PROMISSORY
NOTE


 


	Borrower:	Lex
    Partners II, LLC

    444 Gulf of Mexico Dr. #101

    Longboat Key, FL 34228	 	Lender:	Shepherd’s
    Finance, LLC 12627

    San Jose Blvd, Ste. 203

    Jacksonville, FL 32223

    (302) 752-2688
	 	 	 	 	 


 


	Principal
    Amount: $3,600,000.00	 	Initial
    Rate: 11.94%	 	Date
    of Note: February 19, 2016


 


PROMISE
TO PAY. Lex Partners II, LLC (“Borrower”) promises to pay to Shepherd’s Finance, LLC (“Lender”),
or order, in lawful money of the United States of America, on demand, but in no event later than February 28, 2018 (“Maturity
Date”), the principal amount of Three Million Six Hundred Thousand and 00/100 dollars ($3,600,000.00) or so much as may
be advanced under the Loan Documents from time to time, together with interest on the unpaid outstanding principal balance of
each advance. Interest shall be calculated from the date of each advance until repayment of each advance. Lender shall disburse
the funds in accordance with the Construction Loan Agreement and other Loan Documents.


 


PAYMENT.
Borrower will pay this loan in full immediately upon Lender’s demand. Borrower will pay by means of an ACH initiated
by Lender regular monthly payments of all accrued unpaid interest due as of each payment date, beginning March 15, 2016 with all
subsequent interest payments to be due on the same day of each month after that. Unless otherwise agreed or required by applicable
law, payments will be applied first to any accrued unpaid interest; then to any unpaid collection costs; and then to principal.
Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing.


 


LATE
FEE. All scheduled payments shall be subject to a fifteen-day (15) grace period. In the event any payment is not made as and
when due, the Lender will impose a late charge equal to the greater of five percent (5.00%) of the delinquent amount or twenty-five
dollars ($25.00).


 


VARIABLE
INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an independent index
which is the Shepherd’s Finance, LLC Cost of Funds plus the Rate Adder. Lender’s Cost of Funds (the “Index”),
shall mean the greater of five percent (5.0%) or the weighted average price paid by Lender on or in connection with all of its
borrowed funds. Such weighted average price shall include interest rates, loan fees, legal fees and any and all other costs paid
by Lender on its borrowed funds, and, in the case of funds borrowed by Lender from an Affiliate of Lender, the weighted average
price paid by such Affiliate on or in connection with such borrowed funds. Lender’s Cost of Funds is determined each month
at the beginning of the month, based on the cost of funds for the previous month. Each change in such rate shall be effective
as of the beginning of the month. The Index is not necessarily the lowest rate charged by Lender on its loans. If the Index becomes
unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower
the current Index rate upon Borrower’s request. The interest rate change will not occur more often than each change in the
Index. The interest rate on the Loan will be adjusted contemporaneously with changes in the Index. Borrower understands that Lender
may make loans based on other rates as well. The Index currently is 9.940% per annum. Interest on the unpaid principal
balance of this Note will be calculated as described in the “INTEREST CALCULATION METHOD” paragraph using a rate equal
to the percentage points over the Index, as set forth in the Rate Adder below, adjusted if necessary for any minimum and maximum
rate limitations described below, resulting in an initial rate of 11.940% per annum. NOTICE: Under no circumstances will the interest
rate on this Note be less than 7.000% per annum or more than the maximum rate allowed by applicable law.


 


“Rate
Adder” shall be calculated each month, based on the number of full months since the Closing Date.


 


	Number
    of full months since

    Closing Date	 	Rate
    Adder
	1-12	 	2%
	13-18	 	4%
	19-24	 	6%
	25
    – and greater	 	8%


 


INTEREST
CALCULATION METHOD. Interest on this Note is computed on a 365/366 simple interest basis; that is, by applying the ratio of
the interest rate over the number of days in a year, multiplied by the outstanding principal balance, multiplied by the actual
number of days the principal balance is outstanding. All interest payable under this Note is computed using this method.


 


PREPAYMENT.
Borrower agrees that all loan fees and other prepaid finance charges are earned fully as of the date of the loan and will
not be subject to refund upon early payment (whether voluntary or as a result of default), except as otherwise required by law.
Except for the foregoing, Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments
will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’s obligation to continue to make payments
of accrued unpaid interest. Rather, early payments will reduce the principal balance due. Borrower agrees not to send Lender payments
marked “paid in full”, “without recourse”, or similar language. If Borrower sends such a payment, Lender
may accept it without losing any of Lender’s rights under this Note, and Borrower will remain obligated to pay any further
amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument
that indicates that the payment constitutes “payment in full” of the amount owed or that is tendered with other conditions
or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: Shepherd’s Finance, LLC, 12627
San Jose Blvd, Ste. 203, Jacksonville, FL 32223.


 


INTEREST
AFTER MATURITY OR DEFAULT. After the principal amount of any part of the debt, accrued interest thereon, or any fees or any
other sums payable hereunder become due and remain unpaid (whether upon demand by Lender, upon the occurrence of an Event of Default,
by acceleration or otherwise), including a failure to pay upon final maturity, the interest rate on this Note shall be increased
by adding an additional 4.000 percentage point margin (“Default Rate Margin”). The Default Rate Margin shall also
apply to each succeeding interest rate change that would have applied had there been no default; however, in no event will the
interest rate exceed the maximum interest rate limitations under applicable law. The default interest rate(s) shall apply to the
entire outstanding principal balance of the Loan. Upon Borrower curing the default, the interest rate on the Loan shall revert
to the initially agreed upon interest rate hereunder, effective as of the date on which Borrower cures the default.


 




     


     

    


 





	PROMISSORY
    NOTE
	(Continued)




 


LENDER’S
RIGHTS. Upon Lender’s demand, Lender may declare the entire unpaid principal balance under this Note and all accrued
unpaid interest immediately due, and then Borrower will pay that amount.


 


ATTORNEYS’
FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay
Lender that amount. This includes, subject to any limits under applicable law, Lender’s reasonable attorneys’ fees
and Lender’s legal expenses whether or not there is a lawsuit, including reasonable attorneys’ fees and legal expenses
for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. Lender may also
recover from Borrower all court, alternative dispute resolution or other collection costs (including, without limitation, fees
and charges of collection agencies) actually incurred by Lender.


 


JURY
WAIVER. Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either
Lender or Borrower against the other.


 


GOVERNING
LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws
of the State of Florida without regard to its conflicts of law provisions. This Note has been given by Borrower and accepted by
Lender in the State of Florida.


 


CHOICE
OF VENUE. If there is a lawsuit, Borrower agrees upon Lender’s request to submit to the jurisdiction of the courts of
Sarasota County, State of Florida.


 


COLLATERAL.
Borrower acknowledges this Note is secured by the following collateral described in the security instrument listed herein:
a Mortgage and Security Agreement dated February 19, 2016, to Lender on real property located in Sarasota County, State of Florida
commonly known as 1333 Vista Dr., Sarasota, FL 34239.


 


LINE
OF CREDIT. This Note evidences a straight line of credit. Once the total amount of principal has been advanced, Borrower
is not entitled to further loan advances. Borrower agrees to be liable for all sums either: (A) advanced in accordance with
the instructions of an authorized person or (B) credited to any of Borrower’s accounts with Lender. The unpaid
principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender’s internal
records, including daily computer print-outs.


 


SUCCESSOR
INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower’s heirs, personal representatives,
successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.


 


GENERAL
PROVISIONS. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delay
or forgo enforcing any of its rights or remedies under this Note without losing them. Borrower and any other person who signs,
guarantees or endorses this Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor.
Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether
as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may
renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair,
fail to realize upon or perfect Lender’s security interest in the collateral; and take any other action deemed necessary
by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the
consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint
and several.


 


PRIOR
TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.
BORROWER AGREES TO THE TERMS OF THE NOTE.


 


BORROWER
ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.


 


THIS
NOTE IS DELIVERED UNDER SEAL AND IT IS INTENDED THAT THIS NOTE IS AND SHALL CONSTITUTE AND HAVE THE EFFECT OF A SEALED INSTRUMENT
ACCORDING TO LAW.


 


	BORROWER:	 
	 	 
	Lex Partners II, LLC	 
	 	 
	By:	/s/
    Steven Hanson	 
	 	Steven
    Hanson, Manager and Member of Lex Partners II, LLC	 


 






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