ANNALY CAPITAL MANAGEMENT INC
EXHIBIT 10.4
<DOCUMENT>
<TYPE>EX-10.4
<SEQUENCE>2
<FILENAME>a5617618ex10_4.txt
<DESCRIPTION>EXHIBIT 10.4
<TEXT>
                                                                    Exhibit 10.4

                              AMENDED AND RESTATED
                              EMPLOYMENT AGREEMENT


         THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT ("Agreement"), dated
February 25, 2008 (the "Effective Date"), is entered into by and between
Wellington Denahan-Norris (the "Executive") and Annaly Capital Management, Inc.,
a Maryland corporation (the "Company").

         WHEREAS, the Company and the Executive entered into an employment
agreement, dated January 27, 1997 (the "Employment Agreement") and amended and
restated on December 31, 2003; and

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

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

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

         Definitions. Capitalized terms used in this Agreement shall have the
respective meanings assigned to them below:

         1.1 "Book Value" of the Company shall be equal to the aggregate amounts
reported as Stockholders Equity on the Company's balance sheet as of the end of
each fiscal year determined in accordance with generally accepted accounting
principles (GAAP) but without taking into account any valuation reserves (i.e.,
changes in the value of the Company's portfolio of investments as a result of
mark-to-market valuation changes, referred to in the financial statements as
"Accumulated Other Comprehensive Gain or Loss").

         1.2 "Code" shall mean the Internal Revenue Code of 1986, as amended.

         1.3 "Compensation Committee" shall mean the Compensation Committee of
the Board of Directors of the Company.

         1.4 "Good Reason" shall mean the occurrence of one or more of the
following without the Executive's written consent: (i) a material breach of this
Agreement by the Company, or (ii) a materially significant change in the
Executive's duties, authorities or responsibilities, or (iii) the relocation of
the Executive's principal place of employment more than 60 miles from New York,
New York, or (iv) the failure of the Company to obtain the assumption in writing
of its obligations to perform this Agreement by any successor to all or
substantially all of the assets or business of the Company within fifteen (15)
days upon a merger, consolidation, sale or similar transaction, provided however
that none of the events specified in (i), (ii) or (iii) shall constitute Good
Reason unless the Executive shall have notified the Company in writing
describing the events which constitute Good Reason and the Company shall have
failed to cure such event within a reasonable period, not to exceed thirty (30)
days, after the Company's actual receipt of such written notice.

             Employment as Chief Investment Officer and Chief Operating
Officer of the Company. The Company hereby employs and engages the Executive as
Chief Investment Officer and Chief Operating Officer of the Company, and the
Executive does hereby accept and agree to such employment and engagement. The
Executive's duties as Chief Investment Officer and Chief Operating Officer shall
be such duties typically required of a Chief Investment Officer and Chief
Operating Officer, and as shall from time to time be agreed upon by the
Executive and the Board of Directors of the Company. The Executive shall report
solely and directly to the Company's Chief Executive Officer. The Executive's
services shall be performed in the Company's offices in New York, New York or
such other location as the Company and Executive shall agree. Except for periods
of Disability (as defined below), during the Term, the Executive shall devote
substantially all of her business time, attention and energies to the
performance of her duties under this Agreement; provided, however, that the
Executive shall be allowed, to the extent such activities do not substantially
interfere with the performance by the Executive of her duties and
responsibilities hereunder, (a) to manage the Executive's personal, financial
and legal affairs, and (b) serve on civic or charitable boards or committees.
Furthermore, the Executive shall exercise due diligence and care in the
performance of her duties to the Company under this Agreement.
<PAGE>
             Term of Agreement.

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

             Compensation.

             Base Salary. The Company shall pay the Executive, and the Executive
agrees to accept from the Company, in payment for her services to the Company, a
base salary equal to a per annum amount of $2,430,000, ("Base Salary"), payable
in equal biweekly installments or at such other time or times as the Executive
and the Company shall agree. The Base Salary can be increased (but not
decreased) at any time by the Compensation Committee or the Board of Directors
of the Company, as the case may be. The Executive's salary as increased shall be
deemed to be the Base Salary for all purposes under this Agreement.

             Performance Bonus. With respect to each fiscal year, the Executive
shall be eligible to receive an amount equal to the sum of: (A) the excess, if
any, of (i) 0.250% of the Book Value of the Company for such fiscal year over
(ii) the Executive's Base Salary as of the last day of such fiscal year;
provided, however, that the Compensation Committee must approve such amount,
plus (B) additional amounts as may be recommended by management and approved by
the Compensation Committee (such sum being the "Performance Bonus").

             Annual Review. The Board of Directors shall, at least annually,
review the Executive's entire compensation package to determine if it should be
increased (but not decreased) in order for it to continue to meet the Company's
compensation objectives.

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

             Benefit Plans. The Executive shall be entitled to participate in
any benefit plans relating to stock options, stock purchases, awards, pension,
thrift, profit sharing, life insurance, medical coverage, education, or other
retirement or employee benefits available to other senior executive employees of
the Company, subject to any restrictions (including waiting periods) specified
in such plans.

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

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

             Termination of Executive's Employment.

             Death. If the Executive dies while employed by the Company, her
employment shall immediately terminate. The Company's obligation to pay the
Executive's Base Salary shall cease as of the date of Executive's death, except
that any earned, but unpaid Base Salary and Performance Bonus shall be paid to
the Executive's beneficiaries as soon as practicable after her death. In
addition, the Executive's beneficiaries shall receive the pro rata portion of
the Performance Bonus for the year of the Executive's death, which shall be
equal to the Performance Bonus (as determined at the end of the year of the
Executive's death) multiplied by a ratio equal to (A) the number of days the
Executive was employed in the year of her death, divided by (B) 365. The
Performance Bonus shall be paid to the Executive's beneficiaries at the same
time and in the same manner as such Performance Bonus would have been paid to
the Executive had the Executive not died or been terminated. Thereafter,
Executive's beneficiaries or her estate shall receive benefits in accordance
with the Company's retirement, insurance and other applicable programs and plans
then in effect.
<PAGE>

             Disability. If, as a result of the Executive's incapacity due to
physical or mental illness ("Disability"), Executive shall have been absent from
the full-time performance of her duties with the Company for six (6) consecutive
months, and, within thirty (30) days after written notice is provided to her by
the Company, the Executive shall not have returned to the full-time performance
of her duties, the Executive's employment under this Agreement may be terminated
by the Company for Disability. With respect to the period during which begins
when the Executive is first absent from the full-time performance of her duties
with the Company due to Disability and ends upon the later of (i) the date she
is terminated from employment in accordance with the foregoing sentence, or,
(ii) the date she begins receiving long-term disability payments under the
Company's long term disability plan for senior executives ("Salary Continuation
Period"), the Company shall continue to pay the Executive her Base Salary at the
rate in effect at the commencement of such period of Disability. In addition,
the Executive shall receive the pro rata portion of the Performance Bonus for
the year of the Executive's termination due to Disability, which shall be equal
to the Performance Bonus (as determined at the end of the year in which the
Executive is terminated by reason of Disability) multiplied by a ratio equal to
(A) the number of days the Executive was employed in the year of her termination
for Disability, divided by (B) 365. The Performance Bonus shall be paid to the
Executive at the same time and in the same manner as such Performance Bonus
would have been paid had the Executive not been terminated by reason of
Disability. Upon the end of the Salary Continuation Period, the Executive's
benefits shall be determined under the Company's retirement, insurance and other
compensation programs then in effect in accordance with the terms of such
programs

             Termination by the Company for Cause. The Company may terminate the
Executive's employment under this Agreement for "Cause," at any time prior to
expiration of the Term of the Agreement, only in the event of (i) the
Executive's failure to substantially perform the duties described in this
Agreement, (ii) acts or omissions constituting recklessness or willful
misconduct on the part of the Executive in respect of her fiduciary obligations
to the Company which is materially and demonstrably injurious to the Company, or
(iii) the Executive's conviction for fraud, misappropriation or embezzlement in
connection with the assets of the Company. In the case of clause (i) only, it
shall also be a condition precedent to the Company's right to terminate the
Executive's employment for Cause that (1) the Company shall first have given the
Executive written notice stating with specificity the reason for the termination
("breach") at least 60 days before the meeting of the Board of Directors called
to make such determination and the Executive and her counsel are given the
opportunity to answer such grounds for termination in person, at a hearing or in
writing delivered to the Chairman of the Board, in the Executive's discretion,
before a vote by the Board of Directors on the existence of Cause; and (2) if
such breach is susceptible to cure or remedy, a period of 60 days from and after
the giving of the notice described in (1) shall have elapsed without the
Executive having effectively cured or remedied such breach during such 30-day
period, unless such breach cannot be cured or remedied within 60 days, in which
case the period for remedy or cure shall be extended for a reasonable time (not
to exceed an additional 30 days), provided the Executive has made and continues
to make a diligent effort to effect such remedy or cure. In the case of clause
(iii) above, the Executive's employment under this Agreement may be terminated
immediately without any advance written notice. Upon a determination that
grounds exist for a termination for Cause by the Board of Directors and that the
breach cannot be cured, or immediately in the case of clause (iii) above, the
Company's obligation to pay the Executive's Base Salary, any Performance Bonus
and benefits shall immediately cease, except to the extent any Base Salary or
Performance Bonus has been earned but has not yet been paid.

             Termination by the Executive. The Executive may at any time during
the Term of this Agreement terminate her employment hereunder for any reason or
no reason by giving the Company notice in writing not less 90 days in advance of
such termination. The Executive shall have no further obligations to the Company
after the effective date of her termination, as set forth in the notice. In the
event of a termination by the Executive under this Section, the Company will pay
only the portion of Base Salary or previously awarded Performance Bonus unpaid
as of the termination date. Benefits which have accrued and/or vested on the
termination date will continue in effect according to their terms, but no
additional accrual or vesting will take place. Notwithstanding the foregoing, if
the Executive terminates her employment for Good Reason, the notice period
provided in Section 7.2 above shall not apply and the Executive will be entitled
to the severance detailed in Section 8.

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

             Payment of Unpaid Base Salary. The Company shall immediately pay
the Executive any portion of the Executive's Base Salary or previously awarded
Performance Bonus not paid prior to the termination date.
<PAGE>

             Severance Payment. The Company shall pay the Executive an amount
(the "Severance Amount") equal to three (3) times the greater of (i) the
Executive's combined Base Salary and actual Performance Bonus for the preceding
fiscal year or (ii) the average for the three preceding years of the Executive's
combined actual Base Salary and Performance Bonus. Fifty percent of the
Severance Amount shall be paid within five (5) days after the date the Executive
terminates for Good Reason or is terminated by the Company for any reason other
than Cause, and the remaining 50% of the Severance Amount shall be paid in three
equal monthly installments beginning on the first business day of the month
following the month of such termination.

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

             Maximization of Payment in the Event of a Change in Control. The
Company shall make the payments and provide the benefits to be paid and provided
under this Agreement; provided, however, that if all or any portion of the
payments and benefits provided under this Agreement, either alone or together
with other payments and benefits which the Executive receives or is then
entitled to receive from the Company or otherwise, would constitute a "parachute
payment" within the meaning of Section 280G of the Code (or a similar or
successor provision), the Company shall reduce such payments hereunder and such
other payments to the extent necessary so that no portion thereof shall be
subject to the excise tax imposed by Section 4999 of the Code (or a similar or
successor provision); but only if, by reason of such reduction, the net
after-tax benefit to the Executive shall exceed the net after-tax benefit if
such reduction were not made. The payments or benefits shall be reduced in the
manner and order determined by the Executive, subject to the consent of the
Company, which consent shall not be unreasonably withheld. The determination of
whether the payments shall be reduced as provided in this Section 8(d) and the
amount of such reduction shall be made at the Company's expense by a public
accounting firm retained by the Company at the time the calculation is to be
performed, or one selected by the Company from among the four (4) largest public
accounting firms in the United States (the "Accounting Firm"). The Accounting
Firm shall provide its determination, together with detailed supporting
calculations and documentation to the Company and the Executive within twenty
(20) business days of the payment of the initial installment of the Severance
Amount. The Executive may review these calculations for a period of twenty days
and may retain another accounting firm (at her own expense) for such review and
submit objections during such twenty-day review period.

             No Other Entitlement to Benefits Under Agreement. Except as set
forth in Section 7 or Section 8 of this Agreement, following a termination
governed by Section 7 or Section 8, the Executive shall not be entitled to any
other compensation or benefits, except as may be separately negotiated by the
parties and approved by the Board of Directors of the Company in writing in
conjunction with the termination of Executive's employment.

             Noncompetition Provisions.

             Noncompetition. The Executive agrees that during the Term of
employment under this Agreement prior to any termination of her employment
hereunder and, in the event of termination of the Executive's employment by the
Company for Cause or voluntary termination of employment by the Executive (other
than for Good Reason), for a period of one year following such termination, the
Executive will not, directly or indirectly, without the prior written consent of
the Company, manage, operate, join, control, participate in, or be connected as
a stockholder (other than as a holder of shares publicly traded on a stock
exchange or the NASDAQ National Market System), partner, or other equity holder
with, or as an officer, director or employee of, any private or public
investment firm, broker dealer or real estate investment trust whose business
strategy is based on or who engages in the trading, sales or management of
mortgage-backed securities (the "Business") in any geographical region in which
the Company engages in the Business (a "Competitor"). It is further expressly
agreed that the Company will or would suffer irreparable injury of the Company
in violation of the preceding sentence of this Agreement and that the Company
would by reason of such competition be entitled to injunctive relief in a court
of appropriate jurisdiction, and the Executive further consents and stipulates
to the entry of such injunctive relief in such a court prohibiting the Executive
from competing with the Company or any subsidiary or affiliate of the Company,
in the areas of business set forth above, in violation of this Agreement.
<PAGE>

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

             Soliciting Executives. The Executive promises and agrees that she
will not directly or indirectly solicit any of the Company Executives to work
for any Competitor during the one-year period following her termination of
employment unless such termination is by the Company for reasons other than
Cause or by the Executive for Good Reason.

             Corporate Opportunities. The Executive agrees, in accordance with
Maryland law, to first offer to the Company corporate opportunities learned of
solely as a result of her service as an officer of the Company.

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

               If to the Company:          Michael A. J. Farrell

                                           Chairman and Chief Executive Officer

                                           Annaly Capital Management, Inc.

                                           1211 Avenue of the Americas

                                           Suite 2902

                                           New York, NY 10036

                                           Phone: (212) 696-0100

                                           Fax:  (212) 696-9809

               If to the Executive:        Wellington Denahan-Norris

                                           180 West 58, PH-A

                                           New York, NY  10019

                                           Phone: (212) 212-307-8053


         Either party may change such party's address for notices by notice duly
given pursuant hereto.

             Attorneys' Fees. In the event judicial determination or arbitration
(as provided in Section 22) is necessary for any dispute arising as to the
parties' rights and obligations hereunder, the Company shall pay to the
Executive her costs incurred (including attorney's fees) in deciding such
dispute provided that she has substantially prevailed.

             No Mitigation or Offset. The Executive shall not be required to
mitigate the amount of any payment provided for in this Agreement by seeking
other employment or otherwise. The Company shall not be entitled to set off
against the amounts payable to the Executive under this Agreement any amounts
earned by the Executive in other employment after termination of employment with
the Company, or any amounts which might have been earned by the Executive in
other employment had such other employment been sought.
<PAGE>

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

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

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

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

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

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

             Indemnification; Directors and Officers Insurance. The Company
shall indemnify and hold Executive harmless to the maximum extent permitted by
Section 2-418 of the Maryland General Corporations Law or its successor statute.
During the Term and for six years following the date of the Executive's
termination as an officer of the Company, the Company (or any successor thereto)
shall provide comprehensive coverage under the Company's officers and directors
insurance policy (or policies) on substantially the same terms and levels that
it provides to its senior executive officers, at the Company's sole cost.

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

             Successor Sections. References herein to sections, rules or
regulations of the Code or other applicable law shall be deemed to include any
successor sections, rules or regulations.

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

             Any decision made by the Board of Arbitration (either prior to or
after the expiration of such thirty (30) calendar day period) shall be final,
binding and conclusive on the Executive and the Company and entitled to be
enforced to the fullest extent permitted by law and entered in any court of
competent jurisdiction. The Company shall bear all of the costs of arbitration,
except for the attorneys' fees incurred by the Executive, which fees shall be
subject to Section 11 hereof.

             [REMAINDER OF THE PAGE LEFT INTENTIONALLY BLANK]


<PAGE>



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



         ANNALY CAPITAL MANAGEMENT, INC.





         By: /s/ Michael A.J. Farrell
            -------------------------
              Michael A.J. Farrell









         By: /s/ Wellington Denahan-Norris
            ------------------------------
            Wellington Denahan-Norris



</TEXT>
</DOCUMENT>
