Document:

2007 Incentive Plan for Entities

 Exhibit 10.3 
 ELLINGTON FINANCIAL LLC 
 INCENTIVE PLAN FOR ENTITIES 
 Effective as of August 17, 2007 

 TABLE OF CONTENTS 
  

					
	 	  	 	  	PAGE
	 SECTION 1    PURPOSE OF PLAN; DEFINITIONS
	  	1
		  	1. Purpose	  	1
		  	2. Definitions	  	1
	 SECTION 2    ADMINISTRATION
	  	4
		  	1. Administration	  	4
		  	2. Duties and Powers of the Committee	  	5
		  	3. Majority Rule	  	5
		  	4. Compensation; Professional Assistance; Good Faith Actions	  	5
	 SECTION 3    STOCK SUBJECT TO PLAN
	  	6
		  	1. Number and Source of Shares	  	6
		  	2. Unrealized Awards	  	6
		  	3. Adjustment of Awards	  	6
	 SECTION 4    ELIGIBILITY
	  	7
	 SECTION 5    AWARDS
	  	7
		  	1. Stock Appreciation Rights	  	7
		  	2. Restricted Stock	  	8
		  	3. Performance Awards	  	8
		  	4. Manager Awards	  	8
		  	5. LTIP Units	  	9
		  	6. Other Awards	  	9
	 SECTION 6    AWARD AGREEMENTS
	  	9
		  	1. Terms of Award Agreements	  	9
		  	2. Replacement and Substitution	  	11
		  	3. Surrender of Awards	  	11
	 SECTION 7    AMENDMENT AND TERMINATION
	  	11
	 SECTION 8    UNFUNDED STATUS OF PLAN
	  	12
	 SECTION 9    GENERAL PROVISIONS
	  	12
		  	1. Securities Laws Compliance	  	12
		  	2. Certificate Legends	  	12
		  	3. Transfer Restrictions	  	13
		  	4. Company Actions; No Right to Continued Service	  	13
		  	5. Payment of Taxes	  	13
	 SECTION 10    EFFECTIVE DATE OF PLAN
	  	14
	 SECTION 11    TERM OF PLAN
	  	14

 ELLINGTON FINANCIAL LLC 
 INCENTIVE PLAN FOR ENTITIES 
 SECTION 1 
 PURPOSE OF PLAN; DEFINITIONS 
 1.
Purpose. The purpose of the Plan is (a) to reinforce the long-term commitment to the Company’s success of the Manager and those advisors and consultants that are non-natural persons or entities and to facilitate the ownership of the
Company’s stock by such persons, thereby reinforcing the identity of their interests with those of the Company’s stockholders; (b) to compensate the Manager for its successful efforts in managing the investments of the Company and to
provide performance-based compensation in order to provide incentive to the Manager to enhance the value of the Company and (c) to benefit the Company’s stockholders by encouraging high levels of performance by the Manager and other
advisors of the Company. 
 2. Definitions. For purposes of the Plan, the following terms shall be defined as set forth below:

 (a) “Affiliate” means (i) any Person directly or indirectly controlling, controlled by or in common control with
such other Person, (ii) any officer or general partner of such other Person and (iii) any legal entity for which such Person acts as an executive officer or general partner. 
 (b) “Award” or “Awards” means an award described in Section 5 hereof. 
 (c) “Award Agreement” means an agreement described in Section 6 hereof entered into between the Company and a Participant, setting
forth the terms, conditions and any limitations applicable to the Award granted to the Participant. 
 (d) “Beneficial
Owner” shall have the meaning set forth in Rule 13d-3 under the Exchange Act. 
 (e) “Board” means the Board of
Directors of the Company. 
 (f) “Change in Control” of the Company shall be deemed to have occurred if an event set forth
in any one of the following paragraphs (i)-(iii) shall have occurred unless prior to the occurrence of such event, the Board determines that such event shall not constitute a Change in Control: 
  

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 (i) any Person, other than the Manager or any of its Affiliates or any Affiliate of the Company is or
becomes Beneficial Owner, directly or indirectly, of securities of the Company representing fifty percent (50%) or more of the combined voting power of the then outstanding securities of the Company, excluding (A) any Person who becomes
such a Beneficial Owner in connection with a transaction described in clause (x) of paragraph (ii) below, and (B) any Person who becomes such a Beneficial Owner through the issuance of such securities with respect to purchases made
directly from the Company; or 
 (ii) the members of the Company approve a merger or consolidation of the Company with any other corporation
or the issuance of voting securities of the Company in connection with a merger or consolidation of the Company (or any direct or indirect subsidiary of the Company) pursuant to applicable stock exchange requirements, other than (x) a merger or
consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation continuing to represent (either by remaining outstanding or by being converted into voting securities of the
surviving entity or any parent thereof) fifty percent (50%) or more of the combined voting power of the securities of the Company or such surviving entity or any parent thereof outstanding immediately after such merger or consolidation, or
(y) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no Person is or becomes the Beneficial Owner, directly or indirectly, of securities of the Company representing thirty
percent (30%) or more of the combined voting power of the then outstanding securities of the Company; or 
 (iii) the members of the
Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the assets of the Company. 
 (g) “Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. 
 (h) “Commission” means the Securities and Exchange Commission. 
 (i) “Committee” means the Board or any committee the Board may appoint to administer the Plan. To the extent necessary and desirable,
the Committee shall be composed entirely of individuals who meet the qualifications referred to in Section 162(m) of the Code and Rule 16b-3 under the Exchange Act. If at any time or to any extent the Board shall not administer the Plan, then
the functions of the Board specified in the Plan shall be exercised by the Committee. 
  

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 (j) “Company” means Ellington Financial LLC, a Delaware limited liability company or its
successor. 
 (k) “Effective Date” means the date provided pursuant to Section 11 hereof. 
 (l) “Exchange Act” means the Securities Exchange Act of 1934, as amended. 
 (m) “Fair Market Value” means, as of any given date, (i) the closing price of a share of the Company’s Stock on the principal
exchange on which Shares are then trading, if any, on the trading day previous to such date, or, if stock was not traded on the trading day previous to such date, then on the next preceding trading day during which a sale occurred; or (ii) if
such Stock is not traded on an exchange but is quoted on a quotation system, the mean between the closing representative bid and asked prices for the Stock on the trading day previous to such date as reported by such quotation system; or
(iii) if such Stock is not publicly traded on an exchange and not quoted on a quotation system, the mean between the closing bid and asked prices for the Stock, on the day previous to such date, as determined in good faith by the Committee; or
(iv) if the Stock is not publicly traded, the fair market value established by the Committee using any reasonable method and acting in good faith and in conformity with Section 409A of the Code. 
 (n) “Individual Plan” means the Ellington Financial LLC Incentive Plan for Individuals. 
 (o) “LLC Agreement” means the Operating Agreement of the Company, as amended and restated on August 17, 2007, as may be amended
from time to time. 
 (p) “LTIP Unit” means a long term incentive plan unit as described in Section 6 hereof.

 (q) “Management Agreement” means that certain Management Agreement, dated as of August 17, 2007, by and among the
Company and the Manager, as amended from time to time. 
 (r) “Manager” means Ellington Financial Management LLC, a Delaware
limited liability company or its successor. 
 (s) “Manager Awards” means the Awards granted to the Manager as described in
Section 5.5 hereof. 
  

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 (t) “144A Offering” means the offering, which closed on August 17, 2007, pursuant
to Rule 144A of the Securities Act. 
 (u) “Participant” means the Manager and any consultant or advisor to the Company or
to any parent or subsidiary of the Company that is a non-natural person and is selected by the Committee, pursuant to the Committee’s authority in Section 2 below, to receive Awards. 
 (v) “Person” means an individual, and a corporation, limited liability company, partnership, trust, incorporated or unincorporated
association, joint venture or other entity of any kind. 
 (w) “Plan” means this Ellington Financial LLC Incentive Plan for
Entities. 
 (x) “Profits Interest Unit” means a unit that confers an interest in the profits of the Company, as determined
by the Board of Directors. 
 (y) “Restricted Stock” means Stock as described in Section 5.2 hereof. 
 (z) “Securities Act” means the Securities Act of 1933, as amended. 
 (aa) “Shares” means shares of Stock. 
 (bb) “Stock” means the common shares representing limited liability company interests of the Company. 
 (cc) “Stock Appreciation Right” shall have the meaning set forth in Section 5.1 hereof. 
 SECTION 2 
 ADMINISTRATION 
 1. Administration. To the extent applicable, the Plan shall be administered in accordance with the requirements of (i) Section 162(m) of the Code (to the extent applicable and only to the extent
necessary and desirable to maintain qualification of awards under the Plan under Section 162(m) of the Code), (ii) Rule 16b-3 under the Exchange Act and (iii) of the Securities and Exchange Commission and the applicable stock exchange
on which the Shares trade or are quoted, by the Board or, at the Board’s sole discretion, by the Committee, which shall be appointed by the Board, and which shall serve at the pleasure of the Board. 
  

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 2. Duties and Powers of the Committee. The Committee shall have the power and authority to grant
Awards to Participants pursuant to the terms of the Plan, and, in its discretion, to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable; to interpret the terms
and provisions of the Plan and any Award issued under the Plan (and any agreements relating thereto); and to otherwise supervise the administration of the Plan. 
 In particular, the Committee shall have the authority to determine, in a manner consistent with the terms of the Plan: 
 (a) in addition to the Manager, those consultants and advisors, if any, that are non-natural persons or entities which shall be Participants; 
 (b) subject to Section 3 hereof, the number of Shares to be covered by and the vesting schedule of each Award granted hereunder; 
 (c) the terms and conditions of any Award granted hereunder, including the waiver or modification of any such terms or conditions, consistent with the
provisions of the Plan (including, but not limited to, Section 7 hereof); and 
 (d) the terms and conditions which shall govern all the
Award Agreements, including the waiver or modification of any such terms or conditions. 
 3. Majority Rule. The Committee shall act
by a majority of its members in attendance at a meeting at which a quorum is present or by a memorandum or other written instrument signed by all members of the Committee. 
 4. Compensation; Professional Assistance; Good Faith Actions. The Committee may, with the approval of the Board, employ attorneys, consultants,
accountants, appraisers, brokers or other persons. The Committee, the Board, the Company and any officers and directors of the Company shall be entitled to rely upon the advice, opinions or valuations of any such persons. All actions taken and all
interpretations and determinations made by the Committee or Board in good faith shall be final and binding upon all Participants, the Company and all other interested persons. No member of the Committee or Board shall be personally liable for any
action, determination or interpretation made in good faith with respect to this Plan or any Award, and all members of the Committee and Board shall be fully protected and indemnified to the fullest extent permitted by law, by the Company, in respect
of any such action, determination or interpretation. 
  

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 SECTION 3 
 STOCK SUBJECT TO PLAN 
 1. Number and Source of Shares. Subject to the provisions of
Section 3.3 below, the initial aggregate maximum number of Shares and LTIP Units reserved and available that may be made the subject of Awards under the Plan and the Individual Plan combined, shall be six percent (6%) of the number of
Shares outstanding on the closing date of the 144A Offering or approximately 750,000 Shares and LTIP Units (subject to adjustment if the initial purchasers/placement agent exercises its additional over-allotment option). In each subsequent calendar
year, the maximum limit on the number of Shares and LTIP Units issuable under the Plan and the Individual Plan combined shall increase by an amount equal to six percent (6%) of the difference, if any (but not less than zero) between
(i) the number of Shares that are outstanding as of the last day of such calendar year and (ii) the number of Shares that are outstanding as of the last day of the immediately preceding calendar year, excluding any Shares issued pursuant
to the Plan and Individual Plan, except that for purposes of the foregoing calculation, the last day of the calendar year preceding the calendar year ending on December 31, 2007, shall be the closing date of the 144 Offering. Any issuance of an
LTIP Unit will reduce the available Shares that may be issued under the Plan and the Entity Plan on a one-for-one basis; however, the conversion of an LTIP Unit into a share shall not reduce the number of available shares that may be issued under
the Plan and the Entity Plan. Notwithstanding the foregoing, in no event shall the aggregate number of Shares and LTIP Units issued pursuant to both the Plan and the Individual Plan combined exceed 10,000,000. The Stock which may be issued pursuant
to an Award under the Plan may be treasury Stock, authorized but unissued Stock, or Stock acquired, subsequently or in anticipation of the transaction, in the open market to satisfy the requirements of the Plan. Awards may consist of any combination
of such Stock, or, at the election of the Company, cash. 
 2. Unrealized Awards. If any Shares or LTIP Units subject to an Award are
forfeited, cancelled, exchanged or surrendered, withheld in satisfaction of the holder’s obligation to remit an exercise price or withholding taxes or if an Award otherwise terminates or expires with or without a distribution of Shares to the
Participant, the Shares or LTIP Units subject to such Award shall, to the extent of any such forfeiture, cancellation, exchange, surrender, termination or expiration, again be available for Awards under the Plan, except as determined by the
Committee. 
 3. Adjustment of Awards. Upon the occurrence of any event that affects the Shares in such a way that an adjustment of
outstanding Awards is appropriate in order to prevent the dilution or enlargement of rights under the Awards (including, without limitation, any extraordinary dividend or other distribution (whether in cash or in kind), recapitalization, stock
split, reverse split, reorganization, 

  

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merger, consolidation, spin-off, combination, repurchase, or share exchange, or other similar corporate transaction or event), the Committee shall make
appropriate equitable adjustments, which may include, without limitation, adjustments to any or all of the number and kind of Shares (or other securities) which may thereafter be issued in connection with such outstanding Awards and adjustments to
any exercise price specified in the outstanding Awards and shall also make appropriate equitable adjustments to the number and kind of Shares (or other securities) authorized by or to be granted under the Plan. Such other substitutions or
adjustments shall be made respecting Awards hereunder as may be determined by the Committee, in its sole discretion. In connection with any event described in this paragraph, the Committee may provide, in its discretion, for the cancellation of any
outstanding Award and payment in cash or other property in exchange therefor, equal to the difference, if any, between the Fair Market Value of the Stock or other property subject to the Award, and the exercise price, if any. 
 SECTION 4 
 ELIGIBILITY

 The Manager shall be eligible for Awards under the Plan. Additional Participants under the Plan may be selected from time to time by
the Committee, in its sole discretion, and the Committee shall determine, in its sole discretion, the number of Shares covered by each Award. 
 SECTION 5 
 AWARDS 
 Awards may include, but are not limited to, those described in this Section 5. The Committee may grant Awards singly or in combination with other Awards, as the Committee may in its sole discretion determine.
Subject to the other provisions of this Plan, Awards may also be granted in combination or in replacement of, or as alternatives to, grants or rights under this Plan and any other employee (or director) benefit or compensation plan of the Company.

 1. Stock Appreciation Rights. A Stock Appreciation Right is a right to receive, upon surrender of the right, an amount payable in
cash or Shares or a combination of the foregoing under such terms and conditions as the Committee shall determine. The amount payable in cash or Shares with respect to each right shall be equal in value to a percentage (up to and including 100%) of
the amount by which the Fair Market Value per share of Stock on the exercise date exceeds the Fair Market Value per share of Stock on the date of grant of the Stock Appreciation Right. The applicable percentage shall be established by the Committee.
The Award Agreement may state whether the purchase amount payable is to be paid wholly in cash, wholly in 

  

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Shares or in any combination of the foregoing; if the Award Agreement does not so state the manner of payment, the Committee shall determine such manner of
payment at the time of payment. The amount payable in Shares, if any, is determined with reference to the Fair Market Value per share of Stock on the date of exercise. 
 2. Restricted Stock. Restricted Stock is Stock that is issued to a Participant and is subject to such terms, conditions and restrictions as the Committee deems appropriate, which may include, but are not
limited to, restrictions upon the sale, assignment, transfer or other disposition of the Restricted Stock and the requirement of forfeiture of the Restricted Stock upon termination of employment or service under certain specified conditions. The
Committee may provide for the lapse of any such term or condition or waive any term or condition based on such factors or criteria as the Committee may determine; provided, however, all restrictions on Restricted Stock granted under the Plan shall
be removed immediately and fully upon a change in control. Subject to the restrictions stated in this Section 5.2 and in the applicable Award Agreement, the Participant shall have, with respect to Awards of Restricted Stock, all of the rights
of a stockholder or member of the Company, including the right to vote the Restricted Stock and the right to receive any cash or stock dividends on such Stock. The Company may require that the stock certificates evidencing Restricted Stock granted
hereunder be held in the custody of the Company until the restrictions thereon shall have lapsed, and that, as a condition of any award of Restricted Stock, the Participant shall have delivered a stock power, endorsed in blank, relating to the Stock
covered by such award. 
 3. Performance Awards. Performance Awards may be granted under this Plan from time to time based on such
terms and conditions as the Committee deems appropriate provided that such Awards shall not be inconsistent with the terms and purposes of this Plan. Performance Awards are Awards which are contingent upon the performance of all or a portion of the
Company and/or its subsidiaries and/or which are contingent upon the individual performance of a Participant. Performance Awards may be in the form of performance units, performance shares and such other forms of Performance Awards as the Committee
shall determine. The Committee shall determine the performance measurements and criteria for such Performance Awards. The Company may require that the stock certificates evidencing Performance Awards granted hereunder be held in the custody of the
Company until the restrictions thereon shall have lapsed, and that, as a condition of any award of Performance Awards, the Participant shall have delivered a stock power, endorsed in blank, relating to the Stock covered by such award. 
 4. Manager Awards. Other Awards. The Committee may, from time to time, grant Awards to the Manager as the Committee deems advisable in
order to provide additional incentives to the Manager. Additionally, any portion of the 

  

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Manager’s incentive fees which will be paid in the form of Shares, as provided under the Management Agreement, may be issued under the Plan and shall be
subject to certain restrictions, terms and conditions, as determined by the Committee, in its sole discretion. 
 5. LTIP
Units. Subject to the provisions of the Plan, the Committee shall have sole and complete authority to determine the Participants to whom Awards shall be granted, the purchase price, if any, of an Award, the number and class of interests
to be covered by each Award, any vesting condition (including performance-based vesting conditions) and other conditions and limitations applicable to the Award. As determined by the Committee, in its sole discretion and as provided for in the
applicable Award Agreement, LTIP Units may be convertible into Stock or have associated voting rights. As a condition to the grant of LTIP Units, the Participant will be required to become a party to the LLC Agreement and the LTIP Units acquired
will be held subject to the terms and conditions of the LLC Agreement. LTIP Units issued under the Plan will be authorized but unissued Profits Interest Units that shall have been or may be reacquired by the Company. 
 6. Other Awards. The Committee may from time to time grant other Stock-based and non Stock-based Awards under the Plan, including without
limitation those Awards pursuant to which Shares are or may in the future be acquired, Awards denominated in Shares, securities convertible into Shares, phantom securities, dividend equivalents, or other tandem Awards, or any other equity-based
incentive award and cash. The Committee shall determine the terms and conditions of such other Stock, Stock-based and non-Stock-based Awards provided that such Awards shall not be inconsistent with the terms and purposes of this Plan. 
 SECTION 6 
 AWARD AGREEMENTS 

 Each Award under this Plan shall be evidenced by an Award Agreement setting forth the number of Shares or other securities, and such other
terms and conditions applicable to the Award (and not inconsistent with this Plan) as are determined by the Committee. 
 1. Terms of
Award Agreements. Award Agreements shall include the following terms: 
 (a) Term. The term of each Award (as determined by the
Committee); provided that, no Award shall be exercisable more than ten years after the date such Award is granted; 
  

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 (b) Exercise Price. The exercise price per Share, if any, purchasable under an Award (as determined by
the Committee in its sole discretion at the time of grant); provided that, the exercise price shall not be less than the par value of the Shares; provided, further, that Awards intended to qualify as “performance-based compensation” within
the meaning of Section 162(m) of the Code, shall not be less than 100% of the Fair Market Value of the share of Stock on such date; 
 (c) Exercisability. Provisions regarding the exercisability of Awards (which shall be exercisable at such time or times and subject to such terms and conditions as shall be determined by the Committee at or after the grant date);

 (d) Method of Exercise. Provisions describing the method of exercising Awards; 
 (e) Termination of Employment or Service. Provisions describing the treatment of an Award in the event of termination of a Participant’s employment
or service with the Company, including but not limited to, terms relating to the vesting, time for exercise, forfeiture and cancellation of an Award in such circumstances; 
 (f) Rights as Stockholder. A provision that a Participant shall have no rights as a stockholder or member with respect to any securities covered by an
Award until the date the Participant becomes the holder of record. Except as provided in Sections 3.3 and 5.2 hereof, no adjustment shall be made for dividends or other rights, unless the Award Agreement specifically requires such adjustment, in
which case, grants of dividend equivalents or similar rights shall not be considered to be a grant of any other stockholder right; 
 (g)
Nontransferability. A provision that unless as permitted by the Committee in its sole discretion, the Participant shall not be permitted to sell, transfer, pledge or assign any Award; 
 (h) LLC Agreement. Except as otherwise determined by the Committee, all equity, membership interests or other equity securities in the Company, issued
pursuant to an Award or upon the Exercise of an Award shall be subject to the terms and conditions of the LLC Agreement and each Participant shall execute a signature page to and be joined as a party to the LLC Agreement, if any, concurrently with
the issuance of a such equity, interests or securities subject to an Award; and 
 (i) Other Terms. Such other terms as are necessary and
appropriate, as determined in the sole discretion of the Committee, to effectuate an Award to the Participant, including but not limited to, (1) vesting provisions, (2)

  

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deferral elections, (3) any requirements for continued employment or service with the Company, (4) any other restrictions or conditions (including
performance requirements) on the Award and the method by which restrictions or conditions lapse, (5) effect on the Award of a Change in Control, (6) the right of the Company and such other persons as the Committee shall designate
(“Designees”) to repurchase from a Participant, and such Participant’s permitted transferees, all Shares issued or issuable to such Participant in connection with an Award in the event of such Participant’s termination of
employment or service, (7) rights of first refusal granted to the Company and Designees, if any, (8) holdback and other registration right restrictions in the event of a public registration of any equity securities of the Company and
(9) any other terms and conditions which the Committee shall deem necessary and desirable. Additionally, the Committee may, in any Award Agreement, impose payment or other restrictions, including restrictions intended to conform the Award with
any applicable provisions of Section 409A of the Code. 
 2. Replacement and Substitution. Award Agreements may also include
provisions permitting the replacement or substitution of outstanding Awards or securities held by the Participant in order to exercise or realize rights under other Awards, or in exchange for the grant of new Awards under similar or different terms.

 3. Surrender of Awards. The Committee may require the voluntary surrender of all or a portion of any Award granted under the Plan
as a condition precedent to a grant of a new Award. Subject to the provisions of the Plan, such new Award shall be exercisable at the price, during such period and on such other terms and conditions as are specified by the Committee at the time the
new Award is granted; provided that, should the Committee so require, the number of Shares subject to such new Award shall not be greater than the number of Shares subject to the surrendered Award. 
 SECTION 7 
 AMENDMENT AND TERMINATION

 The Board may at any time and from time-to-time alter, amend, suspend or terminate the Plan in whole or in part; provided that,
no amendment that would increase the total number of Shares reserved for issuance under the Plan, change the class of eligible participants under the Plan or otherwise require stockholder approval in order for the Plan to comply with a rule or
regulation deemed applicable by the Committee shall be effective unless the same shall be approved by the requisite vote of the stockholders of the Company entitled to vote thereon. Notwithstanding the foregoing provision, no amendment shall affect
adversely any of the rights of any Participant, without such Participant’s consent, under any Award theretofore granted under the Plan. In addition, notwithstanding any provision of the Plan, to the extent 

  

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that the Committee determines, in its sole discretion, that the Plan or any Award made pursuant to the Plan that is or becomes subject to Section 409A
of the Code fails to comply with the requirements of Section 409A of the Code, the Committee reserves the right to, but is not obligated to, amend or terminate the Plan and/or the Award in order to cause the Award to either not be subject to
Section 409A of the Code or to comply with the applicable provisions of such section. 
 SECTION 8 
 UNFUNDED STATUS OF PLAN 
 The Plan is
intended to constitute an “unfunded” plan for incentive compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than
those of a general creditor of the Company. 
 SECTION 9 
 GENERAL PROVISIONS 
 1. Securities Laws Compliance. No Award shall be granted hereunder unless
such grant complies with all relevant provisions of law, including without limitation, applicable state securities laws, the Securities Act, the Exchange Act and the requirements of any stock exchange upon which the Stock may then be listed, and
shall be further subject to the approval of counsel for the Company with respect to such compliance. Shares of Stock shall not be issued pursuant to the exercise of any Award granted hereunder unless the exercise of such Award and the issuance and
delivery of such Shares pursuant thereto shall comply with all relevant provisions of law, including, without limitation, applicable state securities laws, the Securities Act, the Exchange Act and the requirements of any stock exchange upon which
the Stock may then be listed, and shall be further subject to the approval of counsel for the Company with respect to such compliance. Nothing contained herein shall be construed to prohibit the Company from relying on any other exemption from
registration to which it may be entitled under the Securities Act in connection with the issuance of Shares underlying Awards in accordance with the Plan. To the extent necessary and desirable, as determined by the Committee, (i) the Plan shall
be amended to comply with any applicable state securities laws prior to the granting of an Award requiring such amendment and (ii) the Company shall complete any filing or application to the appropriate state regulatory agency or body with
respect to any Award which requires compliance with the respective state securities laws. 
 2. Certificate Legends. The Committee may
require each person purchasing Shares pursuant to an Award to represent to and agree with the Company in writing that such person is acquiring the Shares subject thereto without a view to 

  

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distribution thereof. The certificates for such Stock may include any legend which the Committee deems appropriate to reflect any restrictions on transfer.

 3. Transfer Restrictions. All certificates for Shares delivered under the Plan shall be subject to such stock-transfer orders and
other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Commission, any stock exchange upon which the Stock is then listed, and any applicable federal or state securities law, and the
Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. 
 4.
Company Actions; No Right to Continued Service. Nothing contained in the Plan shall prevent the Board from adopting other or additional compensation arrangements, subject to stockholder approval if such approval is necessary and desirable;
and such arrangements may be either generally applicable or applicable only in specific cases. The adoption of this Plan shall not confer upon any consultant or advisor of the Company any right to continued employment or service with the Company, as
the case may be, nor shall it interfere in any way with the right of the Company to terminate the employment or service of any of its employees, consultants or advisors at any time, including the right to terminate the Management Agreement.

 5. Payment of Taxes. Each Participant shall, no later than the date as of which the value of an Award first becomes includible in
the gross income of the Participant for federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Committee regarding payment of, any federal, state, or local taxes of any kind required by law to be withheld with
respect to the Award. Participants are solely responsible and liable for the satisfaction of all taxes and penalties that may arise in connection with Awards (including any taxes arising under Section 409A of the Code), and the Company shall
not have any obligation to indemnify or otherwise hold any Participant harmless from any or all of such taxes. The obligations of the Company under the Plan shall be conditional on the making of such payments or arrangements, and the Company shall,
to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the Participant. Additionally, notwithstanding any provision in this Plan, the Company may, in its sole discretion, require the
surrender of all or a portion of any Award granted under the Plan to satisfy any obligation regarding the payment of any federal, state, or local taxes of any kind required by law to be withheld with respect to the Award. The Company may also use
any other method of obtaining the necessary payment or proceeds, as permitted by law, to satisfy its withholding obligation with respect to any Award. 
  

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 SECTION 10 
 EFFECTIVE DATE OF PLAN 
 The Board adopted the Plan effective as of August 17, 2007 (the
“Effective Date”), and the Sole Member of the Company approved the Plan as of August 9, 2007. 
 SECTION 11 

TERM OF PLAN 
 No Award shall be
granted pursuant to the Plan on or after the tenth anniversary of the Effective Date, but Awards theretofore granted may extend beyond that date. 
  

 14Form of LTIP Unit Award Agreement

 Exhibit 10.4 
 LONG TERM INCENTIVE PLAN UNIT AWARD AGREEMENT 
 ELLINGTON FINANCIAL LLC 
 INCENTIVE PLAN FOR ENTITIES 
 This
Long Term Incentive Plan Unit Award Agreement (this “Award Agreement”), dated as of              (the “Date of Grant”), is made by and between Ellington Financial
LLC, a Delaware limited liability company (the “Company”) and              (the “Participant”). Capitalized terms not defined herein shall have the meaning
ascribed to them in the Company Incentive Plan for Entities (the “Plan”), attached hereto as Exhibit A and the Operating Agreement of the Company, as may be amended from time to time (the “LLC Agreement”), attached hereto as
Exhibit B. Where the context permits, references to the Company shall include any successor to the Company. 
  

	 	1.	Grant of Restricted Profits Interest Units. The Company hereby grants to the Participant an award of
             LTIP Units, subject to all of the terms and conditions of this Award Agreement, the LLC Agreement and the Plan. 

  

	 	2.	Lapse of Restrictions. 

  

	 	(a)	Vesting and Forfeiture. Subject to the provisions set forth below and to the extent the Participant continues to provide services to the Company through each of the first
three anniversaries of              (each, a “Vesting Date”), the restrictions on transfer set forth in Section 2(b) hereof shall lapse with respect to one-third
(1/3) of the LTIP Units granted hereunder on each Vesting Date. If the Participant ceases to perform services to the Company prior to a Vesting Date, the LTIP Units granted hereunder that have not yet vested shall immediately expire as of the
date the Participant ceases to perform such services, and the Participant shall (i) not be entitled to any allocations, distributions, payments or benefits of any kind with respect to such unvested LTIP Units as of such cessation date and
(ii) forfeit any capital account that is associated with the unvested LTIP Units as of such cessation date. 

  

	 	(b)	 Restrictions. Until the restrictions on transfer of the LTIP Units lapse as provided in Section 2(a) above, and except as otherwise provided in the
Plan, LLC Agreement or this Award Agreement, no transfer of the unvested LTIP Units or any of the Participant’s rights with respect to the unvested LTIP Units, whether voluntary or involuntary, by operation of law or otherwise, shall be
permitted. Unless the Administrator determines 

  

 1 

	 	 
otherwise, upon any attempt to transfer any unvested LTIP Units or any rights in respect of LTIP Units before the lapse of such restrictions and in violation
of the terms of this Award Agreement, such LTIP Units, and all of the rights related thereto, shall be immediately forfeited by the Participant and transferred to, and reacquired by, the Company without consideration of any kind.

  

	 	(c)	Conversion to Common Shares. To the extent provided by the LLC Agreement, upon the lapse of restrictions pursuant to Section 2(a) above, the Participant shall, at his,
her or its option, have the right to convert all or a portion of his or her LTIP Units into Common Shares; provided, however, that the Participant may not exercise such right for less than 1,000 LTIP Units or, if the Participant holds less than
1,000 LTIP Units, all of the vested LTIP Units held by the Participant. Such conversion is conditioned on the Participant’s compliance with all applicable procedures and policies as may be required by the Board of Directors to effect such
conversion. Notwithstanding the foregoing, the Board of Directors shall have the right, but not the obligation, at any time to cause a conversion of LTIP Units into Common Shares. 

  

	 	3.	No Obligation to Register. The Company shall be under no obligation to register the LTIP Units pursuant to the Securities Act or any other federal or state securities laws.

  

	 	4.	Protections Against Violations of Agreement. No purported sale, assignment, mortgage, hypothecation, transfer, pledge, encumbrance, gift, transfer in trust (voting or other)
or other disposition of, or creation of a security interest in or lien on, any of the LTIP Units by any holder thereof in violation of the provisions of this Award Agreement will be valid, and the Company will not transfer any of said LTIP Units on
its books, nor will any distributions be paid thereon, unless and until there has been full compliance with said provisions to the satisfaction of the Company. The foregoing restrictions are in addition to and not in lieu of any other remedies,
legal or equitable, available to enforce said provisions. 

  

	 	5.	No Voting Rights. Neither the Participant nor any successor in interest shall have any voting rights with respect to the LTIP Units except to the extent the LTIP Units are
converted into Common Shares. 

  

	 	6.	Distributions and Allocations. Subject to Section 2(a) above, the Participant will be eligible to receive certain distributions and allocations with respect to the LTIP
Units by the Company as set forth in the LLC Agreement. 

  

 2 

	 	7.	Investment Representations. The Participant represents and warrants to the Company that the Participant is acquiring the LTIP Units and to the extent such LTIP Units are
converted into Common Shares, in each case, for the Participant’s own account and not with a view to or for sale in connection with any distribution of the LTIP Units or, as applicable, the Common Shares. The Participant acknowledges that the
LTIP Units: (A) have not been and will not be registered under the Securities Act or any other applicable law of the United States; (B) have not been approved, disapproved or recommended by any U.S. federal, state or other securities
commission or regulatory authority and (C) constitute “restricted securities” within the meaning of Rule 144 under the Securities Act and cannot be resold or transferred unless they are registered under the Securities Act or an
exemption from registration is available. 

  

	 	8.	Section 83(b) Election; Tax Withholding. 

  

	 	(a)	The Participant understands that he or she (and not the Company) shall be responsible for any tax liability that may arise as a result of the transactions contemplated by this Award
Agreement. The Participant shall pay to the Company promptly upon request, and in any event at the time the Participant recognizes taxable income in respect of the LTIP Units (or, if the Participant makes an election under Section 83(b) of the
Internal Revenue Code (the “Code”) in connection with such grant), an amount equal to the taxes the Company determines it is required to withhold under applicable tax laws with respect to such LTIP Units. The Participant may satisfy the
foregoing requirement by making a payment to the Company in cash or check having a value equal to the minimum amount of tax required to be withheld. The Participant agrees to provide the Company with a copy of any election made pursuant to
Section 83(b) of the Code within thirty (30) days of filing such election. A form of the Section 83(b) election is attached hereto as Exhibit C. 

  

	 	(b)	 THE PARTICIPANT ACKNOWLEDGES THAT IT IS THE PARTICIPANT’S SOLE RESPONSIBILITY AND NOT THE COMPANY’S TO FILE TIMELY THE ELECTION UNDER SECTION 83(b) OF THE
CODE. BY SIGNING THIS AWARD AGREEMENT, THE PARTICIPANT REPRESENTS THAT IT HAS REVIEWED WITH ITS OWN TAX ADVISORS THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE TRANSACTIONS CONTEMPLATED BY THIS AWARD AGREEMENT AND THAT THE PARTICIPANT
IS RELYING SOLELY ON SUCH ADVISORS AND NOT ON ANY STATEMENTS OR REPRESENTATIONS OF THE COMPANY OR ANY OF ITS AGENTS. THE PARTICIPANT 

  

 3 

	 	 
UNDERSTANDS AND AGREES THAT THE PARTICIPANT (AND NOT THE COMPANY) SHALL BE RESPONSIBLE FOR ANY TAX LIABILITY THAT MAY ARISE AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AWARD AGREEMENT. 

  

	 	9.	Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Award Agreement shall in no way be construed to be a waiver of such
provision or of any other provision hereof. 

  

	 	10.	Governing Law. This Award Agreement shall be governed by and construed according to the laws of the State of Delaware without regard to its principles of conflict of laws.

  

	 	11.	Incorporation of Plan. The Plan is hereby incorporated by reference and made a part hereof, and the LTIP Units and this Award Agreement shall be subject to all terms and
conditions of the Plan. In the event of any conflict between the provisions of this Award Agreement and the provisions of the Plan, the provisions of the Plan shall govern. 

  

	 	12.	Section 409A Compliance. Notwithstanding anything to the contrary contained in this Award Agreement, to the extent that the Board determines that the Plan or the LTIP
Units are subject to Section 409A of the Code and fails to comply with the requirements of Section 409A of the Code, the Board reserves the right (without any obligation to do so) to amend or terminate the Plan and/or amend, restructure,
terminate or replace the LTIP Units in order to cause the LTIP Units to either not be subject to Section 409A of the Code or to comply with the applicable provisions of such section. 

  

	 	13.	Survival of Terms. This Award Agreement shall apply to and bind the Participant and the Company and their respective permitted assignees and transferees, heirs, legatees,
executors, administrators and legal successors. 

  

	 	14.	Counterparts. This Award Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall be deemed to
be one and the same instrument. 

  

	 	15.	 Agreement Not a Contract for Services. Neither the Plan, the granting of the LTIP Units, this Award Agreement nor any other action taken pursuant to the Plan
shall constitute or be evidence of any agreement or understanding, express or implied, that the Participant has a right to continue to provide services as a 

  

 4 

	 	 
consultant or advisor of the Company or any Affiliate for any period of time or at any specific rate of compensation. 

  

	 	16.	Authority of the Board or Committee. As set forth in the Plan, the Board or the Committee shall have full authority to interpret and construe the terms of the Plan and this
Award Agreement, which determination as to any such matter of interpretation or construction shall be final, binding and conclusive. 

  

	 	17.	Severability. Should any provision of this Award Agreement be held by a court of competent jurisdiction to be unenforceable, or enforceable only if modified, such holding
shall not affect the validity of the remainder of this Award Agreement, the balance of which shall continue to be binding upon the parties hereto with any such modification (if any) to become a part hereof and treated as though contained in this
original Award Agreement. Moreover, if one or more of the provisions contained in this Award Agreement shall for any reason be held to be excessively broad as to scope, activity, subject or otherwise so as to be unenforceable, in lieu of severing
such unenforceable provision, such provision or provisions shall be construed by the appropriate judicial body by limiting or reducing it or them, so as to be enforceable to the maximum extent compatible with the applicable law as it shall then
appear, and such determination by such judicial body shall not affect the enforceability of such provisions or provisions in any other jurisdiction. 

  

	 	18.	Acceptance. The Participant hereby acknowledges receipt of a copy of the Plan and this Award Agreement. The Participant has read and understands the terms and provisions of
the Plan and this Award Agreement, and accepts the LTIP Units subject to all the terms and conditions of the Plan and this Award Agreement. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of
the Board or Committee upon any questions arising under this Award Agreement. 

  

 5 

 IN WITNESS WHEREOF, the parties hereto have executed and delivered this Award Agreement on the day and year first above
written. 
  

			
	ELLINGTON FINANCIAL LLC
		
	By:	 	 
		 	 Name: Laurence Penn
 Title:   Chief
Executive Officer and President

		
	By:	 	 
		 	 Name:
 Title:   

  

 6 

 EXHIBIT A 
 ELLINGTON FINANCIAL LLC 
 INCENTIVE PLAN FOR ENTITIES 
  

 7 

 EXHIBIT B 
 OPERATING AGREEMENT OF 
 ELLINGTON FINANCIAL LLC 
  

 8 

 EXHIBIT C 
 ELECTION UNDER SECTION 83(b) OF THE INTERNAL REVENUE CODE OF 1986 
 The undersigned taxpayer hereby elects, pursuant
to Section 83(b) of the Internal Revenue Code of 1986, as amended, to include in taxpayer’s gross income for the current taxable year the amount of any compensation taxable to taxpayer in connection with taxpayer’s receipt of the
property described below: 
 1. The name address, taxpayer identification number and taxable year of the undersigned are as follows: 
 NAME OF TAXPAYER:                                   
                                         
                                         
                                         
              
 NAME OF
SPOUSE:  N/A                                     
                                         
                                         
                                         
          
 ADDRESS:                                      
                                         
                                         
                                         
                                  
 IDENTIFICATION NO. OF
TAXPAYER:                                       
                                         
                                         
                        
 IDENTIFICATION NUMBER OF
SPOUSE:  N/A                                     
                                         
                                         
             
 TAXABLE
YEAR:                                        
                                         
                                         
                                         
                    
 2. The property with respect to
which the election is made is described as follows: [            ] LTIP Units of Ellington Financial LLC (“Company”). 
 3. The date on which the property was transferred is: [            ], 20[    ].

 4. The property is subject to the following restrictions: 
 The property may not be transferred and is subject to forfeiture under the terms of an agreement between the taxpayer and the Company. These restrictions lapse upon the satisfaction of certain conditions in such agreement. 
 5. The fair market value at the time of transfer, determined without regard to any restriction other than a restriction which by its terms will never lapse, of such
property is: $            . 
 6. The amount (if any) paid for such property is:
$            . 
 The undersigned has submitted a copy of this statement to the person for
whom the services were performed in connection with the undersigned’s receipt of the above-described property. The transferee of such property is the person performing the services in connection with the transfer of said property. 

 

 9 

 The undersigned understands that the foregoing election will not be effective unless the applicable withholding
obligations have been satisfied and may not be revoked except with the consent of the Commissioner. 
 Dated:
            , 200     
  

	
	
	  
	Taxpayer

  

 10

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