LINE OF CREDIT AGREEMENT

 

This Line of Credit Agreement (“Agreement”), dated as of the 23rd day of October
2017, by and between SHEPHERD’S FINANCE, LLC, a Delaware limited liability
company, having an address at 12627 San Jose Blvd., Suite 203, Jacksonville, FL
32223 (“Borrower”),

 

AND

 

PAUL SWANSON having an address of 128 Sota Drive, Jupiter, Florida 33458
(“Lender”).

 

WITNESSETH:

 

WHEREAS, Borrower has requested Lender to extend a revolving line of credit to
Borrower in the principal amount not to exceed FOUR MILLION and 00/100 DOLLARS
($4,000,000.00) to use for certain purposes as set forth herein; and

 

WHEREAS, Lender is willing to extend such credit pursuant to the terms and
conditions set forth herein.

 

NOW, THEREFORE, in consideration of the premises and of the mutual covenants
herein contained and intending to be legally bound hereby, the parties hereto
agree as follows:

 

ARTICLE I

DEFINITIONS

 

1.01. Certain Definitions. In addition to other words and terms defined
elsewhere in this Agreement, the following words and terms shall have the
following meanings, respectively, unless the context otherwise clearly requires:

 

“Affiliate” shall mean any Person which directly or indirectly controls, or is
controlled by, or is under common control with, Borrower, and for each
individual who is an Affiliate within the meaning of the foregoing, any other
individual related to such Affiliate by consanguinity within the third degree or
in a step or adoptive relationship within such third degree or related by
affinity with such Affiliate or any such individual and any Person directly or
indirectly controlled by any of the foregoing. The term “control” means the
possession, directly or indirectly, or the power to direct or cause the
direction of the management or policies of a Person, whether through the
ownership of voting securities or partnership interests, by contract or
otherwise.

 

“Agreement” shall mean this Line of Credit Agreement, as amended, modified or
supplemented from time to time.

 

   

 

 

Shepherd’s Finance, LLC

Line of Credit Agreement

$4,000,000

 

“Business Day” shall mean any day other than a Saturday, Sunday, public holiday
under the laws of the State of Florida or other day on which banking
institutions are authorized or obligated to close in Morgantown, West Virginia.

 

“Closing” shall mean the satisfaction of all requirements set forth in this
Agreement by the Borrower, including those set forth in Article IV hereof.

 

“Closing Date” shall mean the date of Closing.

 

“Code” shall mean the Internal Revenue Code of 1986 as amended along with rules,
regulations, decisions and other official interpretations in connection
therewith.

 

“Collateral Assignment of Notes and Documents” shall mean that certain master
assignment of the notes and all related documents pertaining to the Collateral
Loans given by Borrower to Lender as collateral as required by Section 4.03
hereof.

 

“Collateral Loan” or “Collateral Loans” shall mean those construction loans made
by Borrower in compliance with its loan policies that do not exceed the amount
of $600,000, do not exceed an aggregate of $2,000,000 to any one entity or
person, and are not more than one year old, which from time to time pledged to
secure the Line of Credit and otherwise satisfy the terms and conditions set
forth in Sections 2.04, 4.03 and 4.04 herein. Notwithstanding the limits set
forth hereinabove, in the event a loan pledged exceeds $600,000, only $600,000
shall be used to calculate the amount pledged pursuant to Section 2.04.(a)(ii).
(i.e. if a loan amount is $736,000, only 67% of $600,000 will be added to the
aggregate amount pledged).

 

“Collateral Property Disposition” shall mean the foreclosure, transfer or other
disposition of property securing a Collateral Loan, or another event obligating
Borrower to release a document or security instrument securing a Collateral
Loan.

 

“Custodian” shall mean R. Scott Summers, P.L.L.C., having an office at 69 Clay
Street, Suite 201, Morgantown, WV 26505.

 

“Debt” shall mean collectively (A) all Indebtedness, whether of principal,
interest, fees, expenses or otherwise, of Borrower to Lender, whether now
existing or hereafter incurred including, but not limited to, future loans and
advances, if any, under this Agreement, and the Loan Documents, as the same may
from time to time be amended, together with any and all extensions, renewals,
refinancings or refundings thereof in whole or in part; (B) all other
obligations for the repayment of borrowed money, whether of principal, interest,
fees, expenses or otherwise, of Borrower to Lender, now existing or hereafter
incurred, whether under letters or advances of credit, lines of credit, other
financing arrangements or otherwise (including, but not limited to, any
obligations arising as a result of any overdrafts), whether or not related to
this Agreement or the Note, whether or not contemplated by Lender or Borrower on
the date hereof and whether direct, indirect, matured or contingent, joint or
several, or otherwise, together with any and all extensions, renewals,
refinancings or refundings thereof in whole or in part; (C) all costs and
expenses including, without limitation, to the extent permitted by law,
reasonable attorneys’ fees and legal expenses, incurred by Lender in the
collection of any of the Indebtedness referred to in clauses (A) or (B) above,
and amounts due and owing to Lender under this Agreement; and (D) any advances
made by Lender for the maintenance, preservation, protection or enforcement of,
or realization upon, any property or assets now or hereafter made subject to a
mortgage, pledge, lien or security interest granted pursuant hereto or pursuant
to this Agreement, or the Loan Documents or pursuant to any agreement,
instrument or note relating to any of the Debt including, without limitation,
advances for taxes, insurance, repairs and the like.

 

 2 

 

 

Shepherd’s Finance, LLC

Line of Credit Agreement

$4,000,000

 

“Event of Default” shall mean any of the Events of Default described in Section
7.01.

 

“Expiration Date” shall mean FIFTEEN (15) MONTHS from the date hereof, unless
extended and renewed as required and provided by Section 2.01(b) hereof.

 

“Law” shall mean any law (including common law), constitution, statute, treaty,
regulation, rule, ordinance, order, injunction, writ, decree or award of any
Official Body.

 

“Lien” shall mean any mortgage, deed of trust, pledge, lien, security interest,
charge or other encumbrance or security arrangement of any nature whatsoever
including, but not limited to, any conditional sale or title retention
arrangement, and any assignment, deposit arrangement or lease intended as, or
having the effect of, security.

 

“Loan” or “Loans” shall mean the loans, represented by Loan Advances, made by
Lender to Borrower or to Borrower’s beneficiary pursuant to the Line of Credit,
and as otherwise advanced for the benefit of Borrower under this Agreement and
as further set forth in Section 2.01 hereof.

 

“Loan Account” shall mean that as set forth in Section 2.10 hereof.

 

“Loan Advances” shall mean advances on account of the Note made by the Lender
from time to time pursuant to this Agreement.

 

“Loan Document” or “Loan Documents” shall mean singularly or collectively, as
the context may require, (i) this Agreement, (ii) the Note, (iii) the Collateral
Assignment of Notes and Documents, and (iv) any and all other documents,
instruments, certificates and agreements executed and/or delivered in connection
with this Agreement, as any of they may be amended, modified, extended or
supplemented from time to time.

 

“Note” shall mean the promissory note of Borrower executed and delivered to
Lender under this Agreement, or any note executed and delivered pursuant to this
Agreement, together with all extensions, renewals, refinancings or refundings in
whole or part and as further set forth in Section 2.02 hereof.

 

 3 

 

 

Shepherd’s Finance, LLC

Line of Credit Agreement

$4,000,000

 

“Official Body” shall mean any government or political subdivision or any
agency, authority, bureau, central Lender, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic.

 

“Person” shall mean an individual, corporation, partnership, limited
partnership, limited liability company, joint venture, trust, or unincorporated
organization, or a government or any agency or political subdivision thereof.

 

“Potential Default” shall mean any event or condition which with notice or
passage of time or any combination of the foregoing would constitute an Event of
Default.

 

“Request for Advance” shall mean a statement of the Borrower, in a form
acceptable to Lender, setting forth the amount of the Loan Advance being
requested and containing such other information as is required by Lender and by
Section 2.04 hereof.

 

“UCC” shall mean the Uniform Commercial Code that is in effect on the date of
this Agreement and as amended from time to time, of the state or states having
jurisdiction with respect to all or any portion of the collateral granted or
assigned to Lender from time to time under or in connection with this Agreement
and the other Loan Documents.

 

ARTICLE II

THE LINE OF CREDIT

 

2.01. Commitment.

 

(a)       The Line of Credit. Subject to the terms and conditions and relying
upon the representations and warranties in this Agreement and the other Loan
Documents, Lender agrees to make a revolving line of credit available to
Borrower in the aggregate original principal amount not to exceed FOUR MILLION
and 00/100 DOLLARS ($4,000,000.00) (“Line of Credit”) at the Closing, the
proceeds of which will be advanced to Borrower from time to time during the
period commencing on the date of Closing and ending eleven months from the date
hereof, in accordance with and subject to the conditions, requirements and
limitations set forth in this Agreement. Upon repayment of any amount of
principal or interest on the Line of Credit by Borrower, Borrower may reborrow
hereunder. Reborrowing privileges may be suspended by Lender prior to the
Expiration Date if an Event of Default or Potential Default exists.

 

(b)       Term of Agreement. Lender’s commitments under this Agreement will
expire on the then current Expiration Date, unless Lender, after a review of
Borrower’s performance under this Agreement, elects to renew its commitments for
one or more additional FIFTEEN (15) MONTH periods. IN THE EVENT LENDER ELECTS
NOT TO RENEW THIS AGREEMENT, LENDER MUST GIVE WRITTEN NOTICE TO BORROWER AT
LEAST 120 DAYS BEFORE THE EXPIRATION DATE OF THE THEN CURRENT TERM. If no notice
is given at least ONE HUNDRED TWENTY (120) DAYS before the Expiration Date of
the then current term, this Agreement will be renewed and the Expiration Date
shall be automatically extended an additional FIFTEEN (15) MONTHS, on the same
terms and conditions hereof. However, Borrower’s representations, warranties and
agreements shall remain in full force and effect so long as any Debt is
outstanding. Borrower shall have the right to terminate the line of credit if
Borrower gives Lender Notice of its intention to terminate the line of credit at
least SIXTY (60) DAYS prior to the original expiration or any renewal thereof.

 

 4 

 

 

Shepherd’s Finance, LLC

Line of Credit Agreement

$4,000,000

 

2.02.       Note. The obligation of Borrower to repay the unpaid principal
amount of the Line of Credit made to it by Lender, and to pay interest thereon,
shall be evidenced by the Note, dated of even date herewith. The executed Note
shall be delivered by Borrower to Lender at the Closing.

 

2.03.       Interest Rate; Usury.

 

(a)       Interest Rate. The unpaid principal amounts advanced on the Line of
Credit shall bear interest for each day until due at a fixed rate per annum
(computed on the basis of a year of 360 days for actual days elapsed) for each
day at NINE PERCENT (9%) (the “Rate”).

 

(b)       Interest Rate Set by Law. In the event the rates of interest provided
for in subsections (a) above are finally determined by any Official Body to
exceed the maximum rate of interest permitted by any applicable usury or similar
Laws, or its application shall be suspended and there shall be charged instead
the maximum rate of interest permitted by such Laws. If any payment of interest
or in the nature of interest would cause the foregoing interest rate limitation
to be exceeded, then such excess payment will be credited as a payment of
principal, unless Borrower notifies Lender in writing to return the excess
payment to Borrower.

 

2.04.        Loan Advances.

 

(a)       Request for Advances under Line of Credit. Not less than 5 Business
Days prior to the making of each Loan Advance, the Borrower shall submit to
Lender a Request for Advance and borrowing base certificate, a form of which is
attached hereto as EXHIBIT A, certifying and evidencing that the requested
advance and then current amount outstanding under the Loan does not exceed the
limits set forth below, and shall have submitted to the Custodian the Notes and
Documents, as defined and more particularly set forth in the Collateral
Assignment of Notes and Documents. The Lender shall not be required to make Loan
Advances more frequently than once each month and such monthly Loan Advance
shall not be less than $100,000 and each receipt of the Loan Advance requested
thereby shall constitute a certification by the Borrower that the
representations and warranties contained in Article III hereof are true and
correct on the date of such Request for Advance or such receipt, as the case may
be. Loan Advances shall be made by the Lender within 5 Business Days of receipt
of a Request for Advance, provided such request is supported by the borrowing
base certificate. The amounts outstanding under the Line of Credit shall be the
lesser of (i) $4,000,000 or (ii) 67% of the aggregate amount outstanding on the
Collateral Loans being pledged to secure the Line of Credit and shown on the
borrowing base certificate, which shall be provided monthly by Borrower to
Lender with its payment of accrued interest. The individual Collateral Loans
being pledged to secure the Line of Credit may be substituted with other
Collateral Loans or may be removed as collateral by the Borrower provided the
aggregate amount outstanding on the Collateral Loans being pledged to secure the
Line of Credit is sufficient to meet the minimum requirements set forth
hereinabove.

 

 5 

 

 

Shepherd’s Finance, LLC

Line of Credit Agreement

$4,000,000

 

(b)       Payment of Loan Advances. Loan Advances shall be wired to the
Borrower’s account as directed by Borrower.

 

2.05.       Principal and Interests Payments. Commencing on the 1st day of the
month following the first Loan Advance on the Line of Credit and each month
thereafter during the term of the Line of Credit, Borrower shall make monthly
payments of interest in the amount sufficient to pay the accrued interest on the
Line of Credit. Loan Advances made pertaining to a Collateral Loan shall be
repaid as set forth in the Note.

 

2.06       Optional Prepayments. Borrower shall have the right, at its option,
to prepay the principal, interest or other amounts due from Borrower under this
Agreement or under the Note in whole or in part at any time.

 

2.07.       Payments. All payments to be made in respect of principal, interest
or other amounts due from Borrower under this Agreement or under the Note shall
be payable on or before 2:00 o’clock p.m., Jacksonville, Florida time, on the
day when due without presentment, demand, protest or notice of any kind, all of
which are hereby expressly waived, and an action therefor shall immediately
accrue. Such payments shall be made to Lender at its address in U.S. dollar
funds immediately available without setoff, counterclaim or other deduction of
any nature. All such payments shall be applied at the option of Lender to
accrued and unpaid interest, outstanding principal and other sums dues under
this Agreement in such order as Lender, in its sole discretion, shall elect.

 

2.09.       Indemnity. Borrower shall indemnify Lender against any loss or
expense which Lender has sustained or incurred as a consequence of any default
by Borrower in the performance or observance of any covenant or condition
contained in this Agreement, or under the Note including, without limitation,
any failure of Borrower to pay when due (by demand, upon maturity or otherwise)
any principal, interest, commitment fees or any other amount due hereunder or
under any Note. If Lender sustains or incurs any such loss or out-of-pocket
expense, it shall from time to time notify Borrower of the amount determined in
good faith by Lender (which determination shall be conclusive) to be necessary
to indemnify Lender for such loss or expense. Such amount shall be due and
payable by Borrower to Lender ten (10) Business Days after such notice is given
and shall bear interest at the rate of the default rate set forth in the Note.

 

2.10. Loan Account. Lender shall open and maintain on its books a loan account
(the “Loan Account”) with respect to repayments, prepayments, the computation
and payment of interest, and the computation and final payment of all other
amounts due and sums paid to Lender hereunder. Except in the case of manifest
error in computation, the Loan Account shall be conclusive and binding on
Borrower as to the amount at any time due to Lender from Borrower hereunder.

 

 6 

 

 

Shepherd’s Finance, LLC

Line of Credit Agreement

$4,000,000

 

2.11.       Collateral. The Note and all obligations of Borrower hereunder shall
be secured by the Collateral Assignment of Notes and Documents, and any and all
other Loan Documents executed and recorded with respect thereto.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES

 

Borrower hereby represents and warrants to Lender that:

 

3.01. Organization and Qualification. Borrower is a limited liability company
duly organized, va1idly existing and in good standing under the laws of its
jurisdiction of organization, and is duly qualified or licensed to do business
as a limited liability company, and in good standing in all jurisdictions in
which the ownership of its properties or the nature of its activities or both
make such qualification or licensing necessary.

 

3.02.       Authority; Power to Carry on Business; Licenses. Borrower has the
power and authority to execute, deliver and perform the Loan Documents to which
it is a party, to make the borrowing provided for herein, and to perform its
respective obligations hereunder and under the other Loan Documents. All such
action has been duly and validly authorized by all necessary limited liability
company proceedings on its part. Borrower has all requisite power and authority
to own and operate its properties and to carry on its business as now conducted
and as presently planned to be conducted. Borrower has all licenses, permits,
consents and governmental approvals or authorizations necessary to carry on its
business as now conducted.

 

3.03.       Execution and Binding Effect. The Loan Documents have been duly and
validly executed and delivered by the parties thereto and, to the extent they
are a party thereto, constitute legal, valid and binding obligations of Borrower
enforceable in accordance with the terms hereof and thereof.

 

3.04.       Authorizations and Filings. No authorization, consent, approval,
license, exemption or other action by, and no registration, qualification,
designation, declaration or filing with, any Official Body is or will be
necessary or advisable in connection with the execution and delivery of the Loan
Documents, the consummation of the transactions herein or therein contemplated,
and the performance of or compliance with the terms and conditions hereof or
thereof.

 

3.05.       Absence of Conflicts. Neither the execution and delivery of the Loan
Documents, the consummation of the transactions herein or therein contemplated,
nor the performance of or compliance with the terms and conditions hereof or
thereof will (a) violate any Law or any regulation, order, writ, injunction, or
decree of any court or governmental instrumentality or agency, (b) conflict with
or result in a breach of or a default under the limited partnership of Borrower
or any agreement or instrument to which Borrower is a party or by which its
properties (now owned or hereafter acquired) may be subject or bound or, (c)
result in the creation or imposition of any Lien, charge or encumbrance upon any
property (now owned or hereafter acquired) of Borrower.

 

 7 

 

 

Shepherd’s Finance, LLC

Line of Credit Agreement

$4,000,000

 

3.06.        No Event of Default; Compliance with Instruments. No event has
occurred and is continuing and no condition exists which constitutes an Event of
Default or Potential Default. Borrower is not in violation of (i) any term of
any limited liability company agreement nor (ii) any agreement or instrument to
which it is a party or by which it or any of its properties (now acquired or
hereinafter acquired) may be subject or bound.

 

3.07.        Litigation. There is no pending, contemplated or threatened
proceeding by or before any Official Body against or affecting Borrower which,
if adversely decided, would have a material adverse effect on the financial
condition, assets, properties, management, operations or business of Borrower or
on the ability of Borrower to perform its obligations under the Loan Documents.

 

3.08.       Compliance with Laws. The conduct by Borrower of its business as it
is presently conducted does not violate any provision of any Law or, if such
conduct does not violate a Law, such violation would not, together with all
other such violations, have a material adverse effect on the financial condition
or results of operations of Borrower, and Borrower has obtained all permits,
licenses, consents and approvals of all Official Bodies or other third parties,
including all consents and approvals, if any, under the Laws designed to protect
the environment, which are required to conduct its business as it is presently
conducted.

 

3.09.       Solvency. After giving effect to the consummation of all the
transactions contemplated hereby, Borrower (a) shall be able to pay its debts as
they become due, (b) shall have funds and capital sufficient to carry on its
business and all businesses in which it is about to engage and, (c) shall own
property having a value both at fair valuation and at fair saleable value in the
ordinary course of Borrower’s business greater than the amount required to pay
its debts as they become due. Borrower shall not be rendered insolvent by the
execution and delivery of this Agreement, the borrowing hereunder and/or the
consummation of any transactions contemplated herein.

 

3.10.       Accurate and Complete Disclosure, Continuing Representations and
Warranties. No representation or warranty made by Borrower under this Agreement
or any Loan Document, certificate, report, exhibit or document furnished by
Borrower to Lender pursuant to or in connection with this Agreement is false or
misleading in any material respect (including by omission of material
information necessary to make such representation, warranty or statement not
misleading). Borrower has disclosed to Lender in writing every fact which
materially and adversely affects, or would materially and adversely affect, the
financial condition, assets, properties, management, operations or business of
Borrower or the ability of Borrower to perform its obligations under the Loan
Documents. The representations and warranties are to survive the delivery of the
Loan Documents and the making of the Loan Advances hereunder until the Note is
paid in full and released.

 

 8 

 

 

Shepherd’s Finance, LLC

Line of Credit Agreement

$4,000,000

 

ARTICLE IV

CONDITIONS OF LENDING

 

The obligation of Lender to enter into this Agreement and to make any Loan
hereunder is subject to the accuracy, as of the date hereof, of the
representations and warranties contained in the Loan Documents, to the
performance by Borrower of its obligations to be performed hereunder and
thereunder on or before the Closing Date, and to the satisfaction of the
following further conditions:

 

4.01.       Representations and Warranties, Events of Default and Potential
Defaults. The representations and warranties contained in Article III shall be
true on and as of the date of Closing and each Loan Advance, with the same
effect as though made on and as of such date. On the date of the Closing, no
Event of Default and no Potential Default shall have occurred and be continuing
or exist.

 

4.02.       Loan Documents. On the Closing Date, the Loan Documents shall have
been executed and delivered to Lender and shall be in effect and all filings and
recordings contemplated thereby shall have been made.

 

4.03.       Collateral Assignment of Notes and Documents. There shall have been
executed and delivered to Lender the Collateral Assignment of Notes and
Documents pursuant to which Borrower shall have assigned, with recourse, and
granted to Lender a first lien security interests under the UCC, all of the
notes, security instruments and related documents evidencing, securing or
otherwise pertaining to the Collateral Loans on which a Loan Advance is
requested by Borrower to be made or has been made, which will, among other
things, require Borrower to forward to the Custodian the original Collateral
Loan note and related documents with the initial Request for Advance on the Line
of Credit in regard to such note, but will not require the recording of the
assignment of the recorded instrument securing such note until an Event of
Default exists.

 

4.04.       Borrower Lending Policies. Attached hereto as EXHIBIT B is a copy of
Borrower’s credit policies and underwriting criteria pertaining to the
Collateral Loans, and Borrower hereby agrees that the same will be adhered to
and followed when making such Collateral Loans and not be modified without prior
notice to the Lender.

 

ARTICLE V

AFFIRMATIVE COVENANTS

 

Borrower covenants and agrees with Lender as follows:

 

5.01.       Reporting and Information Requirements.

 

(a)       Notice of Event of Default. Promptly upon becoming aware of any Event
of Default or Potential Default, Borrower shall give Lender notice thereof,
together with a written statement of Borrower setting forth the details thereof
and any action taken or contemplated to be taken by Borrower.

 

 9 

 

 

Shepherd’s Finance, LLC

Line of Credit Agreement

$4,000,000

 

(b)       Notice of Material Adverse Change. Promptly upon becoming aware
thereof, Borrower shall give Lender notice with respect to any material adverse
change in the financial condition, assets, properties, management, operations or
business of Borrower.

 

(c)       Notice of Proceedings. Promptly upon becoming aware thereof, Borrower
shall give Lender notice of the commencement, existence or threat of all
proceedings by or before any Official Body against or affecting Borrower which,
if adversely decided, would have an adverse effect on the financial condition,
assets, properties, management, operations or business of Borrower.

 

5.02.        Compliance with Laws. Borrower shall comply with all applicable
Laws, in all material respects.

 

5.03.       Continuation of Business. Borrower shall continue to engage in the
business and activities that it is presently engaged in.

 

5.04.       Preservation of Existence. Borrower shall maintain its limited
liability company existence, rights and franchises in full force and effect in
its jurisdictions of organization. Borrower shall qualify and remain qualified
as a foreign limited liability company in each jurisdiction in which failure to
receive or retain such qualification would have a material adverse effect on the
financial condition, assets, properties, management, operations or business of
Borrower.

 

5.05       Borrower Lending Policies. Borrower shall make and service the
Collateral Loans in a commercially reasonable manner. Borrower shall notify
Lender immediately if Borrower fails to comply with the terms and conditions of
its lending policies.

 

ARTICLE VI

DEFAULTS

 

6.01. Events of Default. An Event of Default shall mean the occurrence or
existence of one or more of the following events or conditions (whatever the
reason for such Event of Default and whether voluntary, involuntary or effected
by operation of law):

 

(a)       Borrower shall fail to pay when due principal or interest on the Note,
any amount payable pursuant to this Agreement or any other amount due hereunder
or under any agreement with Lender, and such default shall continue ten (10)
consecutive days; or

 

(b)       Any representation or warranty made by Borrower under this Agreement
or the Loan Documents or any statement made by Borrower in any certificate,
report, exhibit or document furnished or made available by Borrower to Lender
pursuant to this Agreement or the other Loan Documents shall prove to have been
false or misleading in any material respect as of the time when made; or

 

 10 

 

 

Shepherd’s Finance, LLC

Line of Credit Agreement

$4,000,000

 

(c)        Borrower shall default in the performance or observance of any
covenant contained in Article V hereof and such default shall continue thirty
(30) consecutive days; or

 

(d)       A proceeding shall have been instituted in respect of Borrower:

 

(i)       seeking to have an order for relief entered in respect of any Borrower
or seeking a declaration or entailing a finding that Borrower is insolvent or a
similar declaration or finding, or seeking dissolution, winding-up, charter
revocation or forfeiture, liquidation, reorganization, arrangement, adjustment,
composition or other similar relief with respect to Borrower, its assets or its
debts under any law relating to bankruptcy, insolvency, relief of debtors or
protection of creditors, termination of legal entities or any other similar law
now or hereafter in effect, or

 

(ii)       seeking appointment of a receiver, trustee, custodian, liquidator,
assignee, sequestrator or other similar official for Borrower or all or any
substantial part of its property; or

 

(iii)       any such proceedings shall result in the entry, making or grant of
any such order for relief, declaration, funding, relief, or appointment, or such
proceeding shall remain undismissed and unstayed for a period of thirty (30)
days or more; or

 

(e)       Borrower shall become insolvent, shall become generally unable to pay
its debts as they become due, shall voluntarily suspend transaction of its
business, shall make a general assignment for the benefit of creditors, shall
institute a proceeding described in Section 7.01j(i) or shall consent to any
such order for relief, declaration, finding or relief described therein, shall
institute a proceeding described in Section 7.01j(ii), shall not have Dan
Wallach as its Chief Executive Officer, shall consent to any such appointment or
to the taking of possession by any such official of all or any substantial part
of its property whether or not any proceeding is instituted, shall dissolve,
wind-up or liquidate itself or any substantial part of its property, or the
current owners of the Borrower shall sell or otherwise transfer more than 50% of
their current ownership interests in Borrower, or shall take any action in
furtherance of any of the foregoing.

 

6.02.       Consequences of an Event of Default. Lender may demand the unpaid
principal amount of the Note, interest accrued thereon and all other amounts
owing by Borrower hereunder or under the Note or other Loan Documents to be
immediately due and payable without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived, and an action
therefor shall immediately accrue.

 

6.03.       Non-Assumption of Liability. Nothing herein contained shall relieve
Borrower from performing any covenant, agreement or obligation on the part of
Borrower to be performed under or in respect to any of the Collateral (including
rights to the Purchased Loans) or from any liability to any party or parties
having an interest therein or impose any liability on Lender for the acts or
omissions of Borrower in connection with any of the Collateral. Lender shall not
assume or become liable for, nor shall it be deemed or construed to have assumed
or become liable for, any obligation of Borrower with respect to any of the
Collateral, or otherwise, by reason of the grant to Lender of security interests
in the Collateral.

 

 11 

 

 

Shepherd’s Finance, LLC

Line of Credit Agreement

$4,000,000

 

ARTICLE VII

MISCELLANEOUS

 

7.01.       Business Days. Except as otherwise provided herein, whenever any
payment or action to be made or taken hereunder or under the Note shall be
stated to be due on a day which is not a Business Day, such payment or action
shall be made or taken on the next following Business Day and such extension of
time shall be included in computing interest or fees, if any, in connection with
such payment or action.

 

7.02.       Records. The unpaid principal amount of the Note, the unpaid
interest accrued thereon, the interest rate or rates applicable to such unpaid
principal amount, the duration of such applicability and the accrued and unpaid
commitment fee shall at all times be ascertained from the records of Lender
which shall be conclusive absent manifest error.

 

7.03.       Amendments and Waivers. Lender and Borrower, acting together, may
from time to time enter into agreements amending, modifying or supplementing
this Agreement or the Note or any other documents or instruments pursuant to or
in connection herewith or changing the rights of Lender or of Borrower hereunder
or thereunder, and Lender may from time to time grant waivers or consents to a
departure from the due performance of the obligations of Borrower hereunder or
thereunder. Any such agreement, waiver or consent must be in writing and shall
be effective only to the extent specifically set forth in such writing. In the
case of any such waiver or consent relating to any provision hereof, any Event
of Default or Potential Default so waived or consented to shall be deemed to be
cured and not continuing, but no such waiver or consent shall extend to any
other or subsequent Event of Default or Potential Default or impair any right
consequent thereto.

 

7.04.       No Implied Waiver, Cumulative Remedies. No course of dealing and no
delay or failure of Lender in exercising any right, power or privilege under
this Agreement, the Note, the Loan Documents or any other documents or
instruments pursuant to or in connection herewith shall affect any other or
further exercise thereof or exercise of any other right, power or privilege
except as and to the extent that the assertion of any such right, power or
privilege shall be barred by an applicable statute of limitations; nor shall any
single or partial exercise of any such right, power or privilege or any
abandonment or discontinuance of steps to enforce such a right, power or
privilege preclude any other exercise thereof or of any other right, power or
privilege. The rights and remedies of Lender under this Agreement, the Note or
any other documents or instruments pursuant to or in connection herewith are
cumulative and not exclusive of any rights or remedies which Lender would
otherwise have.

 

 12 

 

 

Shepherd’s Finance, LLC

Line of Credit Agreement

$4,000,000

 

7.05.        Notices. All notices, requests, demands, directions and other
communications (collectively “notices”) under the provisions of this Agreement
or the Note shall be in writing (including telexed communication) unless
otherwise expressly permitted hereunder and shall be sent by first-class or
first-class express mail, or by telex or email, with confirmation in writing if
mailed first-class, in all cases with charges prepaid, and any such properly
given notice shall be effective when received. All notices shall be sent to the
party in question at the address stated in Section 1.01 or in accordance with
the last unrevoked written direction from such party to the other parties.

 

7.06.       Expenses; Taxes, Attorneys’ Fees. Borrower agrees to pay or cause to
be paid and to save Lender harmless against liability for the payment of all
reasonable out-of-pocket expenses including, but not limited to, fees and
expenses of counsel for Lender, incurred by Lender from time to time (i) arising
in connection with the preparation, execution, delivery and performance of this
Agreement, the Note, and any documents, instruments or transactions pursuant to
or in connection herewith, (ii) relating to any requested amendments, waivers or
consents to this Agreement, the Note or any such documents or instruments and,
(iii) arising in connection with Lender’s enforcement or preservation of rights
under this Agreement the Note or any such documents or instruments including,
but not limited to, such expenses as may be incurred by Lender in the collection
of an outstanding Note. Borrower agrees to pay all stamp, document, transfer,
recording or filing taxes or fees and similar impositions now or hereafter
determined by Lender to be payable in connection with this Agreement, the Note
or any other documents, instruments or transactions pursuant to or in connection
herewith, and Borrower agrees to save Lender harmless from and against any and
all present or future claims, liabilities or losses with respect to or resulting
from any omission to pay or delay in paying any such taxes, fees or impositions.
In the event of a determination adversely to Borrower of any action at law or
suit in equity in relation to this Agreement, the Note or any Loan Document
Borrower will pay, in addition to all other sums which Borrower may be required
to pay, a reasonable sum for attorney’s fees incurred by Lender or the holder of
such Note in connection with such action or suit. All payments due from Borrower
under this Section 8.06 shall be added to and become part of the Note until paid
in full.

 

7.07.       Severability. The provisions of this Agreement are intended to be
severable. If any provision of this Agreement shall be held invalid or
unenforceable in whole or in part in any jurisdiction such provision shall, as
to such jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without in any manner affecting the validity or enforceability
thereof in any other jurisdiction or the remaining provisions hereof in any
jurisdiction.

 

7.08.       Governing Law. This Agreement shall be deemed to be a contract under
the laws of the State of Florida, and for all purposes shall be governed by and
construed and enforced in accordance with the laws of said State, without regard
to the principles of conflicts of laws thereof.

 

7.09.       Prior Understandings. This Agreement supersedes all prior
understandings and agreements, whether written or oral, among the parties
relating to the transactions provided for herein.

 

 13 

 

 

Shepherd’s Finance, LLC

Line of Credit Agreement

$4,000,000

 

7.10.       Duration; Survival. All representations and warranties of Borrower
contained herein or made in connection herewith shall survive the making of and
shall not be waived by the execution and delivery of this Agreement or the Note,
any investigation by Lender, or the making of any Loan and Lender may hereby
rely upon same. Notwithstanding termination of this Agreement or an Event of
Default, all covenants and agreements of Borrower shall continue in full force
and effect from an after the date of this Agreement so long as it may borrow
hereunder and until payment in full of the Note, interest thereon, commitment
fees and all other obligations of Borrower under this Agreement or the Note.
Without limitation, it is understood that all obligations of Borrower to make
payments to or indemnify Lender shall survive the payment in full of the Note
and of all other obligations of Borrower thereunder and hereunder.

 

7.11.        Counterparts. This Agreement may be executed in any number of
counterparts and

by the different parties hereto on separate counterparts each of which, when so
executed, shall be deemed an original, but all such counterparts shall
constitute but one and the same instrument.

 

7.12        Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of Lender, Borrower and its successors and assigns. Except
to the extent otherwise required by the context of this Agreement, the word
“Lender” where used in this Agreement shall mean and include any holder of a
Note originally issued to Lender, and each such holder of a Note shall be bound
by and have the benefits of this Agreement the same as if such holder had been a
signatory hereto.

 

IN WITNESS WHEREOF, the parties, have caused this Agreement to be duly and
properly executed as of the date first above written.

 

  Borrower:       SHEPHERD’S FINANCE, LLC         By: /s/ Daniel M. Wallach    
Daniel M. Wallach   Its: Chief Executive Officer

 

  Lender:       /s/ Paul Swanson   PAUL SWANSON

 

 14 

 

 

Shepherd’s Finance, LLC

Line of Credit Agreement

$4,000,000

 

STATE OF FLORIDA:

COUNTY OF DUVAL:

 

The foregoing instrument was acknowledged before me this 23rd day of October,
2017, by DANIEL M. WALLACH, the CHIEF EXECUTIVE OFFICER of SHEPHERD’S FINANCE,
LLC, a Delaware limited liability company, for and on behalf of said limited
liability company.

 

My commission expires: 3/7/2019.

 

  {Seal} /s/ Shannon R. Lee     NOTARY PUBLIC

 

STATE OF FLORIDA:

COUNTY OF PALM BEACH:

 

The foregoing instrument was acknowledged before me this 24th day of October,
2017, by PAUL SWANSON.

 

My commission expires: 12/3/2018.

 

  {Seal} /s/ Jean M. Velez     NOTARY PUBLIC

 

 15