Severance Amount shall be paid in three equal monthly installments beginning on
the first business day of the month following the month of such termination;
provided, however, in no event shall any portion of the Severance Amount be
payable after March 15th of the year following the year in which such
termination occurs.

     

    (c)           Termination by MFA for Cause
or Voluntary Termination by the Executive.  In the event the
Executive’s employment is terminated by MFA for Cause, or is terminated by the
Executive on his own initiative for other than a Good Reason (including pursuant
to Paragraph 1(b)), the Executive shall be entitled to any compensation
earned but not yet paid, including and without limitation, any amount of Base
Salary 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.

     

    (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 two and one half months following a Change in
Control, or (3) the termination of the Executive’s employment by MFA other
than for Cause or the Executive’s resignation of his employment for Good Reason
within twelve months following a Change in Control,

     

    (i)           MFA
shall immediately pay to Executive in a lump sum, but in all events within two
and one half months following the calendar year in which such termination of
employment occurs, an amount equal to 300% of the sum of (a) the
Executive’s then current Base Salary and (b) the Executive’s highest bonus
for the two preceding years;

     

    (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.

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

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

     

    Notwithstanding
the foregoing, a “Change in Control” shall not be deemed to have occurred for
purposes of the foregoing clause (i) solely as the result of an acquisition
of securities by MFA which, by reducing the number of Shares or other voting
securities outstanding, increases (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.

     

    
      
        
        

      

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

     

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

     

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

     

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

     

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

     

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

     

    (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.

     

    (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.

     

    
      
        
        

      

      
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    7.           Covenant Not To
Compete.  In the event of the termination of the Executive’s
employment with MFA other than upon notification by the Executive of the
nonrenewal of the Term of Employment, the Executive will not, without the prior
written consent of MFA, manage, operate, control or be connected as a
stockholder (other than as a holder of shares publicly traded on a stock
exchange or the NASDAQ National Market System, provided that the Executive
shall not own more than five percent of the outstanding shares of any publicly
traded company) or partner with, or as an officer, director, employee or
consultant of, any mortgage REIT for a period of one year following termination
of his employment with MFA.  For a period of one year following the
termination of his employment by MFA for any reason, the Executive shall not
solicit any employees of MFA to work for any mortgage REIT.  Except as
otherwise required by law, the Executive shall keep confidential all materials,
files, reports, correspondence, records and other documents (collectively the
“Company
Materials”) used, prepared or made available to him in connection with
his employment by MFA and which have not otherwise been made available to the
public, and upon termination of his employment shall return such Company
Materials to MFA.  The Executive acknowledges that MFA may seek
injunctive relief or other specific enforcement of its rights under this
Paragraph.

     

    8.           Indemnification.  MFA
shall indemnify the Executive to the fullest extent permitted by Maryland law as
amended from time to time in connection with the Executive’s duties with MFA,
against all costs, expenses, liabilities and losses (including, without
limitation, attorneys’ fees, judgments, fines, penalties, ERISA excise taxes and
amounts paid in settlement) actually and reasonably incurred by the Executive in
connection with an action, suit or proceeding.  During the Term of
Employment and for six years following the date of the Executive’s termination
as an officer of MFA, MFA (or any successor thereto) shall provide comprehensive
coverage under its officers and directors insurance policy (or policies) on
substantially the same terms and levels that it provides to its senior executive
officers, at MFA’s sole cost.

     

    9.           Assignability; Binding
Nature.  This Agreement shall inure to the benefit of MFA and
the Executive and their respective successors, heirs (in the case of the
Executive) and assigns.  No rights or obligations of MFA under this
Agreement may be assigned or transferred by MFA except that any such rights or
obligations may be assigned or transferred pursuant to a merger or consolidation
in which MFA is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of MFA, provided that the assignee or
transferee is the successor to all or substantially all of the assets of MFA and
such assignee or transferee assumes the liabilities, obligations and duties of
MFA, as contained in this Agreement, either contractually or as a matter of
law.  This Agreement shall not be assignable by the
Executive.

     

    10.           Representation.  MFA
represents and warrants that it is fully authorized and empowered to enter into
this Agreement and that its entering into this Agreement and the performance of
its obligations under this Agreement will not violate any agreement between MFA
and any other person, firm or organization or any law or governmental
regulation.

     

    11.           Entire
Agreement.  This Agreement contains the entire agreement
between MFA and the Executive concerning the subject matter hereof and
supersedes all prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between them with respect
thereto.

     

    12.           Amendment or
Waiver.  This Agreement cannot be changed, modified or amended
without the consent in writing of both the Executive and MFA.  No
waiver by either MFA or the Executive at any time of any breach by the other
party of any condition or provision of this Agreement shall be deemed a waiver
of a similar or dissimilar condition or provision at the same or at any prior or
subsequent time.  Any waiver must be in writing and signed by the
Executive or an authorized officer of MFA, as the case may be.

     

    13.           Severability.  In
the event that any provision or portion of this Agreement shall be determined to
be invalid or unenforceable for any reason, in whole or in part, the remaining
provisions of this Agreement shall be unaffected thereby and shall remain in
full force and effect to the fullest extent permitted by law.

     

    
      
        
        

      

      
        - 9
-

        
          

        

      

      
        
        

      

    

     

    14.           Reasonableness.  To
the extent that any provision or portion of this Agreement is determined to be
unenforceable by a court of law or equity, that provision or portion of this
Agreement shall nevertheless be enforceable to the extent that such court
determines is reasonable.

     

    15.           Survivorship.  The
respective rights and obligations of the parties hereunder shall survive any
termination of this Agreement to the extent necessary to the intended
preservation of such rights and obligations.

     

    16.           Governing
Law.  This Agreement and all rights thereunder, and any
controversies or disputes arising with respect thereto, shall be governed by and
construed and interpreted in accordance with the laws of the State of New York,
applicable to agreements made and to be performed entirely within such State,
without regard to conflict of laws provisions thereof that would apply the law
of any other jurisdiction.

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        - 10
-

        
          

        

      

      
        
        

      

    

     

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

     

     MFA
MORTGAGE INVESTMENTS, INC. 

     

    
      	
                
      

            	
               By: 

            	 /s/
      Stewart Zimmerman 	   

    

    
      	
                
      

            	
               Name:  Stewart
      Zimmerman 

            

    

    
      	
                
      

            	
               Title:    Chairman
      and Chief Executive
Officer 

            

    

     

     

    
      	
                
      

            	
               By: 

            	 /s/
      William S. Gorin 	   

    

    
      	
                
      

            	
               Name:  William
      S. Gorin 

            

    

    
      	
                
      

            	
               Title:    President
      and Chief Financial Officer 

            

    

     

    
      
        
        

      

      
        - 11
-

        
          

        

      

      
        
        

      

    

     

    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%+

              

      

    

     

    
      
        
        

      

      
        Exh.
A-1

        
          

        

      

      
        
        

      

    

     

    Exhibit
B

     

    Mutual
Release

     

    This
Mutual Release of Claims (this “Release”) is made as
of _______________, by and between MFA MORTGAGE INVESTMENTS, INC. (the “Company”) and
_____________________ (the “Executive”).

     

    
      	
               
      

            	
              1.

            	
              Release by the
      Company.

            

    

     

    (a)           The
Company on behalf of itself, its agents, successors, affiliated entities and
assigns, in consideration for the Executive’s execution and delivery of this
Release, hereby forever releases and discharges the Executive, and his agents,
heirs, successors, assigns, executors and administrators, from any and all known
and unknown causes of action, actions, judgments, liens, indebtedness, damages,
losses, claims, liabilities, and demands of whatsoever kind and character in any
manner whatsoever arising on or prior to the date of this Release, including but
not limited to (i) any claim for breach of contract, breach of implied
covenant, breach of oral or written promise, defamation, interference with
contract relations or prospective economic advantage, negligence,
misrepresentation; (ii) any and all liability that was or may have been
alleged against or imputed to the Executive by the Company or by anyone acting
on its behalf; (iii) any punitive, compensatory or liquidated damages and
(iv) all rights to and claims for attorneys’ fees and costs except as
otherwise provided in his amended and restated employment agreement with the
Company dated December [__], 2008 (the “Employment
Agreement”).

     

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

     

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

     

    
      
        
        

      

      
        Exh.
B-1

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              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.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        Exh.
B-2

        
          

        

      

      
        
        

      

    

     

    (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;

     

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

     

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

     

    
      
        
        

      

      
        Exh.
B-3

        
          

        

      

      
        
        

      

    

     

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

     

     

    
      	
               
      

            	
              By:

            	 	 

    

    
      	
               
      

            	
              Name:

            

    

    
      	
               
      

            	
              Title:  
       Executive

            

    

     

     

    MFA
MORTGAGE INVESTMENTS, INC.

     

    
      	
               
      

            	
              By:

            	 	 

    

    
      	
               
      

            	
              Name:

            

    

    
      	
               
      

            	
              Title:

            

    

     

     

    
      Exh.
B-4Unassociated Document

     

    
       Exhibit
10.6 

       

    

    AMENDED
AND RESTATED

    EMPLOYMENT
AGREEMENT

     

     THIS
AMENDED AND RESTATED EMPLOYMENT AGREEMENT (this “Agreement”) is
entered into as of the 10th day of December, 2008 by and between MFA MORTGAGE
INVESTMENTS, INC., a Maryland corporation (“MFA”), and RONALD A.
FREYDBERG (the “Executive”). 

     

    W I T N E S S E T
H:

     

    WHEREAS,
MFA and the Executive entered into an amended and restated employment agreement,
effective as of July 1, 2008 (the “Employment
Agreement”);

     

    WHEREAS,
MFA and the Executive desire to amend the terms of the Executive’s employment to
comply with the documentary requirements of Section 409A of the Internal Revenue
Code of 1986, as amended (the “Code”);
and

     

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

     

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

     

    1.           Term of
Employment.

     

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

     

    (b)           The
term of employment (the “Term of Employment”)
under this Agreement shall include the Initial Term and each Renewal
Term.  The Initial Term, which commenced on July 1, 2008, shall
continue until December 31, 2011.  The Term of Employment shall
automatically renew for a one-year period (each such renewal, a “Renewal Term”) at the
end of the Initial Term and each Renewal Term, unless either party shall give
notice to the other not less than six months prior to the end of the Initial
Term or any Renewal Term, as the case may be, of his or its intent not to renew
such Initial Term or Renewal Term, as the case may
be.  Notwithstanding the foregoing sentences of this
Paragraph 1(b), the Term of Employment may be terminated before the
expiration of the Initial Term or any Renewal Term in accordance with
Paragraph 5 hereof.

     

    2.           Position; Duties and
Responsibilities.

     

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

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (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 President, the CEO and/or the Board of Directors of
MFA (the “Board of
Directors”) may, from time to time, request.  MFA and such
subsidiaries and affiliates are hereinafter referred to, collectively, as the
“Company.”  For
purposes of this Agreement, the term “affiliate” shall have the meaning ascribed
thereto in Rule 12b-2 under the Securities Exchange Act of 1934, as amended
(the “Act”).

     

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

     

    3.           Compensation.

     

    (a)           Base
Salary.  During the Term of Employment, the Executive shall be
entitled to receive an annualized base salary (the “Base Salary”) of not
less than seven hundred fifty thousand dollars ($750,000).

     

    (b)           Restricted Stock
Award.  In connection with the Executive’s new duties and
responsibilities, the Executive shall receive an award of 75,000 shares of
restricted stock on the date hereof.  The period of restriction with
respect to such award shall begin on the date hereof and shall lapse with
respect to 4,687.5 shares on the last business day of each quarter ending after
the date hereof (with all restrictions having lapsed on  June 30,
2012).  Under the terms of the definitive award agreement, the
Executive shall be entitled to receive any dividends payable with respect to any
shares subject to restriction at such time as such shares  are no
longer subject to restrictions.  Vested shares of such restricted
stock cannot be transferred or sold during the Executive’s employment by MFA
until the value of the Executive’s stock holdings in MFA (including shares of
restricted stock) exceeds three times the Executive’s Base Salary; and,
following the termination of Executive’s employment with the Company, vested
shares of such restricted stock may not be sold or transferred to the extent the
value of the Executive’s stock holdings does not exceed three times the
Executive’s Base Salary as of the date of the Executive’s termination of
employment (provided,
however, that this
sentence shall no longer apply following the six-month anniversary of the
Executive’s termination of employment).

     

    (c)           Performance
Bonus.  The CEO, 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 CEO, allocations as between the President and Executive Vice President, if
any, shall be made by the Compensation Committee together with the CEO based
upon each participants performance during the applicable period.  The
Compensation Committee, in its discretion, can adjust the aggregate Bonus Pool
upward or downward in any year by as much as thirty percent (30%) depending
upon the Compensation Committee’s assessment of MFA’s leverage strategy, share
price performance relative to the S&P financial index or other relevant
indices, share price relative to peer group, total return (share price change
plus dividend), and its other asset management activities, as well as the
Executive’s individual performance, among other considerations, as determined by
the Compensation Committee.

     

    
      
        
        

      

      
        - 2
-

        
          

        

      

      
        
        

      

    

     

    The
amount allocated to the Executive from the Bonus Pool shall be paid in a
combination of cash and restricted stock based on the total Bonus Pool (after
any reduction or increase referred in the immediately-preceding paragraph), as
follows:  (i) Bonus Pool (as adjusted) up to
$2,700,000:  seventy-five percent (75%) will be paid in cash and
twenty-five (25%) percent will be paid in restricted stock; (ii) the
incremental total Bonus Pool (as adjusted) between $2,700,000 and
$4,050,000:  sixty-five percent (65%) will be paid in cash and
thirty-five percent (35%) will be paid in restricted stock; (iii) the
incremental total Bonus Pool (as adjusted) in excess of
$4,050,000:  fifty percent (50%) will be paid in cash and fifty
percent (50%) will be paid in restricted stock.  In each case referred
to above, the period of restriction with respect to the applicable shares of
restricted stock shall lapse with respect to six and one quarter percent (6.25%)
of the shares on the last business day of each quarter commencing with the
quarter beginning with the first calendar quarter following the end of the
fiscal year to which the Bonus Pool relates, with the lapse of all restrictions
occurring four years following the date of grant.  Under the terms of
the definitive award agreement, the Executive shall be entitled to receive any
dividends payable with respect to any shares subject to restriction at such time
as such shares  are no longer subject to
restrictions.  Vested shares of such restricted stock cannot be
transferred or sold during the Executive’s employment by MFA until the value of
the Executive’s stock holdings in MFA (including shares of restricted stock)
exceeds three times the Executive’s Base Salary; and, following the termination
of Executive’s employment with the Company, vested shares of such restricted
stock may not be sold or transferred to the extent the value of the Executive’s
stock holdings does not exceed three times the Executive’s Base Salary as of the
date of the Executive’s termination of employment (provided, however, that this sentence
shall no longer apply following the six-month anniversary of the Executive’s
termination of employment). 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.

     

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

     

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

     

    5.           Termination of
Employment.

     

    (a)           Termination Due to Death or
Disability.  If the Executive’s employment is terminated during
the Term of Employment by reason of the Executive’s death or Disability, the
Executive’s Term of Employment shall terminate automatically without further
obligations to the Executive, his legal representative or his estate, as the
case may be, under this Agreement except for (i) any compensation earned
but not yet paid, including and without limitation, any amount of Base Salary
accrued or earned but unpaid and any other payments payable to the Executive
pursuant to Paragraph 5(e) below, which amounts shall be promptly paid in a
lump sum to the Executive, his legal representative or his estate, as the case
may be, and (ii) a lump sum payment in an amount equal to the Executive’s
Base Salary, 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, the 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 65 or such later date
through which coverage is permissible under MFA’s health insurance
policy.

     

    
      
        
        

      

      
        - 3
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    (b)           Termination Without Cause or
for Good Reason.  In the event the Executive’s employment is
terminated by MFA without Cause (including by notice of MFA’s determination not
to renew the Initial Term or any Renewal Term pursuant to Paragraph 1(b))
or by the Executive for Good Reason, unless any such termination is preceded by
the Executive’s giving notice of his determination not to renew the Initial Term
or any Renewal Term pursuant to Paragraph 1(b), the Executive shall be
entitled to both (i) a payment (referred to below as the “Severance Amount”)
equal to the amount of his then current Base Salary that would be payable from
the date of such termination through the later of (A) the expiration of the Term
of Employment and (B) the first anniversary of such termination of employment
(the period with respect to which the Severance Amount is payable, the
“Severance Period”) and (ii) continued health insurance coverage at MFA’s
expense, for the Severance Period.  Fifty percent of the Severance
Amount shall be paid within five (5) days after the date the Executive’s
employment is terminated as described above, and the remaining 50% of the
Severance Amount shall be paid in three equal monthly installments beginning on
the first business day of the month following the month of such termination;
provided, however, in no event shall any portion of the Severance Amount be
payable after March 15th of the year following the year in which such
termination occurs.

     

    (c)           Termination by MFA for Cause
or Voluntary Termination by the Executive.  In the event the
Executive’s employment is terminated by MFA for Cause, or is terminated by the
Executive on his own initiative for other than a Good Reason (including pursuant
to Paragraph 1(b)), the Executive shall be entitled to any compensation
earned but not yet paid, including and without limitation, any amount of Base
Salary 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.

     

    (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 two and one-half months following a Change in
Control, or (3) the termination of the Executive’s employment by MFA other
than for Cause or the Executive’s resignation of his employment for Good Reason
within twelve months following a Change in Control,

     

    (i)           MFA
shall immediately pay to Executive in a lump sum, but in all events within two
and one-half months following the calendar year in which the termination of
employment occurs, an amount equal to 300% of the sum of (a) the
Executive’s then current Base Salary and (b) the Executive’s highest bonus
for the two preceding years;

     

    (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.

     

    
      
        
        

      

      
        - 4
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    To the
extent necessary to avoid imposition of the excise tax under Section 4999 of the
Code in connection with a Change in Control, the amounts payable or benefits to
be provided to the Executive shall be reduced such that the reduction of
compensation to be provided to the Executive is minimized.  In
applying this principle, the reduction shall be made in a manner consistent with
the requirements of Section 409A of the Code, and where two economically
equivalent amounts are subject to reduction but payable at different times, such
amounts shall be reduced on a pro rata basis (but not below zero).

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

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

     

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

     

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

     

    
      
        
        

      

      
        - 6
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    (b)           Change in
Control.  A “Change in Control”
shall mean the occurrence of any one of the following events:

     

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

     

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

     

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

     

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

     

    (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.

     

    
      
        
        

      

      
        - 7
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    (d)           Good
Reason.  “Good Reason” shall
mean:

     

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

     

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

     

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

     

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

     

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

     

    (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.

     

    (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.

     

    
      
        
        

      

      
        - 8
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    7.           Covenant Not To
Compete.  In the event of the termination of the Executive’s
employment with MFA other than upon notification by the Executive of the
nonrenewal of the Term of Employment, the Executive will not, without the prior
written consent of MFA, manage, operate, control or be connected as a
stockholder (other than as a holder of shares publicly traded on a stock
exchange or the NASDAQ National Market System, provided that the Executive
shall not own more than five percent of the outstanding shares of any publicly
traded company) or partner with, or as an officer, director, employee or
consultant of, any mortgage REIT for a period of one year following termination
of the Executive’s employment with MFA.  For a period of one year
following the termination of his employment by MFA for any reason, the Executive
shall not solicit any employees of MFA to work for any mortgage
REIT.  Except as otherwise required by law, the Executive shall keep
confidential all materials, files, reports, correspondence, records and other
documents (collectively the “Company Materials”)
used, prepared or made available to him in connection with his employment by MFA
and which have not otherwise been made available to the public, and upon
termination of his employment shall return such Company Materials to
MFA.  The Executive acknowledges that MFA may seek injunctive relief
or other specific enforcement of its rights under this Paragraph.

     

    8.           Indemnification.  MFA
shall indemnify the Executive to the fullest extent permitted by Maryland law as
amended from time to time in connection with the Executive’s duties with MFA,
against all costs, expenses, liabilities and losses (including, without
limitation, attorneys’ fees, judgments, fines, penalties, ERISA excise taxes and
amounts paid in settlement) actually and reasonably incurred by the Executive in
connection with an action, suit or proceeding.  During the Term of
Employment and for six years following the date of the Executive’s termination
as an officer of MFA, MFA (or any successor thereto) shall provide comprehensive
coverage under its officers and directors insurance policy (or policies) on
substantially the same terms and levels that it provides to its senior executive
officers, at MFA’s sole cost.

     

    9.           Assignability; Binding
Nature.  This Agreement shall inure to the benefit of MFA and
the Executive and their respective successors, heirs (in the case of the
Executive) and assigns.  No rights or obligations of MFA under this
Agreement may be assigned or transferred by MFA except that any such rights or
obligations may be assigned or transferred pursuant to a merger or consolidation
in which MFA is not the continuing entity, or the sale or liquidation of all or
substantially all of the assets of MFA, provided that the assignee or
transferee is the successor to all or substantially all of the assets of MFA and
such assignee or transferee assumes the liabilities, obligations and duties of
MFA, as contained in this Agreement, either contractually or as a matter of
law.  This Agreement shall not be assignable by the
Executive.

     

    10.           Representation.  MFA
represents and warrants that it is fully authorized and empowered to enter into
this Agreement and that its entering into this Agreement and the performance of
its obligations under this Agreement will not violate any agreement between MFA
and any other person, firm or organization or any law or governmental
regulation.

     

    11.           Entire
Agreement.  This Agreement contains the entire agreement
between MFA and the Executive concerning the subject matter hereof and
supersedes all prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between them with respect
thereto.

     

    12.           Amendment or
Waiver.  This Agreement cannot be changed, modified or amended
without the consent in writing of both the Executive and MFA.  No
waiver by either MFA or the Executive at any time of any breach by the other
party of any condition or provision of this Agreement shall be deemed a waiver
of a similar or dissimilar condition or provision at the same or at any prior or
subsequent time.  Any waiver must be in writing and signed by the
Executive or an authorized officer of MFA, as the case may be.

     

    
      
        
        

      

      
        - 9
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    13.           Severability.  In
the event that any provision or portion of this Agreement shall be determined to
be invalid or unenforceable for any reason, in whole or in part, the remaining
provisions of this Agreement shall be unaffected thereby and shall remain in
full force and effect to the fullest extent permitted by law.

     

    14.           Reasonableness.  To
the extent that any provision or portion of this Agreement is determined to be
unenforceable by a court of law or equity, that provision or portion of this
Agreement shall nevertheless be enforceable to the extent that such court
determines is reasonable.

     

    15.           Survivorship.  The
respective rights and obligations of the parties hereunder shall survive any
termination of this Agreement to the extent necessary to the intended
preservation of such rights and obligations.

     

    16.           Governing
Law.  This Agreement and all rights thereunder, and any
controversies or disputes arising with respect thereto, shall be governed by and
construed and interpreted in accordance with the laws of the State of New York,
applicable to agreements made and to be performed entirely within such State,
without regard to conflict of laws provisions thereof that would apply the law
of any other jurisdiction.

     

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

     

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

     

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

     

    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.

     

    
      
        
        

      

      
        - 10
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    IN
WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first written above.

     

     MFA
MORTGAGE INVESTMENTS, INC. 

     

    
      	
                
      

            	
               By: 

            	 /s/
      Stewart Zimmerman 	   

    

    
      	
                
      

            	
               Name:  Stewart
      Zimmerman 

            

    

    
      	
                
      

            	
               Title:    Chairman
      and Chief Executive Officer 

            

    

     

     

    
      	
                
      

            	
               By: 

            	 /s/ Ronald A.
      Freydberg 	   

    

    
      	
                
      

            	
               Name:  Ronald
      A. Freydberg 

            

    

    
      	
                
      

            	
               Title:   
      Executive Vice President and Chief Investment
  Officer 

            

    

    
      	
               
      

            	
               

            

    

     

    
      
        
        

      

      
        - 11
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    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%+

              

      

    

     

    
      
        
        

      

      
        Exh.
A-1

        
          

        

      

      
        
        

      

    

    
 

    Exhibit
B

     

    Mutual
Release

     

    This
Mutual Release of Claims (this “Release”) is made as
of _____________, by and between MFA MORTGAGE INVESTMENTS, INC. (the “Company”) and
_________________ (the “Executive”).

     

    
      	
               
      

            	
              1.

            	
              Release by the
      Company.

            

    

     

    (a)           The
Company on behalf of itself, its agents, successors, affiliated entities and
assigns, in consideration for the Executive’s execution and delivery of this
Release, hereby forever releases and discharges the Executive, and his agents,
heirs, successors, assigns, executors and administrators, from any and all known
and unknown causes of action, actions, judgments, liens, indebtedness, damages,
losses, claims, liabilities, and demands of whatsoever kind and character in any
manner whatsoever arising on or prior to the date of this Release, including but
not limited to (i) any claim for breach of contract, breach of implied
covenant, breach of oral or written promise, defamation, interference with
contract relations or prospective economic advantage, negligence,
misrepresentation; (ii) any and all liability that was or may have been
alleged against or imputed to the Executive by the Company or by anyone acting
on its behalf; (iii) any punitive, compensatory or liquidated damages; and
(iv) all rights to and claims for attorneys’ fees and costs except as
otherwise provided in his amended and restated employment agreement with the
Company dated December [__], 2008 (the “Employment
Agreement”).

     

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

     

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

     

    
      
        
        

      

      
        Exh.
B-1

        
          

        

      

      
        
        

      

    

     

    
      	
               
      

            	
              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.

     

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

     

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

     

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

     

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

     

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

     

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

     

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

     

    
      
        
        

      

      
        Exh.
B-2

        
          

        

      

      
        
        

      

    

     

    (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;

     

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

     

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

     

    
      
        
        

      

      
        Exh.
B-3

        
          

        

      

      
        
        

      

    

     

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

     

     

    
      	
               
      

            	
              By:

            	 	 

    

    
      	
               
      

            	
              Name:

            

    

    
      	
               
      

            	
              Title:  
       Executive

            

    

     

     

    MFA
MORTGAGE INVESTMENTS, INC.

     

    
      	
               
      

            	
              By:

            	 	 

    

    
      	
               
      

            	
              Name:

            

    

    
      	
               
      

            	
              Title:

            

    

     

    

      Exh.
B-4

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