$4,000,000 As of October 23, 2017 and April 13, 2018

 

MODIFIED PROMISSORY NOTE

 

FOR VALUE RECEIVED, the undersigned, SHEPHERD’S FINANCE, LLC, a Florida limited
liability company (“Borrower”) with an office at 13241 Bartram Park Boulevard,
Suite 2401, Jacksonville, Florida 32258, promises to pay to the order of Paul
Swanson, (“Lender”), with an address at 128 Sota Drive, Jupiter, Florida 33458,
or at such other place or places as Lender from time to time may designate in
writing, the principal sum of Four Million Dollars and No Cents ($4,000,000.00),
or if different from such amount, the unpaid principal balance of this Note, in
lawful money of the United States, together with accrued interest thereon at the
rate and times hereinafter provided, calculated on the principal balance of this
Note from time to time outstanding.

 

1. Background. Borrower and Lender have entered into a secured line of credit
for $7,000,000. The borrowing base for that line of credit may not have
$7,000,000 of collateral at any time during the life of this unsecured note.
Lender and Borrower both wish to have the $7,000,000 be an outstanding debt from
Borrower to Lender, so during the life of this unsecured note, the positive
difference between $7,000,000 and the borrowing base amount (up to $4,000,000)
shall be an usecured borrowing under this promissory note.

 

2. Payment of Principal and Interest. Beginning on the date hereof, interest
will accrue on the principal sum outstanding, and from time to time outstanding,
at a rate equal to ten percent (10.0%) per annum, based upon actual days
outstanding and a 365/366 day year (“Rate”). Interest will be earned daily and
payable to Lender monthly. The first payment shall be due on the 1st day of the
month following the date of this Note, and on the 1st day of each and every
month thereafter during the term of this Note; except that if the first payment
would be due within ten (10) days of the date of this Note then in such case the
first payment shall not be due until the 1st day of the following month. The
outstanding principal balance together with all accrued and unpaid interest
shall be due and payable on Decenber 31, 2018 (“Maturity Date”). All payments of
principal and interest shall be made in lawful currency of the United States of
America, which shall be legal tender in payment of all debts, public and
private, at the time of payment. This Note maybe prepaid in whole or in part at
any time without fee, premium or penalty. If the borrowing base on the secured
portion of this relationship drops during the life of this promissory note, the
balance on this unsecured promissory note will increase so that the balance of
principal on this note is $7,000,000 minus the borrowing base amount.

 

3. Subordination of Note. This Note is subordinated, in all rights to payment
and in all other respects, to Senior Debt. “Senior Debt” shall mean (a) all Debt
(present or future) created, incurred, assumed or guaranteed by Borrower (and
all renewals, extensions or refundings thereof), except such Debt that by its
terms expressly provides that such Debt is not senior or superior in right of
payment to Borrower’s fixed rate subordinated notes, (“Subordinate Notes”) and
(b) all Debt of Borrower obtained from affiliates of Borrower (which shall mean
entities having common ownership and control as Borrower). Notwithstanding
anything herein to the contrary, Senior Debt shall not include Debt of Borrower
to any of its subsidiaries or under the Subordinate Notes. For purposes of this
Note, “Debt” means any indebtedness, contingent or otherwise, in respect of
borrowed money (whether or not the recourse of the lender is to the whole of the
assets of Borrower or only to a portion thereof), or evidenced by bonds, notes,
debentures or similar instruments or letters of credit, or representing the
balance deferred and unpaid on the purchase price of any property or interest
therein, except any such balance that constitutes a trade payable, and shall
include any guarantee of any indebtedness described above.

 

 

 

 

4. Superiority of Note. This note is senior to, in all rights to payment and in
all other respects, the Subordinate Notes.

 

5. Default. The occurrence of any one or more of the following events shall
constitute an event of default (“Event of Default”) under this Note:

 

(a) Any failure to make any payment due under this Note within ten (10) days of
the due date of such payment;

 

(b) Borrower fails to comply with any term, obligation, covenant, condition,
agreement or duty contained in this Note or any related document;

 

(c) Any warranty, representation or statement made or furnished to Lender by
Borrower or on Borrower’s behalf under this Note or any of the related documents
is false or misleading in any material respect, either now or at the time made
or furnished or becomes false or misleading at any time thereafter; and

 

(d) Borrower shall admit in writing its inability to pay its debts as they
become due, or shall seek or consent to, or acquiesce in, the appointment of any
trustee or receiver of the Borrower or of all or any substantial part of its
properties and assets;

 

(e) The appointment of a receiver, trustee or similar officer for Borrower and
the continuance in effect of such appointment without stay for thirty (30) days;
the commencement of any proceedings under the United States Bankruptcy Code, as
amended from time to time (the “Bankruptcy Code”), or any insolvency law by or
the consent of Borrower for its reorganization, or other relief, or the
commencement of any proceedings under the Bankruptcy Code, or any insolvency law
against Borrower if such proceedings are judicially approved as properly
instituted or shall remain undismissed for thirty (30) days; the dissolution or
termination of existence, or insolvency or business failure of Borrower; or the
making by Borrower of an assignment for the benefit of creditors; or the
application by Borrower for, or its consent to, the appointment of a receiver,
trustee or similar officer for it or for any substantial part of its property.

 

6. Acceleration. Upon the occurrence of an Event of Default hereunder Lender may
declare the then outstanding principal and all accrued but unpaid interest
immediately due and payable and upon acceleration and thereafter this Note shall
continue to bear interest at the Rate until all indebtedness evidenced hereby
has been paid in full. Further, in the event of such acceleration, the Note, and
all other indebtedness of Borrower to Lender arising out of or in connection
with the Note, shall become immediately due and payable, without presentation,
demand, protest or notice of any kind, all of which are hereby waived by
Borrower.

 

7. Late Charges. Should Borrower fail to pay the installments of interest or
principal ten (10) days from the date they shall become due, then Borrower
further promises to pay a late payment charge equal to five percent (5%) of the
amount of the unpaid installment as liquidated compensation to Lender for the
extra expense to Lender to process and administer the late payment, Borrower
agreeing, by execution hereof, that any other measure of compensation for a late
payment is speculative and impossible to compute. Imposition of late charges
shall not be deemed a waiver of any right or remedy of Lender, including without
limitation, acceleration of this Note.

 

8. Default Interest Rate. From and after the occurrence and during the
continuation of any Event of Default, at the Lender’s sole option, the entire
unpaid principal balance of the Note and any other sums owing under this Note
shall bear interest until paid at a rate equal to the lesser of (i) fifteen
percent (15%) per annum or (ii) the maximum interest rate permitted by
applicable law (“Default Rate”).

 

9. Application of Payments. All sums received by Lender for application to the
indebtedness evidenced by this Note may be applied by Lender to late charges,
expenses, costs, interest, principal, and other amounts owing to Lender in
connection with this Note in the order selected by Lender in its sole
discretion.

 

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10. Expenses. In the event that it becomes necessary for either Borrower or
Lender to arbitrate, litigate or commence any action in order to enforce its
rights under the terms of this Note then, which shall include collection of any
delinquent payment due under this Note whether legal action has commenced or
not, and in that event, the prevailing party shall be entitled to recover
reasonable attorney’s fees, paralegals’ fees, legal assistants’ fees, costs and
expenses, through all arbitration, trial and appellate levels or as the result
of Lender’s collection of any delinquent payment due under this Note whether
legal action has commenced or not.

 

11. No Recourse. No member, manager, director, officer, employee or stockholder,
individually, of Borrower shall have any liability for any obligations of
Borrower under this Note or for any claim based on, or in respect of, such
obligations or their creation.

 

12. Waiver. All persons now or at any time liable for payment of this Note,
whether directly or indirectly, including without limitation any guarantor,
hereby waive presentment, demand for payment, protest, notice of protest and
dishonor. The undersigned expressly consents to any extensions and renewals, in
whole or in part, to any release of any collateral security or portions thereof,
given to secure this Note, and all delays in time of payment or other
performance which Lender may grant, in its sole discretion, at any time and from
time to time without limitation all without any notice or further consent of
Borrower and any such grant by Lender shall not be deemed a waiver of any
subsequent delay or any of Lender’s rights hereunder.

 

13. Usury. In no event shall this or any other provision herein permit the
collection of any interest, which is usurious under the law governing this
transaction. If any such interest in excess of the maximum rate allowable under
applicable law has been collected, Borrower agrees that the amount of interest
collected above the maximum rate permitted by applicable law, together with
interest thereon at the rate required by applicable law, shall be refunded to
Borrower, and Borrower agrees to accept such refund, or, at Borrower’s option,
such refund shall be applied as a principal payment hereunder.

 

14. Modification. This Note may not be changed orally, but only by an agreement
in writing signed by the party against whom enforcement of any waiver, changes,
modifications, or discharges is sought.

 

15. Applicable Law. This Note shall be governed by and construed in accordance
with the laws of the State of Florida. Venue for all actions taken under or
relating to this Note shall be exclusively in Palm Beach County, Florida.

 

16. Notices. All notices, demands and other communications by Borrower to Lender
or Lender to Borrower shall be in writing and shall be delivered by certified or
registered mail, return receipt requested, postage prepaid, or by a reputable
internationally recognized overnight delivery service and addressed to the other
party as set forth below.

 

If to Lender: Paul Swanson   128 Sota Drive   Jupiter, Florida 33458     If to
Borrower: SHEPHERD’S FINANCE, LLC   13241 Bartram Park Blvd., Suite 2401  
Jacksonville, Florida 32258   Attn: Daniel M. Wallach

 

or to such other addresses of which notice is given in the same manner.

 

17. Successors and Assigns. As used herein, the terms “Borrower” and “Lender”
shall be deemed to include their respective heirs, personal representatives,
successors and assigns.

 

18. Documentary Stamps. Borrower shall pay any and all documentary stamps and/or
intangible taxes and all interest and penalties associated therewith which may
be assessed on account of the executions of this Note. In the event Borrower
fails to pay such sums, Lender or its assigns may, at its option, pay such taxes
and/or documentary stamps. Any such payment by Lender or its assigns shall be
added to the Note and shall bear interest from the date advanced to the date of
recovery at the maximum rate permissible under Florida law. If Borrower fails to
pay any and all documentary stamps and/or intangible taxes and any interest or
penalties associated therewith which may be assessed on account of the execution
and/or recording of this Note, it shall be deemed to be an Event of Default
under the terms hereof and shall immediately accelerate the principal balance
due hereunder, together with accrued interest. The Borrower shall have the right
to contest the foregoing charges.

 

19. WAIVER OF JURY TRIAL. LENDER, BY ACCEPTANCE OF THIS NOTE, AND BORROWER,
HEREBY KNOWINGLY, VOLUNTARILY IRREVOCABLY AND INTENTIONALLY WAIVE THE RIGHT
EITHER MAY HAVE TO A TRIAL BY JURY WITH RESPECT OF ANY LITIGATION BASED HEREON,
OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE AND ANY DOCUMENT
EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OR CONDUCT, COURSE OF DEALING,
STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY.

 

20. Time is of the essence with respect to the terms of this Note.

 

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In witness whereof, Borrower has caused this Note to be dully executed as of the
day and year first above written.

 

  BORROWER:         SHEPHERD’S FINANCE, LLC, a Florida limited liability company
        By: /s/ Daniel M. Wallach     Daniel M. Wallach, CEO

 

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