CONFIDENTIAL TREATMENT REQUESTED

Formation.

Term.

Name.

Principal Office.

DEFINITIONS.

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

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

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

any relative or spouse of the specified Person.

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of an order for relief with respect to a Member in proceedings under the United States Bankruptcy Code, as amended or superseded from time to time;

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

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

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;

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

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.

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;

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

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.

Name.

Place of Business.

BUSINESS OF COMPANY.

MEMBERS AND CAPITAL CONTRIBUTIONS.

Members.

Initial Capital Contributions.

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

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

Its ownership interests in the Series 3 Collateralized Bonds;

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

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.

(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.

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).

(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.

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

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.

(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:

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;

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

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

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.

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.

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.

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

No Member shall be paid interest on its Capital Account.

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.

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.

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.

No Third Party Beneficiaries.

ALLOCATIONS.

Net Income, Net Loss and Credits.

Gain from Sale.

Loss from Sale.

Mid-Year Transfers.

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.

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.

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.

Minimum Gain Chargeback.

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).

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

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).

Allocations to Reflect Book Value/Tax Disparity.

Qualified Income Offset.

Net Cash from Operations.

Net Proceeds from Financing.

Mandatory Excess Cash Distribution.

Mid-Year Transfers.

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

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

Outstanding Loans to Company.

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.

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.

MANAGEMENT.

Board of Directors.

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.

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.

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.

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

Appointment and Removal of Directors.

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

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.

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.

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.

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.

Exercise of Authority Granted to the Board.

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.

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:

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);

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;

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

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

Determining the amount and timing of distributions to the Members;

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);

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

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;

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;

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;

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

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;

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;

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;

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

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

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

Selecting or changing the Auditor;

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

Entering into any collective bargaining agreement;

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

Declaring bankruptcy of the Company; and

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

Chairman of the Board.

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.

The Chairman of the Board shall preside at Board meetings.

Meetings of the Board.

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.

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

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

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.

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

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.

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.

Manager.

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.

The initial Manager of the Company shall be Dynex Capital.

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.

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.

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.

Annual Business Plan.

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.

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.

Limitation on Other Members’ Powers.

Execution of Documents.

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

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.

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.

COMPENSATION AND REIMBURSEMENT OF MEMBERS.

Compensation of Members.

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.

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 (10^th) 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.

Reimbursement Restrictions.

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.

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.

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

General Authority.

Competition with the Company.

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.

Redemption of Bonds.

Bank Accounts.

Maintenance of Books.

Method of Accounting.

Financial Reports.

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.

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.

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.

Tax Returns and Information.

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.

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.

Tax Matters Partner.

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

(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.

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.

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.

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.

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:

extend the statute of limitations on behalf of the Company;

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;

determine whether to appeal or not appeal any administrative or judicial determination;

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

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

EXCULPATION AND INDEMNIFICATION OF THE MEMBERS.

Exculpation.

General Indemnification.

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

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.

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.

TRANSFER OF INTERESTS AND WITHDRAWAL.

No Right to Resign or Withdraw.

Transfer of Interest.

Permitted Transfers.

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"):

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

A Member’s Affiliate.

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.

Disposition by Advisors.

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.

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.

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.

Withdrawal by Voting Member.

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):

Elect the dissolution of the Company as provided in Section 15.1;

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

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

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).

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).

(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

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.

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

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.

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.

Additional or Substituted Member.

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:

The requirements of Section 13.3 have been fulfilled.

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.

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.

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.

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.

Deadlock Regarding a Sale of Assets.

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.

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.

CONTINUATION OF THE COMPANY BUSINESS IN CERTAIN EVENTS.

Bankruptcy.

(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).

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.

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.

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

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.

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.

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

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

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.

DISSOLUTION.

The election by the Board to dissolve the Company;

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

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

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

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

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

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

Unless the Voting Members otherwise agree, the sixtieth (60^th) 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).

Winding Up Company Affairs.

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).

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

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.

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.”

Regulatory Event.

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.

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.

ADMISSION OF ADDITIONAL MEMBERS.

AMENDMENTS.

NOTICES.

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.

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

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.

POWER OF ATTORNEY.

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.

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.

ARBITRATION.

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

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.

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.

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.

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.

GOVERNING LAW.

CAPTIONS.

CONSTRUCTION.

SEVERABILITY.

EXECUTION AND COUNTERPARTS.

SUCCESSORS.

ENTIRE AGREEMENT.