Document:

LLC Agreement for Copperhead Ventures, LLC

    Exhibit
      10.1

    

    CONFIDENTIAL
      TREATMENT REQUESTED

    

    Confidential
      material has been separately filed with the Securities and Exchange Commission
      under an application for confidential treatment. Terms, for which confidential
      treatment has been requested, have been omitted and marked as
      redacted.

    

    

    

    

    

    LIMITED
      LIABILITY COMPANY AGREEMENT

    OF

    COPPERHEAD
      VENTURES, LLC

    

    THIS
      LIMITED LIABILITY COMPANY AGREEMENT OF COPPERHEAD VENTURES, LLC (this
“Agreement”) is made as of the 8th day of September, 2006, by and among ISSUED
      HOLDINGS CAPITAL CORPORATION, a Virginia corporation (“IHCC”), DBAH CAPITAL,
      LLC, a Delaware limited liability company (“DBAH”), and DARTMOUTH INVESTMENTS,
      LLP (“Advisors”), a Texas limited liability partnership, which agree to form a
      limited liability company upon the following terms and conditions:

    

    1. FORMATION
      AND TERM.

     

     

    	1.1.  	
            Formation.

          

     

    The
      Company was formed upon the filing of its certificate of formation with the
      Delaware Secretary of State on July 24, 2006.

     

    	1.2.  	
            Term.

          

     

    The
      term
      of the Company shall begin on the date of the filing of the certificate of
      formation and the Company shall continue until dissolved and wound up in
      accordance with this Agreement.

     

     

    	1.3.  	
            Name.

          

     

    The
      name
      of the Company is Copperhead Ventures, LLC. The business of the Company may
      be
      conducted under such trade or fictitious names as the Directors may determine.
      

     

    	1.4.  	
            Principal
              Office.

          

     

    The
      principal office of the Company, at which the records required to be maintained
      by the Act are to kept, shall be at 4551 Cox Road, Suite 300, Glen Allen,
      Virginia, 23060, or such other place as the Directors may determine. The
      Directors shall give notice to the Members of any change of the principal
      office.

    
      
         

      

      
        
        

        
          

        

      

      
         

      

    

    Registered
      Agent.

    The
      Company’s agent for service of process shall be Capitol Services, Inc. or such
      other person as the Directors may designate.

    

    	2.  	
            DEFINITIONS.

          

     

    The
      following terms used in this Agreement shall (unless otherwise expressly
      provided herein or unless the context otherwise requires) have the following
      respective meanings:

    

    Act.

    

    The
      Delaware Limited Liability Company Act, as it may be amended or superseded
      from
      time to time.

    

    Advisors.

    

    Dartmouth
      Investments, LLP.

    

    Advisors
      Note.

    

    The
      Promissory Note issued by Advisors to the Company as provided in
      Section 5.2(c).

    

    Affiliate.

    

     

    When
      used
      with reference to a specified Person:

     

    	(i)  	
            any
              Person directly or indirectly Controlling, Controlled by, or under
              common
              Control with, the specified Person;

          

     

    	(ii)  	
            any
              Person owning or Controlling fifteen percent (15%) or
              more of the outstanding voting securities of the specified
              Person;

          

     

    	(iii)  	
            any
              Person that is an officer, director, partner or trustee of, or serves
              in a
              similar capacity with respect to the specified Person, or of which
              the
              specified Person is an officer, director, partner or trustee;
              and

          

     

    	(iv)  	
            any
              relative or spouse of the specified
              Person.

          

     

    Annual
      Business Plan.

    

    The
      annual business plan of the Company described in Section 8.7.

    

    Approved
      Investment.

    

    An
      investment approved by the Board as provided in
      Section 8.3(b)(i).

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    Auditor.

    

    BDO
      Seidman LLP or another nationally recognized accounting firm agreed upon by
      the
      Board, as provided in Section 8.3(b), to serve as the independent auditors
      for
      the Company.

    

    Available
      Surplus.

     

    All
      amounts, if any, able to be released to Commercial Capital on a Payment Date
      from the surplus account for the CCAO Series 2 Trust Collateralized Bonds
      pursuant to Sections 9(xiii) and (xiv) of the Series 2 Supplement with respect
      to that Payment Date, other than amounts related to the Series 2 Excluded
      Assets.

     

    Bankruptcy.

    	(i)  	
            The
              entry of an order for relief with respect to a Member in proceedings
              under
              the United States Bankruptcy Code, as amended or superseded from time
              to
              time;

          

     

    	(ii)  	
            The
              filing of an application by a Member for, or its consent to, the
              appointment of a trustee, receiver or custodian of its
              assets;

          

     

    	(iii)  	
            The
              making by a Member of a general assignment for the benefit of
              creditors;

          

     

    	(iv)  	
            The
              entry of an order, judgment or decree by any court of competent
              jurisdiction appointing a trustee, receiver or custodian of the assets
              of
              a Member unless the proceedings and the person appointed are dismissed
              within ninety (90) days;

          

     

    	(v)  	
            The
              failure by a Member generally to pay its debts as the debts become
              due
              within the meaning of Section 303(h)(1) of the United States Bankruptcy
              Code or the admission in writing of its inability to pay its debts
              as they
              become due; or

          

     

    	(vi)  	
            A
              Member’s Interest becoming subject to the enforcement of any rights of a
              creditor of a Member, whether arising out of an attempted charge upon
              such
              Member’s Interest by judicial process or otherwise, if such Member shall
              fail to obtain the release of those enforcement rights, whether by
              legal
              process, bonding, or otherwise, within ninety (90) days after actual
              notice of such creditor’s action.

          

     

    Bankrupt
      Member.

    

    A
      Member
      that is the subject of Bankruptcy.

    

    Base
      Indenture.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    The
      Indenture dated as of November 1, 1993, as amended, between Commercial Capital
      and the Trustee.

    

    Board.

    

    The
      Board
      of Directors described in Section 8.1.

    

    Capital
      Account.

    

    As
      of any
      date, with respect to any Member, the capital account maintained for such Member
      as determined under Section 5.5.

    

    Capital
      Contribution.

    

    The
      total
      amount of money and the agreed upon fair market value of any property
      contributed to the Company by a Member or its predecessor in interest on the
      date of contribution. 

    

    Cash
      Determination Date.

    

    The
      last
      day of the six (6) consecutive calendar month period described in Section
      7.3.

    

    Cash
      Percentage.

    

    As
      of the
      last day of any calendar month, the percentage of the Company’s Net Assets
      represented by cash, cash equivalents and short term instruments with original
      maturities of ninety (90) days or fewer.

    

    Cause.

    

    Cause
      for
      removal of the Manager as defined in Section 8.6(e).

    

    CCAO
      Series 2 Trust Collateralized Bonds

    

    The
      bonds
      issued by Commercial Capital pursuant to the Base Indenture and the Series
      2
      Supplement.

    

    CCAO
      Series 3 Trust Collateralized Bonds

    

    The
      bonds
      issued by Commercial Capital pursuant to the Base Indenture and the Series
      3
      Supplement.

    

    CCAO
      Series 2 Assets.

    

    The
      benefits of the Derivative Payments Agreement contributed to the Company by
      IHCC
      as described in Sections 5.2(b)(iii). 

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    CCAO
      Series 3 Assets.

    

    The
      security and redemption rights contributed to the Company by IHCC as described
      in Sections 5.2(b)(i) and (ii).

    

    Change
      in Control Notice.

    

    A
      notice
      from IHCC delivered pursuant to Section 15.3.

    

    Change
      in Control Transaction.

    

    A
      transaction or series of transactions in which a party that is not an Affiliate
      of Dynex Capital will acquire more than twenty-five percent (25%) of the voting
      securities of Dynex Capital to be outstanding after that transaction or series
      of transactions.

    

    Code.

    

    The
      United States Internal Revenue Code of 1986, as amended, and any successor
      statute thereto.

    

    Commercial
      Capital.

     

    Commercial
      Capital Access One, Inc., a Virginia corporation, together with its successors
      and assigns.

     

    Company.

    

    Copperhead
      Ventures, LLC. 

    

    Company
      Business.

    

    The
      business of the Company described in Section 4.

    

    Company
      Minimum Gain.

    

    As
      of any
      date, the amount determined under Regulations Sections 1.704-2(b)(2) and
      1.704-2(d).

    

    Company
      Nonrecourse Deductions.

    

    The
      amount of deductions of the Company calculated under Regulations Section
      1.704-2(c).

    

    Company
      Revenues.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    All
      cash
      revenue from the operation of the Company Business, interest income received
      during the year, and reserves set aside in prior years and no longer deemed
      necessary for the Company Business, as determined by the Board.

    

    Control.

    

    The
      possession by any person or related group of persons, directly or indirectly,
      of
      the power to direct or cause the direction of the management and policies of
      a
      Person, whether through ownership of voting securities or partnership interests,
      by contract or otherwise.

    

    Controlled.

    

    To
      be
      under the Control of the specified Person.

    

    Controls
      or Controlling.

     

    The
      possession of Control.

    

    DBAH
      Directors.

    

    The
      Directors designated by DBAH.

    

    Debt
      Service.

    

    As
      the
      context requires, the amounts, including principal and interest, paid, payable
      or due with respect to any loans to the Company, or to which the property or
      assets of the Company are subject.

    

    Derivative
      Payments Agreement.

    

    The
      Derivative Payments Agreement in the form of Exhibit
      B
      between
      the Company and IHCC.

    

    Director.

    

    Any
      individual designated by a Voting Member to serve on the Board.

    

    Disposition.

    

    The
      sale,
      assignment, transfer or other disposition, in any manner, whether voluntarily
      or
      involuntarily, by operation of law or otherwise.

    

    Dynex
      Capital

    

    Dynex
      Capital, Inc., a Virginia corporation.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    Dynex
      Entity. 

    

    Each
      of
      Dynex Capital, Inc. and its Affiliates.

    

    Dynex
      Special Withdrawal Notice.

    

    A
      notice
      from IHCC delivered pursuant to Sections 15.3(b) or (c).

    

    Election
      Notice.
      

    

    A
      notice
      delivered by a Non-Withdrawing Member pursuant to Section 13.5(b).

    

    Gain
      or Loss from Sale.

    

    Any
      gain
      or loss for federal income tax purposes resulting from the sale or other
      disposition of any or all of the Company’s assets not in the ordinary course of
      business, except that for purposes of Capital Account adjustments, such gain
      or
      loss shall be computed by reference to the value on the books of the Company
      (determined in accordance with Regulations Sections 1.704-1(b)(2)(iv)(g) and
      1.704-3(d)) as of the date of sale or other disposition rather than by reference
      to the adjusted tax basis of such property as of that date.

    

    IHCC
      Directors.

    

    The
      Directors designated by IHCC.

    

    Interest.

    

    The
      ownership interest of a Member in the Company at any particular time, including
      the right of the Member to any and all benefits to which the Member is entitled
      and the obligations to which the Member is subject under this Agreement. The
      initial Interests of the Members, expressed as a percentage, are set forth
      on
Exhibit
      A.

    

    Limited
      Guaranty

    

    The
      Guaranty and Indemnification Agreement dated as of October 30, 1997, as defined
      in the Series 2 Supplement.

    

    Loan
      Notice.

    

    The
      notice described in Section 5.3(a)(ii) of a Member’s intent to lend to the
      Company under Section 5.3(a)(i), which shall specify the amount of the proposed
      loan and the purposes therefor.

    

    Management
      Fee.

    

    The
      Management Fee provided for in Section 9.1(b). 

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

    Manager.

    

    Dynex
      Capital or another person designated as manager in accordance with Section
      8.6.

    

    Mandatory
      Excess Cash Distribution.

    

    A
      distribution required by Section 7.3.

    

    Measuring
      Date.

    

    See
      Section 13.5.

    

    Members.

    

    IHCC,
      DBAH, Advisors and any additions or successors thereto that are admitted as
      Members.

    

    Member
      Nonrecourse Debt.

    

    A
      nonrecourse debt of the Company as described in Regulations Section
      1.704-2(b)(4).

    

    Member
      Nonrecourse Debt Minimum Gain.

    

    As
      of any
      date, the amount determined under Regulations Section
      l.704-2(i)(3).

    

    Member
      Nonrecourse Deductions.

    

    With
      respect to a Member Nonrecourse Debt, the items of loss, deduction, and
      expenditure attributable to such Member Nonrecourse Debt under Regulations
      Section 1.704-2(i)(2).

    

    Modified
      Negative Capital Account.

    

    The
      deficit balance of a Capital Account in excess of the amount of the deficit,
      if
      any, a Member is obligated to contribute to the Company under the Agreement
      or
      is deemed obligated to restore pursuant to the Code Section 704(b)
      Regulations.

    

    Net
      Assets

    

    The
      total
      assets of the Company less any loans to the Company, or other obligations of
      the
      Company incurred to fund the purchase of investments.

    

    Net
      Cash from Operations.

    

    For
      any
      taxable year, the excess of Company Revenues over the sum of (1) Operating
      Expenses of the Company paid in cash during the year, (2) Debt Service,
      (3) the cost of

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    any
      Approved Investments made during the year plus any reserves established by
      the
      Board for the making of Approved Investments, and (4) any reasonable reserves,
      as determined by the Board or in accordance with the Annual Business Plan,
      for
      Operating Expenses in succeeding years, for the repair, replacement or
      preservation during the current or subsequent years of any Company asset, for
      Debt Service, or for contingencies and unanticipated obligations.

    

    Net
      Income or Net Loss.

    

    For
      each
      taxable year, the Company’s taxable income or taxable loss for such year, as
      determined under Section 703(a) of the Code, and Regulations Section 1.703-1,
      but with the following adjustments:

    

    	(i)  	
            Any
              tax exempt income, as described in Section 705(a)(1)(B) of the Code,
              realized by the Company during such year and not otherwise taken into
              account in computing Net Income or Net Loss shall be included as an
              item
              of gross income;

          

     

    	(ii)  	
            Any
              expenditures of the Company described in Section 705(a)(2)(B) of the
              Code
              for such Fiscal Year or treated as being so described in Regulations
              Section 1.704-1(b)(2)(iv)(i) and not otherwise taken into account in
              this
              subsection shall be subtracted from such taxable income or taxable
              loss;
              and

          

     

    	(iii)  	
            Notwithstanding
              any other provision of this definition, any items that are specially
              or
              curatively allocated pursuant to Section 7 shall not be taken into
              account
              in computing Net Income or Net Loss.

          

     

    Net
      Proceeds from Financing.

     

    Net
      cash
      realized by the Company from borrowing by the Company or refinancing of
      indebtedness of the Company, reduced by (1) all expenses related to the
      borrowing or refinancing, (2) the amount applied, as determined by the Board,
      toward the payment of any indebtedness of the Company or other expenditures
      on
      behalf of the Company, (3) the cost of any Approved Investments to be made
      with the proceeds plus any reserves established by the Board for the making
      of
      Approved Investments, and (4) reasonable reserves, as determined by the Board,
      to satisfy other obligations of the Company or anticipated
      expenditures.

    

    Non-Withdrawing
      Member.

    

    A
      Voting
      Member that receives a Withdrawal Notice.

    

    Operating
      Expenses.

    

    All
      costs
      and expenses of ownership and operation of the Company’s assets and the Company
      Business, including, but not limited to, payroll costs, costs of materials,
      taxes,

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    insurance
      premiums, utility costs, costs of repairs and maintenance, costs for general,
      administrative and overhead, audit expenses, and any other expenses incurred
      in
      the ordinary course of operating the Company Business.

    

    Opposing
      Member.

    

    A
      Voting
      Member that receives a Sale Notice as provided in Section 13.7.

    

    Payment
      Date.

    

    A
      Payment
      Date as defined for the purposes of the Series 2 Supplement.

    

    Permitted
      Transferees.

    

    The
      Persons described in Section 13.3.

    

    Person.

    

    Any
      individual, corporation, partnership, limited liability company, firm, joint
      venture, association, trust or unincorporated organization, a government, or
      any
      agency, authority or political subdivision thereof, or any other
      entity.

    

    Prime
      Rate.

    

    The
      annual prime rate (or base rate) reported in the “Money Rates” column or section
      of The
      Wall Street Journal
      as being
      the base rate on corporate loans at larger U.S. Money Center commercial banks
      on
      the first date on which The
      Wall Street Journal
      is
      published in each month. In the event The Wall Street Journal ceases publication
      of the Prime Rate, then the “Prime Rate” shall mean the “prime rate” or “base
      rate” announced by Bank of America, N.A. or the successor to substantially all
      of its assets and business (whether or not such rate has actually been charged
      by that bank). In the event that bank discontinues the practice of announcing
      that rate, Prime Rate shall mean the highest rate charged by that bank on
      short-term, unsecured loans to its most credit-worthy large corporate
      borrowers.

    

    Proportionate
      Share.

    

    The
      share
      equal to the Member’s Interest.

    

    Regulations.

    

    Regulations
      issued under the Code by the Department of the Treasury, as amended from time
      to
      time.

    

    Regulatory
      Notice.

    

    A
      notice
      delivered pursuant to Section 15.4.

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    

    Rules.

    

    The
      American Arbitration Association rules described in Section 20.1.

    

    Sale
      Notice.

    

    A
      notice
      delivered pursuant to Section 13.7. 

    

    Selling
      Member.

    

    A
      Voting
      Member that delivers a Sale Notice as provided in Section 13.7.

    

    Series
      2 Collateralized Bonds.

     

    CCAO
      Trust Collateralized Bonds, Series 2, Class E, Class F and Class
      G.

     

    Series
      2 Excluded Assets

     

    Amounts
      included in and to be distributed to Commercial Capital in accordance with
      Section 9(xiv) of the Series 2 Supplement that result from the net purchase
      proceeds received from the purchase of defaulted loans by SunAmerica or its
      designee pursuant to the Limited Guaranty.

     

    Series
      2 Supplement.

     

    Series
      Supplement dated as of October 1, 1997 to the Base Indenture between Commercial
      Capital, as Issuer, and the Trustee.

     

    Series
      3 Collateralized Bonds.

     

    CCAO
      Trust Collateralized Bonds, Series 3, Class F, Class G and Class
      H.

     

    Series
      3 Excluded Assets

     

    The
      Class
      3R, representing the residual certificate for pursuant to the Series 3
      Supplement, and all accumulated and unpaid interest on the Series 3
      Collateralized Bonds.

     

    Series
      3 Supplement.

     

    Series
      Supplement dated as of December 1, 1998 to the Base Indenture between Commercial
      Capital, as Issuer, and the Trustee.

     

    Trustee.

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    JPMorgan
      Chase Bank, National Association (formerly known as The Chase Manhattan Bank
      and
      successor by merger to Chase Bank of Texas, National Association (formerly
      known
      as Texas Commerce Bank National Association)), as Trustee.

    

    Successor
      in Interest.

    

    The
      Person who succeeds to an Interest upon the Bankruptcy of a Member.

    

    United
      States Bankruptcy Code.

    

    Title
      11
      of the United States Code, as amended from time to time.

     

    Voting
      Members.

     

    IHCC
      and
      DBAH, and any successor to their Interests that are admitted as
      Members.

     

    Withdrawal
      Notice.

     

    A
      notice
      of withdrawal delivered pursuant to Section 13.5(a).

     

    Withdrawing
      Member.

     

    A
      Voting
      Member that delivers a Withdrawal Notice.

     

    	3.  	
            NAME
              AND PLACE OF BUSINESS.

          

     

     

    	3.1.  	
            Name.

          

     

    No
      Member
      shall have the right to use, and each Member agrees not to use, any trade or
      service names, marks, emblems or logos owned by or licensed to the Company
      other
      than on behalf of the Company.

     

    	3.2.  	
            Place
              of Business.

          

     

     

    The
      principal place of business of the Company shall be 4551 Cox Road, Suite 300,
      Glen Allen, Virginia, 23060, or such other place as the Board may
      determine.

     

    	4.  	
            BUSINESS
              OF COMPANY.

          

     

    The
      Company Business shall consist of the ownership and management of a portfolio
      of
      residential mortgage backed debt securities, commercial mortgage backed debt
      securities, asset-backed debt securities, and other similar financial
      instruments, including derivative securities, and equity securities. The Company
      will seek to diversify its investments and allocation of the Company’s capital.
      The Company shall not engage in any other business or activity without the
      mutual consent of the Voting Members, which consent may be withheld in the
      sole
      discretion of either Voting Member. Notwithstanding anything contained herein
      to
      the contrary, each investment made by the Company must

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    comply
      with DBAH’s Anti-Money Laundering and Compliance requirements (which shall be
      consistent with the requirements applicable to Affiliates of DBAH), and, unless
      otherwise approved by DBAH, all securities trading activity by the Company
      must
      be completed through a registered broker-dealer.

     

    	5.  	
            MEMBERS
              AND CAPITAL CONTRIBUTIONS.

          

     

     

    	5.1.  	
            Members.

          

     

    Each
      Member has entered into this Agreement in reliance upon the unique knowledge,
      experience and expertise of the Voting Members in the development and operation
      of the Company Business. Accordingly, no Member shall be required to accept
      performance under this Agreement from any Person other than a Member or a Person
      to whom a Member is permitted to make a Disposition of its Interest, except
      as
      otherwise specifically provided in this Agreement.

     

    	5.2.  	
            Initial
              Capital Contributions.
              

          

     

    	(a)  	
            All
              Capital Contributions shall be made by the close of business on
              September 15, 2006, to be deemed made effective September 16,
              2006.

          

     

    	(b)  	
            IHCC
              will contribute (or cause to be contributed) the following assets to
              the
              Company as Capital Contributions:

          

     

    	(i)  	
            Its
              ownership interests in the Series 3 Collateralized
              Bonds;

          

     

    	(ii)  	
            IHCC
              will cause Commercial Capital to assign its optional right to redeem
              all
              of the outstanding CCAO Series 3 Trust Collateralized Bonds;
              and

          

     

    	(iii)  	
            IHCC
              will deliver an executed copy of the Derivative Payments Agreement
              with
              the Company in the form of Exhibit
              B
              pursuant to which IHCC will agree to pay to the Company amounts equal
              to
              (A) the cash flow received by Commercial Capital with respect to the
              Available Surplus and (B) the cash flow received by IHCC with respect
              to
              the Series 2 Collateralized Bonds.

          

     

    The
      Members hereby agree that the IHCC capital contribution pursuant to this Section
      5.2 is not intended to include the Series 2 Excluded Assets and the Series
      3
      Excluded Assets.

    

    The
      Members agree that the value of the Capital Contributions of IHCC described
      above are deemed to be Thirty Six Million Five Hundred Thousand Dollars
      ($36,500,000.00), consisting of [REDACTED
      PURSUANT TO CONFIDENTIAL TREATMENT REQUEST]
      with
      respect to the assets described in subparagraphs (i) and (ii), and [REDACTED
      PURSUANT TO CONFIDENTIAL TREATMENT REQUEST]
      with
      respect to the assets described in subparagraph (iii).

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    

    	(c)  	
            (i)Advisors
              will contribute $184,000 to the Company as a Capital Contribution in
              the
              form of a promissory note in that principal amount (the “Advisors Note”)
              bearing interest at a rate equal to the Prime Rate in the form attached
              as
              Exhibit
              C.

          

    	 	(ii) The
            Company will forgive the remaining principal balance of the Advisors
            Note
            on March 15, 2009; provided that on that date Advisor remains a
            Member of the Company.

     

    	(d)  	
            DBAH
              will contribute to the Company as a Capital Contribution cash in an
              amount
              equal to Thirty Six Million Five Hundred Thousand Dollars
              ($36,500,000.00).

          

     

     

    	5.3.  	
            Additional
              Capital.

          

     

    	(a)  	
            (i)If
              the Board determines that additional capital, in excess of that which
              the
              Members are obligated to contribute to the Company pursuant to
              Section 5.2, is
              needed by the Company to avoid a default by the Company with respect
              to
              Debt Service or other Company obligations incurred in accordance with
              this
              Agreement, to carry out the Business Plan or to protect and preserve
              the
              value of the Company’s assets or property, the Board shall notify the
              Members of the additional required capital. A Member may, but shall
              not be
              required to, lend money to the Company, which loan shall bear interest
              at
              a fluctuating rate equal to two (2) percentage points above the Prime
              Rate
              (but in no event at an interest rate higher than the maximum rate legally
              permitted). Any such loan shall be repaid in full before any distributions
              are made under Section 7.

          

     

    
      	 	 	
               

            	
              (ii)If
                any Member proposes to lend to the Company under
                Section 5.3(a)(i), that
                Member shall give a Loan Notice to the other Members. The other Members
                shall have the right to lend to the Company their respective Proportionate
                Shares of the loan amount, by giving notice to the first Member within
                fifteen (15) days
                after the Loan Notice is given, and such loan to the Company shall
                be made
                within that time period.

            

    

     

    	5.4.  	
            Guaranty
              of Company Indebtedness.

          

     

    The
      Members shall not be obligated to guarantee Company indebtedness unless all
      Voting Members agree to do so.

     

     

    	5.5.  	
            Additional
              General Provisions on Capital and Obligations of
              Members.

          

     

    	(a)  	
            (i)A
              Capital Account shall be established and maintained for each Member.
              A
              Member shall have a single Capital
              Account,

          

     

     

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

     

     

    	(b)  	
            regardless
              of the time or manner in which any portions of the Member’s Interest were
              acquired. If an Interest is transferred in accordance with this Agreement,
              the transferee shall succeed to the Capital Account of the transferor
              to
              the extent it relates to the transferred Interest.
              

          

     

    
      	 	
              (c)

            	
              In
                accordance with Regulations Section 1.704-1(b)(2)(iv),
                a Member’s Capital Account shall consist of (A) the sum of (1) its Capital
                Contributions, (2)
                allocations to it of Net Income and Gain from Sale (or items thereof)
                (other than gain under Section 6.6) including income and gain exempt
                from
                tax, and (3) the amount of any Company liabilities assumed by that
                Member
                or which are secured by any Company assets distributed to that Member
                (to
                the extent of the value of the securing assets), minus
                (B) the sum of (1) the cash and fair market value of property distributed
                to it by the Company, (2) the amount of any liabilities of that Member
                assumed by the Company or secured by any property contributed by
                that
                Member to the Company, (3) allocations to it of expenditures of the
                Company described in Section 705(a)(2)(B) of the Code or treated
                as such
                expenditures under the Regulations, and (4) allocations
                to it of Net Loss and Loss from Sale (or items
                thereof).

            

    

     

    	(iii)  	
            (A)In
              accordance with Regulations Section 1.704-1(b)(2)(iv)(f), the book
              value
              of the Company’s assets shall be revalued and the Capital Account of each
              Member shall be adjusted to reflect a revaluation of the Company’s assets
              upon the occurrence of the following
              events:

          

     

    	(1)  	
            The
              contribution of money or other property (other than a de minimis
              amount) to the Company by a new or existing Member as consideration
              for an
              Interest;

          

     

    	(2)  	
            The
              distribution of money or other property (other than a de minimis
              amount) by the Company to a retiring or continuing Member as consideration
              for an Interest; or

          

     

    	(3)  	
            The
              liquidation of the Company within the meaning of Regulation Section
              1
              .704-1(b)(2)(ii)(g).

          

     

    
      	 	
              (B)

            	
              The
                adjustment shall be based on the fair market value of Company property
                (taking Section 7701(g) of the Code into account) on the date of
                adjustment, and shall reflect the manner in which the unrealized
                income,
                gain, loss or deduction inherent in the property (that has not previously
                been reflected in the Capital Accounts) would have
                been

            

    

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    allocated
      among the Members if there had been a taxable disposition of the property for
      fair market value on that date.

     

    	(iv)  	
            If,
              pursuant to Regulations Section 1.704-1(b)(2)(iv)(d) or
              1.704-1(b)(2)(iv)(f), any Company asset has a book value that differs
              from
              the adjusted tax basis of that asset, then the Capital Accounts shall
              be
              adjusted in accordance with Regulation Sections 1.704-1(b)(2)(iv)(g)
              and
              for allocations of depreciation, depletion, amortization and gain or
              loss
              computed for book purposes rather than tax purposes, with respect to
              such
              asset.

          

     

    	(v)  	
            If
              there is any basis adjustment pursuant to an election under Section
              754 of
              the Code, then the Capital Accounts shall be adjusted to the extent
              required by the Regulations.

          

     

    	(vi)  	
            The
              principles in this Agreement governing the adjustments of Capital Accounts
              are intended to satisfy the capital account maintenance requirements
              of
              Regulation Section 1 .704-l(b)(2)(iv) and shall be construed consistently
              therewith.

          

     

    	(b)  	
            No
              Member gives up any of its rights to be repaid its Capital Contribution
              in
              favor of the other Members.

          

     

    	(c)  	
            No
              Member shall be paid interest on its Capital
              Account.

          

     

    	(d)  	
            No
              Member shall have the right to demand and receive any distribution
              from
              the Company in any form other than cash, regardless of the nature of
              its
              Capital Contribution.

          

     

    	(e)  	
            Except
              as otherwise provided in this Agreement, no Member shall have the right
              to
              demand and receive property of the Company in return of its Capital
              Contribution or in respect of its Interest until the termination of
              the
              Company.

          

     

    	(f)  	
            The
              liability of each Member to the Company or the other Members for the
              losses, debts, liabilities and obligations of the Company shall be
              limited
              to paying its Capital Contributions when due under the Agreement, its
              share of any undistributed assets of the Company, and (only to the
              extent
              required by the Act or other applicable law) any amounts previously
              distributed to it from the Company.

          

     

     

    	5.6.  	
            No
              Third Party Beneficiaries.

          

     

    The
      foregoing provisions of this Section are not intended to be for the benefit
      of
      any creditor or other person to which any debts, liabilities or obligations
      are
      owed by (or that otherwise has any claim against) the Company or any of the
      Members; and no creditor or other person shall obtain any right under any of
      the
      foregoing

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    provisions
      or shall by reason of any of the foregoing provisions make any claim in respect
      of any debt, liability or obligation (or otherwise) against the Company or
      any
      of the Members.

     

    	6.  	
            ALLOCATIONS.

          

     

     

    	6.1.  	
            Net
              Income, Net Loss and Credits.

          

     

    Subject
      to Sections 6.5 through 6.8, Net Income, Net Loss and tax credits shall be
      allocated among the Members in proportion to their respective
      Interests.

     

    	6.2.  	
            Gain
              from Sale.

          

     

     

    
      	 	 	
              Subject
                to Sections 6.5 through 6.8, Gain from Sale shall be allocated among
                the
                Members in proportion to their respective
                Interests.

            

    

     

     

    	6.3.  	
            Loss
              from Sale.

          

     

    Subject
      to Sections 6.6 and 6.8, Loss from Sale shall be allocated among the Members
      in
      proportion to their respective Interests.

     

    	6.4.  	
            Mid-Year
              Transfers.

          

     

    In
      the
      case of an Interest that has been transferred during the year, unless otherwise
      agreed by the parties to the transfer:

     

    	(a)  	
            All
              Net Income and Loss allocable to the Interest shall be allocated between
              the transferor and the transferee in the ratio of the number of days
              in
              the year before and after the effective date of the transfer without
              regard to the dates during the year on which income was earned, losses
              were incurred or Net Cash from Operations was
              distributed.

          

     

    	(b)  	
            Tax
              credits, if any, shall be allocated among the Members at the time the
              property with respect to which the credit is claimed is placed in
              service.

          

     

    	(c)  	
            All
              Gain or Loss from Sale shall be allocated to the holder of the Interest
              as
              of the date on which the Company recognizes that Gain or Loss from
              Sale.

          

     

     

    	6.5.  	
            Minimum
              Gain Chargeback.

          

     

    	(a)  	
            Notwithstanding
              anything to the contrary in this Agreement, if there is a net decrease
              in
              the Company Minimum Gain during a fiscal year, then there shall be
              allocated to the Members items of Company income and gain in accordance
              with the Minimum Gain chargeback requirements of Regulations Section
              1.704-2(f).

          

     

    	(b)  	
            Notwithstanding
              anything to the contrary in this Agreement, if there is a net decrease
              in
              Member Nonrecourse Debt Minimum Gain during a
              fiscal

          

     

     

    
      
         

      

      
        17

        
          

        

      

      
         

      

    

     

     

    	(c)  	
            year,
              there shall be allocated to any Member with a share of that Member
              Nonrecourse Debt Minimum Gain items of income and gain in accordance
              with
              the requirements of Regulations Section 1
              .704-2(i)(4).

          

     

     

    	6.6.  	
            Allocations
              to Reflect Book Value/Tax Disparity.

          

     

    In
      accordance with Section 704(c) of the Code and the Regulations thereunder,
      income, gain, loss, and deduction with respect to any property contributed
      to
      the capital of the Company shall, solely for tax purposes, be allocated among
      the Members so as to take into account any variation between the adjusted basis
      of such property to the Company for federal income tax purposes and its agreed
      upon fair market value at the time of contribution, such that any unrealized
      gain or loss associated with such property at the time of the contribution
      is
      allocated to the Member that contributed the property; and any additional gain
      or loss associated with such property is allocated among the Members in
      accordance with their respective Interests. In addition, if Company property
      is
      revalued and the Capital Accounts are adjusted, then subsequent allocations
      of
      income, gain, loss and deduction for tax purposes with respect to the revalued
      property shall take into account the variation between the property’s adjusted
      tax basis and book value in the same manner as under Section 704(c) of the
      Code
      and Regulations. 

     

    	6.7.  	
            Qualified
              Income Offset.

          

     

    If
      a
      Member unexpectedly receives an adjustment, allocation, or distribution
      described in Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5) or (6) that
      creates or increases a Modified Negative Capital Account, then items of income
      or gain (consisting of a pro rata portion of each item of Company income,
      including gross income and gain for such year) shall be allocated to that Member
      in an amount and manner sufficient to eliminate, to the extent required by
      the
      Regulations, the Modified Negative Capital Account created or increased by
      the
      adjustments, allocations or distributions as quickly as possible. For purposes
      of this Section 6.7, in determining whether a Member has a Modified
      Negative Capital Account, there shall be taken into account those adjustments,
      allocations and distributions that, as of the end of the year, are reasonably
      expected to be made.

     

    	6.8.  	
            Member
              Nonrecourse Deductions.

          

     

    Any
      Member Nonrecourse Deductions for any fiscal year shall be allocated to the
      Member who bears the economic risk of loss with respect to the Member
      Nonrecourse Debt to which such Member Nonrecourse Deductions are attributable
      in
      accordance with Regulations Section 1.704-2(i)(1).

     

    
      
         

      

      
        18

        
          

        

      

      
         

      

    

    DISTRIBUTIONS.

     

     

    	6.9.  	
            Net
              Cash from Operations.

          

     

    Net
      Cash
      from Operations for any year shall be distributed to the Members at such time
      as
      the Board shall determine, but not less than annually, in proportion to their
      respective Interests.

     

     

    	6.10.  	
            Net
              Proceeds from Financing.

          

     

    Net
      Proceeds from Financing shall be distributed to the Members (at such time as
      the
      Board shall determine) in proportion to their respective Interests.

     

    	6.11.  	
            Mandatory
              Excess Cash Distribution.
              

          

     

    If
      for
      any period greater than six (6) consecutive calendar months beginning with
      the
      fourth (4th)
      calendar month next commencing after the date of this Agreement, the Company’s
      Cash Percentage, as calculated as of the last day of each calendar month for
      the
      purposes of Section 9.1(b), exceeds thirty percent (30%), then unless otherwise
      directed by the Board, the Company shall distribute to the Members within thirty
      (30) days following the last day of the applicable six (6) consecutive calendar
      month period (the "Cash Determination Date") an amount of cash sufficient to
      cause the Cash Percentage to be ten percent (10%) or less as of the Cash
      Determination Date. Each Mandatory Excess Cash Distribution made pursuant to
      this Section 7.3 shall be distributed to the Members in proportion to their
      respective Interests. 

     

    	6.12.  	
            Mid-Year
              Transfers.

          

     

    In
      the
      case of an Interest that has been transferred during the year, unless otherwise
      agreed by the parties to the transfer:

     

    	(a)  	
            Net
              Cash from Operations shall be distributed to the holder of the Interest
              on
              the date of distribution.

          

     

    	(b)  	
            Net
              Proceeds from Financing allocable to the Interest shall be distributed
              to
              the holder of the Interest on the date of
              distribution.

          

     

     

    	6.13.  	
            Outstanding
              Loans to Company.

          

     

    Notwithstanding
      anything to the contrary contained in this Section 7 or in Section 5.2(c)
      and except as provided below, no distributions shall be made to any Member
      until
      all loans, together with interest accrued thereon, owed by that Member to the
      Company have been repaid in full. Any distribution due to Advisors while any
      of
      the principal or interest under the Advisors Note remains outstanding shall
      be
      applied first to repay accrued and unpaid interest and then to any unpaid
      principal of the Advisors Note. Advisors shall not receive any cash

     

    
      
         

      

      
        19

        
          

        

      

      
         

      

    

    distribution
      until the principal of and any interest accrued on the Advisors Note have been
      repaid in full.

     

     

    	6.14.  	
            Other
              Payments to Advisors.

          

     

    	(a)  	
            The
              Members will negotiate in good faith with respect to the payment of
              additional fees to Advisors in the event that Advisors is engaged by
              the
              Company to and successfully facilitates the early redemption of the
              Series
              2 Collateralized Bonds and/or the Series 3 Collateralized Bonds. To
              the
              extent Advisors does not receive such fees in cash, the Members will
              negotiate in good faith to adjust the distributions and allocations
              otherwise provided for in this Section 7 and in Section 6.
              

          

     

    	(b)  	
            Advisors
              shall receive a one-time fee, payable upon the repayment, maturity,
              sale
              or other liquidation of an investment of the Company, equal to one
              percent
              (1.0%) of the purchase price of any investment made by the Company
              that
              was introduced to the Company by Advisors. The fee payable to Advisors
              pursuant to this subsection shall only be payable after the Company
              recovers its basis in such investment plus a profit equal to the one-month
              London Interbank Offered Rate compounded on a monthly basis from the
              inception of the investment.

          

     

    	7.  	
            MANAGEMENT.

          

     

     

    	7.1.  	
            Board
              of Directors.

          

     

    	(a)  	
            The
              Company Business shall be managed by a Board that shall consist initially
              of two Directors, with the Voting Members each having the right to
              designate one Director. 

          

     

    	(b)  	
            The
              Board shall, subject to the approval rights and other requirements
              in
              Section 4 and the approval rights reserved to the Voting Members in
              Sections 5.4, 16 and 17, and subject to Section 8.8, have exclusive
              authority and full discretion with respect to the management of the
              Company Business.

          

     

    	(c)  	
            The
              Board shall act by resolution duly adopted at a meeting of the Board
              or by
              consent in writing of all Directors. Directors may vote or give their
              consent in person or by proxy.

          

     

    	(d)  	
            No
              action may be taken by the Board without the affirmative vote of at
              least
              two Directors.

          

     

     

    	7.2.  	
            Appointment
              and Removal of Directors.

          

     

    	(a)  	
            Each
              Voting Member shall promptly designate its Director so that the Board
              shall at all times consist of two
              Directors.

          

     

     

    
      
         

      

      
        20

        
          

        

      

      
         

      

    

     

     

    	(b)  	
            Either
              Voting Member may at any time, by notice to the other Members, remove
              any
              or all of its Directors, with or without cause, and substitute new
              Directors to serve in their stead. No Director shall be removed from
              office, with or without cause, without the consent of the Voting Member
              that designated him.

          

     

    	(c)  	
            If
              any Director is unwilling or unable to serve or is removed from office
              by
              the Voting Member that designated him, the Voting Member that designated
              him shall designate the successor to that
              Director.

          

     

    	(d)  	
            The
              notice of a Voting Member appointing a Director shall in each case
              set
              forth that Director’s business and residence addresses and business
              telephone number.

          

     

    	(e)  	
            Each
              Voting Member shall promptly give notice to the other Voting Member
              of any
              change in the business or residence address or business telephone number
              of any of its Directors.

          

     

     

    	7.3.  	
            Exercise
              of Authority Granted to the Board.

          

     

    	(a)  	
            Subject
              to the limitations of Section 8.3(b), the Board may delegate such general
              or specific authority to the officers of the Company as it from time
              to
              time considers desirable, and the officers of the Company may, subject
              to
              any restraints or limitations imposed by the Board, exercise the authority
              granted to them.

          

     

    	(b)  	
            Notwithstanding
              anything contained herein to the contrary, the authority to determine
              the
              following matters with respect to the Company shall be retained by
              the
              Board (subject to Section 8.6) and any action with respect thereto
              may be
              taken by the officers of the Company (within such general or specific
              limits as may be determined by the Board) only after the Board has
              approved the action in question in accordance with this
              Section:

          

     

    	(i)  	
            Investing
              the assets of the Company (provided that the Manager may invest assets
              of
              the Company in short term instruments with original maturities of ninety
              (90) days or fewer and that are rated the equivalent of AAA by two
              of the
              three national ratings agencies, without the approval of the Board);
              

          

     

    	(ii)  	
            Take
              any action that would have the effect of causing the Company not to
              cause
              the redemption of the CCAO Series 3 Trust Collateralized Bonds issued
              pursuant to the Series 3 Supplement in February
              2009;

          

     

    	(iii)  	
            Appointing
              or removing the Manager, subject to Section
              8.6(e);

          

     

    	(iv)  	
            Determining
              the amount and necessity for loans pursuant to Section
              5.3(a);

          

     

     

    
      
         

      

      
        21

        
          

        

      

      
         

      

    

     

     

    	(v)  	
            Determining
              the amount and timing of distributions to the
              Members;

          

     

    	(vi)  	
            Entering
              into any transaction between the Company and any Member or any Affiliate
              of a Member, other than a loan pursuant to Section
              5.3(a);

          

     

    	(vii)  	
            Acquiring
              or starting up any new business activity within the Company
              Business;

          

     

    	(viii)  	
            Except
              as provided in Section 5.3(a), borrowing money, other than trade debt
              in
              the ordinary course of the Company Business or as provided for in the
              Annual Business Plan then in effect;

          

     

    	(ix)  	
            Pledging,
              placing in trust, assigning or otherwise encumbering any existing
              property, now owned or hereafter acquired by the Company, excluding
              accounts receivable from trade creditors, as collateral or security
              for
              any borrowing or other obligation of the Company, except for pledges
              or
              deposits under workmen’s compensation, unemployment insurance and social
              security laws or to secure the performance of bids, tenders, contracts
              (other than for the repayment of money), or leases, or to secure statutory
              obligations or surety or appeal bonds or to secure indemnity, performance
              or similar bonds used in the ordinary course of
              business;

          

     

    	(x)  	
            Selling
              or otherwise disposing of, or contracting to sell or otherwise dispose
              of,
              any of the Company’s assets in any one transaction or in any series of
              transactions out of the ordinary course of the Company Business, other
              than as contemplated by the Annual Business Plan then in
              effect;

          

     

    	(xi)  	
            Causing
              the Company to be merged, pooled or combined with any other business
              or
              enterprise;

          

     

    	(xii)  	
            Adopting
              overall financial policies for the Company including, without limitation,
              adopting or changing significant tax or accounting principles or policies,
              adopting the initial and subsequent Annual Business Plans or any
              amendments thereto, or any change in the amount of any reserves to
              be
              maintained by the Company;

          

     

    	(xiii)  	
            Assuming,
              guaranteeing (other than credit card obligations for employees), endorsing
              or otherwise becoming liable for the obligations of any Person except
              by
              endorsement for purposes of discount or collection of notes or other
              instruments received by the Company from customers in the ordinary
              course
              of business;

          

     

    	(xiv)  	
            Commencing
              or entering into the resolution of any actual or threatened litigation
              involving the Company with respect to which the aggregate amount in
              controversy exceeds $10,000 or that is otherwise material or seeking
              injunctive relief against or on behalf of the
              Company;

          

     

    	(xv)  	
            Making
              loans or advances to any party, excluding advances for travel
              expenses;

          

     

    	(xvi)  	
            Entering
              into any contract or commitment obligating the Company to make aggregate
              expenditures of more than $25,000;

          

     

    	(xvii)  	
            Dissolving
              the Company except as otherwise provided in
              Section 14.1(a)(i);

          

     

    	(xviii)  	
            Selecting
              or changing the Auditor;

          

     

     

    
      
         

      

      
        22

        
          

        

      

      
         

      

    

     

     

    	(xix)  	
            Changing
              the fiscal year of the Company or any accounting policy or procedure
              of
              the Company, except as required by law;

          

     

    	(xx)  	
            Entering
              into any collective bargaining agreement;

          

     

    	(xxi)  	
            Amending
              or modifying any contract, agreement or arrangement required to be
              approved by the Board pursuant to this Section 8.2(b);
              

          

     

    	(xxii)  	
            Declaring
              bankruptcy of the Company; and

          

     

    	(xxiii)  	
            Making
              any other decision material to the Company’s operations, management,
              business or financial condition. 

          

     

     

    	7.4.  	
            Chairman
              of the Board.

          

     

    	(a)  	
            The
              Chairman of the Board, who shall be one of the Directors, shall be
              selected by each Voting Member on a rotating basis for a one (1) year
              term. The initial Chairman of the Board shall be designated by
              DBAH.

          

     

    	(b)  	
            The
              Chairman of the Board shall preside at Board meetings.
              

          

     

     

    	7.5.  	
            Meetings
              of the Board.

          

     

    	(a)  	
            The
              Directors shall hold not less than four (4) regular meetings each year
              on
              such dates and at such times as may be designated by the
              Board.

          

     

    	(b)  	
            Special
              meetings of the Board may be held at any time, upon call of the Manager
              or
              any Director.

          

     

    	(c)  	
            Unless
              waived in writing by all of the Directors (before or after a meeting),
              at
              least two (2) business days’ prior notice of any meeting
              shall

          

     

     

    
      
         

      

      
        23

        
          

        

      

      
         

      

    

     

     

     

    	(d)  	
            be
              given to each Director. Such notice shall, in the case of a special
              meeting, state the purpose for which such meeting has been called.
              No
              business can be conducted or action taken at such meeting that is not
              provided for in such notice. Except as otherwise determined by the
              Board,
              the locations of all meetings of the Board shall be alternated between
              locations within the United States (unless otherwise agreed by the
              Voting
              Members) designated by each Voting Member. Meetings of the Board shall
              be
              conducted in accordance with Roberts Rules of
              Order.

          

     

    	(e)  	
            A
              quorum for any meeting of the Board shall be at least two (2) of the
              Directors then in office.

          

     

    	(f)  	
            The
              Board shall cause to be kept a book of minutes of all of its meetings
              in
              which there shall be recorded the time and place of such meeting, whether
              regular or special, and if special, by whom such meeting was called,
              the
              notice thereof given, the names of those present, and the proceedings
              thereof. Copies of any consents in writing shall also be filed in such
              minute book.

          

     

    	(g)  	
            Members
              of the Board may participate in a meeting of the Board by means of
              conference telephone or similar communications equipment by means of
              which
              all persons participating in the meeting can hear each other, and such
              participation shall constitute presence in person at such meeting.
              Either
              Voting Member may permit its employees or employees of its Affiliates
              to
              attend Board meetings as non-voting
              observers.

          

     

     

    	7.6.  	
            Manager.

          

     

    	(a)  	
            The
              Manager shall act as agent of the Company and shall have such powers
              as
              are usually exercised by officers of a Delaware corporation and shall
              have
              the power to bind the Company through the exercise of such powers,
              to the
              extent consistent with the terms hereof. 

          

     

    	(b)  	
            The
              initial Manager of the Company shall be Dynex
              Capital.

          

     

    	(c)  	
            Unless
              the Board otherwise approves as provided in Section 8.3(b)(ii), the
              Manager shall take all actions necessary to cause the Company to exercise
              the rights assigned to it by Commercial Capital to redeem the CCAO
              Series
              3 Assets in February 2009 in accordance with the terms of the Base
              Indenture and the Series 3 Supplement or any other documents governing
              those securities.

          

     

    	(d)  	
            Unless
              the Board otherwise directs, the Manager shall take all actions necessary
              to enforce, on behalf of the Company, the obligation of IHCC under
              the
              Derivative Payments Agreement to cause the redemption of the CCAO Series
              2
              Trust Collateralized Bonds at the earliest possible date that those
              bonds
              may be redeemed.

          

     

     

    
      
         

      

      
        24

        
          

        

      

      
         

      

    

     

     

     

    	(e)  	
            The
              Manager may be removed for "Cause" (as defined below) by either Voting
              Member, by the DBAH Directors or by the IHCC Directors. In the event
              of
              removal, a new Manager reasonably acceptable to each Voting Member
              shall
              be appointed by the Board. There shall be Cause to remove the Manager
              if
              the Manager or any Affiliate of the Manager: (i) intentionally engages
              in
              dishonest conduct in connection with the Manager's performance of services
              for the Company; (ii) is convicted of, or pleads guilty or nolo
              contendere
              to, a felony or any crime involving moral turpitude; (iii) willfully
              fails
              or refuses to perform the Manager's material obligations under any
              agreement with the Company; (iv) breaches in any material respect any
              fiduciary duties to the Company; or (v) willfully breaches or violates
              in
              a material respect any law, rule or regulation in connection with the
              Manager's performance of services for the
              Company.

          

     

     

    	7.7.  	
            Annual
              Business Plan.

          

     

    	(a)  	
            The
              Manager shall, on or before December 31 of each year, propose an
              annual budget (collectively, the “Annual Business Plan”) for the Company
              for the next fiscal year and submit that budget to the Board for its
              approval. The budget shall include a profit and loss statement, a cash
              flow statement and a balance sheet for the next fiscal year, as of
              year
              end, and proposals for deployment of the Company's assets.
              

          

     

    	(b)  	
            The
              Board shall consider the adoption of the Annual Business Plan at a
              meeting
              called for that purpose and may modify or adjust the Annual Business
              Plan
              or any aspect thereof in such manner as it deems appropriate. The Company
              Business shall be carried on in accordance with the Annual Business
              Plan
              as adopted by the Board.

          

     

     

    	7.8.  	
            Limitation
              on Other Members’ Powers.

          

     

    Except
      for designating and removing Directors pursuant to Sections 8.1(a) and 8.2,
      adopting a plan of liquidation and directing the Manager in winding up the
      affairs of the Company after the dissolution of the Company pursuant to
      Section 14.1(a)(i), as provided in Section 15.2, and executing certificates
      and amendments thereof as described in Section 19; no Member acting alone shall,
      without the consent of the Voting Members, have any right or authority, either
      express or implied, to act for or bind the Company.

     

    	7.9.  	
            Execution
              of Documents.

          

     

    	(a)  	
            Any
              deed, deed of trust, bill of sale, lease agreement, security agreement,
              financing statement, contract of sale or other contract or instrument
              purporting to bind the Company or to convey or encumber any of the
              assets
              of the Company in the ordinary course of business, may be signed by
              Stephen J. Benedetti in his capacity as an executive officer of the
              Manager, or by another executive officer of the Manager, after
              obtaining

          

     

     

    
      
         

      

      
        25

        
          

        

      

      
         

      

    

     

     

     

    	(b)  	
            the
              approval required by this Agreement, and no other signature shall be
              required. For the purposes of this Agreement, “executive officer” shall
              have the same meaning given that term under Rule 3b-7 promulgated by
              the
              Securities and Exchange Commission under the Securities Exchange Act
              of
              1934. 

          

     

    	(c)  	
            Any
              Person dealing with the Company shall be entitled to rely on a certificate
              of the Manager, as conclusive evidence of the incumbency of the Manager
              and its authority to take action on behalf of the Company and shall
              be
              entitled to rely on a copy of any resolution or other action taken
              by the
              Board and certified by the Manager, as conclusive evidence of such
              action
              and of the authority of the Manager to bind the Company to the extent
              set
              forth therein.

          

     

    	8.  	
            COMPENSATION
              AND REIMBURSEMENT OF MEMBERS.

          

     

     

    	8.1.  	
            Compensation
              of Members.

          

     

    	(a)  	
            Except
              as provided in Section 10 or as the Board may otherwise determine,
              no
              Member shall receive any compensation for its services to the
              Company.

          

     

    	(b)  	
            If
              the Manager is a Member or an Affiliate of any Member, the Manager
              will
              not be entitled to receive any compensation from the Company for its
              services. If the Manager is not a Member or an Affiliate of a Member,
              the
              Manager will be entitled to receive from the Company a quarterly
              Management Fee equal to 0.017% of the value of the Net Assets in the
              Company's portfolio as of the last business day of each calendar quarter.
              The Company shall pay the Management Fee for the preceding calendar
              quarter to the Manager not later than the tenth (10th)
              day of each calendar quarter. The value of the Net Assets in the Company’s
              portfolio as of the last business day of each calendar quarter shall
              be
              determined by reference to the financial statements of the Company
              prepared in accordance with generally accepted accounting
              principles.

          

     

     

    	8.2.  	
            Reimbursement
              Restrictions.

          

     

    	(a)  	
            No
              Member shall, without Board approval, be entitled to be reimbursed
              for any
              expenses incurred by that Member in its capacity as Member including,
              without limitation, direct out-of-pocket expenses, overhead or
              administrative expenses or any allocated expenses of employees or
              staff.

          

     

    	(b)  	
            Except
              with respect to travel and related expenses incurred by the Directors
              in
              conjunction with attendance at meetings of the Board, no compensation
              of,
              or expenses incurred by, the Directors incident to their duties and
              responsibilities as Directors (as contrasted with expenses incurred
              by the
              Manager) under this Agreement shall be paid by, or charged to, the
              Company.

          

     

     

    
      
         

      

      
        26

        
          

        

      

      
         

      

    

     

     

     

    	(c)  	
            AUTHORITY
              OF THE MEMBERS AND AFFILIATES TO DEAL WITH THE COMPANY, COMPETE WITH
              THE
              COMPANY AND COMPETE WITH EACH OTHER.

          

     

     

    	8.3.  	
            General
              Authority.

          

     

    The
      Company may, in the Board’s discretion, (a) engage any Person in which any
      Member, or any Affiliate of a Member, may have an interest, for the performance
      of any and all services or purchase of goods or other property that may at
      time
      be necessary, proper, convenient, or advisable in carrying on the Company
      Business, or (b) transact the Company Business with, or sell or all of the
      Company’s assets to, any Person in which a Member, or any Affiliate, may have an
      interest if the compensation or price therefor does not materially and adversely
      differ from that prevailing in arm’s length transactions by others rendering or
      receiving similar services or purchasing similar goods or other property in
      comparable transactions as an on-going activity in the same geographical area
      where such business is transacted.

     

    	8.4.  	
            Competition
              with the Company.

          

     

    	(a)  	
            Except
              as expressly limited by this Section 10.2(a), any of the Members and
              any
              Affiliate of a Member may engage in and possess an interest in any
              business venture of any nature and description, independently or with
              others; and neither the Company nor the other Members shall, except
              as
              otherwise provided in this Section 10.2(a), have any right by virtue
              of
              this Agreement in and to any such independent ventures or to the income
              or
              profits derived therefrom. Neither a Member nor any Affiliate of a
              Member
              shall be obligated to present any particular investment opportunity
              to the
              Company even if such opportunity is of a character which, if presented
              to
              the Company, could be taken by the Company, and each of them shall
              have
              the right to take for its own account (individually or as a trustee)
              or to
              recommend to others any such particular investment opportunity.
              

          

     

    
      	 	
              (b)

            	
              Notwithstanding
                the provisions of Section 10.2(a), Advisors shall not intentionally
                engage
                in willful misconduct that Advisors reasonably knows or should know
                will
                have a material adverse effect on the Company or its business, operations
                or reputation.

            

    

     

    	8.5.  	
            Redemption
              of Bonds.

          

     

    No
      Member
      will take, and each Member will use reasonable efforts to cause its Affiliates
      not to take, any action that would impair the ability of the Company to redeem
      the Series 2 Collaterized Bonds and/or the Series 3 Collaterized
      Bonds.

     

    
      
         

      

      
        27

        
          

        

      

      
         

      

    

    ACCOUNTS,
      BOOKS, RECORDS, ACCOUNTING REPORTS AND TAX MATTERS.

     

     

    	8.6.  	
            Bank
              Accounts.

          

     

    All
      funds
      of the Company shall be deposited in accounts of the Company at such financial
      institutions as the Board may designate. Withdrawals from any such account
      shall
      be made only in the regular course of the Company Business. All withdrawals
      shall be made upon the signature of such individual or individuals as the Board
      shall designate.

     

     

    	8.7.  	
            Maintenance
              of Books.

          

     

    The
      Company shall keep or cause to be kept complete and accurate books of account,
      in which shall be entered fully and accurately each and every transaction of
      the
      Company. The Company’s books shall be maintained at the principal place of
      business of the Company or at such other place as the Board may from time to
      time designate; and each Member shall have access to the books at all reasonable
      times and the right to inspect and copy such books either directly or through
      a
      person designated by it.

     

    	8.8.  	
            Method
              of Accounting.

          

     

    All
      books
      and records of the Company shall be kept in accordance with generally accepted
      accounting principles, with such exceptions as the Board may determine from
      time
      to time, with an annual accounting period ending in December, except for the
      final accounting period, which shall end on the date of termination of the
      Company. Any reference in this Agreement to a “fiscal year” shall be to such
      annual accounting period.

     

    	8.9.  	
            Financial
              Reports.

          

     

    	(a)  	
            The
              Company shall prepare or cause to be prepared and shall provide to
              each
              Member, within ten (10) business days after the end of each month,
              a
              statement of profit and loss, a cash flow statement for such month
              showing
              variations from the budgeted amount for such month and the year to
              date,
              and a balance sheet as of the end of such month, all on a consolidated
              basis and separately for each reporting
              unit.

          

     

    	(b)  	
            The
              Company shall also cause to be prepared and shall send to each Member
              within ninety (90) days after the end of each fiscal year, audited
              financial statements and a statement of profit and loss approved by
              the
              Auditors.

          

     

    	(c)  	
            In
              addition, the Company shall cause to be prepared and shall send to
              each
              Member within ninety (90) days after the end of each fiscal year, a
              report
              stating each Member’s distributive share of each class of income, gain,
              loss or deduction, including tax preference items, for the
              year.

          

     

     

    
      
         

      

      
        28

        
          

        

      

      
         

      

    

     

     

     

    	(d)  	
            Tax
              Returns and Information.

          

     

    	(e)  	
            It
              is intended that the Company be characterized and treated as a partnership
              for, and solely for, federal, state and local income tax purposes.
              For
              such purpose, the Company shall be subject to all of the provisions
              of
              subchapter K of chapter 1 of subtitle A of the Code, and all references
              to
              a “Partner,” to “Partners” and to the “Partnership” in the provisions of
              the Code and Regulations cited in this Agreement shall be deemed to
              refer
              to a Member, the Members and the Company,
              respectively.

          

     

    	(f)  	
            The
              Company shall cause to be prepared and timely filed annually the federal,
              state and local tax returns of the Company. Drafts of the tax returns
              shall be submitted to each Member for review at least thirty (30) days
              before the earlier of (a) the proposed filing date or (b) the due date
              for
              filing, including extensions that have been granted. The Company shall
              cause to be delivered to each Member (i) the tax information required
              to
              enable the Members to prepare and file their tax returns in a timely
              manner, and (ii) copies of all tax returns and amendments thereto filed
              by
              the Company.

          

     

     

    	8.10.  	
            Tax
              Matters Partner.

          

     

    	(a)  	
            IHCC
              is designated as the Tax Matters Partner for purposes of the
              Code.

          

     

    	(b)  	
            (i)The
              Tax Matters Partner shall keep the other Members informed of all
              administrative and judicial proceedings and shall promptly provide
              the
              other Members with copies of all notices and other communications to
              and
              from the Internal Revenue Service or other federal, state or local
              administrative agency pertaining to any tax or similar return filed
              by the
              Company.

          

     

    	(ii)  	
            The
              Tax Matters Partner shall promptly give notice to the other Members
              of the
              time and place of meetings with representatives of the Internal Revenue
              Service or other federal, state or local administrative agency pertaining
              to any tax or similar return filed by the Company, and DBAH shall be
              given
              the opportunity to have a representative attend any such
              meeting.

          

     

    	(iii)  	
            If
              any matter concerning the Company is in litigation, the Tax Matters
              Partner shall keep the other Members informed of the progress of the
              litigation and shall afford DBAH, through its representative, the
              opportunity to attend all meetings and hearings pertaining to such
              litigation.

          

     

    	(iv)  	
            The
              Tax Matters Partner shall provide the other Members with copies of
              all
              pleadings, notices or other material documents or communications relating
              to such litigation.

          

     

     

    
      
         

      

      
        29

        
          

        

      

      
         

      

    

     

     

     

    	(v)  	
            Notwithstanding
              any right or power that may be granted to the Tax Matters Partner under
              the Code or any other provision of law, the Tax Matters Partner shall
              not,
              without the approval of the Board or an individual designated by each
              Voting Member for such purpose:

          

     

    	(vi)  	
            extend
              the statute of limitations on behalf of the
              Company;

          

     

    	(vii)  	
            determine
              the Company’s choice of the forum for the litigation of any matter
              pertaining to the treatment of items of income, deduction or
              credit;

          

     

    	(viii)  	
            determine
              whether to appeal or not appeal any administrative or judicial
              determination;

          

     

    	(ix)  	
            enter
              into any settlement agreement with the Internal Revenue Service which
              purports to bind a Member other than the Tax Matters Partner; or
              

          

     

    	(x)  	
            file
              any request for an administrative adjustment under Section 6227 of
              the
              Code.

          

     

     

    	8.11.  	
            Fair
              Value Information.

          

     

    From
      time
      to time upon request by the Manager, DBAH will use reasonable efforts to provide
      the Company with information regarding the fair market value of the assets
      of
      the Company.

    

    	9.  	
            EXCULPATION
              AND INDEMNIFICATION OF THE MEMBERS.

          

     

     

    	9.1.  	
            Exculpation.

          

     

    No
      Member
      or Manager, nor any Director of the Company, shall be liable to the Company
      or
      to any Member for or as a result of any act, omission or error in judgment
      that
      was taken, omitted or made by it in the exercise of its judgment in good faith
      pursuant to the authorization granted to it under this Agreement or delegated
      to
      it pursuant to this Agreement that does not constitute gross negligence, willful
      misconduct or a knowing violation of law, or a transaction from which the
      Member, Manager or Director derived an improper personal benefit. 

     

    	9.2.  	
            General
              Indemnification.

          

     

    	(a)  	
            To
              the extent that a corporation is permitted to indemnify its directors
              under the Delaware General Corporation Law, the Company shall indemnify
              and hold harmless the Members, the Manager and the Directors from and
              against all costs, loss, damage and expense, including reasonable
              attorney’s fees, arising out of or resulting from any act performed by
              such Member, Manager or Director, within the scope of the authority
              conferred

          

     

     

    
      
         

      

      
        30

        
          

        

      

      
         

      

    

     

     

     

    	(b)  	
            upon
              it by this Agreement or delegated to it pursuant to this Agreement,
              except
              for (i) acts of gross negligence, fraud, willful misconduct or knowing
              violations of law by such Member, Manager or Director, or (ii) damages
              arising from a transaction from which such Member, Manager or Director
              derived an improper personal benefit.

          

     

    	(c)  	
            Each
              Member shall indemnify and hold harmless the Company and the other
              Members
              from and against all costs, loss, damage and expense, including reasonable
              attorney’s fees, arising out of or resulting from any act performed by the
              indemnifying Member beyond the scope of authority conferred upon the
              indemnifying Member by this Agreement or by reason of any act of fraud,
              bad faith, gross negligence, willful misconduct, knowing violation
              of law,
              or arising from a transaction from which the Member derived an improper
              personal benefit.

          

     

    	10.  	
            TRANSFER
              OF INTERESTS AND WITHDRAWAL.

          

     

     

    	10.1.  	
            No
              Right to Resign or Withdraw.

          

     

    Except
      as
      provided below, no Member shall have any right to voluntarily resign or
      otherwise withdraw from the Company without the written consent of all Voting
      Members.

     

    	10.2.  	
            Transfer
              of Interest.

          

     

    No
      Member
      shall, directly or indirectly, make a Disposition of all or any part of the
      Interest now owned or subsequently acquired by it, other than as provided in
      this Agreement. Any Disposition without full compliance with this Agreement
      shall be void.

     

    	10.3.  	
            Permitted
              Transfers.

          

     

    	(a)  	
            Notwithstanding
              the above, a Member may transfer all or any portion of its Interest
              at any
              time to any of the following (the "Permitted
              Transferees"):

          

     

    	(i)  	
            Other
              Members (subject to Section 13.4 with respect to the Interest of
              Advisors);

          

     

    	(ii)  	
            A
              Member’s Affiliate.

          

     

    Provided,
      however,
      that
      the transferee, as a condition of becoming a Permitted Transferee, expressly
      consents in writing to be bound by all the terms and conditions of this
      Agreement then in effect; and provided further that no Permitted Transferee
      shall become a substitute Member without compliance with the terms of
      Section 13.6.

    
      
         

      

      
        31

        
          

        

      

      
         

      

    

    Notwithstanding
      the provisions of Section 13.3(a), no Member may sell or exchange more than
      twenty five percent (25%) of its Interest within any twelve (12) month period
      unless either (i) the selling or exchanging Member obtains the prior written
      consent of the Voting Members or (ii) in the opinion of counsel for the Company,
      if Section 708 of the Code applies to such a sale or exchange, then the effects
      of Section 708 of the Code would not have a substantial adverse effect on the
      other Members. Moreover, no Disposition by any Member may be made if the
      Disposition (either considered alone or in the aggregate with prior Dispositions
      by other Members) would result in the Company being classified as a “publicly
      traded partnership” within the meaning of Section 7704(b) of the Code.

    	(b)  	
            For
              the purposes of this Agreement, if a Voting Member transfers all or
              any
              portion of its Interest to a Permitted Transferee, and the Permitted
              Transferee is admitted as a substitute Member pursuant to Section 13.5,
              then all references to a Voting Member or Voting Members in this Agreement
              shall be deemed to refer collectively to such Voting Member and its
              Permitted Transferees that have become Members. For the purposes of
              any
              action to be taken or vote or approval to be made or given under this
              Agreement, an action shall be deemed to have been taken, vote shall
              be
              deemed to have been made, and/or approval deemed to have been given
              or
              withheld if such vote, action or approval (or withholding of approval)
              is
              authorized by a majority in Interest of the Members comprising that
              Voting
              Member.

          

     

     

    	10.4.  	
            Disposition
              by Advisors.

          

     

    	(a)  	
            Except
              as provided in this Section 13.4, Advisors shall have no right to
              voluntarily resign or otherwise withdraw from the Company without the
              written consent of all Voting Members, and may not make a Disposition
              of
              all or any part of the Interest now or subsequently acquired by it
              other
              than to a Permitted Transferee.

          

     

    	(b)  	
            If
              Advisors desires to transfer all or any portion of its Interest to
              a
              Voting Member that has agreed to purchase all or a portion of that
              Interest, Advisors may transfer that Interest only after first offering
              the Interest to the other Voting Member by providing the other Voting
              Member a notice that includes a copy of the agreement to purchase the
              Interest with the purchasing Voting Member. This notice shall specify
              the
              portion of the Interest proposed to be purchased by the other Voting
              Member, the proposed price for the Interest and the other terms of
              the
              proposed transfer. Within sixty (60) days following this notice, the
              other
              Voting Member shall have the right to purchase its pro rata share of
              the
              Interest being sold by Advisors. The purchase price for such Interest
              shall be the proportionate amount of the price offered to be paid by
              the
              other Voting Member, and the other terms of the purchase shall be
              identical to the terms agreed to with the other Voting
              Member.

          

     

     

    
      
         

      

      
        32

        
          

        

      

      
         

      

    

     

     

    	(c)  	
            Advisors
              shall have the right, exercisable by written notice to the Company,
              to
              request that the Company redeem its Interest, which request may be
              acted
              upon by the Company in its sole discretion, at a purchase price equal
              to
              the amount of Advisors’ Capital Contribution or such other purchase price
              as may be mutually agreed to by Advisors and the
              Company.

          

     

     

    	10.5.  	
            Withdrawal
              by Voting Member.
              

          

     

    	(a)  	
            A
              Voting Member may elect to withdraw from the Company by giving a
              Withdrawal Notice to the other Voting Members during the term of this
              Agreement. Upon the receipt of a Withdrawal Notice, the other Voting
              Members shall be entitled to take any of the following actions (which
              shall not be deemed applicable to a Change in Control Notice, Dynex
              Special Withdrawal Notice or Regulatory
              Notice):

          

     

    	(i)  	
            Elect
              the dissolution of the Company as provided in Section
              15.1;

          

     

    	(ii)  	
            Cause
              the Company to redeem the Interest of the Withdrawing Member as provided
              in this Section 13.5; or

          

     

    	(iii)  	
            Purchase
              the interest of the Withdrawing Member as provided in this Section
              13.5.
              

          

     

    	(b)  	
            Upon
              receipt of a Withdrawal Notice, the Non-Withdrawing Member shall deliver
              an Election Notice to the Withdrawing Member within thirty (30) days
              following receipt of the Withdrawal Notice, specifying the election
              it has
              made pursuant to Section 13.5(a).

          

     

    	(c)  	
            If
              the Non-Withdrawing Member has elected to cause the dissolution of
              the
              Company, then the Company shall be dissolved as provided in Section
              15.1(b), provided that the distribution to be received by the Withdrawing
              Member pursuant to Section 15.1(b) shall be reduced by ten percent
              (10%)
              if the Withdrawal Notice is given on or prior to September 15, 2007,
              and shall be reduced by four percent (4%) if the Withdrawal Notice
              is
              given on or prior to September 15, 2008. If the Non-Withdrawing
              Member elects to cause the Company to redeem the Interest of the
              Withdrawing Member or to purchase the Interest of the Withdrawing Member,
              then the redemption or purchase shall take place in accordance with
              provisions of Section 13.5(d).

          

     

    	(d)  	
            (i)Closing
              for the Purchase of a Withdrawing Member’s Interest shall take place
              within thirty (30) days following the date of delivery of the Withdrawal
              Notice; provided, however, that if the Election Notice includes a
              statement to the effect that the Company or the Non-Withdrawing Member
              requires financing in order to complete the redemption or purchase
              of the
              Withdrawing Member’s Interest, the Non-Withdrawing Member shall have the
              option to postpone

          

     

     

    
      
         

      

      
        33

        
          

        

      

      
         

      

    

     

     

    	(e)  	
            the
              closing for the redemption or purchase of the Non-Withdrawing Member’s
              Interest until a date that is no later than ninety (90) days following
              the
              date of the Withdrawal Notice, unless the Withdrawal Notice contained
              an
              offer by the Withdrawing Member to finance the redemption or purchase
              of
              the Withdrawing Member’s Interest that complies with the terms described
              in Section 13.5(e). Unless the Voting Members agree otherwise, if the
              Non-Withdrawing Member or the Company, as the case may be, is unable
              to
              obtain financing within the ninety (90) day period following the
              Withdrawal Notice, the Company shall be dissolved in accordance with
              Section 15. 

          

     

    	(i)  	
            The
              purchase price for the redemption or purchase of the Withdrawing Member’s
              Interest shall be such price as is mutually agreed to by the Withdrawing
              Member and the Non-Withdrawing Member. If the Withdrawing Member and
              the
              Non-Withdrawing Member cannot mutually agree upon the purchase price
              within ten (10) business days after receipt of the Election Notice
              by the
              Withdrawing Member, the purchase price shall be the lower of (A) the
              value
              of the Capital Account of the Withdrawing Member as of the last day
              of the
              calendar month next preceding the date of closing (the "Measuring Date"),
              or (B) as of the Measuring Date, the Withdrawing Member’s Proportionate
              Share multiplied by (x) the amount of cash and cash equivalents of
              the
              Company, plus (y) the fair market value of the assets of the Company
              other
              than cash and cash equivalents, which shall be determined by obtaining
              a
              third party valuations from a qualified investment banker that is not
              an
              Affiliate of any Member for each of the assets of the Company other
              than
              cash or cash equivalents. If the Withdrawing Member and the
              Non-Withdrawing Member cannot agree on the investment banker selected
              to
              provide the valuations, then each of them shall select a qualified
              investment banker that is not an Affiliate of any Member to provide
              the
              valuations. If the higher aggregate valuation amount for the assets
              of the
              Company received from one of the investment bankers is no more than
              ten
              percent (10%) greater than the aggregate valuation amount received
              from
              the second investment banker, then the aggregate valuation amount shall
              be
              deemed to be the average of the aggregate valuation amounts received
              from
              the two investment bankers. However, if the higher aggregate valuation
              amount exceeds the lesser aggregate valuation amount by more than ten
              percent (10%), then the two investment bankers shall jointly select
              a
              third investment banker to provide valuations. If the aggregate valuation
              amount provided by the third investment banker is between the aggregate
              valuation amounts provided by the other two investment bankers, then
              the
              aggregate valuation amount shall be deemed to be the aggregate valuation
              amount provided by the third appraiser. If the
              aggregate

          

     

     

    
      
         

      

      
        34

        
          

        

      

      
         

      

    

     

     

    	(ii)  	
            valuation
              amount provided by the third appraiser is greater than the highest
              aggregate valuation amount provided by the first two appraisers, or
              less
              than the lowest aggregate valuation amount provided by the first two
              appraisers, then the aggregate valuation amount shall be deemed to
              be the
              aggregate valuation amount received from the one of the first two
              appraisers whose aggregate valuation amount is closest to the aggregate
              valuation amount provided by the third appraiser. The aggregate valuation
              amount shall be adjusted for any applicable discount as provided in
              the
              next sentence. Any valuation of the assets of the Company shall be
              discounted by ten percent (10%) if the Withdrawal Notice is delivered
              on
              or prior to the first anniversary of the date of this Agreement, and
              shall
              be discounted by four percent (4%) if the Withdrawal Notice is delivered
              after the first anniversary of the date of this Agreement but on or
              prior
              to the second anniversary of the date of this
              Agreement.

          

     

    	(f)  	
            If
              the Withdrawing Member has provided in the Withdrawal Notice that it
              is
              willing to finance the purchase or redemption of its Interest, then
              such
              financing shall satisfy the condition provided for in Section 13.5(d)
              if the financing provides for a term of not less than one year and
              interest rates consistent with the interest costs made available to
              a
              typical counterparty of DBAH’s Affiliates under reverse repurchase
              agreements.

          

     

     

    	10.6.  	
            Additional
              or Substituted Member.

          

     

    	(a)  	
            A
              transferee of a Member’s Interest may become an additional or substituted
              Member in place of its transferor only if all of the following conditions
              are satisfied:

          

     

    	(i)  	
            The
              requirements of Section 13.3 have been
              fulfilled.

          

     

    	(ii)  	
            The
              instrument of assignment sets forth the intention of the assignor that
              the
              assignee shall succeed to the assignor’s Interest as an additional or
              substituted Member.

          

     

    	(iii)  	
            The
              assignor and assignee shall have executed such other instruments as
              the
              Board may reasonably require, including written acceptance by the assignee
              of this Agreement and any ancillary agreements to which the Members
              are
              parties.

          

     

    	(iv)  	
            The
              assignee shall have paid all reasonable fees and costs incurred by
              the
              Company in connection with its addition or substitution as a Member
              as
              determined by the Board, including all costs of amending this Agreement
              and any ancillary agreements to which the Members are parties in order
              to
              accommodate the assignee’s addition or substitution as a
              Member.

          

     

     

    
      
         

      

      
        35

        
          

        

      

      
         

      

    

     

     

    	(v)  	
            Unless
              named in this Agreement or admitted to the Company as provided in Sections
              13.6, 14.1(a)(iii), or 16, no Person shall be considered a Member,
              and the
              Company, each Member, and any other Person having business with the
              Company need deal only with Members so named and so admitted. Neither
              the
              Company, another Member or any other Person having business with the
              Company shall be required to deal with any other Person by reason of
              any
              Disposition by a Member or by reason of the dissolution of a Member,
              except as otherwise provided in this Agreement. In the absence of
              substitution of a Member for an assigning or dissolved Member, any
              payment
              to such Member, or to its successors, shall release the Company of
              all
              liability to any other Person who may be interested in such payment
              by
              reason of an assignment by the Member or by reason of its
              dissolution.

          

     

     

    	10.7.  	
            Deadlock
              Regarding a Sale of Assets.

          

     

    At
      any
      time after good faith efforts fail to resolve a deadlock of the Board or Voting
      Members that has a duration of at least ninety (90) days, measured from the
      date
      of the meeting of the Board at which the deadlock first occurred, with respect
      to the sale of any asset of the Company in which the Company has a basis of
      at
      least $10 million (except with respect to any of the CCAO Series 2 Assets,
      including any rights of the Company under the Derivative Payments Agreement,
      or
      the CCAO Series 3 Assets), the Voting Member that is in favor of the sale of
      the
      asset (the “Selling Member”) shall have the right to cause the Company to offer,
      by written notice (a “Sale Notice”) to the Voting Member opposing such sale (the
“Opposing Member”), to sell the asset to the Opposing Member at the price
      specified in the Sale Notice. The Opposing Member may elect, by written notice
      to the Company within ten (10) business days after the Opposing Member receives
      the Sale Notice, to purchase the asset at the price specified in the Sale
      Notice, and the Opposing Member shall have thirty (30) days to complete such
      purchase. If the Opposing Member does not notify the Company of its election
      to
      purchase the asset or fails to complete the purchase of the asset within the
      time periods prescribed above, then the Selling Member shall have the right,
      for
      a period of ten (10) business days after the deadline for the Opposing Member
      to
      provide notice of its intent to purchase the asset or to complete the purchase
      of such asset, as the case may be, to cause the Company to sell the asset to
      a
      third party purchaser at a sale price equal to or greater than the price
      specified in the Sale Notice. If the sale to such third party is not completed
      within ten (10) business days after the Selling Member acquires the right to
      cause the Company to sell the asset to a third party, then the Company shall
      not
      sell such asset unless it first re-offers to sell the asset to the Opposing
      Member in accordance with the procedures specified above.

    
      
         

      

      
        36

        
          

        

      

      
         

      

    

    Company
      Right to Purchase Advisors Interest.

     

    	(a)  	
            Advisors
              hereby grants to the Company the right to purchase, at the Company’s
              option, the Interest held by Advisors if Advisors or any of its Affiliates
              (i) intentionally engages in willful misconduct that Advisors
              reasonably knew or should have known would have a material adverse
              effect
              on the Company or its business, operations or reputation or (ii) is
              convicted of, or pleads guilty or nolo
              contendere
              to, a felony or any crime involving moral
              turpitude.

          

     

    	(b)  	
            The
              Company may exercise the foregoing right to purchase by giving notice
              to
              Advisors within 60 days after the occurrence of one of the events
              specified above. Such notice shall set forth the date, time and place
              for
              the closing of such purchase. The purchase price for such Interest
              shall
              be the lesser of (i) the value of the Capital Account of Advisors as
              of
              the date the Company provides such notice to Advisors or (ii) the
              remaining principal balance of the Advisors
              Note.

          

     

    	11.  	
            CONTINUATION
              OF THE COMPANY BUSINESS IN CERTAIN EVENTS.

          

     

     

    	11.1.  	
            Bankruptcy.
              

          

     

    	(a)  	
            (i)Upon
              the Bankruptcy of a Member, the other Voting Member or Voting Members
              shall have the option either to (A) purchase not less than all of the
              Interest of the Bankrupt Member and its Affiliates, at a price determined
              pursuant to Section 14.1(b), (B) dissolve the Company, or (C) continue
              the
              business of the Company and allow the Successor in Interest to the
              Bankrupt Member to become a Member. The option shall be exercised by
              giving notice to the Bankrupt Member and its Successor in Interest
              within
              ninety (90) days after the determination of value under Section
              14.1(b).

          

     

    	(ii)  	
            If
              the option to purchase is exercised, closing shall be within thirty
              (30)
              days after the giving of notice of exercise or lifting of the automatic
              stay, whichever is later. If the option to purchase is exercised, the
              business of the Company shall be continued without winding up the
              Company’s affairs.

          

     

    	(iii)  	
            If
              the non-Bankrupt Member does not elect to dissolve the Company, the
              business of the Company shall continue without winding up the Company’s
              affairs, and the Successor in Interest to the Bankrupt Member shall
              become
              a Member with all the benefits and obligations of its predecessor in
              interest and shall be deemed to be a party to this
              Agreement.

          

     

    	(b)  	
            If
              the Voting Member or Voting Members having the option to purchase and
              the
              Successor in Interest to the Bankrupt Member cannot agree
              upon

          

     

     

    
      
         

      

      
        37

        
          

        

      

      
         

      

    

     

     

    	(c)  	
            the
              purchase price within thirty (30) days after the first event of
              Bankruptcy, then the purchase price shall be based upon the Bankrupt
              Member’s Proportionate Share multiplied by (x) the amount of cash and
              cash equivalents of the Company, plus (y) the fair market value of
              the assets of the Company other than cash and cash equivalents determined
              as provided in Section 13.5(d)(ii). Any valuation of the assets of
              the Company other than cash or cash equivalents shall be discounted
              by a
              ten percent (10%) if the event of Bankruptcy occurs on or prior to
              June 30, 2007, and shall be discounted by four percent (4%) if the
              event of Bankruptcy occurs on or prior to June 30,
              2008.

          

     

    	(d)  	
            If
              the option to purchase is exercised, the expenses of all investment
              bankers shall be paid by the purchasing Member or Members. If the option
              to purchase is not exercised, the expenses of all investment bankers
              shall
              be paid by the Company.

          

     

    	(e)  	
            The
              purchase price, if the option is exercised, shall be payable as
              follows:

          

     

    	(i)  	
            Twenty
              percent (20%) of the purchase price shall be paid at closing in cash;
              and

          

     

    	(ii)  	
            The
              balance of the purchase price shall be paid within ninety (90) days
              after,
              the closing, plus interest on such amount at the Prime Rate plus two
              percent (2%) (but in no event at any interest rate higher than the
              maximum
              rate legally permitted). If not sooner paid, such purchase price balance
              and accrued interest thereon shall be payable in full upon sale or
              all or
              substantially all of the assets of the Company. The Successor in Interest
              shall have a continuing lien on the Interest being acquired by the
              purchaser to secure the payment of the balance of the purchase price
              and
              the interest due thereon, which lien may be foreclosed and enforced
              under
              applicable law. The purchaser will execute and deliver such instruments
              as
              may be necessary or appropriate to create such
              lien.

          

     

    	12.  	
            DISSOLUTION.

          

     

     

    	12.1.  	
            Events
              Causing Dissolution.

          

     

    The
      Company shall be dissolved upon the first to occur of one of the following
      events:

    

    	(a)  	
            The
              election by the Board to dissolve the
              Company;

          

     

    	(b)  	
            An
              election to dissolve under Section
              14.1(a)(i);

          

     

    	(c)  	
            The
              sale or other disposition of all or substantially all of the Company’s
              assets;

          

     

     

    
      
         

      

      
        38

        
          

        

      

      
         

      

    

     

     

    	(d)  	
            The
              delivery by IHCC of a Change in Control Notice or Dynex Special Withdrawal
              Notice as provided in Section 15.3;

          

     

    	(e)  	
            The
              delivery by a Member of a Regulatory Notice as provided in
              Section 15.4; 

          

     

    	(f)  	
            An
              election to dissolve by a Non-Withdrawing Member under Section
              13.5;

          

     

    	(g)  	
            The
              failure of the Company or the Non-Withdrawing Member to pay the purchase
              price for the redemption or purchase of the Withdrawing Member’s Interest
              pursuant to Section 13.5(d), unless the Voting Members agree otherwise;
              and

          

     

    	(h)  	
            Unless
              the Voting Members otherwise agree, the sixtieth (60th)
              day following the redemption of the CCAO Series 3 Trust Collateralized
              Bonds (which redemption date is expected to be, as of the date of this
              Agreement, on or about February 15,
              2009).

          

     

     

    	12.2.  	
            Winding
              Up Company Affairs.

          

     

    Upon
      the
      occurrence of an event specified in Section 15.1, the Manager shall wind up
      the
      affairs of the Company in accordance with the plan of liquidation adopted by
      the
      Board. If the Board cannot agree on a plan of liquidation within ninety (90)
      days after the occurrence of an event specified in Section 15.1, the Voting
      Members shall agree upon and the Company shall engage, within fifteen (15)
      days
      after the expiration of the ninety (90) day period, an investment banker to
      wind
      up the affairs of the Company. If the Voting Members are unable to agree upon
      an
      investment banker within such fifteen (15) day period, then one investment
      banker shall be selected by each Voting Member within five (5) days thereafter
      and such investment bankers shall jointly appoint within five (5) days of their
      selection a nationally recognized investment banker. However, in the event
      of an
      election to dissolve the Company under Section 14.1(a)(i), the non-Bankrupt
      Voting Member or Voting Members shall have the right to adopt the plan of
      liquidation and direct the Manager in winding up the affairs of the Company.
      After the payment of, or provision for, all debts of the Company, the proceeds
      of the sale of the Company assets and/or the Company assets shall be distributed
      to the Members in accordance with their Capital Accounts, subject to the
      provisions of Section 7.5. IHCC shall have the option, in any dissolution
      of the Company, to elect to receive a distribution in kind of the CCAO Series
      2
      Assets, and to the extent the value of this distribution in kind to IHCC of
      the
      CCAO Series 2 Assets exceeds the value of the distribution to which IHCC would
      otherwise be entitled under this Agreement, IHCC shall contribute to the Company
      for distribution to the other Members an amount of cash equal to the excess
      of
      the value of the CCAO Series 2 Assets over the distribution to which IHCC is
      otherwise entitled under this Agreement. If any assets are distributed in kind,
      they shall be distributed on the basis of the fair market value thereof
      as

    
      
         

      

      
        39

        
          

        

      

      
         

      

    

    determined
      in accordance with Section 13.5(d)(ii), and shall be deemed to have been sold
      at
      fair market value for purposes of the allocations under Section 6. 

     

    	12.3.  	
            Dynex
              Withdrawals.

          

     

    	(a)  	
            On
              or before June 30, 2008, IHCC may deliver a Change in Control Notice
              to
              the other Members. A Change in Control Notice shall specify that the
              Board
              of Directors of Dynex Capital, Inc. has determined in good faith, after
              consultation with its financial advisors and outside legal counsel,
              that
              it is consistent with its fiduciary duties to cause IHCC to withdraw
              from
              and cause the dissolution of the Company in order to engage in a Change
              in
              Control Transaction. The delivery of a Change in Control Notice shall
              be
              deemed to be an event causing the withdrawal of IHCC as a Member of
              the
              Company and the dissolution of the Company as provided in Section
              15.1(d).

          

     

    	(b)  	
            IHCC
              may deliver a Dynex Special Withdrawal Notice to the other Members
              in
              either of the following circumstances:

          

     

    	(i)  	
            IHCC
              has determined, in good faith after consultation with its outside legal
              counsel, that the transactions contemplated by this Agreement or the
              status of IHCC will have the effect of causing the Company, IHCC, Dynex
              or
              any Affiliate of Dynex to be treated as a company required to register
              under the Investment Company Act of 1940.

          

     

    	(ii)  	
            IHCC
              has determined, in good faith after consultation with its outside legal
              counsel, that the transactions contemplated by this Agreement or the
              status of IHCC will have the effect of causing IHCC to not qualify
              as a
              qualified REIT subsidiary or to cause Dynex Capital to cease to satisfy
              the requirements under the Code and Regulations to continue to be treated
              as a “real estate investment trust.”

          

     

     

    	12.4.  	
            Regulatory
              Event.

          

     

    Any
      Member may deliver a Regulatory Notice to the other Members. A Regulatory Notice
      shall specify that the Member has determined in good faith, after consultation
      with its outside legal counsel, that such Member and its Affiliates, taken
      as a
      whole, will experience a material and adverse impact with respect to regulatory,
      compliance, tax or accounting requirements if such Member continues to hold
      its
      Interest in the Company. The delivery of a Regulatory Notice shall be deemed
      to
      be an event causing the withdrawal of the Member delivering the notice as a
      Member of the Company and the dissolution of the Company as provided in Section
      15.1(e).

    
      
         

      

      
        40

        
          

        

      

      
         

      

    

    Effect
      of
      Change in Control Notice, Dynex Special Withdrawal Notice or Regulatory
      Notice.

    	(a)  	
            If
              IHCC delivers a Change in Control Notice on or before June 30, 2007,
              IHCC
              shall reimburse the Company and DBAH for the reasonable costs of formation
              of the Company incurred by the Company or DBAH,
              respectively.

          

     

    	(b)  	
            If
              IHCC delivers a Change in Control Notice after June 30, 2007, or delivers
              a Dynex Special Withdrawal Notice, or if a Member delivers a Regulatory
              Notice, then the party giving the notice shall pay all costs associated
              with effecting the withdrawal contemplated by the notice, including
              the
              costs and expenses of the Company and the other
              Members.

          

     

    

    	13.  	
            ADMISSION
              OF ADDITIONAL MEMBERS.

          

     

    Except
      as
      provided in Section 13.6 or 14.1(a)(iii), admission of a new Member shall
      require the consent of all Voting Members, which consent may be withheld in
      the
      sole discretion of any Voting Member. Upon admission, the business of the
      Company shall be continued without winding up.

     

    	14.  	
            AMENDMENTS.

          

     

    Amendments
      to this Agreement shall require the written consent of all Voting Members.
      However, if a Voting Member does not execute, within sixty (60) days after
      receipt thereof, an amendment which is, in the opinion of counsel for the
      Company, necessary to satisfy requirements of the Code or Act with respect
      to
      partnerships or joint ventures or of any federal or state securities law or
      regulations and such amendment would not adversely affect the federal income
      tax
      treatment to be afforded a Member, adversely affect the liabilities of a Member,
      or change the method of allocation of Net Income or Net Loss, Gain or Loss
      from
      Sale, or the distribution (including, without limitation, the timing of
      distributions) of Net Proceeds from Financing or other funds available for
      distribution as provided in Section 7, then the Board shall make such amendment
      to this Agreement.

     

    	15.  	
            NOTICES.

          

     

     

    	15.1.  	
            Form
              of Notice.
              All notices, requests and other communications required or permitted
              to be
              given by this Agreement shall be in writing (including telexes,
              telecopies, facsimile transmissions, and similar writings) and shall
              be
              given to a Member or other Person at its address or telecopier or
              facsimile number set forth on Exhibit A or such other address or
              telecopier facsimile number as such Member or other Person may hereafter
              specify for that purpose by notice to the
              Members.

          

     

     

    	15.2.  	
            Effective
              Date of Notice. Each such notice, request or other communication shall
              be
              effective (1) if given by telecopier facsimile, when such
              telecommunication is transmitted and confirmation of receipt obtained;
              provided, however, that if any

          

     

     

    
      
         

      

      
        41

        
          

        

      

      
         

      

    

     

     

     

    	15.3.  	
            notice,
              request or other communication so transmitted is received other than
              during the regular business hours of the recipient, it shall be deemed
              to
              have been given on the opening of business on the next business day
              of the
              recipient, (2) if given by mail, five days after such communication
              is
              deposited in the mails with first class postage prepaid, addressed
              as
              aforesaid or (3) if given by any other means, when delivered at the
              address specified on Exhibit A.

          

     

    	16.  	
            POWER
              OF ATTORNEY.

          

     

     

    	16.1.  	
            Appointment
              of Members as Attorney-in-Fact.
              Each Member irrevocably constitutes and appoints, with full power of
              substitution, the other Voting Member or Voting Members as its true
              and
              lawful attorney-in-fact with full power and authority in its name,
              place
              and stead for the following purposes: to execute, certify, acknowledge,
              deliver, swear to, file and record at the appropriate public offices,
              (i)
              any certificate identifying the Members, their addresses, the address
              of
              the Company and/or the term of the Company, (ii) any certificate
              identifying the name or names under which the Company conducts the
              Company
              Business, and (iii) any amendment of any certificate described in
              subsection (i) or (ii), which may be necessary to qualify, or to continue
              the qualification of, the Company to do business in any jurisdiction
              or
              which may otherwise be required in connection with the Company’s
              transaction of business in any
              jurisdiction.

          

     

     

    	16.2.  	
            Irrevocable
              Appointment. The appointment by each Member of the other Voting Member
              or
              Voting Members as its attorney-in-fact is irrevocable and shall be
              deemed
              to be a power coupled with an interest and shall survive the Bankruptcy
              or
              dissolution of any Voting Member giving such power and the transfer
              or
              assignment of all or any part of the Interest of such Member; provided,
              however, that in the event of the transfer by a Member of all or any
              part
              of its Interest, this power of attorney of a transferor Member shall
              survive such transfer only until such time, if any, as the transferee
              shall have been admitted to the Company as a substituted Member and
              all
              required documents and instruments shall have been duly executed, filed
              and recorded to effect such substitution.

          

     

    	17.  	
            ARBITRATION.
              

          

     

     

    	17.1.  	
            Except
              as provided in Section 20.3, the Members acknowledge and agree that
              any
              dispute or controversy arising out of, relating to, or in connection
              with
              this Agreement, or the interpretation, validity, construction,
              performance, breach, or termination thereof, shall be submitted to
              binding
              arbitration in New York City before a panel of three arbitrators under
              the
              auspices of the American Arbitration Association, Commercial Arbitration
              Rules and Mediation Procedures (the “Rules”). The parties shall be deemed
              to have made these Rules, as amended and in effect as of the date of
              the
              submission of the dispute, a part of their agreement. Each party shall
              appoint a single arbitrator and the two party-selected arbitrators
              shall
              themselves appoint the third arbitrator, who shall serve as the panel
              chairman. The arbitrators may grant injunctions or other relief
              in

          

     

     

    
      
         

      

      
        42

        
          

        

      

      
         

      

    

     

     

    	17.2.  	
            such
              dispute or controversy. The decision of the arbitrators shall be final,
              conclusive and binding on the parties to the arbitration. Judgment
              may be
              entered on the arbitrators’ decision in any court having jurisdiction. In
              the arbitration, each party shall bear its own attorneys’ fees, and the
              Company shall bear the other costs and expenses of the arbitration,
              unless
              and to the extent the arbitrators shall determine that under the
              circumstances such fees, costs and expenses should be paid by one of
              the
              parties.

          

     

     

    	17.3.  	
            The
              arbitrators shall apply Delaware law to the merits of any dispute or
              claim, without reference to rules of conflicts of law. Each Member
              hereby
              consents to the personal jurisdiction of the state and federal courts
              located in Virginia and New York for any action or proceeding arising
              from
              or relating to this Agreement or relating to any arbitration in which
              the
              parties are participants.

          

     

     

    	17.4.  	
            The
              parties may apply to any court of competent jurisdiction for a temporary
              restraining order, preliminary injunction, or other interim or
              conservatory relief, as necessary, without breach of this arbitration
              agreement and without abridgment of the powers of the
              arbitrators.

          

     

     

    	17.5.  	
            EACH
              MEMBER HEREBY CONFIRMS IT HAS READ AND UNDERSTANDS THIS SECTION 20.4,
              WHICH DISCUSSES ARBITRATION, AND UNDERSTANDS THAT BY SIGNING THIS
              AGREEMENT, IT AGREES, EXCEPT AS PROVIDED IN SECTION 20.3, TO SUBMIT
              ANY
              CLAIMS ARISING OUT OF, RELATING TO, OR IN CONNECTION WITH THIS AGREEMENT,
              OR THE INTERPRETATION, VALIDITY, CONSTRUCTION, PERFORMANCE, BREACH
              OR
              TERMINATION THEREOF TO BINDING ARBITRATION, UNLESS OTHERWISE REQUIRED
              BY
              LAW, AND THAT THIS ARBITRATION CLAUSE CONSTITUTES A WAIVER OF ITS RIGHT
              TO
              A JURY TRIAL.

          

     

    	18.  	
            GOVERNING
              LAW.

          

     

    This
      Agreement and the rights and liabilities of the parties shall be determined
      in
      accordance with the laws of Delaware.

     

    	19.  	
            CAPTIONS.

          

     

    Captions
      contained in this Agreement are inserted only as a matter of convenience and
      in
      no way define, limit, extend or describe the scope of this Agreement or the
      intent of any provision hereof.

     

    	20.  	
            CONSTRUCTION.

          

     

    Whenever
      the context may require, any pronouns used herein shall include the
      corresponding masculine, feminine or neuter gender, and the use of nouns and
      pronouns in the singular shall include the plural and vice versa. This Agreement
      shall not be construed more strictly against one party than the others by virtue
      of the fact that it may

     

    
      
         

      

      
        43

        
          

        

      

      
         

      

    

    have
      been
      prepared by counsel for one of the parties, it being recognized that all of
      the
      parties have contributed substantially and materially to the preparation of
      this
      Agreement

     

    	21.  	
            SEVERABILITY.

          

     

    Every
      provision of this Agreement is intended to be severable. If any term or
      provision hereof is illegal or invalid for any reason whatsoever, such
      illegality or invalidity shall not affect the validity of the remainder of
      this
      Agreement.

     

    	22.  	
            EXECUTION
              AND COUNTERPARTS.

          

     

    This
      Agreement and any amendment hereof may be executed in multiple counterparts,
      each of which shall be deemed an original and all of which shall constitute
      one
      agreement. In addition, this Agreement and any amendment hereof may be executed
      through the use of counterpart signature pages. The signature of any party
      on
      any counterpart agreement or signature page shall be deemed to be a signature
      to, and may be appended to, any other counterpart.

    

    	23.  	
            SUCCESSORS.

          

     

    Subject
      to the limits on transferability contained herein, each and all of the
      covenants, terms, provisions and agreements herein contained shall be binding
      upon and inure to the benefit of the successors and the permitted assigns of
      the
      respective parties hereto.

    

    	24.  	
            ENTIRE
              AGREEMENT.

          

     

    This
      Agreement, together with the exhibits hereto, constitutes the entire agreement
      among the Members and supersedes and cancels any prior agreements,
      representations, warranties or communications, whether oral or written, among
      the Members relating to the transactions contemplated hereby or the subject
      matter hereof.

    

    

    [SIGNATURE
      LINES ON THE FOLLOWING PAGE]

    

     

    
      
        
          316197_17.DOC

        

         

      

      
        44

        
          

        

      

      
         

        
        

      

    

    IN
      WITNESS WHEREOF, the undersigned have each caused this Limited Liability Company
      Agreement of Copperhead Ventures, LLC to be executed as of the day and year
      first above written.

     

    ISSUED
      HOLDINGS CAPITAL CORPORATION

     

    

    By:

    Name:
      

    Title: 

    

    DARTMOUTH
      INVESTMENTS, LLP

    

    

    By:

    Name:
      

    Title: 

    

    DBAH
      CAPITAL, LLC

    

    

    By:

    Name:
      

    Title: 

    

    

    By:

    Name:
      

    Title: 

    

    

    Dynex
      Capital, Inc. hereby acknowledges its rights and obligations in its capacity
      as
      Manager of the Company. 

    

    

    DYNEX
      CAPITAL, INC.

    

    

    By:___________________________________

    Name:

    Title:

    

     

    
      
         

      

      
        45

        
          

        

      

      
         

      

    

    
 

    EXHIBIT
      A

    

    Percentage
      Interests in the Company

    

    
      	
              Member

            	
              Percentage
                Interest

            
	
              Issued
                Holdings Capital

              Corporation

              c/o
                Dynex Capital, Inc.

              4551
                Cox Road

              Suite
                300

              Glen
                Allen, Virginia 23060 Fax: (804) 217-5860

            	
              49.875%

            
	
              DBAH
                Capital, LLC

              60
                Wall Street

              New
                York, NY 10005

              Fax:
                212-797-5152

            	
              49.875%

            
	
              Dartmouth
                Investments, LLP

              16294
                Via Venetia

              Delray
                Beach, FL 33484

              Fax:
                561-330-8006

               

              With
                a copy to:

               

              John
                Knobelsdorf

              McNaughton
                Knobelsdorf

              3730
                Kirby Drive

              Houston,
                TX 77098

              Fax:
                (713) 665-4369

            	
              0.25%

            

    

    

     

    
      
         

      

      
        46

        
          

        

      

      
         

      

    

     

    
 

    EXHIBIT
      B

    

    Derivative
      Payments Agreement

    

     

     

     

    

      
        
           

        

        
          47

          
            

          

        

        
           

        

      

    

    EXHIBIT
      C

    

    Form
      of Advisors Note

    

    

    

    
      
         

      

      
        48

        
          

        

      

      
         

      

    

    Exhibit
      B to the LLC Agreement

     

    AGREEMENT

     

    

     

    This
      DERIVATIVE PAYMENTS AGREEMENT (the “Agreement”)
      is
      made as of September 16, 2006 among ISSUED HOLDINGS CAPITAL CORPORATION, a
      Virginia corporation (together with its successors and assigns, “IHCC”)
      DYNEX
      CAPITAL, INC , a Virginia corporation (together with its successors and assigns,
      “Dynex”),
      and
      COPPERHEAD VENTURES, LLC, a Delaware limited liability company (together with
      its successors and assigns, “Copperhead”).

     

    In
      consideration of the mutual covenants and agreements set forth in this
      Agreement, and for other good and valuable consideration, the receipt and
      sufficiency of which are hereby acknowledged, the parties agree as
      follows:

     

    Section
      1.
       Definitions.
      Capitalized terms used herein and not otherwise defined herein have the meanings
      set forth on Exhibit
      A.

     

    Section
      2. Consideration.
      The
      parties to this Agreement acknowledge and agree that IHCC has been issued an
      interest in and admitted as a member of Copperhead, and that IHCC’s agreements
      contained in this Agreement represent an integral portion of its capital
      contribution to Copperhead as described in Section 5.2(b) of the Limited
      Liability Company Agreement dated as of September 8, 2006 (the “LLC
      Agreement”).

     

    Section
      3.
       Derivative
      Payments.
      IHCC
      shall pay to Copperhead, on each Payment Date, an amount equal to the sum of
      the
      Available Surplus and the payments due on the Series 2 Collateralized Bonds
      for
      such Payment Date distributed to IHCC as provided in Section 5. IHCC shall
      pay
      each such amount in immediately available funds by wire transfer to the
      following account (or to such other account as may be specified by Copperhead
      in
      writing):

     

    Beneficiary: Copperhead
      Ventures, LLC

    Bank
      Name: Wachovia
      Bank, NA

    Bank
      Address: Two
      James
      Center, 7th Floor

    1021
      East
      Cary Street, VA9620

    Richmond,
      VA 23219

    Account
      Name: Copperhead
      Ventures, LLC

    ABA
      Number:  051400549

    Account
      Number: 2000034699744

     

    Section
      4.
       Dynex
      Guaranty.
      Dynex
      shall execute and deliver to Copperhead, on the date of this Agreement, a
      Guaranty substantially in the form attached as Exhibit
      B.

     

    Section
      5.
       Additional
      Covenants.
      

     

    (a)
      IHCC
      will cause Commercial Capital to exercise in full any rights Commercial Capital
      may have (it being understood that Commercial Capital may have limited rights
      or
      no

     

    
      
         

      

      
        Ex.
          B -
          1

        
          

        

      

      
         

      

    

    such
      rights) under the Series 2 Supplement to withdraw or otherwise receive the
      Available Surplus and the payments due on the Series 2 Collateralized Bonds
      and
      will cause Commercial Capital promptly to distribute all Available Surplus
      that
      it withdraws or otherwise receives, and such payments on the Series 2
      Collateralized Bonds, to IHCC. IHCC will cause Commercial Capital not to take
      any action that could reasonably be expected to have a material adverse effect
      on the Available Surplus, provided,
      however
      that,
      notwithstanding anything in this Agreement to the contrary, IHCC shall be under
      no obligation to cause Commercial Capital to take any action or refrain from
      taking any action that Commercial Capital determines (based upon opinion of
      counsel) would be reasonably likely to constitute a breach of Commercial
      Capital’s obligations under the Base Indenture or the Series 2
      Supplement.

     

    (b)
      IHCC
      will cause Commercial Capital to redeem the CCAO Series 2 Trust Collateralized
      Bonds on the earliest allowable date such bonds can be redeemed, and will cause
      Commercial Capital to pay to Copperhead any “Net Proceeds Available” from such
      redemption that might otherwise have not been paid to Copperhead pursuant to
      Section 3 of this Agreement. Net Proceeds Available for the purposes of this
      Section 5(b) equal the excess of the cash received by Commercial Capital from
      (i) the sale of the remaining loans collateralizing the CCAO Series 2 Trust
      Collateralized Bonds upon redemption, or (ii) the proceeds from the reissuance
      and resale of the CCAO Series 2 Trust Collateralized Bonds subsequent to their
      redemption, over the amount paid by Commercial Capital to redeem the CCAO Series
      2 Trust Collateralized Bonds.

     

    Section
      6. Governing
      Law.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      Commonwealth of Virginia without giving effect to any choice of law or conflict
      of law provision or rule (whether of the Commonwealth of Virginia or any other
      jurisdiction) that would require the application of any other law.

     

    Section
      7. Counterparts.
      This
      Agreement may be executed in one or more counterpart copies, each of which
      will
      be deemed to be an original copy of this Agreement and all of which, when taken
      together, will be deemed to constitute one and the same agreement. The exchange
      of copies of this Agreement and of signature pages by facsimile transmission
      shall constitute effective execution and delivery of this Agreement as to the
      parties and may be used in lieu of the original Agreement for all purposes.
      Any
      signatures of the parties transmitted by facsimile shall be deemed to be their
      original signatures for all purposes.

     

    Section
      8. Assignment;
      Amendment.
      IHCC
      and Dynex may not assign any of their rights or delegate any of their
      obligations under this Agreement (whether by operation of law or otherwise)
      without the prior written consent of Copperhead. Copperhead may assign any
      of
      its rights or delegate any of its obligations under this Agreement with the
      prior written consent of IHCC (which consent shall not be unreasonably
      withheld). This Agreement may not be amended or otherwise modified except by
      a
      written agreement executed by the party to be charged with such amendment or
      other modification.

     

    Section
      9. Interpretation.
      The
      parties intend and agree that this Agreement shall constitute a “swap agreement”
within the meaning of Section 101 of the United States Bankruptcy Code (the
      “Code”)
      and
      that each of IHCC and Copperhead shall constitute a “swap participant” within
      the meaning of Section 101 of the Code.

     

    
      
         

      

      
        Ex.
          B -
          2

        
          

        

      

      
         

      

    

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

     

    ISSUED
      HOLDINGS CAPITAL CORPORATION

     

    

     

    By: 

    Name: Wayne
      Brockwell

    Title: Senior
      Vice President

    

    

     

    DYNEX
      CAPITAL, INC.

     

    

     

    By: 

    Name: Stephen
      J. Benedetti

    Title: Executive
      Vice President,

    Chief
      Operating Officer

    

    

     

    COPPERHEAD
      VENTURES, LLC

    By
      Dynex
      Capital, Inc., Manager

     

    

     

    By: 

    Name: Stephen
      J. Benedetti

    Title: Executive
      Vice President,

    Chief
      Operating Officer

    

     

    
      
         

      

      
        Ex.
          B -
          3

        
          

        

      

      
         

      

    

    Exhibit
      A

    Derivative
      Payments Agreement Definitions

     

    “Available
      Surplus”
means,
      with respect to any Payment Date, all amounts, if any, able to be released
      to
      Commercial Capital on a Payment Date from the surplus account for the CCAO
      Series 2 Trust Collateralized Bonds pursuant to Sections 9(xiii) and (xiv)
      of
      the Series 2 Supplement with respect to that Payment Date, other than amounts
      related to the Series 2 Excluded Assets, as that term is defined in the LLC
      Agreement.

     

    “Base
      Indenture”
means
      the Indenture dated as of November 1, 1993, as amended, between Commercial
      Capital and the Trustee.

     

    “CCAO
      Series 2 Trust Collateralized Bonds”
      means
      the bonds issued by Commercial Capital pursuant to the Base Indenture and the
      Series 2 Supplement.

     

    “Commercial
      Capital”
means
      Commercial Capital Access One, Inc., a Virginia corporation, together with
      its
      successors and assigns.

     

    “Payment
      Date”
means
      each date specified as a Payment Date for the Series 2 Collateralized Bonds,
      commencing with the first such date after the date of this Agreement (it being
      understood that, as of the date of this Agreement, the date specified as the
      Payment Date for the Series 2 Collateralized Bonds is the 15th day of each
      month
      (or, if such 15th day is not a Business Day, the next succeeding Business
      Day).

     

    “Series
      2 Collateralized Bonds” means
      Commercial Capital Access One Trust Collateralized Bonds, Series 2, Class
      E, Class F and Class G. 

     

    “Series
      2 Supplement”
means
      the Series 2 Supplement dated as of October 1, 1997 to the Base Indenture
      between Commercial Capital, as Issuer, and the Trustee.

     

    “Trustee”
means
      JPMorgan Chase Bank, National Association (formerly known as The Chase Manhattan
      Bank and successor by merger to Chase Bank of Texas, National Association
      (formerly known as Texas Commerce Bank National Association)), as
      Trustee.

     

    
      
         

      

      
        Ex.
          B -
          4

        
          

        

      

      
         

      

    

    Exhibit
      B

    Form
      of Dynex Guaranty

     

    

     

    GUARANTY

     

    This
      GUARANTY (this “Guaranty”
is
      made
      as of August 31, 2006 by DYNEX CAPITAL, INC., a Virginia corporation (together
      with its successors and assigns, “Dynex”),
      in
      favor of COPPERHEAD VENTURES, LLC, a Delaware limited liability company
      (together with its successors and assigns, “Copperhead”).

     

    Section
      1. Guaranty.
      To
      induce Copperhead to enter into the Derivative Payments Agreement dated as
      of
      August 31, 2006 (the “Agreement”)
      among
      Issued Holdings Capital Corporation, a Virginia corporation (together with
      its
      successors and assigns, “IHCC”),
      Dynex
      and Copperhead, Dynex irrevocably and unconditionally guarantees to Copperhead,
      and its successors and permitted assigns, the prompt payment by IHCC, on demand,
      of any amount due and payable to Copperhead under the Agreement (the
“”Obligations”).
      Dynex
      hereby waives acceptance of this Guaranty, diligence, promptness, presentment,
      demand on IHCC for payment, protest of nonpayment and all notices of any kind.
      In addition, Dynex’s obligations hereunder shall not be affected by the
      existence, validity, enforceability, perfection, or extent of any collateral
      therefor. Copperhead shall not be obligated to proceed against IHCC before
      claiming under this Guaranty or filing any claim relating to the Obligations
      in
      the event that IHCC becomes subject to a bankruptcy, reorganization or similar
      proceeding, and the failure of Copperhead so to file shall not affect Dynex’s
      obligations hereunder. Dynex agrees that its obligations under this Guaranty
      constitute a guaranty of payment and not of collection.

     

    Section
      2. Consents,
      Waivers and Renewals.
      Dynex
      agrees that Copperhead may, at any time and from time to time, either before
      or
      after the maturity thereof, without notice to or further consent of Dynex,
      extend the time of payment of, exchange or surrender any collateral for, or
      renew any of the Obligations, and may also make any agreement with IHCC or
      with
      any other party to or person liable on any of the Obligations, or interested
      therein, for the extension, renewal, payment, compromise, discharge or release
      thereof, in whole or in part, or for any modification of the terms thereof
      or of
      any agreement between Copperhead and IHCC or any such other party or person,
      without in any way impairing or affecting this Guaranty. Dynex agrees that
      Copperhead may resort to Dynex for payment of any of the Obligations whether
      or
      not Copperhead shall have resorted to any collateral security or shall have
      proceeded against any other obligor principally or secondarily obligated with
      respect to any of the Obligations.

     

    Section
      3. Expenses.
      Dynex
      agrees to pay on demand all out-of-pocket expenses (including without limitation
      the reasonable fees and disbursements of Copperhead’s counsel) incurred in the
      enforcement of the rights of Copperhead hereunder, provided,
      however,
      that
      Dynex shall not be liable for any expenses of Copperhead if no payment under
      this Guaranty is due.

     

    Section
      4.
       Subrogation.
      Dynex
      will not exercise any rights which it may acquire by way of subrogation until
      all of the Obligations shall have been paid in full. If any amount
      shall

     

    
      
         

      

      
        Ex.
          B -
          5

        
          

        

      

      
         

      

    

    be
      paid
      to Dynex in violation of the preceding sentence, such amount shall be held
      for
      the benefit of Copperhead and shall forthwith be paid to Copperhead to be
      credited and applied to the Obligations, whether matured or unmatured. Subject
      to the foregoing, upon payment of all the Obligations, Dynex shall be subrogated
      to the rights of Copperhead against IHCC and Copperhead agrees to take at
      Dynex’s expense such steps as Dynex may reasonably request to implement such
      subrogation.

     

    Section
      5. Cumulative
      Rights.
      No
      failure on the part of Copperhead to exercise, and no delay in exercising,
      any
      right, remedy or power hereunder shall operate as a waiver thereof, nor shall
      any single or partial exercise by Copperhead of any right, remedy or power
      hereunder preclude any other or future exercise of any right, remedy or power.
      Each and every right, remedy and power hereby granted to Copperhead or allowed
      it by law or other agreement shall be cumulative and not exclusive of any other,
      and may be exercised by Copperhead from time to time.

     

    Section
      6. Representations
      and Warranties.
      Dynex
      hereby represents and warrants to Copperhead that: (i) Dynex is a corporation
      duly organized, validly existing and in good standing under the laws of the
      Commonwealth of Virginia, (ii) Dynex has the absolute and unrestricted right,
      power and authority to execute and deliver this Guaranty and to perform its
      obligations under this Guaranty, and such action has been duly authorized by
      all
      necessary corporate action, (iii) this Guaranty constitutes the legal, valid
      and
      binding obligation of Dynex, enforceable against Dynex in accordance with its
      terms, except that such enforcement may be subject to bankruptcy, receivership,
      insolvency, moratorium, reorganization, fraudulent transfer or similar laws
      affecting the enforcement of the rights of creditors generally and to legal
      and
      equitable limitations on the enforceability of specific remedies; and (iv)
      neither the execution and delivery of this Guaranty nor the performance by
      Dynex
      of its obligations under this Guaranty will, directly or indirectly (with or
      without notice or lapse of time), conflict with or violate any provision of
      the
      articles of incorporation or bylaws of Dynex or violate any applicable law,
      rule
      or regulation.

     

    Section
      7. Continuing
      Guaranty.
      This
      Guaranty shall remain in full force and effect and be binding upon Dynex and
      its
      successors and permitted assigns, and inure to the benefit of Copperhead and
      its
      successors and permitted assigns, until all of the Obligations shall have been
      paid in full. In the event that any payment by IHCC in respect of any Obligation
      is rescinded or must otherwise be returned for any reason whatsoever, Dynex
      shall remain liable hereunder in respect of such Obligation as if such payment
      had not been made.

     

    Section
      8. Notices.
      All
      notices in connection with this Guaranty shall be deemed effective, if in
      writing and delivered in person or by courier, on the date delivered to the
      following address (or such other address which Dynex shall notify Copperhead
      of
      in writing):

     

    Dynex
      Capital, Inc.

    4551
      Cox
      Road, Suite 300

    Glen
      Allen, Virginia 23060

    Attention:
      Executive Vice President, Chief Operating Officer

     

    
      
         

      

      
        Ex.
          B -
          6

        
          

        

      

      
         

      

    

    Section
      9. Governing
      Law.
      This
      Guaranty shall be governed by and construed in accordance with the laws of
      the
      Commonwealth of Virginia without giving effect to any choice of law or conflict
      of law provision or rule (whether of the Commonwealth of Virginia or any other
      jurisdiction) that would require the application of any other law.

     

    IN
      WITNESS WHEREOF, Dynex has executed this Guaranty as of the date first written
      above.

     

    DYNEX
      CAPITAL, INC.

     

    By: 

    Name: Stephen
      J. Benedetti

    Title: Executive
      Vice President,

    Chief
      Operating Officer

    

    

     

    

    

    

    
      
         

      

      
        Ex.
          B -
          7

        
          

        

      

      
         

      

    

     

    Exhibit
      C to the LLC Agreement

    PROMISSORY
      NOTE

     

    $184,000.00     September
      16, 2006

     

    FOR
      VALUE
      RECEIVED, the undersigned, DARTMOUTH
      INVESTMENTS, LLP,
      a Texas
      limited liability partnership, (the “Maker”), promises to pay, without offset,
      deduction or abatement, except as provided herein, to the order of COPPERHEAD
      VENTURES, LLC,
      a
      Delaware limited liability company (“Payee”; Payee and any subsequent holder(s)
      hereof are hereinafter referred to collectively as “Holder”), at the office of
      Payee at 4551 Cox Road, Suite 300, Glen Allen, Virginia, 23060, or at such
      other
      place as Holder may designate to Maker in writing from time to time, the
      principal sum of One Hundred Eighty-Four Thousand Dollars ($184,000), together
      with interest on the outstanding principal balance hereof from the date hereof
      at the rate described below.

     

    Interest
      shall accrue on the outstanding principal balance of this Note at the “Prime
      Rate” (as defined below and computed on the basis of a 360-day
      year). “Prime
      Rate” shall mean the annual prime rate (or base rate) reported in the “Money
      Rates” column or section of The
      Wall Street Journal
      as being
      the base rate on corporate loans at larger U.S. Money Center commercial banks
      on
      the first date on which The
      Wall Street Journal
      is
      published in each month. In the event The Wall Street Journal ceases publication
      of the Prime Rate, then the “Prime Rate” shall mean the “prime rate” or “base
      rate” announced by Bank of America, N.A. or the successor to substantially all
      of its assets and business (whether or not such rate has actually been charged
      by that bank). In the event that bank discontinues the practice of announcing
      that rate, Prime Rate shall mean the highest rate charged by that bank on
      short-term, unsecured loans to its most credit-worthy large corporate
      borrowers.

    

    Principal
      payments and accrued interest under this Note will be paid to Holder in
      accordance with Sections 7.5 and/or 13.8(b) of the Limited Liability Company
      Agreement of Copperhead Ventures, LLC of even date herewith (the “LLC
      Agreement”), from distributions or payments that would otherwise be made to
      Maker under Sections 7.5 or 13.8 of the LCC Agreement, as applicable, until
      the
      earlier of such time this Note is paid in full or March 15, 2009. Provided
      no
      Event of Default (as defined below) has occurred and is continuing, effective
      as
      of March 15, 2009, any remaining principal balance of and accrued interest
      under
      this Note shall be forgiven by Holder as provided in Section 5.2(c) of the
      LLC
      Agreement.

    

    All
      payments received or otherwise deemed to be made by virtue of the LLC Agreement
      shall be applied first to any Late Charge (as defined below) due hereunder,
      then
      to any accrued but unpaid interest, then the balance of any payment shall be
      applied to the outstanding principal balance of this Note. If an Event of
      Default occurs, monies may be applied to this Note in any manner or order deemed
      appropriate by Holder.

     

    The
      indebtedness evidenced hereby may be prepaid in whole or in part, at any time
      and from time to time, without premium or penalty. Any such prepayments shall
      be
      credited first to any Late Charges, then to accrued and unpaid interest and
      then
      to the outstanding principal balance hereof.

     

     

    
      
         

      

      
        Ex.
          C -
          1

        
          

        

      

      
         

      

    

     

     

    TIME
      IS
      OF THE ESSENCE for this Note. It is hereby expressly agreed that in the event
      that any default shall occur in the performance of any of Maker’s obligations
      hereunder (an “Event of Default”), then, and in such event, the entire
      outstanding principal balance of the indebtedness evidenced hereby, together
      with any other sums advanced hereunder, and/or under any other instrument or
      document now or hereafter evidencing, securing or in any way relating to the
      indebtedness evidenced hereby, together with all unpaid interest accrued
      thereon, shall, at the option of Holder and without notice to Maker, at once
      become due and payable and may be collected forthwith, regardless of the
      stipulated date of maturity. 

     

    Maker
      shall pay without demand a late charge equal to ten percent (10%) of any
      principal and/or interest which is not paid within ten (10) days after its
      due
      date (“Late Charge”). In
      the
      event this Note is placed in the hands of an attorney for collection, or if
      Holder incurs any costs incident to the collection of the indebtedness evidenced
      hereby, Maker and any endorsers hereof agree to pay to Holder an amount equal
      to
      all such costs, including without limitation all reasonable attorneys’ fees
      (based on such attorneys’ normal hourly rates and actual time expended) and all
      court costs.

     

    Presentment
      for payment, demand, protest and notice of demand, protest and nonpayment are
      hereby waived by Maker and all other parties hereto. No failure to accelerate
      the indebtedness evidenced hereby by reason of an Event of Default hereunder,
      acceptance of a past-due installment or other indulgences granted from time
      to
      time, shall be construed as a novation of this Note or as a waiver of such
      right
      of acceleration or of the right of Holder thereafter to insist upon strict
      compliance with the terms of this Note or to prevent the exercise of such right
      of acceleration or any other right granted hereunder or by applicable law.
      No
      extension of the time for payment of the indebtedness evidenced hereby or any
      installment due hereunder, made by agreement with any person now or hereafter
      liable for payment of the indebtedness evidenced hereby, shall operate to
      release, discharge, modify, change or affect the original liability of Maker
      hereunder or that of any other person now or hereafter liable for payment of
      the
      indebtedness evidenced hereby, either in whole or in part, unless Holder agrees
      otherwise in writing. This Note may not be changed orally, but only by an
      agreement in writing signed by the party against whom enforcement of any waiver,
      change, modification or discharge is sought.

     

    This
      Note
      is intended as a contract under and shall be construed and enforceable in
      accordance with the laws of the State of Delaware.

     

    If
      Holder
      is unable to obtain prompt legal service on Maker at the address shown for
      Maker
      below, Maker hereby appoints the Secretary of State of the State of Delaware
      as
      Maker's agent for the acceptance of substituted service of process upon
      Maker.

     

     

    TO
      THE
      FULLEST EXTENT POSSIBLE, MAKER WAIVES IN FULL THE RIGHT TO A TRIAL BY JURY
      IN
      REGARD TO ANY DISPUTES, CLAIMS, CAUSES OF ACTION, OBLIGATIONS, DAMAGES,
      COMPLAINTS, LITIGATION OR ANY MATTER WHATSOEVER AND OF ANY TYPE OR NATURE,
      WHETHER IN CONTRACT, TORT OR OTHERWISE, WHICH MAKER MAY HAVE NOW OR IN THE
      FUTURE RELATING TO THIS NOTE. BY EXECUTION OF THISNOTE, MAKER REPRESENTS AND
      WARRANTS THAT MAKER IS REPRESENTED BY COMPETENT COUNSEL WHO HAS FULLY AND
      COMPLETELY ADVISED MAKER OF THE MEANING AND RAMIFICATIONS OF THE RIGHT OF MAKER
      TO A TRIAL BY JURY OR HAD THE FULL AND COMPLETE OPPORTUNITY TO CONSULT SUCH
      COUNSEL AND CHOSE NOT TO DO SO, AND, THEREFORE, MAKER FREELY AND VOLUNTARILY
      WAIVES SUCH RIGHT TO TRIAL BY JURY.

     

     

    
      
         

      

      
        Ex.
          C -
          2

        
          

        

      

      
         

      

    

     

     

     

    Maker
      hereby agrees that any dispute with respect to this Note shall be resolved
      in
      the manner provided in Section 20 of the LLC Agreement.

     

    As
      used
      herein, the terms “Maker” and “Holder” shall be deemed to include their
      respective successors, legal representatives and assigns, whether by voluntary
      action of the parties or by operation of law.

     

    MAKER:

     

    Maker's
      Address for Notices:   DARTMOUTH
      INVESTMENTS, LLP

    

    

    By:      

    16294
      Via
      Venetia Name:

    Delray
      Beach, FL 33484 Title:

    Fax:
      (561) 330-8006

    

    With
      a
      copy to:

    

    John
      Knobelsdorf

    McNaughton
      Knobelsdorf

    3730
      Kirby Drive

    Houston,
      TX 77098

    Fax:
      (713) 665-4369

     

     

    
 

    
      
         

      

      
        Ex.
          C -
          3Exhibit 10.1

FARM CREDIT SERVICES OF GRAND FORKS
Rural America's Natural Resource                              www.fscdirect.com
2424 32ND AVENUE SOUTH
P.O. BOX 13570
GRAND FORKS, ND 58208-3570
(701) 775-3193
1(800) 288-3982
FAX (701) 787-6659

                                 August 7, 2006

NEDAK Ethanol, LLC
Attn: Jerome Fagerland
118 East State Street
Atkinson, NE 68713

        Re:    CONDITIONAL LOAN COMMITMENT
               NEDAK ETHANOL, LLC PROJECT

Dear Jerome:

        Farm Credit Services of Grand Forks, ACA/FLCA ("Lender") is pleased to
extend to NEDAK Ethanol, LLC, a Nebraska limited liability company ("Borrower")
its conditional commitment to make a $46,250,000 loan (the "Loan") for the
purpose of acquiring, constructing, owning, and operating an approximately 44
million gallon per year dry mill ethanol plant near Atkinson, Nebraska (the
"Project"). The terms and conditions of the Loan shall be set forth in the Loan
Agreement and accompanying Loan Documents to be prepared by our legal counsel
and to be satisfactory in form and substance to Lender.

        The Loan Documents shall include, among other provisions, the following
terms and conditions:

     I.   GENERAL TERMS AND CONDITIONS

          A.   Borrower - NEDAK Ethanol, LLC, a Nebraska limited liability
               company.

          B.   Loan Facilities - The Loan shall be comprised of a $46,250,000
               non-revolving, multiple advance, construction loan facility (the
               "Construction Facility") available from Closing to a date that is
               not to exceed fourteen (14) months after Closing (the
               "Construction Period"). If Borrower is not in default under the
               Loan at the end of the Construction Period, an operating
               certificate has been issued, and Borrower has satisfied all other
               pre-identified conditions for conversion of the Construction
               Facility, the amount outstanding under the Loan at such time
               (such date being referred to herein as the "Completion Date")
               will convert to a term loan with a 10-year maturity at an
               interest rate selected by Borrower as set forth below in Section
               I.D (1) (the "Term Facility"). Upon satisfaction of certain
               conditions following conversion to the Term Facility, $10,000,000
               of the Term Facility will be converted to a revolving term loan
               with a ten-year maturity at an interest rate as set forth below
               in Section I.C (1) (the "Revolving Term Facility"). Said
               Revolving Term Facility may be prepaid in whole or in part
               (minimum $500,000 principal increments) on any interest payment
               date upon 30 days advance written notice without prepayment
               premium. Interest on the Loan will be calculated on the basis of
               the actual number of days elapsed in a 365-day year.
               Notwithstanding anything to the contrary contained herein, the
               Loan at no time shall exceed the lesser of: (1) $46,250,000 and
               (2) 50% of Borrower's total approved Project costs.
<PAGE>
NEDAK Ethanol, LLC
August 7, 2006
Page 2

          C.   Construction Facility -

               (1)  Interest Rate - 30 day LIBOR plus 3.40% per annum.

               (2)  Payment Schedule - Interest shall be payable monthly in
                    arrears.

               (3)  Use of Construction Proceeds - Proceeds shall be used for:

                    (a)  the cost of design and engineering for the Project,
                         preparing the site, constructing the plant, purchasing
                         and installing equipment, initial inventory, and
                         start-up working capital; and

                    (b)  the interest expense incurred and capitalized in
                         accordance with Generally Accepted Accounting
                         Principles (GAAP) during construction.

          D.   Term Facility -

               (1)  Interest Rate Options - Borrower shall have the option of
                    choosing (a) a variable rate equal to the 30-day LIBOR plus
                    3.40% per annum, or (b) (i) a fixed rate for five years
                    equal to the then current yield of the 5-year rate with the
                    Federal Home Loan Bank of Des Moines, Iowa, plus 3.40%
                    (which currently would result in a rate of 8.98% per annum),
                    and (ii) on the fifth (5th) anniversary of the Completion
                    Date, a fixed rate for the next five years equal to the then
                    current yield of the 5-year rate with the Federal Home Loan
                    Bank of Des Moines, Iowa, plus 3.40%. The interest rate
                    applicable to the Term Facility will be reduced by 0.25% per
                    annum at such time as Borrower reaches, and maintains as of
                    the next fiscal year end, 65% owners' equity (based on
                    audited fiscal year end financial statements after reduction
                    for any permitted annual dividend declaration), and by an
                    additional 0.25% per annum at such time as Borrower reaches,
                    and maintains as of the next fiscal year end, 70% owners'
                    equity (based on fiscal year end audited financial
                    statements after reduction for any permitted annual dividend
                    declaration). The interest rate margin will revert to the
                    original rate if owners' equity falls below 65% or 70% at
                    any interim quarterly reporting period. Other interest rate
                    options are available. Certain fixed rates may include
                    prepayment fees.
<PAGE>
NEDAK Ethanol, LLC
August 7, 2006
Page 3

               (2)  Payment Schedule - On the first day of the month following
                    the Completion Date, and on the first day of each month
                    thereafter, Borrower will provide to Lender equal, fixed
                    payments of principal plus all accrued interest to retire
                    the Term Facility over the ten-year period consisting of 120
                    monthly payments. The entire unpaid principal and interest
                    balance under the Term Facility shall be due and payable no
                    later than ten (10) years after the Completion Date. Accrued
                    interest only on the Revolving Term Facility shall be
                    payable by Borrower in consecutive monthly installments due
                    and payable on the first day of each calendar month
                    following the conversion of certain amounts of the Term
                    Facility to the Revolving Term Facility.

               (3)  Prepayment; Breakage Fees - The Term Facility may not be
                    prepaid for a period of three (3) years from and after the
                    Completion Date. Thereafter, a prepayment premium shall be
                    due and payable by Borrower in connection with any
                    prepayment of all or part of the Term Facility as follows:
                    1% of the prepayment amount during the fourth year following
                    the Completion Date. Thereafter, Borrower may prepay all or
                    part of the outstanding indebtedness under the Term Facility
                    without premium or penalty; provided, however, if Borrower
                    selects a fixed rate option, (a) any prepayment shall be
                    accompanied by the amount of any breakage fees imposed upon
                    Lender by Lender's funding source, and (b) a one-year
                    additional prepayment lockout may apply at the time of the
                    first re-pricing set forth above in Section I.D (1)(b)(i).
                    Any prepayment permitted shall be made on a scheduled
                    monthly payment date upon 60 days' advance written notice.

          E.   Collateral - The Loan shall be secured by a first and prior lien
               against the real property comprising the Project running in favor
               of Lender, by a first priority security interest on all personal
               property which is a part of or related to the Project, by the
               debt service reserve described above, by a collateral assignment
               of all management contracts, all supply contracts, all off-take
               contracts (including all contracts relating to marketing and
               sales), all railroad, trucking and other transportation
               contracts, all power contracts, the construction contract (and
               significant subcontracts) relating to the Project, any design
               and/or technology license agreements relating to the Project, all
               permits and other approvals, and all other material contracts of
               Borrower (together with the consent to such collateral
               assignments by all third parties to such contracts and
               agreements), by a collateral assignment of the State of Nebraska
               Sales Tax Rebate and any Federal and/or State incentive payments,
               and by such other collateral assignments, security interests and
               documents as may be deemed necessary by Lender. The foregoing
               list of contracts, permits approvals and other documents are
               collectively called the "Project Documents".
<PAGE>
NEDAK Ethanol, LLC
August 7, 2006
Page 4

          F.   Closing - The closing for the Loan shall be no later than
               September 30, 2006, unless otherwise agreed by Lender and
               Borrower (the "Closing").

          G.   Closing Conditions - All conditions precedent to the funding of
               the Construction Facility set forth in the Loan Agreement and
               other Loan Documents shall be satisfied by Borrower on or before
               the Closing.

          H.   Fees - Borrower will pay to Lender the fees set forth in the fee
               letter dated the date hereof (the "Fee Letter"). In addition,
               Borrower will pay Lender a quarterly fee in arrears equal to
               0.25% of the unused portion of the revolving commitment during
               the term of the Revolving Term Facility. All fees, including the
               portion of the fees paid upon acceptance of this Commitment
               Letter, shall be considered fully earned by the Lender when
               received.

          I.   Debt Service Reserve - Borrower shall fund a debt service reserve
               in the minimum amount of $2,400,000 which may be drawn upon by
               Lender at any time Borrower fails to make any required interest
               payment or scheduled debt service payment when due, including at
               any time that net operating income from the Project in
               insufficient to make scheduled debt service payments on any Loan.
               The Borrower, prior to making any distributions or dividend
               payments to any members, shall promptly replenish any drawing on
               the debt service reserve. Lender acknowledges that Borrower may
               elect to satisfy the debt service reserve requirement by applying
               the anticipated State of Nebraska Sales Tax Rebate (expected to
               be equal to $2,400,000) against the revolving commitment
               availability such that the Revolving Term Facility would be
               reduced by $2,400,000, i.e., from $10,000,000 to $7,600,000.

II.  PRE-CLOSING REQUIREMENTS

          Upon acceptance of this Commitment by Borrower, Borrower shall submit
     to Lender as soon as practical, but in no event later than ten (10) days
     prior to Closing, each of the following, in form and substance acceptable
     to Lender:
<PAGE>
NEDAK Ethanol, LLC
August 7, 2006
Page 5

          A.   Title Insurance - A title insurance commitment to insure the lien
               of Lender's first mortgage, in all respects acceptable to
               Lender's legal counsel and specifically, but without limitation,
               waiving the standard exceptions to title insurance relating to
               matters of survey, mechanic's liens, and parties in possession.

          B.   Survey - Three (3) copies of a current, certified survey of the
               Project prepared in a manner acceptable to Lender, its counsel,
               and the title insurer.

          C.   Insurance - Insurance containing the following coverages:

               (1)  Borrower shall keep the buildings, structures, fixtures,
                    personal property, and other improvements now existing or
                    hereafter erected or placed on the Project insured against
                    loss by fire, perils of extended coverage, and such other
                    hazards, casualties, and contingencies as required by Lender
                    in an amount at least equal to the unpaid indebtedness
                    secured by the mortgage outstanding at any given time. The
                    policies shall include "all risk" coverage, and shall be
                    satisfactory in form and substance to Lender. All insurance
                    shall be carried with companies approved by Lender, and the
                    policies and renewals thereof shall (i) contain a waiver of
                    defense based on co-insurance (ii) be assigned and pledged
                    to Lender as additional security, and (iii) have attached
                    thereto standard mortgagee and loss payee clauses in form
                    acceptable to Lender.

               (2)  If steam boilers or similar equipment for the generation of
                    steam are located in, on or about the Project, Borrower
                    shall maintain insurance against loss or damage by
                    explosion, rupture or bursting of such equipment and
                    appurtenances thereto, without a co-insurance clause, in an
                    amount satisfactory to Lender, and containing a standard
                    mortgagee clause in form acceptable to Lender.

               (3)  If the Project or any part thereof is located in a flood
                    hazard area for which flood insurance is available, Borrower
                    shall maintain flood insurance insuring the existing and
                    contemplated improvements on the Project to the maximum
                    limit of coverage made available, or in such lesser amount
                    as Lender may in writing consent, and containing standard
                    mortgagee and loss payee clauses in form acceptable to
                    Lender.
<PAGE>
NEDAK Ethanol, LLC
August 7, 2006
Page 6

               (4)  Borrower shall maintain comprehensive general liability
                    insurance naming Lender as an additional insured in an
                    amount acceptable to Lender, insuring against claims arising
                    from any accident or occurrence in or upon the Project.

               All insurance policies shall be issued by companies approved by
               Lender, and shall provide at least thirty (30) days notice to
               Lender prior to cancellation or non-renewal thereof. Borrower
               shall provide copies of all such insurance policies to Lender.

          D.   Disbursement Schedule - Borrower's estimated schedule for
               disbursement of the Construction Facility proceeds.

          E.   Zoning - A letter satisfactory to Lender from appropriate
               governmental offices regarding zoning, building code, ordinance
               and all other federal, state, and local requirements for the
               Project. Borrower shall have obtained all applicable permits and
               licenses for operation of the Project, including without
               limitation all air quality and water quality permits, prior to
               the conversion of the Construction Facility to the Term Facility.

          F.   Utilities - Written confirmation of availability from the
               suppliers of water, storm, and sanitary sewer, gas, electric, and
               telephone utilities for the Project.

          G.   UCC - UCC security interest searches from the appropriate office
               in Holt County, Nebraska and from the office of the Secretary of
               State of Nebraska, covering Borrower.

          H.   Organizational Documents - A copy of Borrower's organizational
               and governance documents certified by the Nebraska Secretary of
               State or Borrower's secretary, as applicable, together with
               evidence, reasonably satisfactory to Lender, that Borrower has
               complied with all necessary filing requirements to permit
               Borrower to do business in the State of Nebraska, and evidence,
               reasonably satisfactory to Lender, that Borrower has complied
               with such documents in executing this Commitment and the
               documents referred to herein.

          I.   Equity - Lender shall be satisfied in its reasonable discretion
               with the equity and capital structure of Borrower (including
               subordinated debt, tax increment financing and any other sources
               of funds) and that all applicable laws have been complied with in
               raising such equity.
<PAGE>
NEDAK Ethanol, LLC
August 7, 2006
Page 7

          J.   Project Documents - Copies of all Project Documents (to the
               extent the same exist pre-closing), all of which Project
               Documents shall be in form and substance reasonably acceptable to
               Lender; provided however, that copies of all final, executed
               Project Documents shall be delivered to Lender prior to the first
               advance of Loan proceeds.

          K.   Other - Such other agreements, documents, and exhibits, without
               limitation, which Lender may require to assure compliance with
               the requirements of this Commitment.

III.   CLOSING DOCUMENTATION

          A.   Loan Documents -

               The following documents (the "Loan Documents") will be prepared
               by Lender's counsel in accordance with the terms of this
               Commitment. The parties shall execute the same and/or cause the
               same to be executed at Closing:

               (1)  A note in an original principal amount not to exceed
                    $46,250,000.

               (2)  A first mortgage upon fee title to the real property
                    comprising the Project.

               (3)  A general assignment of all leases of, rents from, and funds
                    associated with the operation of the Project.

               (4)  A security agreement evidencing a first security interest in
                    all fixtures, equipment, and other personal property owned
                    by Borrower located upon the Project or used or usable in
                    connection with the development, operation and/or
                    maintenance of the Project, and appropriate financing
                    statements.

               (5)  An assignment of the plans and specifications and an
                    assignment of the Project architect's agreement, along with
                    written acknowledgment from the Project architect
                    authorizing Lender to rely on and utilize the Plans and
                    agreement without additional charge, and further confirming
                    to Lender that, in the event of default, the Project
                    architect will cooperate with Lender regarding the
                    completion of the Project.

               (6)  An assignment of Borrower's general construction contract
                    for the Project and an agreement from the general contractor
                    to honor and perform the same for Lender in the event of
                    default.
<PAGE>
NEDAK Ethanol, LLC
August 7, 2006
Page 8

               (7)  A loan agreement containing such representations,
                    warranties, covenants, conditions, events of default, and
                    such other provisions as are customary and satisfactory to
                    Lender.

               (8)  A disbursing agreement with the title company detailing the
                    terms, conditions, and procedures for disbursing amounts
                    under the Construction Facility.

               (9)  The collateral assignments and consents described above in
                    paragraph I.E.

               (10) Such other documents, licenses, permits, and items as Lender
                    may require.

               Lender may designate which of the Loan Documents are to be placed
               of record and the offices in which the same are to be recorded.
               Borrower shall pay all documentary, recording, and/or
               registration taxes and/or fees upon the Loan Documents.

          B.   Other Documents and Requirements -

               The following further requirements shall be satisfied prior to
               Closing:

               (1)  Borrower shall deliver an ALTA mortgagee's policy of title
                    insurance fully acceptable to Lender dated as of Closing and
                    issued in accordance with the title insurance commitment
                    approved by Lender.

               (2)  Borrower shall deliver an opinion from outside counsel for
                    Borrower confirming compliance with the legal requirements
                    of the laws of Nebraska and confirming such other matters as
                    Lender's counsel may deem necessary.

               (3)  Borrower shall deliver such other affidavits, statements,
                    certificates, and forms from Borrower or third parties as
                    may be required by Lender's counsel.

               (4)  All toxic or hazardous substances, hazardous wastes,
                    pollutants or contaminants, including petroleum products,
                    polychlorinated biphenyls and urea-formaldehyde, all as
                    defined in any applicable state, local or federal statute,
                    ordinance, code or regulation (collectively, "Substances")
                    shall be manufactured, stored and/or used by Borrower in
                    strict compliance with all applicable laws.
<PAGE>
NEDAK Ethanol, LLC
August 7, 2006
Page 9

               (5)  Lender shall be provided with evidence satisfactory to
                    Lender indicating that there are not presently any
                    Substances on, about or beneath the surface of the real
                    property comprising the Project. In furtherance and not in
                    limitation of the foregoing, Borrower shall deliver a Phase
                    One environmental assessment report to Lender prepared by a
                    qualified certified testing laboratory acceptable to Lender.
                    If such Phase One report indicates a likelihood of the
                    presence of any such Substances, Lender, in its sole
                    discretion, may require further tests and findings of the
                    real property comprising the Project to perform such
                    additional inspections, tests or borings. Borrower shall be
                    responsible for removing or causing to be removed prior to
                    Closing any and all Substances discovered on the real
                    property comprising the Project. Borrower shall be
                    responsible for all costs and expenses in connection with
                    the performance of the foregoing tests, the preparation of
                    the report and the removal of any Substances from the real
                    property comprising the Project.

               (6)  The loan documentation shall provide and Borrower shall
                    agree that if Lender determines at any time that asbestos
                    containing materials exist on the real property comprising
                    the Project and present a health hazard, or removal or
                    containment of the asbestos containing materials or any
                    other Substances from the real property comprising the
                    Project is required by applicable governmental or regulatory
                    authorities or pursuant to applicable laws or regulations,
                    Lender may, in its sole discretion, require the removal or
                    containment of such asbestos containing materials or any
                    other Substances at Borrower's expense.

               (7)  There shall be at the time of Closing no action, proceeding
                    or investigation pending or threatened (or any basis
                    therefore) which involves the real property comprising the
                    Project or which might materially adversely affect the
                    condition, business or prospects of Borrower or any of
                    Borrower's properties or assets, or which might adversely
                    affect Borrower's ability to perform the obligations under
                    the Loan documentation.

               (8)  On or prior to Closing, Borrower shall have obtained in a
                    manner satisfactory to Lender equity funds (or unequivocal
                    binding commitments therefor in form and substance
                    satisfactory to Lender in its sole discretion) in a minimum
                    amount of $46,250,000 (a portion of which may also include
                    tax increment financing and subordinated or mezzanine debt
                    on terms acceptable to Lender) which shall serve as a part
                    of Borrower's equity funds for the Project. All such funds

<PAGE>
NEDAK Ethanol, LLC
August 7, 2006
Page 10

                    must be paid into the Project prior to any disbursements of
                    the Loan from Lender. Terms of subordinate debt will
                    generally be acceptable to Lender if such debt (i) is
                    unsecured, (ii) accrues interest at a rate of 12% or less,
                    (iii) does not require accrued interest payments until the
                    date the Project commences operations, and then only with
                    senior debt covenant compliance, (vii) does not require
                    principal repayment until one year from the date the Project
                    commences operations, and then only with senior debt
                    covenant compliance, and (viii) is subject to a full and
                    complete standstill, subordination and/or intercreditor
                    agreement acceptable to Lender. Notwithstanding the
                    foregoing, Borrower's equity funds must equal or exceed 50%
                    of the total costs of the Project.

               (9)  The Loan Documents shall contain financial covenants as
                    follows:

                    (a)  Working Capital: Borrower must have working capital of
                         at least (x) $5,000,000 at the end of the first fiscal
                         year of operations, which includes the year
                         construction of the Project is completed, and (y)
                         $6,000,000 at the end of the second fiscal year of
                         operations, and thereafter. In calculating working
                         capital, Borrower may include the un-advanced portion
                         of the Revolving Term Facility less the debt service
                         reserve.

                    (b)  Current Ratio: Borrower will maintain at the end of the
                         first fiscal year of operations, which includes the
                         year construction of the Project is completed, and
                         thereafter, a ratio of current assets to current
                         liabilities of not less than 1.20:1.00. Borrower may
                         include in the current ratio computation the
                         un-advanced portion of the Revolving Term Facility less
                         the debt service reserve.

                    (c)  Owner's Equity Ratio: Borrower must have a minimum
                         owner's equity ratio (together with any subordinated
                         debt approved by Lender) defined as owner's equity plus
                         approved subordinated debt divided by total assets
                         expressed as a percent of total assets of 50% at the
                         end of the first fiscal year of operations, which
                         includes the year construction of the Project is
                         completed.
<PAGE>
NEDAK Ethanol, LLC
August 7, 2006
Page 11

                    (d)  Minimum Net Worth: Borrower must have a minimum
                         tangible net worth (together with any subordinated debt
                         approved by Lender) of $41,000,000 at the end of the
                         first fiscal year of operations, which includes the
                         year construction of the Project is completed.

                    (e)  Fixed Charge Coverage Ratio: A minimum fixed charge
                         coverage ratio (earnings before interest, taxes,
                         depreciation and amortization, DIVIDED BY the sum of
                         interest, mandatory debt payments, cash taxes,
                         non-financed capital expenditures, and equity
                         distributions) of 1.25:1.00 prior to payment of any
                         distributions or dividends, and 1.00:1.00 (taking into
                         account such distribution and dividend payments), after
                         the first fiscal year of operations, which includes the
                         year construction of the Project is completed, and
                         thereafter. For purposes of determining the fixed
                         charge coverage ratio, non-financed capital
                         expenditures shall be the lesser of $500,000 or the
                         actual amount of non-financed capital expenditures for
                         any year.

                    (f)  Without the prior consent of Lender, capital
                         expenditures shall not exceed $500,000 in any fiscal
                         year of Borrower following completion of the Project.

                    (g)  Without the prior consent of Lender, annual
                         distributions to the owners of Borrower shall not
                         exceed 65% of Borrower's "Net Available Cash" in the
                         first fiscal year of operations, which includes the
                         year construction of the Project is completed, and all
                         years thereafter. When owner's equity of 75% is reached
                         and maintained, then annual distributions to owners of
                         Borrower shall be unlimited, provided Borrower complies
                         with all covenants of the Loan Documents. Should
                         owner's equity decline below 75%, then the distribution
                         restriction of 65% of Borrower's Net Available Cash
                         shall be reinstated. No distributions may be made if
                         Borrower is (or would be) in default under the Loan
                         Documents either prior to or after such distributions.
                         In that regard, no distributions shall be made except
                         out of Net Available Cash which is defined to be cash

<PAGE>
NEDAK Ethanol, LLC
August 7, 2006
Page 12

                         flow that is available after application of all cash
                         flows from Project operations to the following items in
                         the order of priority listed: (i) all fees and
                         scheduled debt service on the Loan; (ii) scheduled debt
                         service permitted to be paid on subordinated debt;
                         (iii) replenishment of any draws taken from the debt
                         service reserve; (iv) payment of capital expenditures;
                         (v) payment to Borrower's members of an amount equal to
                         such members' estimated tax obligations on taxable
                         earnings of Borrower; and (vi) required Cash Flow Sweep
                         payments to the extent applicable as described in
                         Section III.B (9)(h) below. All such distributions
                         based on any fiscal year shall be allowable based upon
                         the Borrower's audited financial statement for such
                         fiscal year, and must be approved by Borrower's board
                         of managers within 120 days of fiscal year end and such
                         approval must state the fiscal period that the
                         dividends will be paid from.

                    (h)  On an annual basis after receipt of the Borrower's
                         audited financial statement, and after payment of the
                         items listed in clauses (i) through (v) in Section
                         III.B (9)(g) immediately above, an amount equal to
                         forty percent (40%) of the remaining cash flow from the
                         Project operations shall be swept ("Cash Flow Sweep")
                         and applied to reduce the principal balance on the Loan
                         (without prepayment premium). At such time as owner
                         equity reaches and continuously is maintained at a
                         minimum level of fifty percent (50%) (as reflected on
                         the audited financial statement and calculated as
                         "total assets minus total liabilities/total assets"),
                         the required Cash Flow Sweep shall be suspended. Should
                         owner's equity decline below 50%, then Lender shall
                         have the right to reinstate the Cash Flow Sweep.

                    (i)  Subordinated debt of up to an aggregate amount of
                         $500,000 will be permitted on terms and conditions
                         acceptable to Lender.

                    (j)  Payments received by Borrower arising from the
                         Commodity Credit Corporation program ("CCC Payments"),
                         other Federal programs, or the Nebraska State
                         Incentives programs will be immediately paid to Lender
                         and applied to reduce the principal balance of the Loan
                         (without prepayment premium).
<PAGE>
NEDAK Ethanol, LLC
August 7, 2006
Page 13

                    (k)  If Borrower elects to expand the Project the Lender
                         will consider providing additional debt for such
                         expansion, and provided Borrower is not in default,
                         Borrower would be permitted to use a portion of its
                         retained earnings (as reflected on its then current
                         audited financial statement) to be agreed upon by
                         Lender and Borrower at the time, for equity purposes
                         for such expansion. Such expansion may be permitted so
                         long as Borrower is in compliance with all loan
                         covenants, member net worth following expansion would
                         be no less than at original Closing on this Loan, and
                         following expansion, all original applicable Loan
                         covenants shall be maintained.

                    (10) Lender shall be reasonably satisfied with the
                         management contract or other arrangement and the
                         manager for operation of the Project. Lender shall have
                         completed its due diligence of Borrower, the Project,
                         and all documents required to be delivered by Borrower
                         hereunder, and Lender shall be satisfied in its sole
                         discretion therewith.

IV.   OTHER TERMS AND CONDITIONS

          A.   No Sale or Liens - Borrower shall not voluntarily or
               involuntarily cause, suffer, or permit (1) any sale or transfer
               of any interest of Borrower, legal or equitable, in the Project,
               or (2) any mortgage, deed of trust, pledge, encumbrance, or lien
               to be imposed or remain outstanding on the Project or the
               granting of any security interest therein, except as granted by
               the Loan Documents and the permitted encumbrances listed in the
               mortgage, without, in each instance, obtaining the prior written
               consent of Lender.

          B.   Plans. No changes shall be made in the plans and specifications
               after the approval thereof by Lender without the prior written
               consent of Lender if such change would in any material way alter
               the design or structure of the Project, or decrease the Project
               cost as detailed in the sworn construction cost statement. In any
               event, Borrower will furnish Lender with two (2) copies of "as
               built" drawings upon completion of the Project. All engineers and
               other personnel of Borrower's general contractor shall be
               reasonably satisfactory to Lender, and Borrower shall provide the
               qualifications of such individuals to Lender for Lender's review.

          C.   Engineer - If a default or event of default occurs under any of
               the Loan Documents, (a) Lender may retain an independent
               architect or engineer to review and approve the plans, soil
               reports, construction contracts and subcontracts, cost figures,
               and sworn construction cost statement; (b) Lender may request the
               inspecting engineer to inspect all work for which payment is
               requested and all other work upon the Project, review all draw
               requests, and approve such work and draw requests prior to each
               disbursement of Loan proceeds; and (c) neither Borrower nor any
               third party shall have the right for any purpose to use or rely
               upon the reports of the inspecting architect or engineer, whether
               they are made prior to or subsequent to the commencement of
               construction of the improvements.
<PAGE>
NEDAK Ethanol, LLC
August 7, 2006
Page 14

          D.   Costs - Borrower shall pay within 10 days after request all
               attorneys' fees, including, without limitation, fees of Lender's
               counsel, as well as all fees, costs and expenses of the
               inspecting architect or engineer for the Project and other
               experts and consultants engaged by Lender in its due diligence
               process, underwriting costs and expenses, appraisal costs, title
               and survey costs, the costs of any third party reports and
               searches, and all other costs and expenses incurred by or on
               behalf of Lender in connection with the issuance of the Proposal
               Letter dated June 6, 2006, this Commitment, preparation of the
               Loan Documents, and the making, closing, repayment,
               administration, enforcement, and/or transfer of the Loan, whether
               or not the Loan closes.

          E.   Additional Information - Borrower shall furnish promptly such
               additional information as shall be requested by Lender,
               including, but not limited to, quarterly compliance certificates
               (in form and substance acceptable to Lender) and interim
               financial statements within forty-five (45) days of the end of
               each quarterly period and audited financial statements for
               Borrower within one hundred twenty (120) days following the end
               of each fiscal year thereof. Also, within one hundred twenty
               (120) days following the end of each fiscal year thereof,
               Borrower will supply an annual budget and business plan for the
               next fiscal year. In addition, for the first year of operation,
               Borrower will furnish to Lender monthly interim production
               reports within 10 days after each month-end. Borrower represents
               that all financial information heretofore furnished to Lender,
               and to be furnished to Lender, is and will be accurate and not
               misleading in any respect.

          F.   Disbursement - Disbursement of the Loan proceeds shall be made in
               accordance with Lender's form of disbursing agreement, and in a
               manner which will always preserve the first lien status of the
               mortgage. With respect to any draws under the Construction
               Facility for payment of amounts owed under construction
               contracts, disbursements shall also be subject to a retainage in
               an amount equal to or at least 10% of each draw until such time
               as the Project is 50% completed. Retainages required for
               subcontracts will be released upon certification to Lender by the
               project architect that the work described in such subcontract has
               been completed.
<PAGE>
NEDAK Ethanol, LLC
August 7, 2006
Page 15

          G.   No Assignment - Without the prior written consent of Lender,
               Borrower's rights under this Commitment may not be assigned. This
               Commitment sets forth the entire agreement of the parties with
               respect to the subject matter hereof and supersedes all prior
               written or oral understandings with respect thereto, except that
               all representations made by Borrower to Lender with respect to
               the subject matter hereof shall survive this Commitment. No
               modification or waiver of any provision of this Commitment shall
               be effective unless set forth in writing and signed by the
               parties hereto.

          H.   Participations - Lender may arrange for other lenders to purchase
               or to participate with Lender in the Loan, and Lender shall be
               entitled to retain any compensation received from any such other
               lender. Lender's obligation to close the Loan and/or advance any
               amounts under the Loan is expressly conditioned upon Lender's
               receipt of participations in the Loan in such amounts as are
               satisfactory to Lender in its sole discretion.

          I.   Funding Bank - Lender's obligation to close the Loan and/or
               advance any amounts under the Loan is expressly conditioned upon
               the approval of Lender's funding bank (AgriBank), if such
               approval is required of Lender.

          J.   Choice of Law - Except to the extent otherwise provided in the
               Loan Documents, the rights of the parties hereto shall be
               governed by and construed in accordance with the laws of the
               State of North Dakota.

          K.   Expiration of Commitment - This Commitment shall expire and be
               null and void on August 7, 2006, unless Lender receives an
               accepted copy of this Commitment prior to said expiration date.

          L.   Signs - Lender may, if it so desires, place a sign or signs of
               reasonable size on the land indicating that Lender is providing
               financing for the Project.

          M.   Early Start - As an express condition to the Closing, and prior
               to the record date of Lender's Loan Documents, appropriate title
               insurance coverage (including appropriate early-start coverage)
               as required by Lender in favor of Lender, its successors,
               participants and their respective assigns, shall be in place, and
               no mechanics lien or other encumbrance shall have been filed or
               exist against the real estate comprising the Project as a result
               of:

               (1)  work on or construction of the Project;

               (2)  materials delivered to the land for use or construction
                    thereon;
<PAGE>
NEDAK Ethanol, LLC
August 7, 2006
Page 16

               (3)  the filing of a construction contract or any memorandum
                    thereof for record; or

               (4)  the filing of an affidavit or other evidence of any oral
                    agreement for the construction of any improvements,
                    performance of labor, furnishing of materials, or providing
                    of specially fabricated materials in connection with the
                    Project.

          N.   Borrower's Full Compliance - Lender's obligation to make the Loan
               is conditioned upon Borrower's performance of each and every
               obligation and covenant and the accuracy of each representation
               and warranty contained in this letter, and Lender's obligations
               hereunder may, at Lender's option, be terminated, whether or not
               this offer to lend has been accepted by Borrower, by written
               notice to Borrower at the above address if (1) there is any
               material adverse change in the security for the Loan or in
               Borrower, (2) any information, representation or warranty
               furnished to Lender in connection with the Loan shall have
               contained at the time made or furnished or at any time thereafter
               any untrue statement or at any such time shall have omitted to
               state any fact necessary to make the application or any such
               information, representation or warranty not materially
               misleading, (3) Borrower fails to deliver properly executed Loan
               Documents, or perform any of the terms, conditions or agreements
               of this offer to lend, (4) in the reasonable judgment of Lender
               any condition contained herein or in the Loan Documents cannot be
               fulfilled by Closing, (5) a petition in bankruptcy or insolvency
               is filed by or against Borrower or an assignment for the benefit
               of creditors is made by Borrower which is not withdrawn or
               dismissed, cancelled and/or terminated within sixty (60) days
               after the filing of the same or entry into the same, or (6) the
               Project, or any part thereof, shall be taken by condemnation or
               shall be materially damaged by fine or other casualty.

          O.   Default - Upon the occurrence of a default under any Loan
               Document, and not remedied by Borrower within the allowable cure
               period, Lender shall have the right to declare the entire unpaid
               principal balance of and all unpaid accrued interest on the Loan
               to be immediately due and payable.

          P.   Advances - Lender shall not be required to make any advances or
               authorize any disbursements of Loan proceeds until the conditions
               and requirements set forth in this Commitment have all been
               completed and fulfilled to the satisfaction of Lender. However,
               Lender may make advances and authorize disbursements prior to
               completion and fulfillment of any or all of such conditions and
               requirements, without waiving its right to require such
               completion and fulfillment before additional advances are made or
               additional disbursements are authorized.
<PAGE>
NEDAK Ethanol, LLC
August 7, 2006
Page 17

          Q.   Survival of Warranties and Agreements - All of the
               representations, warranties and agreements made herein, in any
               application for the Loan, or in connection with the Loan shall
               survive the Closing and inure to the benefit of Lender, its
               successors and assigns.

          R.   Right to Inspect - As long as this offer to lend, or any Loan
               pursuant thereto, is in force and effect, Lender shall have the
               right at all reasonable times to inspect the Project.

          S.   Notices - Borrower shall provide immediate written notice to
               Lender of any adverse developments with respect to the
               construction and/or operation of the Project.

          T.   Depositary - First Dakota National Bank of Yankton South Dakota
               ("First Dakota"), shall be appointed the depositary banking
               institution for handling all depositary relationships with
               Borrower for the benefit of Lender, unless Lender and First
               Dakota shall agree otherwise in writing.

        This Commitment and the Fee Letter constitute the entire agreement
between Lender and Borrower and supersede all prior and current understandings
and agreements whether oral or written. Any changes to this Commitment or the
Fee Letter must be in writing signed by both parties hereto.

               [THE REMAINDER OF THIS PAGE IS INTENTIONALLY BLANK;
                       SIGNATURES ARE ON FOLLOWING PAGE.]

<PAGE>

NEDAK Ethanol, LLC
August 7, 2006
Page 18

                                LENDER:

                                FARM CREDIT SERVICES OF GRAND FORKS, ACA/FLCA

                                By: /s/ Robert Ellerbusch
                                     ------------------------------
                                        Robert Ellerbusch
                                Title:  Assistant Vice President
                                     ------------------------------

        The foregoing Commitment is hereby accepted by Borrower as of the date
shown below.

Dated: August 7, 2006

                               BORROWER:

                               NEDAK ETHANOL, LLC

                               By: /s/ Jerome Fagerland
                                   --------------------------------
                                       Jerome Fagerland
                              Title:   President - Gen. Mgr.
                                   --------------------------------

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00113-of-00352.parquet"}]]