Exhibit 10.2

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ELLINGTON FINANCIAL OPERATING PARTNERSHIP LLC

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LIMITED LIABILITY COMPANY OPERATING AGREEMENT

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Dated as of January 1, 2013

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THE LIMITED LIABILITY COMPANY MEMBERSHIP INTERESTS OF ELLINGTON FINANCIAL
OPERATING PARTNERSHIP LLC (“UNITS”) HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), THE SECURITIES LAWS
OF ANY STATE OR ANY OTHER APPLICABLE SECURITIES LAWS IN RELIANCE UPON EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND SUCH LAWS. SUCH
UNITS MUST BE ACQUIRED FOR INVESTMENT ONLY AND MAY NOT BE OFFERED FOR SALE,
PLEDGED, HYPOTHECATED, SOLD, ASSIGNED OR TRANSFERRED AT ANY TIME EXCEPT IN
COMPLIANCE WITH (A) THE SECURITIES ACT, (B) ANY APPLICABLE STATE SECURITIES
LAWS, (C) ANY OTHER APPLICABLE SECURITIES LAWS, AND (D) THE TERMS AND CONDITIONS
OF THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT.

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LIMITED LIABILITY COMPANY OPERATING AGREEMENT
OF
ELLINGTON FINANCIAL OPERATING PARTNERSHIP LLC
THIS LIMITED LIABILITY COMPANY OPERATING AGREEMENT (the “Agreement”) of
Ellington Financial Operating Partnership LLC (the “Company”) shall be effective
as of 12:01 a.m. of this 1st day of January, 2013, and is entered into by EMG
Holdings, L.P., a Delaware limited partnership, Ellington Financial LLC (“EFC”
or the “Managing Member,” and together with EMG Holdings, L.P., the “Members”),
a Delaware limited liability company, and Ellington Financial Operating
Partnership LLC, a Delaware limited liability company.
RECITALS
WHEREAS, the Company was formed as a limited liability company under the laws of
the State of Delaware on December 14, 2012 pursuant to a certificate of
formation filed with the Secretary of State of the State of Delaware; and
WHEREAS, EFC is the sole member and owner of one hundred percent (100%) of the
limited liability company interests of each of EF Securities LLC, a Delaware
limited liability company, and EF Mortgage LLC, a Delaware limited liability
company (collectively, the “Contributed Subsidiaries”); and
WHEREAS, pursuant to Section 1.12 hereof, concurrent with the effectiveness of
this Agreement, EFC shall contribute and assign the Contributed Subsidiaries and
its other assets and existing liabilities (collectively, the “Contributed
Property”) to the Company, and the Company shall acquire and assume the same,
whereby the Company shall become the sole member of each of EF Securities LLC
and EF Mortgage LLC (the “EFC Contribution”); and
WHEREAS, concurrent with the effectiveness of this Agreement, EFC shall receive
20,370,469 Common Units and 397,096 LTIP Units and the other consideration set
forth herein in exchange for the EFC Contribution; and
WHEREAS, concurrent with the effectiveness of this Agreement, EMG Holdings, L.P.
shall contribute cash to the Company in exchange for 212,000 Common Units and
the other consideration set forth herein; and
WHEREAS, the Members desire to enter into this Agreement to provide for the
regulation of the affairs and the conduct of the business of the Company on the
terms set forth in this Agreement.
ARTICLE I
THE LIMITED LIABILITY COMPANY
1.1.    Definitions. Capitalized terms used herein shall have the meanings
assigned to such terms in Exhibit A hereto.

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1.2.    Formation. The Company was formed as a limited liability company under
and pursuant to the provisions of the Delaware Limited Liability Company Act, as
amended from time to time (the “Act”) by the execution, delivery and filing of a
Certificate of Formation described in Section 18‑201 of the Act (the
“Certificate of Formation”) with the Office of the Secretary of State of
Delaware. The rights and liabilities of the Members shall be as provided under
the Act, the Certificate of Formation and this Agreement.
1.3.    Name. The name of the Company shall be “Ellington Financial Operating
Partnership LLC” and its business shall be carried on in such name with such
variations and changes as the Managing Member (as hereinafter defined) shall
determine or deem necessary to comply with requirements of the jurisdictions in
which the Company’s operations are conducted.
1.4.    Purpose; Powers.
(a)    The purposes of the Company are (i) to conduct or promote any lawful
business, purpose or activity permitted for a limited liability company of the
State of Delaware under the Act, (ii) subject to clause (i), to make such
investments and engage in such activities as the Managing Member may approve,
and (iii) to engage in any and all activities related or incidental to the
purposes set forth in clauses (i) and (ii); provided, however, that, except if
the Managing Member determines otherwise pursuant to Section 1.11, such
activities shall be limited to and conducted in such a manner as to not require
the Company to be registered as an investment company under the Investment
Company Act of 1940, as amended (the “Investment Company Act”) or to cause the
Company to be treated as an association or publicly traded partnership taxable
as a corporation for U.S. federal (and applicable state) income tax purposes.
(b)    The Company has the power to do any and all acts necessary, appropriate,
proper, advisable, incidental or convenient to or in furtherance of the purposes
of the Company set forth in this Section 1.4 and has, without limitation, any
and all powers that may be exercised on behalf of the Company by the Managing
Member pursuant to Article III hereof.
1.5.    Term. Except if the Company is sooner dissolved as provided herein, the
term of the Company shall commence on the date of filing of the Certificate of
Formation and shall continue in full force and effect until the Company is
dissolved and liquidated pursuant to the terms and conditions of Article VII and
Article VIII of this Agreement and the Certificate of Formation is canceled as
provided in the Act.
1.6.    Principal Business Office. The principal business office of the Company
shall be located at c/o Ellington Financial LLC, 53 Forest Avenue, Suite 301,
Old Greenwich, Connecticut 06870, or at such other location as may hereafter be
determined by the Managing Member. The Company may maintain such other offices
at such other places as the Managing Member deems advisable.
1.7.    Registered Office. The address of the registered office of the Company
in the State of Delaware is c/o National Corporate Research, Ltd., 615 South
DuPont Highway, Dover, Delaware 19901. At any time, the Managing Member may
designate another registered office for the Company.

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1.8.    Registered Agent. The name of the registered agent of the Company for
service of process on the Company in the State of Delaware is National Corporate
Research, Ltd. At any time, the Managing Member may designate another registered
agent for the Company.
1.9.    Title to Company Property. Legal title to all property of the Company
shall be held and vested and conveyed in the name of the Company and no real or
other property of the Company shall be deemed to be owned by the Members
individually. The membership Units of the Members shall constitute personal
property.
1.10.    Fiscal Year. The fiscal year of the Company (the “Fiscal Year”) for
financial statement purposes shall be fixed by the Managing Member.
1.11.    Power of Attorney. Each Member by execution of this Agreement, directly
or through execution by power of attorney or other consent, irrevocably appoints
the Managing Member its true and lawful attorney-in-fact, who may act for each
Member and in its name, place and stead, and for its use and benefit, to sign,
acknowledge, swear to, deliver, file or record, at the appropriate public
offices, any and all documents, certificates and instruments, including without
limitation, any and all amendments and restatements of this Agreement as may be
deemed necessary or desirable by the Managing Member to carry out fully the
provisions of this Agreement and the Act in accordance with their terms, which
power of attorney is coupled with an interest and shall survive the death,
dissolution or legal incapacity of the Member, or the Transfer by the Member of
any part or all of its Membership Interest.
1.12.    EFC Contribution. Concurrent with the effectiveness of this Agreement,
EFC hereby contributes, transfers and assigns the Contributed Property to the
Company, and the Company hereby accepts transfer of and assumes the Contributed
Property from EFC and further assumes all liabilities and obligations of EFC
outstanding as of the date hereof. In exchange for the EFC Contribution, EFC
shall receive 20,370,469 Common Units and 397,096 LTIP Units and the other
consideration set forth herein and the Company shall become the sole member and
owner of one hundred percent (100%) of the limited liability company interests
of each of EF Securities LLC and EF Mortgage LLC. The Contributed Property shall
be transferred to the Company concurrent with the execution of this Agreement on
the date hereof, free and clear of all liens, encumbrances, security interests,
prior assignments or conveyances, conditions, restrictions, claims and other
matters affecting title. EFC hereby represents and warrants that it has clear
title to the Contributed Property as of the date of this Agreement.
ARTICLE II

THE MEMBERS
2.1.    The Members. As of the effective date of this Agreement, the Company
shall have two classes of Units entitled “Common Units” and “LTIP Units,” which
shall be issued to the Members in the amounts set forth opposite such Member’s
name on Schedule A hereto. As of the date hereof, the Members (including the
Common Members) are those listed on Schedule A attached hereto, which includes
the addresses of such Members and the Units owned by each of them. The Units
issued to the Members shall represent valid Membership Interests in the Company.
The Units are subject to the restrictions on Transfer set forth in Article X
and, except as set forth in a written

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agreement between the Managing Member or the Company and a Member with respect
to Units held by such Member, no Members will have registration rights with
respect to their Units.
2.2.    Admission of New Members. New members shall be admitted only upon
approval of the Managing Member, subject in all cases to Section 3.2, Article X
and the other terms and conditions of this Agreement, and upon execution of a
counterpart signature page to this Agreement. The Managing Member shall have the
authority to amend and update Schedule A from time to time to reflect changes in
the Members.
2.3.    Liability of Members. All debts, obligations and liabilities of the
Company, whether arising in contract, tort or otherwise, shall be solely the
debts, obligations and liabilities of the Company, and the Members shall not be
obligated personally for any such debt, obligation or liability of the Company
solely by reason of being a Member. If, notwithstanding the terms of this
Agreement, it is determined under applicable Law that any Member has received a
distribution which is required to be returned to or for the account of the
Company or Company creditors, then the obligation under applicable Law of any
Member to return all or part of a distribution made to such Member shall be the
obligation of such Member and not of any other Member. To the fullest extent
permitted by Law, no Member shall have any fiduciary duty, or any other duty or
liability (except as expressly provided herein), to the Company or any other
Member; provided, however that each Member shall be subject to the implied
contractual covenant of good faith and fair dealing.
ARTICLE III
MANAGEMENT BY THE MANAGING MEMBER; COMPANY OBLIGATIONS
3.1.    Managing Member. The management of the Company is fully reserved to the
Managing Member, who is EFC. Subject to Section 3.2 hereof, the powers of the
Company shall be exercised by or under the authority of, and the business and
affairs of the Company shall be managed under the direction of, the Managing
Member, who shall make all decisions and take all actions for the Company.
Decisions or actions taken by the Managing Member in accordance with this
Agreement shall constitute decisions or actions by the Company and shall be
binding on the Company. Except as expressly provided for herein, including
Section 3.2 hereof, the Members (other than the Managing Member) shall not
participate in, or take part in the control of, the business of the Company, and
shall have no right or authority to act for or bind the Company.
3.2.    Officers and Related Persons. The Managing Member shall have the
authority to (i) appoint and terminate officers of the Company, including, but
not limited to, a chief executive officer, a president, one or more chief
investment officers, a chief financial officer, one or more vice presidents
(each of whom may be designated as an executive vice president, a senior vice
president or a vice president with a particular area of responsibility), a
treasurer, one or more assistant treasurers, a secretary and one or more
assistant secretaries, each of which shall have such rights, powers and
authority as the Managing Member may, in its sole discretion, from time to time
delegate to any such officer, and (ii) retain and terminate employees, agents
and consultants of the Company and to delegate such duties to any such officers,
employees, agents and consultants as the Managing Member deems appropriate,
including the power, acting individually or jointly, to represent and bind the
Company in all matters, in accordance with the scope of their respective duties.

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3.3.    Company Obligations.
(a)    Except as provided in this Section 3.3 and elsewhere in this Agreement
(including the provisions of Articles V and IX hereof regarding distributions,
payments and allocations to which it may be entitled), the Managing Member shall
not be compensated for its services as Managing Member of the Company.
(b)    All Administrative Expenses shall be obligations of the Company, and the
Managing Member shall be entitled to reimbursement by the Company for any
expenditure (including Administrative Expenses) incurred by it that has been
made other than out of the funds of the Company. All reimbursements hereunder
shall be characterized for federal income tax purposes as expenses of the
Company incurred on its behalf, and not as expenses of the Managing Member.
ARTICLE IV

CAPITAL CONTRIBUTIONS AND ACCOUNTS
4.1.    Capital Contributions. Each Member has made or is deemed to have made a
capital contribution to the Company in exchange for the Units set forth opposite
such Member’s name on Schedule A hereto, as it may be amended or restated from
time to time by the Managing Member to the extent necessary to reflect
accurately sales, exchanges or other Transfers, redemptions, Capital
Contributions, the issuance of additional Units or similar events having an
effect on a Member’s ownership of Units.
4.2.    Additional Capital Contributions and Issuances of Additional Units.
Except as provided in this Section 4.2 or in Section 4.3 hereof, the Members
shall have no right or obligation to make any additional Capital Contributions
or loans to the Company. The Managing Member may contribute additional capital
to the Company, from time to time, and receive additional Membership Interests,
in the form of Units, in respect thereof, in the manner contemplated in this
Section 4.2.
(a)    Issuances of Additional Units.
(i)    General. As of the effective date of this Agreement, the Company shall
have two classes of Units, entitled “Common Units” and “LTIP Units.” The
Managing Member is hereby authorized to cause the Company to issue such
additional Membership Interests, in the form of Units, for any Company purpose
at any time or from time to time to the Members (including the Managing Member)
or to other Persons for such consideration and on such terms and conditions as
shall be established by the Managing Member in its sole and absolute discretion,
all without the approval of any other Members. The Managing Member’s
determination that consideration is adequate shall be conclusive insofar as the
adequacy of consideration relates to whether the Units are validly issued and
fully paid. Any additional Units issued thereby may be issued in one or more
classes, or one or more series of any of such classes, with such designations,
preferences and relative, participating, optional or other special rights,
powers and duties, including rights, powers and duties senior to the
then-outstanding Units held by the Members, all as shall be determined by the

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Managing Member in its sole and absolute discretion and without the approval of
any other Member, subject to Delaware law that cannot be preempted by the terms
hereof and as set forth in a written document hereafter attached to and made an
exhibit to this Agreement (each, a “Unit Designation”), including, without
limitation, (i) the allocations of items of Company income, gain, loss,
deduction and credit to each such class or series of Units; (ii) the right of
each such class or series of Units to share in the Company’s distributions; and
(iii) the rights of each such class or series of Units upon dissolution and
liquidation of the Company; provided, that no additional Units shall be issued
to the Managing Member (or any direct or indirect wholly owned Subsidiary of the
Managing Member) unless:
(1)    (A) the additional Units are issued in connection with an issuance of EFC
Shares or other membership interests of, or other interests in, EFC, which EFC
Shares, membership interests or other interests have designations, preferences
and other rights, all such that the economic interests are substantially similar
to the designations, preferences and other rights of the additional Units issued
to the Managing Member (or any direct or indirect wholly owned Subsidiary of the
Managing Member) by the Company in accordance with this Section 4.2(a)(i)(1) and
(B) the Managing Member (or any direct or indirect wholly owned Subsidiary of
the Managing Member) shall make a Capital Contribution to the Company in an
amount equal to the cash consideration, if any, received by the Managing Member
from the issuance of such EFC Shares, membership interests or other interests in
the Managing Member;
(2)    the additional Units are issued in connection with an issuance of EFC
Shares or other membership interests of, or other interests in, EFC pursuant to
a distribution declared by EFC, which EFC Shares, membership interests or
interests have designations, preferences and other rights, all such that the
economic interests are substantially similar to the designations, preferences
and other rights of the additional Units issued to the Managing Member (or any
direct or indirect wholly owned Subsidiary of the Managing Member) by the
Company in accordance with this Section 4.2(a)(i)(2), provided that (A) if the
Managing Member allows the holders of its EFC Shares to elect whether to receive
such distribution in EFC Shares or other membership interests of, or other
interests in the Managing Member or cash, the Company will give the other
Members (excluding the Managing Member or any direct or indirect Subsidiary of
the Managing Member) the same election to elect to receive (I) Units or cash or,
(II) at the election of the Managing Member, EFC Shares, membership interests or
other interests in the Managing Member or cash, and (B) if the Company issues
additional Units pursuant to this Section 4.2(a)(i)(2), then an amount of income
equal to the value of the Units received will be allocated to those holders of
Common Units that elect to receive additional Units;
(3)    the additional Units are issued in exchange for property owned by the
Managing Member (or any direct or indirect wholly owned Subsidiary of the
Managing Member) with a fair market value, as determined by the Managing Member,
in good faith, equal to the value of the Units; or

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(4)    the additional Units are issued to all Members in proportion to their
respective Percentage Interests.
Without limiting the foregoing, the Managing Member is expressly authorized to
cause the Company to issue Units for less than fair market value, so long as the
Managing Member concludes in good faith that such issuance is in the best
interests of the Managing Member and the Company. Upon the issuance of any
additional Units, the Managing Member shall amend Schedule A as appropriate to
reflect such issuance.
(ii)    Upon Issuance of Additional Securities. The Managing Member shall not
issue any Additional Securities (other than EFC Shares issued in connection with
an exchange pursuant to Section 11.1 hereof or EFC Shares or other membership
interests of or other interests in the Managing Member issued in connection with
a distribution as described in Section 4.2(a)(i)(2) hereof) or engage in any
transaction that would cause an adjustment to the Conversion Factor or Rights
other than to all holders of EFC Shares, EFC LTIP Units, Preferred Shares,
Junior Shares or New Securities, as the case may be, unless (A) the Managing
Member shall cause the Company to issue to the Managing Member (or any direct or
indirect wholly owned Subsidiary of the Managing Member) Units or Rights having
designations, preferences and other rights, all such that the economic interests
are substantially similar to those of the Additional Securities, and (B) the
Managing Member, (or any direct or indirect wholly owned Subsidiary of the
Managing Member) contributes the proceeds, if any, from the issuance of such
Additional Securities and from any exercise of Rights contained in such
Additional Securities to the Company; provided, that the Managing Member is
allowed to issue Additional Securities in connection with an acquisition of
property to be held directly by the Managing Member, but if and only if, such
direct acquisition and issuance of Additional Securities have been approved by a
majority of the Independent Directors. Without limiting the foregoing, the
Managing Member is expressly authorized to issue Additional Securities for less
than fair market value, and the Managing Member is authorized to cause the
Company to issue to the Managing Member (or any direct or indirect wholly owned
Subsidiary of the Managing Member) corresponding Units, so long as (x) the
Managing Member concludes in good faith that such issuance is in the best
interests of the Managing Member and the Company and (y) the Managing Member (or
any direct or indirect wholly owned Subsidiary of the Managing Member)
contributes all proceeds, if any, from such issuance to the Company, including
without limitation, the issuance of EFC Shares and corresponding Units pursuant
to (1) a share purchase or distribution reinvestment plan providing for
purchases of EFC Shares at a discount from fair market value, (2) share awards,
EFC LTIP Units and options that have an exercise price that is less than the
fair market value of the EFC Shares, either at the time of issuance or at the
time of exercise, and restricted or other share awards approved by the Board of
Directors, or (3) the payment of the incentive fee pursuant to the Management
Agreement. For example, in the event the Managing Member issues EFC Shares for a
cash purchase price and the Managing Member (or any direct or indirect wholly
owned Subsidiary of the Managing Member) contributes all of the proceeds of such
issuance to the Company as required hereunder, the Managing Member (or any
direct or indirect wholly owned Subsidiary of the Managing Member) shall be
issued a number of additional Units equal to the product of (A)

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the number of such EFC Shares issued by the Managing Member, the proceeds of
which were so contributed, multiplied by (B) a fraction, the numerator of which
is 100%, and the denominator of which is the Conversion Factor in effect on the
date of such contribution.
(b)    Certain Contributions of Proceeds of Issuance of EFC Shares. In
connection with any and all issuances of EFC Shares, the Managing Member (or any
direct or indirect wholly owned Subsidiary of the Managing Member) shall make
Capital Contributions to the Company of the proceeds therefrom (if any),
provided that if the proceeds actually received and contributed by the Managing
Member (or any direct or indirect wholly owned Subsidiary of the Managing
Member) are less than the gross proceeds of such issuance as a result of any
underwriter’s discount, commissions, placement fees or other expenses paid or
incurred in connection with such issuance, then the Managing Member (or any
direct or indirect wholly owned Subsidiary of the Managing Member) shall be
deemed to have made a Capital Contribution to the Company in the amount equal to
the sum of the net proceeds of such issuance plus the amount of such
underwriter’s discount, commissions, placement fees or other expenses paid by
the Managing Member, and the Company shall be deemed simultaneously to have
reimbursed such discount, commissions, placement fees and expenses as an
Administrative Expense for the benefit of the Company for purposes of Section
3.3 hereof.
(c)    Repurchases of EFC Securities. If the Managing Member shall repurchase
shares of any class or series of its membership interest, the purchase price
thereof and all costs incurred in connection with such repurchase shall be
reimbursed to the Managing Member by the Company pursuant to Section 3.3 hereof
and the Managing Member shall cause the Company to redeem an equivalent number
of Units of the appropriate class or series held by the Managing Member (or any
direct or indirect wholly owned Subsidiary of the Managing Member) (which, in
the case of EFC Shares, shall be a number equal to the quotient of the number of
such EFC Shares divided by the Conversion Factor).
4.3.    Additional Funding.
(a)    If the Managing Member determines that it is in the best interests of the
Company to provide for additional Company funds (“Additional Funds”) for any
Company purpose, the Managing Member may (i) cause the Company to obtain such
funds from outside borrowings, or (ii) elect to have the Managing Member or any
of its Affiliates provide such Additional Funds to the Company through loans or
otherwise.
(b)    Unless an EMGH Redemption Right Event has occurred, if EMGH has
Transferred (other than to an EMGH Affiliate) any of its Common Units
(including, for the avoidance of doubt, pursuant to the Redemption Right) and
the Members other than the Managing Member collectively own less than 0.2% of
the outstanding Common Units and LTIP Units, then the Managing Member may
require EMGH or its designee to make additional contributions to the Company in
exchange for additional Common Units in an amount sufficient for the Members
other than the Managing Member to own at least 0.2% of the outstanding Common
Units and LTIP Units. If the Managing Member exercises the right provided in the
preceding sentence, Common Units will be issued to EMGH or its designee at a
price equal to the net asset value of the Company divided by the number of
Common Units and LTIP Units or at such other price agreed to by the Managing

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Member and EMGH or its designee. Notwithstanding anything to the contrary
contained herein, the Managing Member shall not issue any EFC Shares in a public
or private offering if the issuance of such EFC Shares and the contribution of
the proceeds of such offering to the Company in exchange for Common Units
pursuant to Section 4.2(b) hereof would allow the Managing Member to exercise
the right provided in the second preceding sentence, unless the Managing Member
shall offer to sell to EMGH or its designee, concurrent with the offering of EFC
Shares and at a price per Common Unit equal to the lowest price per EFC Share
issued in the offering, the number of Common Units that, when combined with the
Common Units and LTIP Units owned by the Members other than the Managing Member
immediately prior to the offering, equals 0.2% or more of the outstanding Common
Units and LTIP Units (immediately following completion of the offering).
4.4.    Capital Accounts. A separate capital account (a “Capital Account”) shall
be established and maintained for each Member in accordance with Regulations
Section 1.704-1(b)(2)(iv). If (i) a new or existing Member acquires an
additional Membership Interest in exchange for more than a de minimis Capital
Contribution, (ii) the Company distributes to a Member more than a de minimis
amount of Company property as consideration for a Membership Interest, (iii) the
Company is liquidated within the meaning of Regulation Section
1.704-1(b)(2)(ii)(g) or (iv) the Company grants a Membership Interest (other
than a de minimis Membership Interest) as consideration for the provision of
services to or for the benefit of the Company to an existing Member acting in a
Member capacity, or to a new Member acting in a Member capacity or in
anticipation of being a Member, the Managing Member shall revalue the property
of the Company to its fair market value (as determined by the Managing Member,
in its sole and absolute discretion, and taking into account Section 7701(g) of
the Code) in accordance with Regulations Section 1.704-1(b)(2)(iv)(f); provided,
that the Managing Member may elect not to revalue the property of the Company in
connection with the issuance of additional Units pursuant to Section 4.2 to the
extent it determines, in its sole and absolute discretion, that revaluing the
property of the Company is not necessary or appropriate to reflect the relative
economic interests of the Members. When the Company’s property is revalued by
the Managing Member, the Capital Accounts of the Members shall be adjusted in
accordance with Regulations Sections 1.704-1(b)(2)(iv)(f) and (g), which
generally require such Capital Accounts to be adjusted to reflect the manner in
which the unrealized gain or loss inherent in such property (that has not been
reflected in the Capital Accounts previously) would be allocated among the
Members pursuant to Section 5.1 hereof if there were a taxable disposition of
such property for its fair market value (as determined by the Managing Member,
in its sole and absolute discretion, and taking into account Section 7701(g) of
the Code) on the date of the revaluation.
4.5.    Percentage Interests. If the number of outstanding Common Units or LTIP
Units increases or decreases during a taxable year, each Member’s Percentage
Interest shall be adjusted by the Managing Member effective as of the effective
date of each such increase or decrease to a percentage equal to the number of
Common Units and LTIP Units held by such Member divided by the aggregate number
of Common Units and LTIP Units, as applicable, outstanding after giving effect
to such increase or decrease. If the Members’ Percentage Interests are adjusted
pursuant to this Section 4.5, the Profits and Losses for the taxable year in
which the adjustment occurs shall be allocated between the part of the year
ending on the day when that adjustment occurs and the part of the year beginning
on the following day either (i) as if the taxable year had ended on the date of

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the adjustment or (ii) based on the number of days in each part. The Managing
Member, in its sole and absolute discretion, shall determine which method shall
be used to allocate Profits and Losses for the taxable year in which the
adjustment occurs. The allocation of Profits and Losses for the earlier part of
the year shall be based on the Percentage Interests before adjustment, and the
allocation of Profits and Losses for the later part shall be based on the
adjusted Percentage Interests. In the event that there is an increase or
decrease in the number of outstanding Units (other than Common Units and LTIP
Units) during a taxable year, the Managing Member shall have similar discretion,
as provided in the preceding sentences of this Section 4.5, to allocate items of
Profit and Loss between the part of the year ending on the day when that
increase or decrease occurs and the part of the year beginning on the following
day, and that allocation shall take into account the Members’ relative interests
in those items of Profit and Loss before and after such increase or decrease.
4.6.    No Interest on Contributions. No Member shall be entitled to interest on
its Capital Contribution.
4.7.    Return of Capital Contributions. No Member shall be entitled to withdraw
any part of its Capital Contribution or its Capital Account or to receive any
distribution from the Company, except as specifically provided in this
Agreement. Except as otherwise provided herein, there shall be no obligation to
return to any Member or former Member any part of such Member’s (or former
Member’s) Capital Contribution for so long as the Company continues in
existence.
4.8.    No Third-Party Beneficiary. No creditor or other third party having
dealings with the Company shall have the right to enforce the right or
obligation of any Member to make Capital Contributions or loans or to pursue any
other right or remedy hereunder or at Law or in equity, it being understood and
agreed that the provisions of this Agreement, except as provided in Article IX
hereof, shall be solely for the benefit of, and may be enforced solely by, the
parties to this Agreement and their respective permitted successors and assigns.
None of the rights or obligations of the Members herein set forth to make
Capital Contributions or loans to the Company shall be deemed an asset of the
Company for any purpose by any creditor or other third party, nor may such
rights or obligations be sold, transferred or assigned by the Company or pledged
or encumbered by the Company to secure any debt or other obligation of the
Company or of any of the Members. In addition, it is the intent of the parties
hereto that no distribution to any Member shall be deemed a return of money or
other property in violation of the Act. However, if any court of competent
jurisdiction holds that, notwithstanding the provisions of this Agreement, a
Member is obligated to return such money or property, such obligation shall be
the obligation of such Member and not of any other Member. Without limiting the
generality of the foregoing, a deficit Capital Account of a Member shall not be
deemed to be a liability of such Member nor an asset or property of the Company.

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ARTICLE V
PROFITS AND LOSSES; DISTRIBUTIONS
5.1.    Allocation of Profit and Loss.
(a)    Profit. Except as set forth in Section 4.5 hereof, Profit of the Company
for each fiscal year of the Company shall be allocated to the Members in
accordance with their respective Percentage Interests.
(b)    Loss. Except as set forth in Section 4.5 hereof, Loss of the Company for
each fiscal year of the Company shall be allocated to the Members in accordance
with their respective Percentage Interests.
(c)    Minimum Gain Chargeback. Notwithstanding any provision to the contrary,
(i) any expense of the Company that is a “nonrecourse deduction” within the
meaning of Regulations Section 1.704-2(b)(1) shall be allocated in accordance
with the Members’ respective Percentage Interests, (ii) any expense of the
Company that is a “partner nonrecourse deduction” within the meaning of
Regulations Section 1.704-2(i)(2) shall be allocated to the Member that bears
the “economic risk of loss” of such deduction in accordance with Regulations
Section 1.704-2(i)(1), (iii) if there is a net decrease in Company Minimum Gain
within the meaning of Regulations Section 1.704-2(f)(1) for any Company taxable
year, then, subject to the exceptions set forth in Regulations
Section 1.704-2(f)(2),(3), (4) and (5), items of gain and income shall be
allocated among the Members in accordance with Regulations Section 1.704-2(f)
and the ordering rules contained in Regulations Section 1.704-2(j), and (iv) if
there is a net decrease in Member Nonrecourse Debt Minimum Gain within the
meaning of Regulations Section 1.704-2(i)(4) for any Company taxable year, then,
subject to the exceptions set forth in Regulations Section 1.704(2)(g), items of
gain and income shall be allocated among the Members in accordance with
Regulations Section 1.704-2(i)(4) and the ordering rules contained in
Regulations Section 1.704-2(j). The manner in which it is reasonably expected
that the deductions attributable to nonrecourse liabilities will be allocated
for purposes of determining a Member’s share of the nonrecourse liabilities of
the Company within the meaning of Regulations Section 1.752-3(a)(3) shall be in
accordance with a Member’s Percentage Interest.
(d)    Qualified Income Offset. If a Member receives in any taxable year an
adjustment, allocation or distribution described in subparagraphs (4), (5) or
(6) of Regulations Section 1.704-1(b)(2)(ii)(d) that causes or increases a
deficit balance in such Member’s Capital Account that exceeds the sum of such
Member’s shares of Company Minimum Gain and Member Nonrecourse Debt Minimum
Gain, as determined in accordance with Regulations Sections 1.704-2(g) and
1.704-2(i), such Member shall be allocated specially for such taxable year (and,
if necessary, later taxable years) items of income and gain in an amount and
manner sufficient to eliminate such deficit Capital Account balance as quickly
as possible as provided in Regulations Section 1.704-1(b)(2)(ii)(d). After the
occurrence of an allocation of income or gain to a Member in accordance with
this Section 5.1(d), to the extent permitted by Regulations Section 1.704-1(b),
items of expense or loss shall be allocated to such Member in an amount
necessary to offset the income or gain previously allocated to such Member under
this Section 5.1(d).

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(e)    Capital Account Deficits. Loss shall not be allocated to a Member to the
extent that such allocation would cause a deficit in such Member’s Capital
Account (after reduction to reflect the items described in Regulations
Section 1.704-1(b)(2)(ii)(d)(4), (5) and (6)) to exceed the sum of such Member’s
shares of Company Minimum Gain and Member Nonrecourse Debt Minimum Gain. Any
Loss in excess of that limitation shall be allocated to the other Members. After
the occurrence of an allocation of Loss to the other Members in accordance with
this Section 5.1(e), to the extent permitted by Regulations Section 1.704-1(b),
Profit first shall be allocated to the other Members in an amount necessary to
offset the Loss previously allocated to the other Members under this
Section 5.1(e).
(f)    Allocations Between Transferor and Transferee. If a Member Transfers any
part or all of its Membership Interest, the distributive shares of the various
items of Profit and Loss allocable among the Members during such fiscal year of
the Company shall be allocated between the transferor and the transferee Member
either (i) as if the Company’s fiscal year had ended on the date of the Transfer
or (ii) based on the number of days of such fiscal year that each was a Member
without regard to the results of Company activities in the respective portions
of such fiscal year in which the transferor and the transferee were Members. The
Managing Member, in its sole and absolute discretion, shall determine which
method shall be used to allocate the distributive shares of the various items of
Profit and Loss between the transferor and the transferee Member.
(g)    LTIP Unit Catch-up. Immediately prior to a conversion of an LTIP Unit
pursuant to Section 5.2(c), the LTIP Unitholder of such LTIP Unit shall be
specially allocated items of Company gross income and gain for such Fiscal Year
in an amount equal to the excess, if any, of (i) the Managing Member Capital
Account Balance Per Common Unit over (ii) the Capital Account associated with
the LTIP Unit that is to be converted. Immediately prior to (i) the occurrence
of an Event of Dissolution, or (ii) a sale of all or substantially of the
Company’s assets, items of Company gross income and gain shall also be specially
allocated to LTIP Unitholders in respect of all LTIP Units until the Capital
Account balance of each LTIP Unit equals the Managing Member Capital Account
Balance Per Common Unit at that time.
(h)    Definition of Profit and Loss. “Profit” and “Loss” and any items of
income, gain, expense or loss referred to in this Agreement shall be determined
in accordance with federal income tax accounting principles, as modified by
Regulations Section 1.704-1(b)(2)(iv), except that Profit and Loss shall not
include items of income, gain and expense that are specially allocated pursuant
to Sections 5.1(c), 5.1(d) or 5.1(e) hereof. All allocations of income, Profit,
gain, Loss and expense (and all items contained therein) for federal income tax
purposes shall be identical to all allocations of such items set forth in this
Section 5.1, except as otherwise required by Section 704(c) of the Code and
Regulations Section 1.704-1(b)(4). With respect to properties acquired by the
Company, the Managing Member shall have the authority to elect the method to be
used by the Company for allocating items of income, gain and expense as required
by Section 704(c) of the Code with respect to such properties, and such election
shall be binding on all Members.
5.2.    LTIP Units.
(a)    Allocations and Adjustments. Subject to the terms of the Incentive Plans
and the applicable award agreement governing the award of the LTIP Units under
the Incentive

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Plans (the “Award Agreement”), or as otherwise provided herein, each LTIP Unit
shall have economic rights that are the equivalent of one Common Unit,
including, without limitation, the Percentage Interest, rights to allocations
and distributions pursuant to this Article V, provided, however, that, unless
otherwise determined by the Managing Member, the LTIP Units shall not be issued
in consideration for cash, and, initially, shall have a Capital Account balance
of zero. Upon the occurrence of any event that affects the Common Unit in such a
way that an adjustment of outstanding LTIP Units is appropriate in order to
prevent the dilution or enlargement of rights under the LTIP Units (including,
without limitation, any extraordinary dividend or other distribution (whether in
cash or in kind), recapitalization, share split, reverse split, reorganization,
merger, consolidation, spin-off, combination, repurchase, or share exchange, or
other similar transaction or event) (an “LTIP Adjustment Event”), then the
Managing Member shall make a corresponding adjustment to the LTIP Units to
maintain a one-for-one conversion and economic equivalence ratio between Common
Units and LTIP Units. If more than one LTIP Adjustment Event occurs, the
adjustment to the LTIP Units need be made only once using a single formula that
takes into account each and every LTIP Adjustment Event as if all LTIP
Adjustment Events occurred simultaneously. For the avoidance of doubt, the
following shall not be an LTIP Adjustment Events: (x) the issuance of Common
Units in a financing, reorganization, acquisition or other similar business
transaction, or (y) the issuance of Common Units pursuant to, or as a result of,
any employee benefit or compensation plan or distribution reinvestment plan.
(b)    Priority. Subject to the terms of the Incentive Plans and the applicable
Award Agreement, or as otherwise provided herein, the LTIP Units shall rank pari
passu with the Common Units as to the payment of regular and special periodic or
other distributions.
(c)    Conversion of LTIP Units. Subject to the terms of the Incentive Plans and
the applicable Award Agreement, or as otherwise provided herein, to the extent
that an LTIP Unit is fully vested and no longer subject to forfeiture, the LTIP
Unitholder of such LTIP Unit shall have the right (the “LTIP Conversion Right”),
at his or her option, to convert the LTIP Unit into a Common Unit; provided,
however, that a holder may not exercise the LTIP Conversion Right for less than
1,000 LTIP Units or, if such holder holds less than 1,000 LTIP Units, all of the
vested LTIP Units held by such holder, and such holder must comply with all
applicable procedures and policies as may be required by the Managing Member to
effect such conversion. Notwithstanding the foregoing, the Managing Member shall
have the right, but not the obligation, at any time to cause a conversion of
LTIP Units into Common Units. If a holder of EFC LTIP Units exercises its right
pursuant to the EFC Operating Agreement to convert its EFC LTIP Units into EFC
Shares, then an equal number of LTIP Units held by the Managing Member shall be
automatically converted into Common Units effective as of the date such EFC LTIP
Units are converted into EFC Shares, unless the Managing Member in, its sole and
absolute discretion, determines that such LTIP Units should not be converted
into Common Units.
5.3.    Distribution of Cash.
(a)    Subject to Sections 5.3(b) and 5.3(c) hereof and to the terms of any Unit
Designation, the Company shall distribute cash at such times and in such amounts
as are determined by the Managing Member in its sole and absolute discretion, to
the Members who are Members on

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the Company Record Date with respect to such quarter (or other distribution
period) in proportion with their respective Common Units and LTIP Units on the
Company Record Date.
(b)    Notwithstanding any other provision of this Agreement, the Managing
Member is authorized to take any action that it determines to be necessary or
appropriate to cause the Company to comply with any withholding requirements
established under the Code or any other federal, state or local law including,
without limitation, pursuant to Sections 1441, 1442, 1445 and 1446 of the Code.
To the extent that the Company is required to withhold and pay over to any
taxing authority any amount resulting from the allocation or distribution of
income to a Member or assignee (including by reason of Section 1446 of the
Code), either (i) if the actual amount to be distributed to the Member (the
“Distributable Amount”) equals or exceeds the Withheld Amount, the entire
Distributable Amount shall be treated as a distribution of cash to such Member,
or (ii) if the Distributable Amount is less than the Withheld Amount, the excess
of the Withheld Amount over the Distributable Amount shall be treated as a
Company Loan from the Company to the Member on the day the Company pays over
such amount to a taxing authority. A Company Loan shall be repaid upon the
demand of the Company or, alternatively, through withholding by the Company with
respect to subsequent distributions to the applicable Member or assignee and any
such distributions so withheld shall be deemed first to have been distributed to
the applicable Member or assignee and then immediately repaid to the Company.
Any amounts treated as a Company Loan pursuant to this Section 5.3(b) shall bear
interest at the lesser of (i) 300 basis points above the rate of interest per
annum publicly announced from time to time by Citibank N.A. as its prime rate in
effect at its principal office in New York City (as published from time to time
in the Bloomberg Professional service ticker “PRBKCITI {Index}”, or (ii) the
maximum lawful rate of interest on such obligation, such interest to accrue from
the date the Company or the Managing Member, as applicable, is deemed to extend
the loan until such loan is repaid in full.
(c)    In no event may a Member receive a distribution of cash with respect to a
Unit if such Member is entitled to receive the same cash distribution as the
holder of record of a EFC Share for which all or part of such Unit has been or
will be redeemed.
5.4.    No Right to Distributions in Kind. No Member shall be entitled to demand
property other than cash in connection with any distributions by the Company.
5.5.    Limitations on Distributions. Notwithstanding any of the provisions of
this Article V, the Company shall not be required to make distributions from the
Company to any Member to the extent such distribution is inconsistent with, or
in violation of, the Act or any provision of this Agreement or other applicable
law.
5.6.    Distributions Upon Liquidation.
(a)    Upon liquidation of the Company, after payment of, or adequate provision
for, debts and obligations of the Company, including any Member loans, any
remaining assets of the Company shall be distributed to all Members with
positive Capital Accounts in accordance with their respective positive Capital
Account balances.

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(b)    For purposes of Section 5.6(a) hereof, the Capital Account of each Member
shall be determined after all adjustments made in accordance with Sections 5.1,
5.2 and 5.3 hereof resulting from Company operations and from all sales and
dispositions of all or any part of the Company’s assets.
(c)    Any distributions pursuant to this Section 5.6 shall be made by the end
of the Company’s taxable year in which the liquidation occurs (or, if later,
within 90 days after the date of the liquidation). To the extent deemed
advisable by the Managing Member, appropriate arrangements (including the use of
a liquidating trust) may be made to assure that adequate funds are available to
pay any contingent debts or obligations.
5.7.    Substantial Economic Effect. It is the intent of the Members that the
allocations of Profit and Loss under the Agreement have substantial economic
effect (or be consistent with the Members’ interests in the Company in the case
of the allocation of losses attributable to nonrecourse debt) within the meaning
of Section 704(b) of the Code as interpreted by the Regulations promulgated
pursuant thereto. This Article V and other relevant provisions of this Agreement
shall be interpreted in a manner consistent with such intent.
ARTICLE VI
TAX MATTERS
6.1.    Partnership for Tax Purposes. It is the intention of the Members that
the Company be treated as a partnership for U.S. federal income tax purposes. By
executing this Agreement, each of the Members hereby consents to any election
made by the Managing Member on behalf of the Company to be treated as a
partnership for U.S. federal income tax purposes (and any applicable state and
local tax purposes).
6.2.    Tax Matters Member. The Managing Member is hereby designated as the “tax
matters partner” of the Company under the Code and in any similar capacity under
state or local tax law (the “Tax Matters Member”). The Tax Matters Member is
authorized and required to represent the Company (at the Company’s expense) in
connection with all examinations of the Company’s affairs by tax authorities,
including resulting administrative and judicial proceedings, and to expend
Company funds for professional services and costs associated therewith. Each
Member agrees to cooperate with the Tax Matters Member and to do or refrain from
doing any or all things reasonably required by the Tax Matters Member to conduct
such proceedings. In representing the Company before any taxing authorities and
courts in tax matters affecting the Company and the Members in their capacity as
such, the Tax Matters Member shall keep the Members promptly informed of any
such administrative and judicial proceedings.
6.3.    Tax Elections.
(a)    The determinations of the Managing Member with respect to the Company’s
treatment of any item or its allocation for U.S. federal, state or local tax
purposes shall be binding upon all of the Members so long as such determination
shall not be inconsistent with any express term hereof and provided that the
Company’s accountants shall not have disagreed therewith. The Managing Member
shall make (or refrain from making, as applicable) all appropriate elections and

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take (or refrain from taking, as applicable) all other appropriate actions to
the extent required pursuant to Section 7701 of the Code (and the Regulations
thereunder) for the Company to be classified as a “partnership” for U.S. federal
income tax purposes and any applicable state and local tax purposes. The
Managing Member may, in its sole discretion, make or revoke any tax election
which the Managing Member deems appropriate, including without limitation, an
election pursuant to Section 754 of the Code. The Members acknowledge that the
Managing Member (i) does not anticipate making an election under Section 754 of
the Code with respect to the Company now or at any time in the future and (ii)
intends to elect under Section 475(f) of the Code to mark to market its
securities with respect to the Company for U.S. federal income tax purposes.
(b)    The Members, intending to be legally bound, hereby authorize the Company
to make an election (the “Safe Harbor Election”) to have the “liquidation value”
safe harbor provided in Proposed Treasury Regulation § 1.83-3(1) and the
Proposed Revenue Procedure set forth in Internal Revenue Service Notice 2005-43,
as such safe harbor may be modified when such proposed guidance is issued in
final form or as amended by subsequently issued guidance (the “Safe Harbor”),
apply to any interest in the Company transferred to a service provider while the
Safe Harbor Election remains effective, to the extent such interest meets the
Safe Harbor requirements (collectively, such interests are referred to as “Safe
Harbor Interests”). The Tax Matters Member is authorized and directed to execute
and file the Safe Harbor Election on behalf of the Company and the Members. The
Company and the Member (including any person to whom an interest in the Company
is transferred in connection with the performance of services) hereby agree to
comply with all requirements of the Safe Harbor (including forfeiture
allocations) with respect to all Safe Harbor Interests and to prepare and file
all U.S. federal income tax returns reporting the tax consequences of the
issuance and vesting of Safe Harbor Interests consistent with such final Safe
Harbor guidance. The Company is also authorized to take such actions as are
necessary to achieve, under the Safe Harbor, the effect that the election and
compliance with all requirements of the Safe Harbor referred to above would be
intended to achieve under Proposed Treasury Regulation § 1.83-3, including
amending this Agreement.
ARTICLE VII
EVENTS OF DISSOLUTION
7.1.    Events. The Company shall be dissolved upon the occurrence of any of the
following events (each, an “Event of Dissolution”):
(a)    Determination by the Managing Member to dissolve the Company following
the sale, Transfer or other disposition of all or substantially all of the
assets of the Company;
(b)    The unanimous vote of the Members to dissolve, wind up, and liquidate the
Company; or
(c)    A judicial dissolution of the Company under Section 18‑802 of the Act.
7.2.    Continuation. No other events shall cause the dissolution of the
Company.

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ARTICLE VIII
LIQUIDATION AND TERMINATION
8.1.    Liquidation and Termination.
(a)    In the event that an Event of Dissolution shall occur, then the Company
shall be liquidated and its affairs shall be wound up in an orderly fashion
under the direction of the Managing Member or its designee. All proceeds from
such liquidation shall be distributed in accordance with the provisions of
Section 5.6.
(b)    Upon the completion of the distribution of the Company’s assets following
liquidation, the Company shall be terminated and a Certificate of Cancellation
shall be executed and filed by the Company in accordance with Section 18‑203 of
the Act.
ARTICLE IX
INDEMNIFICATION
9.1.    Indemnification and Advances.
(a)    The Company shall indemnify each Indemnitee from and against any and all
losses, claims, damages, liabilities, joint or several, expenses (including
reasonable legal fees and expenses), judgments, fines, settlements, and other
amounts arising from any and all claims, demands, actions, suits or proceedings,
civil, criminal, administrative or investigative, that relate to the operations
of the Company as set forth in this Agreement in which any Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it is
established that: (i) the act or omission of the Indemnitee was material to the
matter giving rise to the proceeding and either was committed in bad faith or
was the result of active and deliberate dishonesty; (ii) the Indemnitee actually
received an improper personal benefit in money, property or services; or (iii)
in the case of any criminal proceeding, the Indemnitee had reasonable cause to
believe that the act or omission was unlawful. The termination of any proceeding
by judgment, order or settlement does not create a presumption that the
Indemnitee did not meet the requisite standard of conduct set forth in this
Section 9.1(a). The termination of any proceeding by conviction or upon a plea
of nolo contendere or its equivalent, or an entry of an order of probation prior
to judgment, creates a rebuttable presumption that the Indemnitee acted in a
manner contrary to that specified in this Section 9.1(a). Any indemnification
pursuant to this Section 9.1 shall be made only out of the assets of the
Company.
(b)    The Company shall reimburse an Indemnitee for reasonable expenses
incurred by an Indemnitee who is a party to a proceeding in advance of the final
disposition of the proceeding upon receipt by the Company of (i) a written
affirmation by the Indemnitee of the Indemnitee’s good faith belief that the
standard of conduct necessary for indemnification by the Company as authorized
in this Section 9.1 has been met, and (ii) a written undertaking by or on behalf
of the Indemnitee to repay the amount if it shall ultimately be determined that
the standard of conduct has not been met. To the fullest extent permitted by
Law, expenses (including attorneys’ fees) incurred by any Indemnitee in
defending any civil, criminal, administrative or investigative

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action, suit or proceeding may be paid by the Company in advance of the final
disposition of such action, suit or proceeding upon receipt of an undertaking by
or on behalf of such Indemnitee to repay such amount if it shall ultimately be
determined that such Indemnitee is not entitled to be indemnified by the Company
as authorized in this Section 9.1.
(c)    The indemnification provided by this Section 9.1 shall be in addition to
any other right to which an Indemnitee or other Person may be entitled under any
agreement, pursuant to any vote of the Members, as a matter of law or otherwise,
and shall continue as to an Indemnitee who has ceased to serve in such capacity.
(d)    The Company may purchase and maintain insurance, as an expense of the
Company, on behalf of the Indemnitees and such other Persons as the Managing
Member shall determine, against any liability that may be asserted against or
expenses that may be incurred by such Person in connection with the Company’s
activities, regardless of whether the Company would have the power to indemnify
such Person against such liability under the provisions of this Agreement.
(e)    For purposes of this Section 9.1, the Company shall be deemed to have
requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Company also imposes duties
on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute fines
within the meaning of this Section 9.1; and actions taken or omitted by the
Indemnitee with respect to an employee benefit plan in the performance of its
duties for a purposes reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
that is not opposed to the best interests of the Company.
(f)    In no event may an Indemnitee subject the Members to personal liability
by reason of the indemnification provisions set forth in this Agreement.
(g)    An Indemnitee shall not be denied indemnification in whole or in part
under this Section 9.1 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
(h)    The provisions of this Section 9.1 are for the benefit of the
Indemnitees, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons.
(i)    Any amendment modification or repeal of this Section 9.1 or any provision
hereof shall be prospective only and shall not in any way affect the
indemnification of an Indemnitee by the Company under this Section 9.1 as in
effect immediately prior to such amendment, modification or repeal with respect
to matters occurring, in whole or in part, prior to such amendment, modification
or repeal, regardless of when claims relating to such matters may arise or be
asserted.

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9.2.    Liability of the Managing Member.
(a)    Notwithstanding anything to the contrary set forth in this Agreement,
neither the Managing Member, nor any of its directors, officers, agents or
employees shall be liable for monetary damages to the Company or any Members for
losses sustained or liabilities incurred as a result of errors in judgment or
mistakes of fact or law or of any act or omission if any such party acted in
good faith. The Managing Member shall not be in breach of any duty that the
Managing Member may owe to the Members or the Company or any other Persons under
this Agreement or of any duty stated or implied by law or equity provided the
Managing Member, acting in good faith, abides by the terms of this Agreement.
(b)    The Members expressly acknowledge that the Managing Member is acting on
behalf of the Company, the Members and the Managing Member’s stockholders
collectively, that the Managing Member is under no obligation to consider the
separate interests of the Members (including, without limitation, the tax
consequences to Members or the tax consequences of some, but not all, of the
Members) in deciding whether to cause the Company to take (or decline to take)
any actions. In the event of a conflict between the interests of the Managing
Member’s stockholders on the one hand and the Members (other than the Managing
Member) on the other, the Managing Member shall endeavor in good faith to
resolve the conflict in a manner not adverse to either the Managing Member’s
stockholders or the Members (other than the Managing Member); provided, that for
so long as the Managing Member owns a controlling interest in the Company, any
such conflict that the Managing Member, in its sole and absolute discretion,
determines cannot be resolved in a manner not adverse to either the Managing
Member’s stockholders or the Members (other than the Managing Member) shall be
resolved in favor of the Managing Member’s stockholders. The Managing Member
shall not be liable for monetary damages for losses sustained, liabilities
incurred or benefits not derived by the Members in connection with such
decisions.
(c)    Subject to its obligations and duties as Managing Member set forth in
Section 3.1 hereof, the Managing Member may exercise any of the powers granted
to it under this Agreement and perform any of the duties imposed upon it
hereunder either directly or by or through its agents. The Managing member shall
not be responsible for any misconduct or negligence on the part of any such
agent appointed by it in good faith.
(d)    Any amendment, modification or repeal of this Section 9.2 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the Managing Member’s or any of its officers’, directors’,
agents’ or employees’ liability to the Company and the Members under this
Section 9.2 as in effect immediately prior to such amendment, modification or
repeal, regardless of when claims relating to such matters may arise or be
asserted.
ARTICLE X
TRANSFER OF MEMBERSHIP INTERESTS IN THE COMPANY
10.1.    Purchase for Investment. Subject to the provisions of Section 10.2
hereof, each Member agrees that such Member will not sell, assign or otherwise
Transfer such Member’s Units or any fraction thereof, whether voluntarily or by
operation of Law or at judicial sale or otherwise,

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to any Person who does not make the representations and warranties to the
Managing Member set forth in Section 15.2 hereof.
10.2.    Restrictions on Transfer of Units.
(a)    Subject to the provisions of Sections 10.2(b), 10.2(c), 10.3 and 11.1
hereof, no Member may offer, sell, assign, hypothecate, pledge or otherwise
Transfer all or any portion of such Member’s Units, or any of such Member’s
economic rights as a Member without the consent of the Managing Member, which
consent may be granted or withheld in the Managing Member’s sole and absolute
discretion; provided, that the term Transfer for purposes of this Section
10.2(a) does not include (a) any redemption of Common Units by the Company or
the Managing Member, or acquisition of Common Units by the Managing Member,
pursuant to Section 11.1 or (b) any redemption of Units pursuant to any Unit
Designation. The Managing Member may require, as a condition of any Transfer to
which it consents, that the transferor assume all costs incurred by the Company
in connection therewith (including, but not limited to, cost of legal counsel).
(b)    No Member may withdraw from the Company other than as a result of a
permitted Transfer (i.e., a Transfer consented to as contemplated by clause (a)
above or a Transfer pursuant to Sections 10.3 or 10.6 hereof) of all of such
Member’s Units pursuant to this Article X or pursuant to a redemption of all of
such Member’s Common Units pursuant to Section 11.1 hereof. Upon the permitted
Transfer or redemption of all of a Member’s Common Units and LTIP Units, such
Member shall cease to be a Member.
(c)    No Member may effect a Transfer of its Units, in whole or in part, if, in
the opinion of legal counsel for the Company, such proposed Transfer would
require the registration of the Units under the Securities Act or would
otherwise violate any applicable federal or state securities or blue sky law
(including investment suitability standards).
(d)    No Transfer by a Member of its Units, in whole or in part, may be made to
any Person (including, for the avoidance of doubt, pursuant to the Redemption
Right) if (i) in the opinion of legal counsel for the Company, such Transfer
would result in the Company or the Managing Member being treated as an
association taxable as a corporation, (ii) in the opinion of legal counsel for
the Company, such Transfer could cause any REIT Entity to fail to qualify as a
“real estate investment trust” under Sections 856 through 860 of the Code or
(iii) in the opinion of legal counsel for the Company, such Transfer is
reasonably likely to cause the Company or the Managing Member to fail to satisfy
the 90% qualifying income test described in Section 7704(c) of the Code.
(e)    No Transfer by a Member of its Units in whole or in part, may be made by
any Person (including, for the avoidance of doubt, pursuant to the Redemption
Right) if it would cause the Members, other than the Managing Member,
collectively to either (i) own less than 0.2% of the outstanding Common Units
and LTIP Units or (ii) have a Capital Account balance with respect to their
Common Units and LTIP Units of less than $500,000. The Managing Member, in its
sole and absolute discretion, may waive the restrictions in this Section 10.2(e)
for any Member requesting a particular Transfer; provided, however, that (i)
such requesting Member may require the Company to seek, at such requesting
Member's expense unless agreed otherwise by the Managing Member,

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a written opinion from Company's counsel concluding that waiving such
restrictions for the requested Transfer should not materially adversely change
the federal income tax consequences of the ownership of the Units for the other
current and future Members or the ownership of EFC Shares for the current and
future holders of EFC Shares, and (ii) upon receipt of such written opinion, the
Managing Member shall waive such restrictions for the requested Transfer.
(f)    Notwithstanding the provisions of Section 10.2(a) hereof, EMGH may
Transfer all or any portion of its Membership Interest to an Affiliate of EMGH;
provided that such Person expressly agrees to assume all obligations and rights
of EMGH hereunder (each such Affiliate that assumes all such obligations and
rights of EMGH pursuant to this Section 10.2(f), an “EMGH Affiliate”).
(g)    Any purported Transfer in contravention of any of the provisions of this
Article X shall be void ab initio and ineffectual and shall not be binding upon,
or recognized by, the Managing Member or the Company.
(h)    Prior to the consummation of any Transfer under this Article X, the
transferor and/or the transferee shall deliver to the Managing Member such
opinions, certificates and other documents as the Managing Member shall request
in connection with such Transfer.
10.3.    Transfer of the Managing Member’s Membership Interest.
(a)    Notwithstanding the other provisions of this Article X, other than to one
of its Affiliates, the Managing Member shall not transfer all or any portion of
its Membership Interests, except as provided in or in connection with a
transaction contemplated by Sections 10.3(b), 10.3(c) or 10.3(d) hereof.
(b)    Except as otherwise provided in Sections 10.3(c) or 10.3(d) hereof, the
Managing Member shall not engage in any merger, consolidation or other
combination with or into another Person or sale of all or substantially all of
its assets (other than in connection with a change in the Managing Member’s
state of organization or organizational form), in each case which results in a
change of control of the Managing Member (a “Transaction”), unless at least one
of the following conditions is met:
(i)    the consent of a Majority in Interest (other than the Managing Member or
EMGH) is obtained and the Survivor (defined below) expressly agrees to assume
all obligations of the Managing Member hereunder; provided, however, that this
Section 10.3(b)(i) shall not apply at any time that one hundred percent (100%)
of the Membership Interests are owned by the Managing Member and EMGH and/or
Affiliates of EMGH;
(ii)    as a result of such Transaction, all Members (other than the Managing
Member and any Subsidiary of the Managing Member) will receive, or have the
right to receive, for each Unit an amount of cash, securities or other property
equal or substantially equivalent in value, as determined by the Managing Member
in good faith, to the product of the Conversion Factor and the greatest amount
of cash, securities or other property paid in the Transaction to a holder of one
EFC Share in consideration of one EFC Share, provided

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that if, in connection with such Transaction, a purchase, tender or exchange
offer (“Offer”) shall have been made to and accepted by the holders of more than
50% of the outstanding EFC Shares, each holder of Units (other than the Managing
Member and any Subsidiary of the Managing Member) shall be given the option to
exchange its Units for an amount of cash, securities or other property equal or
substantially equivalent in value, as determined by the Managing Member in good
faith, to the greatest amount of cash, securities or other property that such
Member would have received had it (A) exercised its Redemption Right pursuant to
Section 11.1 hereof and (B) sold, tendered or exchanged pursuant to the Offer
the EFC Shares received upon exercise of the Redemption Right immediately prior
to the expiration of the Offer; or
(iii)    the Managing Member is the surviving entity in the Transaction and
either (A) the holders of EFC Shares do not receive cash, securities or other
property in the Transaction or (B) all Members (other than the Managing Member
and any Subsidiary of the Managing Member) receive for each Unit an amount of
cash, securities or other property (expressed as an amount per EFC Share) equal
or substantially equivalent in value, as determined by the Managing Member in
good faith, to the product of the Conversion Factor and the greatest amount of
cash, securities or other property (expressed as an amount per EFC Share)
received in the Transaction by any holder of EFC Shares.
(c)    Notwithstanding Section 10.3(b) hereof, the Managing Member may merge
with or into or consolidate with another entity if immediately after such merger
or consolidation (i) substantially all of the assets of the successor or
surviving entity (the “Survivor”), other than Units held directly or indirectly
by the Managing Member, are contributed, directly or indirectly, to the Company
as a Capital Contribution in exchange for Units, or for economically equivalent
partnership interests issued by a Subsidiary Partnership established at the
direction of the Board of Directors, with a fair market value equal to the value
of the assets so contributed as determined by the Survivor in good faith and
(ii) the Survivor expressly agrees to assume all obligations of the Managing
Member hereunder. Upon such contribution and assumption, the Survivor shall have
the right and duty to amend this Agreement as set forth in this Section 10.3(c).
The Survivor shall in good faith arrive at a new method for the calculation of
the Cash Amount, the EFC Shares Amount and Conversion Factor for a Unit after
any such merger or consolidation so as to approximate the existing method for
such calculation as closely as reasonably possible. Such calculation shall take
into account, among other things, the kind and amount of securities, cash and
other property that was receivable upon such merger or consolidation by a holder
of EFC Shares or options, warrants or other rights relating thereto, and which a
holder of Units could have acquired had such Units been exchanged immediately
prior to such merger or consolidation. Such amendment to this Agreement shall
provide for adjustment to such method of calculation, which shall be as nearly
equivalent as may be practicable to the adjustments provided for with respect to
the Conversion Factor. The Survivor also shall in good faith modify the
definition of EFC Shares and make such amendments to Section 11.1 hereof so as
to approximate the existing rights and obligations set forth in Section 11.1
hereof as closely as reasonably possible. The above provisions of this Section
10.3(c) shall similarly apply to successive mergers or consolidations permitted
hereunder.

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(d)    Notwithstanding anything in this Article X,
(i)    the Managing Member may transfer all or any portion of its Membership
Interest to (A) any wholly owned Subsidiary of the Managing Member or (B) one
Person if that one Person owns 100% of the ownership interests of the Managing
Member; provided that, in each case, such Person expressly agrees to assume all
obligations of the Managing Member hereunder; and
(ii)    the Managing Member may engage in a transaction required by law or by
the rules of any national securities exchange or over-the-counter interdealer
quotation system on which the EFC Shares are listed or traded.
10.4.    Admission of Substitute Member.
(a)    Subject to the other provisions of this Article X, an assignee of the
Units of a Member (which shall be understood to include any purchaser,
transferee, donee or other recipient of any disposition of such Units) shall be
deemed admitted as a Member of the Company only with the consent of the Managing
Member, which consent may be given or withheld by the Managing Member in its
sole and absolute discretion, and upon the satisfactory completion of the
following:
(i)    The assignee shall have accepted and agreed to be bound by the terms and
provisions of this Agreement by executing a counterpart or an amendment thereof,
including a revised Schedule A, and such other documents or instruments as the
Managing Member may require in order to effect the admission of such Person as a
Member.
(ii)    The assignee shall have delivered a letter containing the
representations and warranties set forth in Section 15.2 hereof.
(iii)    If the assignee is a corporation, partnership, limited liability
company or trust, the assignee shall have provided the Managing Member with
evidence satisfactory to counsel for the Company of the assignee’s authority to
become a Member under the terms and provisions of this Agreement.
(iv)    The assignee shall have executed a power of attorney containing the
terms and provisions set forth in Section 1.11 hereof.
(v)    The assignee shall have paid all legal fees and other expenses of the
Company and the Managing Member and filing and publication costs in connection
with its substitution as a Member.
(vi)    The assignee shall have obtained the prior written consent of the
Managing Member to its admission as a Substitute Member, which consent may be
given or denied in the exercise of the Managing Member’s sole and absolute
discretion.
(b)    For the purpose of allocating Profits and Losses and distributing cash
received by the Company, a Substitute Member shall be treated as having become,
and appearing in the records of the Company as, a Member on the later of the
date specified in the Transfer documents

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or the date on which the Managing Member has received all necessary instruments
of Transfer and substitution.
(c)    The Managing Member and the Substitute Member shall cooperate with each
other by preparing the documentation required by this Section 10.4 and making
all official filings and publications. The Company shall take all such action as
promptly as practicable after the satisfaction of the conditions in this Article
X to the admission of such Person as a Member of the Company.
(d)    For the avoidance of confusion, assignee of the Units of a Member (which
shall be understood to include any purchaser, transferee, donee or other
recipient of any disposition of such Units) that results from a Transaction set
forth in Section 10.3 hereof, shall be deemed admitted as a Member upon the
closing of the Transaction and the satisfaction of the provisions of Section
10.3 hereof.
10.5.    Rights of Assignees of Units.
(a)    Subject to the provisions of Sections 10.1, 10.2 and 10.3 hereof, except
as required by operation of Law, the Company shall not be obligated for any
purposes whatsoever to recognize the assignment by any Member of its Units until
the Company has received notice thereof.
(b)    Any Person who is the assignee of all or any portion of a Member’s Units,
but does not become a Substitute Member and desires to make a further assignment
of such Units, shall be subject to all the provisions of this Article X to the
same extent and in the same manner as any Member desiring to make an assignment
of its Units.
10.6.    Effect of Bankruptcy, Death, Incompetence or Termination of a Member.
The occurrence of an Event of Bankruptcy as to a Member, the death of a Member
or a final adjudication that a Member is incompetent (which term shall include,
but not be limited to, insanity) shall not cause the termination or dissolution
of the Company, and the business of the Company shall continue if an order for
relief in a bankruptcy proceeding is entered against a Member, the trustee or
receiver of his estate or, if such Member dies, such Member’s executor,
administrator or trustee, or, if such Member is finally adjudicated incompetent,
such Member’s committee, guardian or conservator, shall have the rights of such
Member for the purpose of settling or managing such Member’s estate property and
such power as the bankrupt, deceased or incompetent Member possessed to assign
all or any part of such Member’s Units and to join with the assignee in
satisfying conditions precedent to the admission of the assignee as a Substitute
Member.
10.7.    Joint Ownership of Units. A Unit may be acquired by two individuals as
joint tenants with right of survivorship, provided that such individuals either
are married or are related and share the same home as tenants in common. The
written consent or vote of both owners of any such jointly held Unit shall be
required to constitute the action of the owners of such Unit; provided, that the
written consent of only one joint owner will be required if the Company has been
provided with evidence satisfactory to the counsel for the Company that the
actions of a single joint owner can bind both owners under the applicable Laws
of the state of residence of such joint owners. Upon the death of one owner of a
Unit held in a joint tenancy with a right of survivorship, the Unit shall

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become owned solely by the survivor as a Member and not as an assignee. The
Company need not recognize the death of one of the owners of a jointly-held Unit
until it shall have received certificated notice of such death. Upon notice to
the Managing Member from either owner, the Managing Member shall cause the Unit
to be divided into two equal Units, which shall thereafter be owned separately
by each of the former owners.
ARTICLE XI
REDEMPTION RIGHT
11.1.    Redemption Right.
(a)    Except as set forth in the sentence that immediately follows this
sentence and Section 11.1(g) hereof and subject to Section 11.1(c) hereof and
the provisions of any agreement between the Company and one or more Members,
beginning on the date that is twelve months after the date of issuance of any
Common Units, each Member (other than the Managing Member or any direct or
indirect wholly owned Subsidiary of the Managing Member) shall have the right
(the “Redemption Right”) to require the Company to redeem on a Specified
Redemption Date all or a portion of such Member’s Common Units at a redemption
price equal to and in the form of the Cash Amount. Notwithstanding the
provisions of Sections 11.1(a) and 11.1(b) hereof, and only with respect to the
Common Units held by EMGH as of the date of this Agreement (the “Initial EMGH
Common Units”), EMGH shall have the Redemption Right set forth in Section
11.1(a) with respect to the Initial EMGH Common Units beginning on the date that
is twenty-four (24) months after the date of this Agreement. The Redemption
Right shall be exercised pursuant to a Notice of Redemption in the form attached
hereto as Exhibit B delivered to the Company (with a copy to the Managing
Member) by the Member who is exercising the Redemption Right (the “Redeeming
Member”), and such notice shall be irrevocable unless otherwise agreed upon by
the Managing Member. No Member may deliver more than one Notice of Redemption
during each calendar quarter unless otherwise agreed upon by the Managing
Member. A Member may not exercise the Redemption Right for less than one
thousand (1,000) Common Units or, if such Member holds less than one thousand
(1,000) Common Units, all of the Common Units held by such Member. The Redeeming
Member shall have no right, with respect to any Common Units so redeemed, to
receive any distribution paid with respect to Common Units if the Company Record
Date for such distribution is on or after the Specified Redemption Date.
(b)    Notwithstanding the provisions of Section 11.1(a) hereof, if a Member
exercises the Redemption Right by delivering to the Company a Notice of
Redemption, then the Managing Member may, in its sole and absolute discretion,
elect to purchase directly and acquire some or all of, and in such event the
Managing Member agrees to purchase and acquire, such Common Units by paying to
the Redeeming Member the EFC Shares Amount, whereupon the Managing Member shall
acquire the Common Units tendered for redemption by the Redeeming Member and the
Managing Member shall be treated for all purposes of this Agreement as the owner
of such Common Units. In the event the Managing Member shall exercise its right
to satisfy the Redemption Right in the manner described in the preceding
sentence, the Company shall have no obligation to pay any amount to the
Redeeming Member with respect to such Redeeming Member’s exercise of the
Redemption Right, and each of the Redeeming Member, the Company and the

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Managing Member shall treat the transaction between the Managing Member and the
Redeeming Member as a sale of the Redeeming Member’s Common Units to the
Managing Member for federal income tax purposes. Each Redeeming Member agrees to
execute such documents as the Managing Member may reasonably require in
connection with the issuance of EFC Shares upon exercise of the Redemption
Right.
(c)    Notwithstanding the provisions of Sections 11.1(a) and 11.1(b) hereof, a
Member shall not be entitled to exercise the Redemption Right if (i) the
delivery of EFC Shares to such Member on the Specified Redemption Date by the
Managing Member pursuant to Section 11.1(b) hereof (regardless of whether or not
the Managing Member would in fact exercise its rights under Section 11.1(b))
would (A) be prohibited under the EFC Operating Agreement or (B) cause the
acquisition of EFC Shares by such Member to be “integrated” with any other
distribution of EFC Shares or Common Units for purposes of complying with the
registration provisions of the Securities Act, or (ii) the exercise of the
Redemption Right would be prohibited under Section 10.2(e) hereof.
(d)    Each Redeeming Member covenants and agrees that all Common Units tendered
for redemption pursuant to this Section 11.1 will be delivered to the Company or
the Managing Member free and clear of all liens, claims, and encumbrances
whatsoever and should any such liens, claims or encumbrances exist or arise with
respect to such Common Units, neither the Company nor the Managing Member shall
be under any obligation to acquire such Common Units pursuant to Section 11.1(a)
or 11.1(b) hereof. Each Redeeming Member further agrees that, in the event any
state or local property transfer tax is payable as a result of the Transfer of
its Common Units to the Company or the Managing Member, such Redeeming Member
shall assume and pay such transfer tax.
(e)    Any Cash Amount to be paid to a Redeeming Member pursuant to this
Section 11.1 shall be paid on the Specified Redemption Date; provided, that the
Managing Member may elect to cause the Specified Redemption Date to be delayed
for up to an additional 180 days to the extent required for the Managing Member
to cause additional EFC Shares to be issued to provide financing to be used to
make such payment of the Cash Amount and may also delay such Specified
Redemption Date to the extent necessary to effect compliance with applicable
requirements of the Law. Any EFC Share Amount to be paid to a Redeeming Member
pursuant to this Section 11.1 shall be paid on the Specified Redemption Date;
provided, that the Managing Member may elect to cause the Specified Redemption
Date to be delayed to the extent necessary to effect compliance with applicable
requirements of the Law. Notwithstanding the foregoing, the Managing Member
agrees to use its commercially reasonable efforts to cause the closing of the
acquisition of redeemed Common Units hereunder to occur as quickly as reasonably
possible.
(f)    Notwithstanding any other provision of this Agreement, the Managing
Member is authorized to take any action that it determines to be necessary or
appropriate to cause the Managing Member and the Company to comply with any
withholding requirements established under the Code or any other federal, state,
local or foreign Law that apply upon a Redeeming Member’s exercise of the
Redemption Right. If the Managing Member determines that Common Units are
“United States real property interests” within the meaning of Section 897(c) of
the Code,

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a Redeeming Member claiming an exemption from withholding must furnish the
Managing Member with a FIRPTA Certificate in the form attached hereto as
Exhibit C and any similar forms or certificates required to avoid or reduce the
withholding under federal, state, local or foreign Law or such other form as the
Managing Member may reasonably request. If the Company or the Managing Member is
required to withhold and pay over to any taxing authority any amount upon a
Redeeming Member’s exercise of the Redemption Right and if the Redemption Amount
equals or exceeds the Withheld Amount, the Withheld Amount shall be treated as
an amount received by such Redeeming Member in redemption of its Common Units.
If, however, the Redemption Amount is less than the Withheld Amount, the
Redeeming Member shall not receive any portion of the Redemption Amount, the
Redemption Amount shall be treated as an amount received by such Redeeming
Member in redemption of its Common Units, and such Redeeming Member shall
contribute the excess of the Withheld Amount over the Redemption Amount to the
Company before the Company is required to pay over such excess to a taxing
authority.
(g)    Notwithstanding anything to the contrary in this Agreement, EMGH and/or
any of its Affiliates who are Members shall have a Redemption Right effective
upon the occurrence of an EMGH Redemption Right Event; provided, however, that
in the case of a Redemption Right exercised pursuant to the provisions of this
Section 11.1(g), the Specified Redemption Date shall mean the first business day
of the month that is at least 30 calendar days after the receipt by the Managing
Member of a Notice of Redemption.
ARTICLE XII
AMENDMENTS; MERGER
12.1.    Amendment of Agreement. The Managing Member’s consent shall be required
for any amendment to this Agreement. The Managing Member, without the consent of
the other Members, may amend this Agreement in any respect; provided, that the
following amendments shall require the consent of a Majority in Interest (other
than the Managing Member or any Subsidiary of the Managing Member):
(a)    any amendment affecting the operation of the Conversion Factor or the
Redemption Right (except as otherwise provided herein) in a manner that
adversely affects the other Members in any material respect;
(b)    any amendment that would adversely affect the rights of the other Members
to receive the distributions payable to them hereunder, other than with respect
to the issuance of additional Units pursuant to Section 4.2 hereof;
(c)    any amendment that would alter the Company’s allocations of Profit and
Loss to the other Members, other than with respect to the issuance of additional
Units pursuant to Section 4.2 hereof;
(d)    any amendment that would impose on the other Members any obligation to
make additional Capital Contributions to the Company beyond what is currently
required by Section 4.3(b) hereof; or

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(e)    any amendment to this Article XII.
12.2.    Amendment of Certificate. In the event this Agreement shall be amended
pursuant to this Article XII, the Managing Member shall amend the Certificate of
Formation of the Company to reflect such change if such amendment is required or
if the Managing Member deems such amendment to be desirable and shall make any
other filings or publications required or desirable to reflect such amendment,
including any required filing for recordation of any Certificate of Formation or
other instrument or similar document.
12.3.    Merger of Partnership. The Managing Member, without the consent of the
other Members, may (i) merge or consolidate the Company with or into any other
domestic or foreign partnership, limited partnership, limited liability company
or corporation or (ii) sell all or substantially all of the assets of the
Company in a transaction pursuant to which the Members (other than the Managing
Member or any Subsidiary of the Managing Member or EMGH and/or Affiliates of
EMGH) receive the consideration set forth in Section 10.3(b)(ii) hereof or in a
transaction that complies with Section 10.3(b)(iii) or Section 10.3(c) hereof
and may amend this Agreement in connection with any such transaction consistent
with the provisions of this Article XII; provided, that the consent of a
Majority in Interest (other than the Managing Member or any Subsidiary of the
Managing Member) shall be required in the case of any other (a) merger or
consolidation of the Company with or into any other domestic or foreign
partnership, limited partnership, limited liability company or corporation or
(b) sale of all or substantially all of the assets of the Company.
ARTICLE XIII

CONSENTS, VOTING AND MEETINGS
13.1.    Voting. The Members’ right to vote or otherwise participate with
respect to matters relating to the Company shall be limited to those matters as
to which the express terms of the Act, the Certificate of Formation or this
Agreement vest in the Members the right to so vote or otherwise participate.
Common Members shall have the exclusive right to vote, approve or consent to
matters relating to the Company, except as otherwise specifically set forth in
this Agreement.
13.2.    Method of Giving Consent. The Common Members may vote, approve a matter
or take any action by the unanimous vote of the Common Members, unless specified
otherwise in this Agreement. Any consent, vote or approval required by this
Agreement (“Consent”) may be given by a written Consent given by the approving
Member or by the affirmative vote by the approving Member at any meeting. A copy
of the Consent shall be filed with the records of the Company.
13.3.    Meetings. Meetings of the Company shall be held at the principal place
of business of the Company, or at any place stated in a notice of meeting.
Meetings shall be held only when called by the Managing Member.
13.4.    Record Dates. The Managing Member may set in advance a date for
determining the Members entitled to notice of and to vote at any meeting. All
record dates shall not be more than sixty (60) days prior to the date of the
meeting to which such record date relates.
13.5.    Submissions to Members; Deemed Consent. The Managing Member shall give
all of the Members written notice of any proposal or other matter required by
any provision of this

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Agreement or by Law to be submitted for the consideration and approval of the
Members. Such written notice shall include any information required by the
relevant provisions of this Agreement or by Law. A Member shall be deemed, for
all purposes under this Agreement, to have Consented to or approved a particular
matter submitted in writing for the approval by such Member if (a) the written
notice requesting approval by such Member of such matter prominently discloses
that such Member shall be deemed to Consent to or approve such matter if it
fails to object to such matter within a reasonable period, but in any case not
less than ten Business Days, after such Member’s receipt of written notice, and
(b) such Member fails to object to such matter within such reasonable period.
ARTICLE XIV
RECORDS AND ACCOUNTING; FISCAL AFFAIRS
14.1.    Records and Accounting.
(a)    Proper and complete records and books of account of the business of the
Company, including a list of the names, addresses and Units of all Members,
shall be maintained at the Company’s principal place of business until six years
following the termination of the Company.
(b)    The books and records of the Company shall be maintained in accordance
with generally accepted accounting principles.
14.2.    Reports to Members and Former Members. The Company shall prepare and
mail (or otherwise make available), or cause its independent accountants to
prepare and mail, to each Member and, to the extent necessary, to each former
Member (or its legal representatives), an IRS Form K-1 (and any applicable
equivalent state and local tax form) setting forth in sufficient detail such
information as shall enable such Member or former Member (or such Member’s legal
representatives) to prepare its U.S. federal income tax returns in accordance
with the Laws, rules and regulations then prevailing, (i) in draft form on or
before March 15 of each year for the preceding year; provided that the Company
shall provide each Member with any corrections to the draft within a
commercially reasonable timeframe after identifying the need to correct such
draft, and (ii) in final form thereafter, subject to commercially reasonable
efforts to make such final form available by April 1.
14.3.    Member Information. Upon the reasonable request of the Managing Member,
each Member agrees to provide the Company with such non-confidential information
concerning the Member and its business so that the Company can comply, or
determine its compliance, with any Laws or regulations applicable to it
(including, without limitation, the Investment Company Act). Notwithstanding
anything in this Article XIV to the contrary, a Member shall have access to
books and records of the Company during normal business hours and the right to
receive copies of Company documents at such Member’s expense only for a purpose
reasonably related to the Member’s interest as a Member of the Company.
ARTICLE XV

REPRESENTATIONS AND WARRANTIES

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15.1.    Representations and Warranties of the Company. The Company hereby
represents and warrants to, and agrees with, each of the Members that, as of the
date hereof:
(a)    the Company is a Delaware limited liability company, duly organized,
validly existing and in good standing under the Laws of the jurisdiction of its
formation with all requisite corporate or other power and authority to carry on
its business as currently conducted in all material respects. The Company is
duly qualified to do business and in good standing as a foreign entity in the
jurisdictions where the nature of the property owned or leased by it, or the
nature of the business conducted by it, makes such qualification necessary, in
all material respects. True and complete copies of the Certificate of Formation
and limited liability company agreement of the Company, each as amended to date,
have heretofore been made available to the Members;
(b)    the Company has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder, and the execution, delivery,
and performance by the Company of this Agreement have been duly authorized by
all necessary action;
(c)    this Agreement has been duly and validly executed and delivered by the
Company and constitutes the binding obligation of the Company enforceable
against the Company in accordance with its terms, subject to applicable
bankruptcy, insolvency or other similar Laws relating to or affecting the
enforcement of creditors’ rights generally and to general principles of equity;
(d)    the Units have been duly authorized by the Company and, when delivered,
will have been duly authorized, validly issued, fully paid and nonassessable.
Following the consummation of the transactions contemplated by this Agreement
and except as set forth herein and in the Certificate of Formation, each Member
will acquire the Units free and clear of any preemptive rights, restrictions on
Transfer, liens, encumbrances, claims or demands, other than liens or
encumbrances created by such Member and any such restrictions under applicable
federal and state securities Laws. The Common Units is the only classes or
series of membership interests of the Company. As of immediately following the
consummation of the transactions contemplated by this Agreement, (i) all of the
outstanding membership interests of the Company are set forth on Schedule A.
Except for this Agreement, there are no outstanding warrants, options,
subscriptions, convertible or exchangeable securities or other agreements,
rights or forms of profit participation pursuant to which the Company is
obligated to issue or sell any Units, other equity interests or other Units of
the Company. Except for this Agreement, there are no contracts relating to the
issuance, sale, repurchase, or Transfer of any Units by the Company;
(e)    the execution, delivery, and performance by the Company of this
Agreement, including the issue and sale of the Units, will not, with or without
the giving of notice or the lapse of time, or both, (i) violate any provision of
Law to which the Company is subject, (ii) violate any order, judgment, or decree
applicable to the Company or (iii) conflict with, or result in a breach or
default under, any agreement or instrument to which the Company is a party or
any term or condition of its Certificate of Formation, except where such
conflict, breach or default would not reasonably be expected to, individually or
in the aggregate, have an adverse effect on the Company’s ability to satisfy its
obligations hereunder;

30

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(f)    no consent, approval, permit, license, order or authorization of, filing
with, or notice or other action to, with or by any Governmental Authority or any
other Person, is necessary, on the part of the Company to perform its
obligations hereunder or to authorize the execution, delivery and performance by
the Company of its obligations hereunder, except where such consent, approval,
permit, license, order, authorization, filing or notice would not reasonably be
expected to, individually or in the aggregate, have an adverse effect on the
Company’s ability to satisfy its obligations hereunder or under any agreement or
other instrument to which the Company is a party; and
(g)    the Company is not, and upon consummation of the issuance and sale of the
Units will not be, an “investment company,” a company controlled by an
“investment company” or an “affiliated person” of, or “promoter” or “principal
underwriter” of, an “investment company,” as such terms are defined in the
Investment Company Act.
15.2.    Representations and Warranties of each Member. Each Member (severally
and not jointly, as to itself) hereby represents and warrants to, and agrees
with, the Company and the other Members that, as of the date hereof:
(a)    such Member has full power and authority to execute and deliver this
Agreement and to perform its obligations hereunder, and the execution, delivery,
and performance by such Member of this Agreement have been duly authorized by
all necessary action;
(b)    this Agreement has been duly and validly executed and delivered by such
Member and constitutes the binding obligation of such Member enforceable against
such Member in accordance with its terms, subject to applicable bankruptcy,
insolvency or other similar Laws relating to or affecting the enforcement of
creditors’ rights generally and to general principles of equity;
(c)    the execution, delivery, and performance by such Member of this Agreement
will not, with or without the giving of notice or the lapse of time, or both,
(i) violate any provision of Law, rule or regulation to which such Member is
subject, (ii) violate any order, judgment, or decree applicable to such Member
or (iii) conflict with, or result in a breach or default under, any agreement or
instrument to which such Member is a party or any term or condition of its
certificate of incorporation or bylaws, certificate of limited partnership or
partnership agreement, or certificate of formation or limited liability company
agreement, as applicable, except where such conflict, breach or default would
not reasonably be expected to, individually or in the aggregate, have an adverse
effect on such Member’s ability to satisfy its obligations hereunder;
(d)    no consent, approval, permit, license, order or authorization of, filing
with, or notice or other action to, with or by any Governmental Authority or any
other Person, is necessary, on the part of such Member to perform its
obligations hereunder or to authorize the execution, delivery and performance by
such Member of its obligations hereunder, except where such consent, approval,
permit, license, order, authorization, filing or notice would not reasonably be
expected to, individually or in the aggregate, have an adverse effect on such
Member’s ability to satisfy its obligations hereunder or under any agreement or
other instrument to which such Member is a party;

31

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(e)    such Member is an “accredited investor” as that term is defined in the
Securities Act and rules and regulations promulgated pursuant thereto;
(f)    such Member is acquiring the Units for investment and not with a view
toward any resale or distribution thereof except in compliance with the
Securities Act; such Member acknowledges that the Units have not been registered
pursuant to the Securities Act and may not be transferred in the absence of such
registration or an exemption therefrom under the Securities Act; and such Member
has sufficient knowledge and experience in financial and business matters so as
to be capable of evaluating the risks of its investment in the Units and is
capable of bearing the economic risks of the transactions contemplated by this
Agreement; and
(g)    such Member is an informed and sophisticated participant in the
transactions contemplated hereby and has undertaken such investigation, and has
been provided with and has evaluated such documents and information, as it has
deemed necessary in connection with the execution, delivery and performance of
this Agreement and the investment in the Company; such Member acknowledges that
it is relying on its own investigation and analysis in entering into the
transactions contemplated hereby and has consulted its own legal, tax, financial
and accounting advisors to determine the merits and risks thereof; and the
Member has not relied on any due diligence investigation of any other Member or
its advisors and their respective Affiliates, or on any oral or written
materials prepared or presented by any other Member or its advisors, including
any projections, forecasts, return on investment or other future cash flow
illustrations prepared by any such Member or its advisors or their respective
Affiliates.
ARTICLE XVI

GENERAL PROVISIONS
16.1.    Other Business. The Members and any person or entity affiliated with
the Members may engage in or possess an interest in other business ventures
(unconnected with the Company) of every kind and description, independently or
with others. The Company shall not have any rights in or to such independent
ventures or the income or profits therefrom by virtue of this Agreement.

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16.2.    Notices. All notices, requests or approvals that any party hereto is
required or desires to give to any Member or to the Company shall be in writing
signed by or on behalf of the party giving the same and shall be deemed to be
duly given if personally delivered, sent via facsimile or electronic mail and
confirmed, or mailed by certified mail, return receipt requested, or sent by
nationally recognized overnight delivery service with proof of receipt
maintained, at the following addresses (or any other address that any such party
may designate by written notice to the other parties):
(a)    if given to the Company, to:
Ellington Financial LLC
53 Forest Avenue
Old Greenwich, Connecticut 06870
Attn: Daniel Margolis
Fax: (203) 698-0306
Email: dmargolis@ellington.com
with a copy (which shall not constitute notice) to:
Hunton & Williams LLP
Riverfront Plaza, East Tower
951 East Byrd Street
Richmond, Virginia 23219
Attn: Daniel M. LeBey
Fax: (804) 788-8218
Email: dlebey@hunton.com
(b)    if given to any Member, to the person and at the address (and, if
applicable, fax number or electronic mail address) set forth under or opposite
its name on Schedule A, or at such other address (and, if applicable, fax number
or electronic mail address) as such Member may hereafter designate by written
notice to the Company.
(c)    All such notices shall be deemed to have been delivered and given for all
purposes (i) on the delivery date if delivered by confirmed facsimile or
electronic mail, (ii) on the delivery date if delivered personally to the party
to whom the same is directed, (iii) one Business Day after deposit with a
commercial overnight carrier, with written verification of receipt or (iv) five
Business Days after the mailing date, whether or not actually received, if sent
by U.S. mail, return receipt requested, postage and charges prepaid, or any
other means of rapid mail delivery for which a receipt is available addressed to
the receiving party as specified on the signature page of this Agreement.
Changes of the person to receive notices or the place of notification shall be
effectuated pursuant to a notice given under this Section 16.2.
16.3.    Governing Law; Jurisdiction; Waiver of Jury Trial; Severability.
(a)    This Agreement shall be governed by and construed in accordance with the
Laws of the State of Delaware, without giving effect to any choice or conflict
of Laws, provisions

33

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or rules that would cause the application of Laws of any jurisdiction other than
the State of Delaware. Each party to this Agreement hereby consents to the
exclusive jurisdiction of the Court of Chancery of the State of Delaware (unless
the federal courts have exclusive jurisdiction over the matter, in which case
each party consents to the jurisdiction of the United States District Court for
the District of Delaware) and irrevocably agrees that all actions or proceedings
arising out of or relating to this Agreement or the transactions contemplated
hereby (whether such actions or proceedings are based in statute, tort, contract
or otherwise), shall be litigated in such court. Each party hereto (i) consents
to submit itself to the personal jurisdiction of such court for such actions or
proceedings, (ii) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (iii) agrees that it will not bring any such action or proceeding in any
court other than such court. Each party hereto accepts for itself and in
connection with its properties, generally and unconditionally, the exclusive and
irrevocable jurisdiction and venue of the aforesaid court and waives any defense
of forum non conveniens, and irrevocably agrees to be bound by any
non-appealable judgment rendered thereby in connection with such actions or
proceedings. A copy of any service of process served upon the parties hereto
shall be mailed by registered mail to the respective party except that, unless
otherwise provided by applicable Law, any failure to mail such copy shall not
affect the validity of service of process. If any agent appointed by a party
hereto refuses to accept service, each party hereto agrees that service upon the
appropriate party by registered mail shall constitute sufficient service.
Nothing herein shall affect the right of a party hereto to serve process in any
other manner permitted by law. Each party acknowledges that any controversy
which may arise under this agreement is likely to involve complicated and
difficult issues, and therefore it hereby irrevocably waives any right it may
have to a trial by jury in respect of any action arising out of or relating to
this Agreement or any of the transactions contemplated by this Agreement. EACH
PARTY ACKNOWLEDGES, AGREES AND CERTIFIES THAT: (I) NO REPRESENTATIVE, AGENT OR
ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH
OTHER PARTY WOULD, IN THE EVENT OF LITIGATION, SEEK TO PREVENT OR DELAY
ENFORCEMENT OF SUCH WAIVER; (II) IT UNDERSTANDS AND HAS CONSIDERED THE
IMPLICATIONS OF SUCH WAIVER; (III) IT MAKES SUCH WAIVER VOLUNTARILY; AND (IV) IT
HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL
WAIVERS AND CERTIFICATIONS IN THIS SECTION 16.3.
(b)    If it shall be determined by a court of competent jurisdiction that any
provisions or wording of this Agreement shall be invalid or unenforceable under
the Act or other applicable Law, such invalidity or unenforceability shall not
invalidate the entire Agreement. In that case, this Agreement shall be construed
so as to limit any term or provision so as to make it enforceable or valid
within the requirements of applicable Law, and, in the event such term or
provisions cannot be so limited, this Agreement shall be construed to omit such
invalid or unenforceable terms or provisions. If it shall be determined by a
court of competent jurisdiction that any provision relating to the distributions
and allocations of the Company or to any expenses payable by the Company is
invalid or unenforceable, this Agreement shall be construed or interpreted so as
(a) to make it enforceable or valid and (b) to make the distributions and
allocations as closely equivalent to those set forth in this Agreement as is
permissible under applicable Law.

34

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16.4.    Entire Agreement; Binding Effect. This Agreement sets forth the entire
understanding of the parties hereto. This Agreement shall be binding upon, and
inure to the benefit of, the Members.
16.5.    Successors, Assigns and Transferees.  Subject to the restrictions on
Transfers set forth in this Agreement, this Agreement shall be binding upon and
inure to the benefit of and be enforceable by the parties hereto and their
respective successors and permitted assigns; and by their signatures hereto,
each party intends to and does hereby become bound. Any assignment of rights or
obligations in violation of this Section 16.5 shall be null and void. Nothing
expressed or mentioned in this Agreement is intended or shall be construed to
give any Person any legal or equitable right, remedy or claim under, in or in
respect of this Agreement or any provision herein contained other than the
parties hereto and their respective permitted successors and assigns, all of
whom are intended to be third party beneficiaries thereof.
16.6.    Waiver. Failure or delay by any party hereto to enforce any covenant,
duty, agreement, term or condition of this Agreement, or to exercise any right
hereunder, shall not be construed as thereafter waiving such covenant, duty,
term, condition or right. The waiver by any party or parties hereto of a breach
of any provision of this Agreement shall not operate or be construed as a waiver
of any other or subsequent breach hereunder. No waiver shall be effective unless
it is in writing and is signed by the party asserted to have granted such
waiver.
16.7.    Additional Documents. Each Member agrees to perform all further acts
and execute, acknowledge and deliver any documents that may be reasonably
necessary to carry out the provisions of this Agreement.
16.8.    No Third-Party Beneficiary. This Agreement is made solely for the
benefit of the Members and no other Persons shall have any rights, interest, or
claims hereunder or otherwise be entitled to any benefits under or on accounts
of this Agreement as a third-party beneficiary otherwise.
16.9.    Waiver of Partition. Except as may otherwise be required by law in
connection with the winding up, liquidation and dissolution of the Company, each
Member hereby irrevocably waives any and all rights that it may have to maintain
an action for partition of any of the Company’s property.
16.10.    Limited Liability Company. The Members intend to form a limited
liability company and do not intend to form a partnership under the Laws of the
State of Delaware or any other Laws.
16.11.    Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which, when
taken together, shall constitute but one instrument.
16.12.    Headings. The headings used in this Agreement are inserted for
reference purposes only and shall not be deemed to limit or affect in any way
the meaning or interpretation of any of the terms or provisions herein.
[Signature Page Follows]

35

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IN WITNESS WHEREOF, the undersigned have duly executed and delivered this
Limited Liability Company Operating Agreement of Ellington Financial Operating
Partnership LLC as of the date first set forth above.
ELLINGTON FINANCIAL OPERATING PARTNERSHIP LLC
By: /s/ Laurence E. Penn                
Name:    Laurence E. Penn
Title:    Chief Executive Officer and President
COMMON MEMBERS:
ELLINGTON FINANCIAL LLC

By: /s/ Laurence E. Penn                
Name: Laurence E. Penn
Title: Chief Executive Officer and President
EMG HOLDINGS, L.P.
By: /s/ Laurence E. Penn                
Name: Laurence E. Penn
Title: Authorized Representative

1

--------------------------------------------------------------------------------

SCHEDULE A

Common Members

Common Members
Cash 
Contribution
Agreed Value of Capital 
Contribution
Common Units
Percentage Interest of Common Units
Agreed Value of Capital 
Contribution
LTIP Units
Percentage Interest of LTIP Units
Percentage Interest of Common Units and LTIP Units
 
 
 
 
 
 
 
 
 
ELLINGTON FINANCIAL LLC
53 Forest Avenue
Suite 301
Greenwich, Connecticut 06870
––
$506,354,767.09
20,370,469
98.97000%
0
397,096
100%
98.98949
%
 
 
 
 
 
 
 
 
 
EMG Holdings, L.P.
53 Forest Avenue
Suite 301
Greenwich, Connecticut 06870
$4,664,360.40
$4,664,360.40
212,000
1.03000%
―
―
―
1.01051
%
 
 
 
 
 
 
 
 
 

TOTALS

$4,664,360.40

      $511,019,127.49  

20,582,469

100%

    0  
      397,096

100%
100%

Schedule A

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EXHIBIT A
DEFINITIONS
For purposes of this Agreement, unless the context otherwise requires:
“Act” means the Delaware Limited Liability Company Act, 6 Del. C. §§ 18-101,
et seq., as amended from time to time.
“Additional Securities” means any: (1) shares representing limited liability
company interests of Ellington Financial LLC now or hereafter authorized or
reclassified that have dividend rights, or rights upon liquidation, winding up
and dissolution, that are superior or prior to the EFC Shares (“Preferred
Shares”), (2) EFC Shares, (3) shares representing limited liability company
interests of Ellington Financial LLC now or hereafter authorized or reclassified
that have distribution rights, or rights upon liquidation, winding up and
dissolution, that are junior in rank to the EFC Shares (“Junior Shares”) and
(4) (i) rights, options, warrants or convertible or exchangeable securities
(including EFC LTIP Units) having the right to subscribe for or purchase or
otherwise acquire EFC Shares, Preferred Shares or Junior Shares, or
(ii) indebtedness issued by Ellington Financial LLC that provides any of the
rights described in clause (4)(i) of this definition (any such securities
referred to in clause (4)(i) or (ii) of this definition, “New Securities”).
“Administrative Expenses” means (i) all administrative and operating costs and
expenses incurred by the Company, (ii) administrative costs and expenses of the
Managing Member, including, without limitation, any salaries or other payments
to directors, trustees, officers or employees of the Managing Member, and any
accounting and legal expenses of the Managing Member, which expenses, the
Members hereby agree, are expenses of the Company and not the Managing Member,
and (iii) to the extent not included in clauses (i) or (ii) above, EFC Expenses;
provided, that Administrative Expenses shall not include any administrative
costs and expenses incurred by the Managing Member that are attributable to
Assets or interests in a Subsidiary that are owned by the Managing Member other
than through its ownership interest in the Company.
“Affiliate” shall mean, as to any specified Person, (i) any Person who is an
“affiliate” as that term is defined in Rule 12b‑2 of the general rules and
regulations under the Exchange Act, (ii) any executive officer, director,
trustee, managing member or general partner of such Person and (iii) any legal
entity for which such Person acts as an executive officer, director, trustee,
manager, managing member or general partner.
“Agreed Value” means the fair market value of a Member’s non-cash Capital
Contribution as of the date of contribution as agreed to by such Member and the
Managing Member. The names and addresses of the Members, number of Units issued
to each Member, and the Agreed Value of non-cash Capital Contributions as of the
date of contribution is set forth on Schedule A, as it may be amended or
restated from time to time.
“Agreement” shall mean this Limited Liability Company Operating Agreement
(including the schedules and exhibits attached hereto) as originally executed
and as amended, modified, supplemented or restated from time to time, as the
context requires.

Exhibit A-1

--------------------------------------------------------------------------------

“Asset” means any asset or other investment in which the Company, directly or
indirectly, holds an ownership interest.
“Award Agreement” shall have the meaning set forth in Section 5.2(a).
“Board of Directors” shall mean the Board of Directors of Ellington Financial
LLC.
“Business Day” shall mean any day except a Saturday, Sunday or day on which
banking institutions in New York, New York are not required to be open.
“Capital Account” shall have the meaning set forth in Section 4.4.
“Capital Contribution” means the total amount of cash, cash equivalents and the
Agreed Value of any Asset or other asset contributed or agreed to be
contributed, as the context requires, to the Company by each Member pursuant to
the terms of this Agreement. Any reference to the Capital Contribution of a
Member shall include the Capital Contribution made by a predecessor holder of
the Membership Interest of such Member.
“Cash Amount” means an amount of cash per Common Unit equal to the Value of the
EFC Shares Amount on the Specified Redemption Date divided by the number of
Common Units tendered for redemption.
“Certificate of Formation” shall have the meaning set forth in Section 1.2.
“Code” shall mean the U.S. Internal Revenue Code of 1986, as amended from time
to time, or any successor U.S. federal income tax code.
“Common Member” shall mean each Person identified on Schedule A as a holder of a
Common Unit or any successor or assignee who becomes a substitute Common Member
in accordance with the terms of this Agreement, and any Person admitted as an
additional Common Member in accordance with the terms of this Agreement.
“Common Unit” shall mean a Unit which has been designated as a Common Unit of
the Company.
“Company” shall mean Ellington Financial Operating Partnership LLC, the Delaware
limited liability company governed hereby.
“Company Loan” means a loan from the Company to the Member on the day the
Company pays over the excess of the Withheld Amount over the Distributable
Amount to a taxing authority.
“Company Minimum Gain” shall have the meaning set forth in Regulations Section
1.704‑2(d). In accordance with Regulations Section 1.704‑2(d), the amount of
Company Minimum Gain is determined by first computing, for each nonrecourse
liability of the Company, any gain the Company would realize if it disposed of
the property subject to that liability for no consideration, other than full
satisfaction of the liability, and then aggregating the separately computed
gains. A

Exhibit A-2

--------------------------------------------------------------------------------

Member’s share of Company Minimum Gain shall be determined in accordance with
Regulations Section 1.704-2(g)(1).
“Company Record Date” means the record date established by the Managing Member
for the distribution of cash pursuant to Section 5.3 hereof, which record date
shall be the same as the record date established by EFC for a distribution to
its shareholders of some or all of its portion of such distribution.
“Consent” shall have the meaning set forth in Section 13.2.
“Contributed Property” shall have the meaning set forth in the Recitals.
“Contributed Subsidiaries” shall have the meaning set forth in the Recitals.
“Conversion Factor” means a factor of 1.0, as adjusted as provided in this
definition. The Conversion Factor will be adjusted in the event that Ellington
Financial LLC (i) declares or pays a dividend on outstanding EFC Shares in EFC
Shares or makes a distribution to all holders of outstanding EFC Shares in EFC
Shares, (ii) subdivides outstanding EFC Shares or (iii) combines outstanding EFC
Shares into a smaller number of EFC Shares. In each of such events, the
Conversion Factor shall be adjusted by multiplying the Conversion Factor by a
fraction, the numerator of which shall be the number of EFC Shares issued and
outstanding on the record date for such dividend, distribution, subdivision or
combination (assuming for such purposes that such dividend, distribution,
subdivision or combination has occurred as of such time), and the denominator of
which shall be the actual number of EFC Shares (determined without the above
assumption) issued and outstanding on such record date and; provided, that in
the event that an entity other than an Affiliate of Ellington Financial LLC
shall become Managing Member pursuant to any merger, consolidation or
combination of Ellington Financial LLC with or into another entity (the
“Successor Entity”), the Conversion Factor shall be adjusted by multiplying the
Conversion Factor by the number of shares of the Successor Entity into which one
EFC Share is converted pursuant to such merger, consolidation or combination,
determined as of the date of such merger, consolidation or combination. Any
adjustment to the Conversion Factor shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for such
event. If, however, the Managing Member receives a Notice of Redemption after
the record date, if any, but prior to the effective date of such event, the
Conversion Factor shall be determined as if the Managing Member had received the
Notice of Redemption immediately prior to the record date for event.
Notwithstanding the foregoing, no adjustment shall be made to the Conversion
Factor if the number of outstanding Common Units is otherwise adjusted in the
same manner and at the same time as the adjustment to the number of outstanding
EFC Shares.
“Distributable Amount” shall have the meaning set forth in Section 5.3(b).
“EFC” shall have the meaning set forth in the Recitals.
“EFC Contribution” shall have the meaning set forth in the Recitals.

Exhibit A-3

--------------------------------------------------------------------------------

“EFC Expenses” means (i) costs and expenses relating to the formation and
continuity of existence and operation of EFC and any Subsidiaries (other than
Subsidiaries taxed as corporations for federal income tax purposes) thereof
(which Subsidiaries shall, for purposes hereof, be included within the
definition of EFC), including taxes, fees and assessments associated therewith,
any and all costs, expenses or fees payable to any trustee, director, officer or
employee of EFC, (ii) costs and expenses relating to any public offering and
registration, or private offering, of securities by EFC, and all statements,
reports, fees and expenses incidental thereto, including, without limitation,
underwriting discounts and selling commissions applicable to any such offering
of securities, and any costs and expenses associated with any claims made by any
holders of such securities or any underwriters or placement agents thereof,
(iii) costs and expenses associated with any repurchase of any securities by
EFC, (iv) costs and expenses associated with the preparation and filing of any
periodic or other reports and communications by EFC under federal, state or
local Laws or regulations, including filings with the Securities and Exchange
Commission, (v) costs and expenses associated with compliance by EFC with Laws,
rules and regulations promulgated by any regulatory body, including the
Securities and Exchange Commission and any securities exchange, (vi) costs and
expenses associated with any health, dental, vision, disability, life insurance,
401(k) plan, incentive plan, bonus plan or other plan providing for compensation
or benefits for the trustees, directors, officers or employees of EFC or any of
its Subsidiaries, (vii) costs and expenses incurred by EFC relating to any
issuance or redemption of Membership Interests and (viii) all other operating,
administrative, financing or other costs of EFC incurred pursuant to the
Management Agreement or incurred in the ordinary course of its business on
behalf of itself or on behalf of or related to the Company.
“EFC LTIP Units” has the meaning provided in the EFC Operating Agreement.
“EFC Operating Agreement” means the Second Amended and Restated Operating
Agreement of Ellington Financial LLC dated as of July 1, 2009, as amended by the
First Amendment to Second Amended and Restated Operating Agreement of Ellington
Financial LLC, effective as of August 8, 2011, as amended, supplemented or
restated from time to time.
“EFC Shares” means common shares representing limited liability company
interests, no par value per share, of EFC (or Successor Entity, as the case may
be).
“EFC Shares Amount” means the number of EFC Shares equal to the product of (X)
the number of Common Units offered for redemption by a Redeeming Limited
Partner, multiplied by (Y) the Conversion Factor as adjusted to and including
the Specified Redemption Date; provided that in the event EFC issues to all
holders of EFC Shares rights, options, warrants or convertible or exchangeable
securities entitling the holders of EFC Shares to subscribe for or purchase or
otherwise acquire additional EFC Shares, or any other securities or property
(collectively, the “Rights”), and such Rights have not expired at the Specified
Redemption Date, then the EFC Shares Amount shall also include such Rights
issuable to a holder of the EFC Shares Amount on the record date fixed for
purposes of determining the holders of EFC Shares entitled to Rights.
“EMGH” means EMG Holdings, L.P., a Delaware limited partnership and all
references to EMGH shall include any EMGH Affiliates.

Exhibit A-4

--------------------------------------------------------------------------------

“EMGH Affiliate” shall have the meaning set forth in Section 10.2(f).
“EMGH Redemption Right Event” means either (i) the initial public announcement
of a transaction that falls under Sections 10.3(b) or 10.3(c) hereof or (ii) the
effectiveness of a termination or non-renewal of the Management Agreement.
“Event of Bankruptcy” as to any Person means (i) the filing of a petition for
relief as to such Person as debtor or bankrupt under the U.S. Bankruptcy Code of
1978, as amended, or similar provision of Law of any jurisdiction (except if
such petition is contested by such Person and has been dismissed within 90
days); (ii) the insolvency or bankruptcy of such Person as finally determined by
a court proceeding; (iii) the filing by such Person of a petition or application
to accomplish the same or for the appointment of a receiver or a trustee for
such Person or a substantial part of his assets; or (iv) the commencement of any
proceedings relating to such Person as a debtor under any other reorganization,
arrangement, insolvency, adjustment of debt or liquidation Law of any
jurisdiction, whether now in existence or hereinafter in effect, either by such
Person or by another, provided that if such proceeding is commenced by another,
such Person indicates his approval of such proceeding, consents thereto or
acquiesces therein, or such proceeding is contested by such Person and has not
been finally dismissed within 90 days.
“Event of Dissolution” shall have the meaning set forth in Section 7.1.
“Fiscal Year” shall have the meaning set forth in Section 1.10.
“Governmental Authority” means: (i) any nation, state, commonwealth, province,
territory, county, municipality, district or other jurisdiction of any nature;
(ii) the United States and other federal, state, local, municipal, foreign or
other government or (iii) any governmental or quasi-governmental authority of
any nature (including any governmental division, department, agency, commission,
instrumentality, official, organization, unit, body or entity and any court or
other tribunal).
“Incentive Plans” means, collectively, EFC’s 2007 Incentive Plan for Entities
and EFC’s 2007 Incentive Plan for Individuals and any successor plans thereto,
each as may be amended from time to time.
“Independent Directors” means a director of EFC who meets the independence
requirements of the New York Stock Exchange as set forth from time to time. If
at any time there are no Independent Directors, references herein to
“Independent Directors” shall be deemed to refer to all directors of EFC.
“Indemnitee” means (i) any Person made a party to a proceeding by reason of its
status as (A) the Managing Member, (B) a director, officer or employee of the
Managing Member or any Subsidiary thereof, or (C) the Manager or its Affiliates
performing services for the Company and (ii) such other Persons (including
Affiliates of the Managing Member or the Company) as the Managing Member may
designate from time to time (whether before or after the event giving rise to
potential liability), in its sole and absolute discretion.

Exhibit A-5

--------------------------------------------------------------------------------

“Initial EMGH Common Units” shall have the meaning set forth in Section 11.1(a).
“Investment Company Act” shall have the meaning set forth in Section 1.4(a).
“Junior Shares” has the meaning set forth in the definition of “Additional
Securities.”
“Law” means any applicable constitutional provision, statute, act, code, law,
regulation, rule, ordinance, order, decree, ruling, proclamation, resolution,
judgment, decision, declaration, or interpretative or advisory opinion or letter
of a Governmental Authority.
“Loss” has the meaning set forth in Section 5.1(h) hereof.
“LTIP Adjustment Event” shall have the meaning set forth in Section 5.2(a).
“LTIP Conversion Right” shall have the meaning set forth in Section 5.2(c).
“LTIP Unit” means a Unit that is designated as an LTIP Unit and granted pursuant
to one or more of the Incentive Plans, which shall have the rights, preferences
and other privileges designated in Section 5.2 hereof. Unless otherwise
determined by the Managing Member or as expressly provided in the applicable
award agreement governing an award of an LTIP Unit, LTIP Units shall not have
any voting rights.
“LTIP Unitholder” means a Member that holds LTIP Units.
“Majority in Interest” means Members holding more than 50% of the Percentage
Interests of the Members; provided, however, that in the event any LTIP Units
that have no voting rights are outstanding, Percentage Interests shall be
calculated by excluding the outstanding LTIP Units that have no voting rights.
“Management Agreement” means the Fourth Amended and Restated Management
Agreement, dated as of January 1, 2013, by and between the Manager, EFC and the
Company, as amended, supplemented or restated from time to time.
"Manager" means Ellington Financial Management LLC.
“Managing Member” shall mean Ellington Financial LLC, a Delaware limited
liability company and/or any successor or additional managing member, each in
its capacity as a managing member of the Company.
“Managing Member Capital Account Balance Per Common Unit” means the Capital
Account balance of the Managing Member with respect to its Common Units divided
by the number of Common Units held by the Managing Member.
“Member Nonrecourse Debt Minimum Gain” shall have the meaning set forth in
Regulations Section 1.704‑2(i). A Member’s share of Member Nonrecourse Debt
Minimum Gain shall be determined in accordance with Regulations Section
1.704-2(i)(5).

Exhibit A-6

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“Members” shall mean the Managing Member, the Common Members and any new members
admitted from time to time upon approval of the Managing Member.
“Membership Interest” means a limited liability company interest of the Company
held by a Member at any particular time representing a fractional part of the
limited liability company interests of the Company of all Members, and includes
any and all benefits to which the holder of such a Membership Interest may be
entitled as provided in this Agreement and in the Act, together with the
obligations of such Member to comply with all the provisions of this Agreement
and of the Act. Membership Interests may be expressed as a number of Common
Units or other Units.
“Member Nonrecourse Debt Minimum Gain” has the meaning set forth in Regulations
Section 1.704‑2(i). A Member’s share of Member Nonrecourse Debt Minimum Gain
shall be determined in accordance with Regulations Section 1.704‑2(i)(5).
“New Securities” has the meaning set forth in the definition of “Additional
Securities.”
“Notice of Redemption” means the Notice of Redemption substantially in the form
attached as Exhibit B hereto.
“Offer” shall have the meaning set forth in Section 10.3.
“Percentage Interest” of a Member shall mean the percentage interest of such
Member in the Common Units and LTIP Units, as determined by dividing the number
of Common Units and LTIP Units held by such Member by the total Common Units and
LTIP Units then outstanding. The Percentage Interests shall be as set forth on
Schedule A.
“Person” shall mean an individual, partnership, corporation, trust, limited
liability company, unincorporated organization, government or agency or
political subdivision thereof, or any other legal entity.
“Preferred Shares” has the meaning set forth in the definition of “Additional
Securities.”
“Profit” has the meaning set forth in Section 5.1(h) hereof.
“Redeeming Member” has the meaning set forth in Section 11.1(a) hereof.
“Redemption Amount” means either the Cash Amount or the EFC Shares Amount.
“Redemption Right” has the meaning set forth in Section 11.1(a) hereof.
“Regulations” shall mean the Treasury regulations promulgated under the Code.
“REIT Entity” mean any entity in which the Company owns an equity interest,
directly or indirectly, and that has elected, or intends to elect, to be treated
as a “real estate investment trust” under Sections 856 through 860 of the Code.
“Rights” has the meaning set forth in the definition of “EFC Shares Amount.”

Exhibit A-7

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“Safe Harbor” shall have the meaning set forth in Section 6.3(b).
“Safe Harbor Election” shall have the meaning set forth in Section 6.3(b).
“Safe Harbor Interests” shall have the meaning set forth in Section 6.3(b).
“Securities Act” shall mean the United States Securities Act of 1933, as
amended.
“Specified Redemption Date” means the first business day of the month that is at
least 60 calendar days after the receipt by the Managing Member of a Notice of
Redemption.
“Subsidiary” means with respect to any Person, (i) any corporation or other
entity a majority of the Capital Stock of which having ordinary voting power to
elect a majority of the board of directors or other Persons performing similar
functions is at the time owned, directly or indirectly, with power to vote, by
such initial Person or (ii) a partnership in which such initial Person or any
direct or indirect Subsidiary of such initial Person is a general partner.
“Subsidiary Partnership” means any partnership or limited liability company in
which the Managing Member, the Company, or a wholly owned Subsidiary of the
Managing Member or the Company owns a partnership or limited liability company
interest.
“Substitute Member” means any Person admitted to the Company as a Member
pursuant to Section 10.4 hereof.
“Successor Entity” has the meaning set forth in the definition of “Conversion
Factor.”
“Survivor” shall have the meaning set forth in Section 10.3.
“Tax Matters Member” shall have the meaning set forth in Section 6.2.
“Trading Day” means a day on which the principal national securities exchange on
which a security is listed or admitted to trading is open for the transaction of
business or, if a security is not listed or admitted to trading on any national
securities exchange, shall mean any day other than a Saturday, a Sunday or a day
on which banking institutions in the State of New York are authorized or
obligated by Law or executive order to close.
“Transaction” shall have the meaning set forth in Section 10.3.
“Transfer” shall mean any sale, exchange, transfer (including any mortgage,
hypothecation or pledge), assignment, distribution or other disposition, direct
or indirect, whether voluntarily or by operation of Law or at judicial sale or
otherwise.
“Unit” shall mean a fractional, undivided share of the Membership Interests of
all Members issued hereunder, and includes Common Units, LTIP Units and any
other class or series of Units that may be established after the date hereof in
accordance with the terms hereof. The number of Units outstanding and the
Percentage Interests represented by such Units are set forth on Schedule A
hereto, as it may be amended or restated from time to time.

Exhibit A-8

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“Unit Designation” shall have the meaning set forth in Section 4.2(a).
“Value” means, with respect to any security, the average of the daily market
prices of such security for the ten consecutive Trading Days immediately
preceding the date of such valuation. The market price for each such Trading Day
shall be: (i) if the security is listed or admitted to trading on the New York
Stock Exchange or any other national securities exchange, the last reported sale
price, regular way, on such day, or if no such sale takes place on such day, the
average of the closing bid and asked prices, regular way, on such day, (ii) if
the security is not listed or admitted to trading on the New York Stock Exchange
or any other national securities exchange, the last reported sale price on such
day or, if no sale takes place on such day, the average of the closing bid and
asked prices on such day, as reported by a reliable quotation source designated
by the Managing Member, or (iii) if the security is not listed or admitted to
trading on the New York Stock Exchange or any national securities exchange and
no such last reported sale price or closing bid and asked prices are available,
the average of the reported high bid and low asked prices on such day, as
reported by a reliable quotation source designated by the Managing Member, or if
there shall be no bid and asked prices on such day, the average of the high bid
and low asked prices, as so reported, on the most recent day (not more than ten
days prior to the date in question) for which prices have been so reported;
provided that if there are no bid and asked prices reported during the ten days
prior to the date in question, the value of the security shall be determined by
the Board of Directors acting in good faith on the basis of such quotations and
other information as it considers, in its reasonable judgment, appropriate. In
the event the security includes any additional rights (including any Rights),
then the value of such rights shall be determined by the Board of Directors
acting in good faith on the basis of such quotations and other information as it
considers, in its reasonable judgment, appropriate.
“Withheld Amount” means any amount required to be withheld by the Company to pay
over to any taxing authority as a result of any allocation or distribution of
income to a Member.

Exhibit A-9

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EXHIBIT B
NOTICE OF REDEMPTION
In accordance with Section 11.1 of the Limited Liability Company Operating
Agreement (the “Agreement”) of Ellington Financial Operating Partnership LLC,
the undersigned hereby irrevocably (i) presents for redemption ________ Common
Units in Ellington Financial Operating Partnership LLC in accordance with the
terms of the Agreement and the Redemption Right referred to in Section 11.1
thereof, (ii) surrenders such Common Units and all right, title and interest
therein and (iii) directs that the Cash Amount or EFC Shares Amount (as defined
in the Agreement) as determined by the Managing Member deliverable upon exercise
of the Redemption Right be delivered to the address specified below, and if EFC
Shares (as defined in the Agreement) are to be delivered, such EFC Shares be
registered or placed in the name(s) and at the address(es) specified below. The
undersigned hereby represents, warrants and certifies that the undersigned
(a) has title to such Common Units, free and clear of the rights and interests
of any person or entity other than the Company or the Managing Member; (b) has
the full right, power and authority to cause the redemption of the Common Units
as provided herein; and (c) has obtained the approval of all persons or
entities, if any, having the right to consent to or approve the Common Units for
redemption.
Dated:________ __, _____
Name of Member:
_______________________________________
(Signature of Member or Authorized Representative)

_______________________________________
(Mailing Address)

_______________________________________
(City) (State) (Zip Code)

Signature Guaranteed by:

_______________________________________

If EFC Shares are to be issued, issue to:
Please insert social security or identifying number:
NAME:

Exhibit B-1

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EXHIBIT C-1
CERTIFICATION OF NON-FOREIGN STATUS
(FOR REDEEMING MEMBERS THAT ARE ENTITIES)
Under Section 1445(e) of the Internal Revenue Code of 1986, as amended (the
“Code”), in the event of a disposition by a non-U.S. person of a partnership
interest in a partnership in which (i) 50% or more of the value of the gross
assets consists of United States real property interests (“USRPIs”), as defined
in Section 897(c) of the Code, and (ii) 90% or more of the value of the gross
assets consists of USRPIs, cash, and cash equivalents, the transferee will be
required to withhold 10% of the amount realized by the non-U.S. person upon the
disposition. To inform Ellington Financial LLC (the “Managing Member”) and
Ellington Financial Operating Partnership LLC (the “Company”) that no
withholding is required with respect to the redemption by ____________
(“Member”) of its Common Units in the Company, the undersigned hereby certifies
the following on behalf of Member:
1.
Member is not a foreign corporation, foreign partnership, foreign trust, or
foreign estate, as those terms are defined in the Code and the Treasury
regulations thereunder.

2.
Member is not a disregarded entity as defined in Treasury Regulation
Section 1.1445‑2(b)(2)(iii).

3.    The U.S. employer identification number of Member is _____________.
4.
The principal business address of Member is:
___________________________________, __________________________ and Member’s
place of incorporation is _____________.

5.
Member agrees to inform the Managing Member if it becomes a foreign person at
any time during the three-year period immediately following the date of this
notice.

6.
Member understands that this certification may be disclosed to the Internal
Revenue Service by the Managing Member and that any false statement contained
herein could be punished by fine, imprisonment, or both.

MEMBER: _____________________________

By:                        
Name:                        
Title:                        

Exhibit C-1-1

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Under penalties of perjury, I declare that I have examined this certification
and, to the best of my knowledge and belief, it is true, correct, and complete,
and I further declare that I have authority to sign this document on behalf of
Member.
Date: _________________    ______________________________________
Name:
Title:

Exhibit C-1-2

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EXHIBIT C-2
CERTIFICATION OF NON-FOREIGN STATUS
(FOR REDEEMING MEMBERS THAT ARE INDIVIDUALS)
Under Section 1445(e) of the Internal Revenue Code of 1986, as amended (the
“Code”), in the event of a disposition by a non-U.S. person of a partnership
interest in a partnership in which (i) 50% or more of the value of the gross
assets consists of United States real property interests (“USRPIs”), as defined
in Section 897(c) of the Code, and (ii) 90% or more of the value of the gross
assets consists of USRPIs, cash, and cash equivalents, the transferee will be
required to withhold 10% of the amount realized by the non-U.S. person upon the
disposition. To inform Ellington Financial LLC (the “Managing Member”) and
Ellington Financial Operating Partnership LLC (the “Company”) that no
withholding is required with respect to my redemption of my Common Units in the
Company, I, ___________, hereby certify the following:
1.    I am not a nonresident alien for purposes of U.S. income taxation.
2.    My U.S. taxpayer identification number (social security number) is
_____________.
3.    My home address is: ____________________________________________________.
4.
I agree to inform the Managing Member promptly if I become a nonresident alien
at any time during the three-year period immediately following the date of this
notice.

5.
I understand that this certification may be disclosed to the Internal Revenue
Service by the Managing Member and that any false statement contained herein
could be punished by fine, imprisonment, or both.

______________________________________
Name:

Under penalties of perjury, I declare that I have examined this certification
and, to the best of my knowledge and belief, it is true, correct, and complete.

Date: _________________
________________________________

Name:
Title:

Exhibit C-2