MFA MORTGAGE INVESTMENTS, INC.

 

SECOND AMENDED AND RESTATED

2003 NONEMPLOYEE DIRECTORS’ DEFERRED COMPENSATION PLAN

 

1.            Purpose

 

The purpose of the Plan is to provide Nonemployee Directors of the Corporation with an opportunity to defer 100% or 50% of their Compensation while at the same time aligning their interests more closely with the interests of the stockholders of the Corporation.  This Plan is an amendment and complete restatement of the Amended and Restated 2003 Nonemployee Directors’ Deferred Compensation Plan.

 

2.            Effective Date

 

This Plan shall become effective on the Effective Date.

 

3.            Definitions

 

In this Plan, the following definitions shall apply:

 

“ Account ” - the account maintained by the Corporation for Deferred Stock Units credited in accordance with Section 6 of the Plan.

 

“ Administrator ” - the person, persons or entity appointed by the Board from time to time to manage and administer the Plan.

 

“ Board ” - the Board of Directors of the Corporation.

 

“Code” - the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

 

“ Common Stock ” - the Corporation’s common stock, $0.01 par value per share.

 

“ Compensation ” - the aggregate value of all annual compensation payable to a Nonemployee Director for service on the Board (exclusive of any reimbursable expenses relating to such Nonemployee Director’s service on the Board).

 

“ Corporation ” - MFA Mortgage Investments, Inc., a Maryland corporation, and its successors.

 

“ Deferral Period ” - the five-year period, if so elected, during which Compensation for a particular year is to be deferred.  At the conclusion of the Deferral Period, such deferred Compensation will be paid out in a lump sum or, if so elected, in a specified number of annual installments not to exceed five years.  If the deferred Compensation is paid out in annual installments, such installment payments shall be treated as a series of separate payments for purposes of Section 409A of the Code.  Except as otherwise provided in Section 8(a) of the Plan, payment(s) will commence, or be made in a lump sum, no earlier than January 15 of the year first following the five-year anniversary of the applicable election date.  For example, if during 2002 a Participant elects the Deferral Period (i.e., 5 years) for Compensation deferred in 2003, the payment(s) shall be made/commence on or about January 15, 2008.

 

“ Deferred Stock Unit ” - a credit to a Participant’s Account under Section 6(c) that represents the right to receive a cash payment equal to the Fair Market Value of one Share on settlement of the Account.

 

“ Effective Date ” - December 19, 2002, the date the Plan was adopted.

 

 

“ Fair Market Value ” - for any date, the average of the high and low sales prices for Shares of the Corporation’s Common Stock, as reported by the New York Stock Exchange or such other relevant exchange on which the Corporation’s Common Stock is traded.

 

“ Nonemployee Director ” - a member of the Board who is not also an employee of the Corporation and/or an employee of any affiliate of the Corporation.

 

“ Participant ” - each Nonemployee Director who elects to defer 100% or 50% of his or her Compensation under this Plan.

 

“ Plan ” - MFA Mortgage Investments, Inc. Second Amended and Restated 2003 Nonemployee Directors’ Deferred Compensation Plan, as it may be amended from time to time.

 

“Second Election” -  an election pursuant to Section 5(c)(4) of the Plan which changes the Nonemployee Director’s prior deferral election.

 

 “ Share ” - a share of Common Stock of the Corporation.

 

“Termination of Service” - termination of service with the Corporation, which shall be interpreted in a manner that is consistent with the definition of a “separation from service” under Section 409A of the Code and Treasury Regulation 1.409A-1(h).

 

4.            Administration

 

(a)           Subject to the oversight of the Board, the Administrator shall have authority to administer the Plan, including conclusive authority to construe and interpret the Plan, to establish rules, policies, procedures, forms and notices for use in carrying out the Plan, and to make all other determinations necessary or desirable for administration of the Plan.  The Administrator may delegate some or all of its functions to another person(s) as it may deem appropriate.

 

(b)           Notwithstanding any other provision herein to the contrary, the Administrator shall administer the Plan and exercise authority and discretion under the Plan, to satisfy the requirements of Section 409A of the Code or any exemption thereto.

 

5.            Election to Defer Compensation

 

(a)            Amount of Deferral .  A Nonemployee Director may elect to defer receipt of 50% or 100% of such Nonemployee Director’s Compensation otherwise thereafter payable to such Nonemployee Director.

 

(b)            Manner of Electing Deferral .  An election to defer Compensation shall be made by each Participant by giving written notice to the Administrator in the form approved by the Administrator.  Such notice shall address, without limitation:

 

(1)           the percentage of Compensation for the next calendar year to be deferred;

 

(2)           if applicable, an election for the Account to be settled following a five-year Deferral Period; and

 

(3)           an election for the Account to be settled in either a lump-sum payment or in a specified number of annual installments (not to exceed five).

 

 

(c)            Time of Election; Effectiveness; Change of Election .

 

(1)           An election to defer Compensation shall be made by a Nonemployee Director no later than the end of the taxable year preceding the year for which the Compensation was earned.  Notwithstanding the foregoing, a Nonemployee Director who first becomes eligible to participate in the Plan may make an election to defer any future Compensation within 30 days after the date of such eligibility; provided, however, that such deferral election shall only apply to the pro rata portion of the Compensation that is earned from the date of such election through the remainder of the year.

 

(2)           An election shall be irrevocable as of the last day of the calendar year in which the election is made and shall continue in effect until the end of the calendar year for which Compensation is earned.

 

(3)           A Nonemployee Director may change a deferral election annually by making different elections in the Annual Participant Election Form provided by the Administrator; all such changes shall only be effective prospectively for subsequent calendar years commencing at or after the time of such notice.

 

(4)           Notwithstanding the foregoing, with respect to any previously deferred amounts, a Nonemployee Director may make a Second Election, which must, except as may otherwise be permitted under the rules applicable under Section 409A of the Code, (A) be effective at least one year after it is made, or, in the case of payments to commence at a specific time, be made at least one year before the first scheduled payment, and (B) defer the commencement of distributions (and each affected distribution) for at least five years.

 

6.            Deferred Compensation Account

 

(a)            Establishment of Account .  The Corporation will maintain Account(s) for each Participant for each year in which they elect to participate in the Plan, which will reflect the Compensation deferred by such Participant for a given calendar year.  Accounts under this Plan shall be unfunded and shall represent only an unsecured claim against the general assets of the Corporation.

 

(b)             Deferred Stock Units .  In any given calendar year, a Participant may elect to defer either 100% or 50% of the Compensation earned by such Participant in the form of Deferred Stock Units.  Such deferral election shall be made in accordance with the provisions of Sections 5(b) and 5(c) of the Plan.  The number of Deferred Stock Units credited to the Participant’s Account, at the time such Compensation would otherwise have been payable absent the election to defer, will be equal to (i) the otherwise payable amount divided by (ii) the Fair Market Value of a Share on the last trading day preceding the credit date.  In addition, on each date on which a cash dividend is payable on the Shares, the Participant’s Account shall be credited with a number of Deferred Stock Units equal to (i) the per Share cash dividend times the number of Deferred Stock Units then credited to the Account, divided by (ii) the Fair Market Value of a Share on the last trading day preceding the dividend payment date. Accounts shall be credited with fractional Deferred Stock Units, rounded to the third decimal place.  Such additional Deferred Stock Units shall be paid to the Participant at the same time as Deferred Stock Units are received by the Participant with respect to the deferral of Compensation.

 

(b)            Adjustments .  In case of a stock split, stock dividend, or other relevant change in capitalization of the Corporation, the number of Deferred Stock Units credited to a Participant’s Account shall be adjusted in such manner as the Administrator deems appropriate.

 

7.            Valuation

 

The value of an Account as of any date on which a settlement payment is to be made under Section 8 shall be the amount equal to the number of Deferred Stock Units then credited to the Participant’s Account times the Fair Market Value of a Share on the last trading day preceding the payment date.

 

 

8.            Settlement

 

(a)            General .  An Account shall be distributed or commence distribution to a Participant on the earlier of (i) the year first following the year in which a Termination of Service occurs, or (ii) with respect to any particular Account, the year first following the year in which the five-year Deferral Period elected by such Participant for such Account expires.  Notwithstanding the foregoing, all distribution elections shall provide that no payments may commence with respect to any Account any later than the year first following the Participant’s 72nd birthday, or such other date as may, subject to Section 409A of the Code, be approved by the Administrator.  To the extent that an Account is to be distributed to a Participant in accordance with this Section 8, such distribution shall occur on or about, but no earlier than, January 15 of the applicable distribution year.

 

(b)            Lump Sum .  If a Participant elects lump sum settlement, an amount of cash equal to the value of the Account determined in accordance with Section 7 shall be paid to the Participant in accordance with Section 8(a).

 

(c)            Installment Payments .  If a Participant elects settlement in installments, an amount of cash determined as hereafter provided shall be paid to the Participant in accordance with Section 8(a) in each year of the installment payment period elected.  The amount of each installment shall be equal to (i) the value of the Account as of the payment date for such installment, determined in accordance with Section 7, divided by (ii) the number of unpaid installments.  Each installment payment shall be debited to the Deferred Stock Units in a Participant’s Account.

 

(d)            Payment on Death .  Notwithstanding a Participant’s settlement election, in the event of a Participant’s death an amount of cash equal to the remaining value of the Account determined as provided in Section 7 shall be paid in a single payment to the Participant’s estate as soon as possible, without undue delay, but in no event later than 90 days after the date of the Participant’s death.

 

(e)            No Early Withdrawal .  No withdrawal may be made from a Participant’s Account except as provided in this Section 8.

 

(f)            Cash Settlement Only .  Settlement of an Account under this Plan shall be made only in cash, via wire transfer or check in U.S. dollars.

 

9.            Non-Assignability

 

The right of a Participant to receive any unpaid portion of the Participant’s Account may not be assigned or transferred except by will or the laws of descent and distribution, and may not be pledged or encumbered or be subject to attachment, execution, or levy of any kind.

 

10.            Amendment and Termination

 

This Plan may be amended, modified or terminated by the Board at any time (taking into account, without limitation, Section 409A of the Code as the Board may deem appropriate), provided that no such amendment, modification or termination shall, without the consent of a Participant, adversely affect such Participant’s rights with respect to amounts accrued in the Participant’s Account.

 

 

11.            Governing Law

 

This Plan and all actions taken under it shall be governed by the laws of the State of New York, without reference to conflict of law principles.

 

12.            Severability

 

If any provision of this Plan shall be deemed illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Plan but shall be fully severable.

 

13.            Compliance

 

The Administrator is authorized to take such steps as may be necessary including, without limitation, delaying effectiveness of a Participant’s election or delaying settlement of an Account, in order to ensure that this Plan and all actions taken under it comply with any law, regulation, or listing requirement which the Administrator deems applicable or desirable, including the exemption provided by Rule 16b-3 under the Securities Exchange Act of 1934, as amended.

 

14.            Withholding

 

If the Corporation concludes that any tax is owing with respect to any deferral of income or payment hereunder, the Corporation shall withhold such amounts from any payments due the Participant, or otherwise make appropriate arrangements with the Participant for satisfaction of such obligation.

 

 

MFA MORTGAGE INVESTMENTS, INC.

 

SECOND AMENDED AND RESTATED

2003 NONEMPLOYEE DIRECTORS’ DEFERRED COMPENSATION PLAN

 

ANNUAL PARTICIPANT ELECTION FORM FOR 2004 DEFERRALS

Annual Director Compensation 20__

 

In accordance with the provisions of the MFA Mortgage Investments, Inc. Second Amended and Restated 2003 Nonemployee Directors’ Deferred Compensation Plan (the “Plan”), I hereby make the following elections pursuant to the Plan:

 

1.           AMOUNT OF COMPENSATION DEFERRAL  -  I hereby elect to defer the annual Compensation otherwise earned and payable in to me in 20__ by the Corporation as follows:  (Check one if participating in Plan)

 

I elect to defer _____ 50% or _____ 100% of the aggregate value of the annual retainer payable to a Nonemployee Director for service on the Board of the Corporation.

 

2.           DEFERRAL PERIOD – I hereby elect the five-year Deferral Period for Compensation earned during 20­­­­__, such that payment will be deferred until on or about January 15, 20__.    _____  Yes          _____  No

 

3.           SETTLEMENT (Check one):

 

_____

I elect to the following installment payment period:  _____ (indicate between two and five years) OR

_____

I elect a lump sum distribution in accordance with the terms of the Plan.

 

This election is subject to all of the terms of the Plan attached hereto and on file with the records of the Corporation.  Unless otherwise defined, all defined terms used herein shall have the meanings ascribed to them in the Plan.

 

 

Please check below if you do not wish to participate in the Plan and sign below.

 

_____

I do not wish to participate in the Plan.

 

 

Dated: _____________________                                  __________________________________                                                     

Signature of Director

 

 

Accepted on the ___ day of ___________, 20__

on behalf of MFA Mortgage Investments, Inc.

 

By: ________________________________________

 

FEDERAL TAX ASPECTS

 

The following discussion is a general description of expected Federal income tax results under current law.  The information is not tax advice, it is intended to be for general guidance only and does not give a full description of all the tax issues which may apply to you.  You should also remember that tax laws may change from time to time.  You should consult your own tax advisors regarding the impact of the Plan, and your election thereunder, with respect to any federal, state, local or other taxes.

 

The Plan is intended to be a non-qualified deferred compensation plan under the provisions of the Internal Revenue Code. At the time a Participant’s deferral of Compensation is made, it is intended that such Participant will not recognize income for Federal income tax purposes. In addition, Deferred Stock Units credited pursuant to Section 6(b) of the Plan are not intended to be treated as income at the time they are credited to the Account of a Participant.

 

Participants will recognize ordinary income at the time the Participant deferrals, together with the earnings credited to these amounts, are actually paid out or made available to the Participants. The amount of such ordinary income will equal the amount of cash received.

 

The Plan is not intended to be a tax-qualified plan under Section 401 (a) of the Internal Revenue Code and is not intended to be subject to ERISA. The Corporation has not received any ruling from the Internal Revenue Service concerning the tax consequences of the Plan.

 

 

 

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%+

 

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.

 

 

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.

 

 

(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.

 

 

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.

 

 

(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.

 

 

(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.

 

 

(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.

 

 

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.

 

 

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.

 

 

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

 

 

 

 

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.

 

 

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 ”);

 

 

(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.

 

 

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

 

 

By:

Name:

Title:

 

 

 

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.

 

 

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.

 

 

(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.

 

 

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.

 

 

(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.

 

 

(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.

 

 

(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.

 

 

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.

 

 

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.

 

 

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

 

 

 

 

Exhibit B

 

Mutual Release

 

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

 

 

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 ”);

 

 

(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.

 

 

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

 

 

By:

Name:

Title: