CONSTRUCTION
LOAN AGREEMENT


 


	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



 


THIS
CONSTRUCTION LOAN AGREEMENT, the (“Agreement”) dated February 19, 2016, is made and executed between Lex Partners
II, LLC (“Borrower”) and Shepherd’s Finance, LLC (“Lender”) on the following terms and conditions.
Borrower has applied to Lender for one or more loans for purposes of constructing the Improvements on the Real Property described
below. Lender is willing to lend the loan amount to Borrower solely under the terms and conditions specified in this Agreement
and in the Promissory Note, Mortgage and Security Agreement, and other related documents, the “Related Documents”
for the loan dated February 19, 2016, to each of which Borrower agrees. Borrower understands and agrees that: (A) in granting,
renewing, or extending any Loan, Lender is relying upon Borrower’s representations, warranties, and agreements as set forth
in this Agreement, and (B) all such Loans shall be and remain subject to the terms and conditions of this Agreement.


 


TERM.
This Agreement shall be effective as of February 19, 2016, and shall continue in full force and effect until such time
as all of Borrower’s Loan in favor of Lender has been paid in full, including principal, interest, costs, expenses, attorneys’
fees, and other fees and charges, upon demand, but in no event later than February 28, 2018.


 


LOAN.
The Loan shall be in an amount not to exceed the principal sum of U.S. $3,600,000.00 and shall bear interest at the
rate set forth in the Note on so much of the principal sum as shall be advanced pursuant to the terms of this Agreement and the
Loan Documents (defined herein). The Loan shall bear monthly interest on each Advance from the date of the Advance in accordance
with the terms of the Note. Borrower shall use the Loan Funds solely for the following specific purposes: CONSTRUCTION OF A SINGLE
FAMILY RESIDENCE LOCATED AT:


 


The
real estate legally described as:


 


See
“Exhibit A” attached to this document and made a part of this document as if fully set forth herein.


 


Its
address is commonly known as:


 


Real
Property located at 1333 Vista Dr., Sarasota, FL 34239.


 


The
Loan amount shall be subject at all times to all maximum limits and conditions set forth in this Agreement or in any of the Loan
Documents, including without limitation, any limits relating to loan to value ratios and acquisition and Project costs.


 


PROJECT
DESCRIPTION. The word “Project” as used in this Agreement means the construction and completion of all Improvements
contemplated by this Agreement, including without limitation the erection of the building or structure on the Real Property identified
to this Agreement by Borrower and Lender, installation of equipment and fixtures, landscaping, and all other work necessary to
make the Project usable and complete for the intended purposes. The Project includes the following work:


 


CONSTRUCTION
OF A SINGLE FAMILY RESIDENCE LOCATED AT:


 


The
real estate legally described as:


 


See
“Exhibit A” attached to this document and made a part of this document as if fully set forth herein.


 


Its
address is commonly known as:


 


Real
Property located at 1333 Vista Dr., Sarasota, FL 34239.


 




    	 	 	 



     


    


 


CONSTRUCTION
LOAN AGREEMENT


(Continued)




 


The
word “Property” as used in this Agreement means all that Real Property described in the Loan Documents, including
but not limited to, all improvements, all equipment, fixtures, and other articles of personal property now or subsequently attached
or affixed to the Real Property, together with all accessions, parts, and additions to, all replacements of, and all substitutions
for any of such property, and all proceeds (including insurance proceeds and refunds of premiums) from any sale or other disposition
of such property. The real estate described below constitutes the Real Property as used in this Agreement.


 


The
real estate legally described as:


 


See
“Exhibit A” attached to this document and made a part of this document as if fully set forth herein.


 


Its
address is commonly known as:


 


Real
Property located at 1333 Vista Dr., Sarasota, FL 34239.


 


FEES
AND EXPENSES. Whether or not the Project shall be consummated, Borrower shall assume and pay upon demand all out-of-pocket
expenses incurred by Lender in connection with the preparation of loan documents and the making of the Loan, including without
limitation the following: (A) all closing costs, loan fees, and disbursements; (B) all expenses of Lender’s legal counsel;
and (C) all title examination fees, title insurance premiums, appraisal fees, survey costs, required fees, and filing and recording
fees.


 


NO
CONSTRUCTION PRIOR TO RECORDING OF SECURITY DOCUMENT. Borrower will not permit any work or materials to be furnished in connection
with the Project until (A) Borrower has signed the Related Loan Documents; (B) Lender’s Mortgage and Security agreement
and other Security Interests in the Property have been duly recorded and perfected; (C) Lender has been provided evidence, satisfactory
to Lender, that Borrower has obtained all insurance required under this Agreement or any Related Loan Documents and that Lender’s
liens on the Property and Improvements are valid perfected first liens, subject only to such exceptions, if any, acceptable to
Lender.


 


REPRESENTATIONS
AND WARRANTIES. Borrower represents and warrants to Lender, as of the date of this Agreement, as of the date of each disbursement
of loan proceeds, as of the date of any renewal, extension or modification of any Loan, and at all times any Indebtedness exists:


 


Organization.
Borrower is a limited liability company which is, and at all times shall be, duly organized, validly existing, and in good
standing under and by virtue of the laws of Borrower’s state of organization. Borrower is duly authorized to transact business
in all other states in which Borrower is doing business, having obtained all necessary filings, governmental licenses and approvals
for each state in which Borrower is doing business. Specifically, Borrower is, and at all times shall be, duly qualified as a
foreign limited liability company in all states in which the failure to so qualify would have a material adverse effect on its
business or financial condition. Borrower has the full power and authority to own its properties and to transact the business
in which it is presently engaged or presently proposes to engage. Borrower maintains an office at 444 Gulf of Mexico Dr. #101,
Longboat Key, FL, 34228. Unless Borrower has designated otherwise in writing, the principal office is the office at which
Borrower keeps its books and records including its records concerning the Collateral. Borrower will notify Lender prior to any
change in the location of Borrower’s state of organization or any change in Borrower’s name. Borrower shall do all
things necessary to preserve and to keep in full force and effect its existence, rights and privileges, and shall comply with
all regulations, rules, ordinances, statutes, orders and decrees of any governmental or quasi-governmental authority or court
applicable to Borrower and Borrower’s business activities.


 


Assumed
Business Names. Borrower has filed or recorded all documents or filings required by law relating to all assumed business names
used by Borrower. Excluding the name of Borrower, the following is a complete list of all assumed business names under which Borrower
does business: None.


 


Authorization.
Borrower’s execution, delivery, and performance of this Agreement and all the Related Loan Documents have been duly
authorized by all necessary action by Borrower, do not require the consent or approval of any other person, regulatory authority,
or governmental body, and do not conflict with, result in a violation of, or constitute a default under (1) any provision of (a)
Borrower’s articles of organization or membership agreements, or (b) any agreement or other instrument binding upon Borrower
or (2) any law, governmental regulation, court decree, or order applicable to Borrower or to Borrower’s properties. Borrower
has the power and authority to enter into the Note and the Related Loan Documents and to grant collateral as security for the
Loan. Borrower has the further power and authority to own and to hold all of Borrower’s assets and properties, and to carry
on Borrower’s business as presently conducted.


 




    	 	Page 2	 



     


    


 CONSTRUCTION
                                         LOAN AGREEMENT


(Continued)


 


Financial
Information. Each of Borrower’s financial statements supplied to Lender truly and completely disclosed Borrower’s
financial condition as of the date of the statement, and there has been no material adverse change in Borrower’s financial
condition subsequent to the date of the most recent financial statement supplied to Lender. Borrower has no material contingent
obligations except as disclosed in such financial statements.


 


Legal
Effect. This Agreement constitutes, and any instrument or agreement Borrower is required to give under this Agreement when
delivered will constitute legal, valid, and binding obligations of Borrower enforceable against Borrower in accordance with their
respective terms.


 


Properties.
Except as contemplated by this Agreement or as previously disclosed in Borrower’s financial statements or in writing
to Lender and as accepted by Lender, and except for property tax liens for taxes not presently due and payable, Borrower owns
and has good title to all of Borrower’s properties free and clear of all Security Interests, and has not executed any security
documents or financing statements relating to such properties. All of Borrower’s properties are titled in Borrower’s
legal name, and Borrower has not used or filed a financing statement under any other name for at least the last five (5) years.


 


Hazardous
Substances. Except as disclosed to and acknowledged by Lender in writing, Borrower represents and warrants that: (1) During
the period of Borrower’s ownership of the Collateral, there has been no use, generation, manufacture, storage, treatment,
disposal, release or threatened release of any Hazardous Substance by any person on, under, about or from any of the Collateral.
(2) Borrower has no knowledge of, or reason to believe that there has been (a) any breach or violation of any Environmental Laws;
(b) any use, generation, manufacture, storage, treatment, disposal, release or threatened release of any Hazardous Substance on,
under, about or from the Collateral by any prior owners or occupants of any of the Collateral; or (c) any actual or threatened
litigation or claims of any kind by any person relating to such matters. (3) Neither Borrower nor any tenant, contractor, agent
or other authorized user of any of the Collateral shall use, generate, manufacture, store, treat, dispose of or release any Hazardous
Substance on, under, about or from any of the Collateral; and any such activity shall be conducted in compliance with all applicable
federal, state, and local laws, regulations, and ordinances, including without limitation all Environmental Laws. Borrower authorizes
Lender and its agents to enter upon the Collateral to make such inspections and tests as Lender may deem appropriate to determine
compliance of the Collateral with this section of the Agreement. Any inspections or tests made by Lender shall be at Borrower’s
expense and for Lender’s purposes only and shall not be construed to create any responsibility or liability on the part
of Lender to Borrower or to any other person. The representations and warranties contained herein are based on Borrower’s
due diligence in investigating the Collateral for hazardous waste and Hazardous Substances. Borrower hereby (1) releases and waives
any future claims against Lender for indemnity or contribution in the event Borrower becomes liable for cleanup or other costs
under any such laws, and (2) agrees to indemnify, defend, and hold harmless Lender against any and all claims, losses, liabilities,
damages, penalties, and expenses which Lender may directly or indirectly sustain or suffer resulting from a breach of this section
of the Agreement or as a consequence of any use, generation, manufacture, storage, disposal, release or threatened release of
a hazardous waste or substance on the Collateral. The provisions of this section of the Agreement, including the obligation to
indemnify and defend, shall survive the payment of the Indebtedness and the termination, expiration or satisfaction of this Agreement
and shall not be affected by Lender’s acquisition of any interest in any of the Collateral, whether by foreclosure or otherwise.


 


Litigation
and Claims. No litigation, claim, investigation, administrative proceeding or similar action (including those for unpaid taxes)
against Borrower is pending or threatened, and no other event has occurred which may materially adversely affect Borrower’s
financial condition or properties, other than litigation, claims, or other events, if any, that have been disclosed to and acknowledged
by Lender in writing.


 


Taxes.
To the best of Borrower’s knowledge, all of Borrower’s tax returns and reports that are or were required to be
filed, have been filed, and all taxes, assessments and other governmental charges have been paid in full, except those presently
being or to be contested by Borrower in good faith in the ordinary course of business and for which adequate reserves have been
provided.


 


Lien
Priority. Unless otherwise previously disclosed to Lender in writing, Borrower has not entered into or granted any Security
Agreements, or permitted the filing or attachment of any Security Interests on or affecting any of the Collateral directly or
indirectly securing repayment of Borrower’s Loan and Note, that would be prior or that may in any way be superior to Lender’s
Security Interests and rights in and to such Collateral.


 




    	 	Page 3	 



     


    


 CONSTRUCTION
                                         LOAN AGREEMENT


(Continued)


 


Binding
Effect. This Agreement, the Note, all Security Agreements (if any), and all Related Loan Documents are binding upon the signers
thereof, as well as upon their successors, representatives and assigns, and are legally enforceable in accordance with their respective
terms.


 


Employee
Benefit Plans. Each employee benefit plan as to which Borrower may have any liability complies in all material respects with
all applicable requirements of law and regulations, and (1) no Reportable Event nor Prohibited Transaction (as defined in ERISA)
has occurred with respect to any such plan, (2) Borrower has not withdrawn from any such plan or initiated steps to do so, (3)
no steps have been taken to terminate any such plan or to appoint a trustee to administer such a plan, and (4) there are no unfunded
liabilities other than those previously disclosed to Lender in writing.


 


Investment
Company Act. Borrower is not an “investment company” or a company “controlled” by an “investment
company”, within the meaning of the Investment Company Act of 1940, as amended.


 


Public
Utility Holding Company Act. Borrower is not a “holding company”, or a “subsidiary company” of a “holding
company”, or an “affiliate” of a “holding company” or of a “subsidiary company” of a
“holding company”, within the meaning of the Public Utility Holding Company Act of 1935, as amended.


 


Regulations
T and U. Borrower is not engaged principally, or as one of its important activities, in the business of extending credit for
the purpose of purchasing or carrying margin stock (within the meaning of Regulations T and U of the Board of Governors of the
Federal Reserve System).


 


Information.
All information previously furnished or which is now being furnished by Borrower to Lender for the purposes of or in connection
with this Agreement or any transaction contemplated by this Agreement is, and all information furnished by or on behalf of Borrower
to Lender in the future will be, true and accurate in every material respect on the date as of which such information is dated
or certified; and no such information is or will be incomplete by omitting to state any material fact the omission of which would
cause the information to be misleading.


 


Claims
and Defenses. There are no defenses or counterclaims, offsets or other adverse claims, demands or actions of any kind, personal
or otherwise, that Borrower, any Grantor, or any Guarantor could assert with respect to the Note, Loan, this Agreement, or the
Related Loan Documents.


 


Title
to Property. Borrower has, or on the date of first disbursement of Loan proceeds will have, good and marketable title to the
Collateral free and clear of all defects, liens, and encumbrances, excepting only liens for taxes, assessments, or governmental
charges or levies not yet delinquent or payable without penalty or interest, and such liens and encumbrances as may be approved
in writing by the Lender. The Collateral is contiguous to publicly dedicated streets, roads, or highways providing access to the
Collateral.


 


Project
Costs. The Project costs are true and accurate estimates of the costs necessary to complete the Improvements in a good and
workmanlike manner according to the Plans and Specifications presented by Borrower to Lender, and Borrower shall take all steps
necessary to prevent the actual cost of the Improvements from exceeding the Project costs.


 


Utility
Services. All utility services appropriate to the use of the Project after completion of construction are available at the
boundaries of the Collateral.


 


Assessment
of Property. The Collateral is and will continue to be assessed and taxed as an independent parcel by all governmental authorities.


 


Compliance
with Governing Authorities. Borrower has examined and is familiar with all the easements, covenants, conditions, restrictions,
reservations, building laws, regulations, zoning ordinances, and federal, state, and local requirements affecting the Project.
The Project will at all times and in all respects conform to and comply with the requirements of such easements, covenants, conditions,
restrictions, reservations, building laws, regulations, zoning ordinances, and federal, state, and local requirements.


 




    	 	Page 4	 



     


    


 CONSTRUCTION
                                         LOAN AGREEMENT


(Continued)


 


Survival
of Representations and Warranties. Borrower understands and agrees that in extending Loan Advances, Lender is relying on all
representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered
by Borrower to Lender under this Agreement or the Related Loan Documents. Borrower further agrees that regardless of any investigation
made by Lender, all such representations, warranties and covenants will survive the extension of Loan Advances and delivery to
Lender of the Related Loan Documents, shall be continuing in nature, shall be deemed made and redated by Borrower at the time
each Loan Advance is made, and shall remain in full force and effect until such time as Borrower’s Indebtedness shall be
paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.


 


CONDITIONS
PRECEDENT TO EACH ADVANCE. Lender’s obligation to make the initial Advance and each subsequent Advance under this Agreement
shall be subject to the fulfillment to Lender’s satisfaction of all of the conditions set forth in this Agreement and in
the Related Loan Documents.


 


Required
Collateral. LENDER’S LIEN ON THE COLLATERAL DESCRIBED IN THE SECTION TITLED “PROJECT DESCRIPTION” MUST REMAIN
IN A FIRST AND BEST LIEN POSITION.


 


Approval
of Contractors, Subcontractors, and Materialmen. Lender shall have approved a list of all contractors, subcontractors in direct
privity with a contractor, and all persons in direct privity with such a subcontractor employed in connection with the construction
of the Improvements, showing the name, address, and telephone number of each contractor, a general description of the nature of
the work to be done, the labor and materials to be supplied, the names of materialmen, if known, and the approximate dollar value
of the labor, work, or materials with respect to each contractor or materialman. Lender shall have the right to communicate with
any person to verify the facts disclosed by the list or by any application for any Advance, or for any other purpose.


 


Plans,
Specifications, and Permits. Lender shall have received and accepted a complete set of written Plans and Specifications setting
forth all Improvements for the Project, and Borrower shall have furnished to Lender copies of all permits and requisite approvals
of any governmental body necessary for the construction and use of the Project.


 


Architect’s
and Construction Contracts. Borrower shall have furnished in form and substance satisfactory to Lender an executed copy of
the Architect’s Contract and an executed copy of the Construction Contract.


 


Budget
and Schedule of Estimated Advances. Lender shall have approved detailed budget and cash flow projections of total Project
costs and a schedule of the estimated amount and time of disbursements of each Advance.


 


Borrower’s
Authorization. Borrower shall have provided in form and substance satisfactory to Lender properly certified resolutions, duly
authorizing the consummation of the Project and duly authorizing the execution and delivery of this Agreement, the Note and the
Related Loan Documents. In addition, Borrower shall have provided such other resolutions, authorizations, documents and instruments
as Lender or its counsel, in their sole discretion, may require.


 


Bond.
If requested by Lender, Borrower shall have furnished a performance and payment bond in an amount equal to 100% of the amount
of the Construction Contract, as well as a materialmen’s and mechanics’ payment bond, with such riders and supplements
as Lender may require, each in form and substance satisfactory to Lender, naming the General Contractor as principal and Lender
as an additional obligee.


 


Appraisal.
If required by Lender, an appraisal shall be prepared for the Property, at Borrower’s expense, which in form and substance
shall be satisfactory to Lender, in Lender’s sole discretion, including applicable regulatory requirements.


 


Plans
and Specifications. If requested by Lender, Borrower shall have assigned to Lender on Lender’s forms the Plans and Specifications
for the Project.


 


Environmental
Report. If requested by Lender, Borrower shall have furnished to Lender, at Borrower’s expense, an environmental report
and certificate on the Property in form and substance satisfactory to Lender, prepared by an engineer or other expert satisfactory
to Lender stating that the Property complies with all applicable provisions and requirements of the “Hazardous Substances”
paragraph set forth in this Agreement.


 


Soil
Report. If requested by Lender, Borrower shall have furnished to Lender, at Borrower’s expenses, a soil report for the
Property in form and substance satisfactory to Lender, prepared by a registered engineer satisfactory to Lender stating that the
Property is free from soil or other geological conditions that would preclude its use or development as contemplated without extra
expense for precautionary, corrective or remedial measures.


 




    	 	Page 5	 



     


    


 CONSTRUCTION
                                         LOAN AGREEMENT


(Continued)


 


Survey.
If requested by Lender, Borrower shall have furnished to Lender a survey of recent date, prepared and certified by a qualified
surveyor and providing that the Improvements, if constructed in accordance with the Plans and Specifications, shall lie wholly
within the boundaries of the Collateral without encroachment or violation of any zoning ordinances, building codes or regulations,
or setback requirements, together with such other information as Lender in its sole discretion may require.


 


Zoning.
Borrower shall have furnished evidence satisfactory to Lender that the Collateral is duly and validly zoned for the construction,
maintenance, and operation of the Project.


 


Insurance.
Unless waived by Lender in writing, Borrower shall have delivered to Lender the following insurance policies or evidence thereof:
(a) an all risks course of construction insurance policy (builder’s risk), with extended coverage covering the Improvements
issued in an amount and by a company acceptable to Lender, containing a loss payable or other endorsement satisfactory to Lender
insuring Lender as mortgagee, together with such other endorsements as may be required by Lender, including stipulations that
coverages will not be cancelled or diminished without at least ten (10) days prior written notice to Lender; (b) owners and General
Contractor general liability insurance, public liability and workmen’s compensation insurance; (c) flood insurance if required
by Lender or applicable law; and (d) all other insurance required by this Agreement or by the Related Loan Documents.


 


Workers’
Compensation Coverage. Provide to Lender proof of the General Contractor’s compliance with all applicable workers’
compensation laws and regulations with regard to all work performed on the Project.


 


Payment
of Fees and Expenses. Borrower shall have paid to Lender all fees, charges, and other expenses which are then due and payable
as specified in this Agreement or any Related Loan Document.


 


Satisfactory
Construction. All work usually done at the stage of construction for which disbursement is requested shall have been done
in a good and workmanlike manner and all materials and fixtures usually furnished and installed at that stage of construction
shall have been furnished and installed, all in compliance with the Plans and Specifications. Borrower shall also have furnished
to Lender such proofs as Lender may require to establish the progress of the work, compliance with applicable laws, freedom of
the Property from liens, and the basis for the requested disbursement.


 


Certification.
Borrower shall have furnished to Lender a certification by an engineer, architect, or other qualified inspector acceptable
to Lender that the construction of the Improvements has complied and will continue to comply with all applicable statutes, ordinances,
codes, regulations, and similar requirements.


 


Lien
Waivers. Borrower shall have obtained and attached to each application for an Advance, including the Advance to cover final
payment to the General Contractor, executed acknowledgments of payments of all sums due and releases of mechanic’s and materialmen’s
liens, satisfactory to Lender, from any party having lien rights, which acknowledgments of payment and releases of liens shall
cover all work, labor, equipment, materials done, supplied, performed, or furnished prior to such application for an Advance.


 


No
Event of Default. There shall not exist at the time of any Advance a condition which would constitute an Event of Default
under this Agreement or under any Related Loan Document.


 


DISBURSEMENT
OF LOAN FUNDS. The following provisions relate to the disbursement of funds from the Loan Fund.


 


Application
for Advances. Borrower shall apply for Advances from the Loan Fund according to the following disbursement schedule:


 


PERCENTAGE
OF COMPLETION BASED ON LENDER’S STANDARD INSPECTION FORM.


 


LENDER
MAY ADVANCE FUNDS FOR SUBCONTRACTORS, MATERIAL SUPPLIERS, AND OTHER INVOICES FOR WORK PERFORMED BY THIRD PARTY VENDORS.


 


Each
application shall be stated on a standard AIA payment request form or other form approved by Lender, executed by Borrower, and
supported by such evidence as Lender shall reasonably require. Borrower shall apply only for disbursement with respect to work
actually done by the General Contractor and for materials and equipment actually incorporated into the Project. Each application
for an Advance shall be deemed a certification of Borrower that as of the date of such application, all representations and warranties
contained in the Agreement are true and correct, and that Borrower is in compliance with all of the provisions of this Agreement.


 




    	 	Page 6	 



     


    


 CONSTRUCTION
                                         LOAN AGREEMENT


(Continued)


 


Projected
Cost Overruns. If Lender at any time determines in its sole discretion that the amount in the Loan Fund is insufficient, or
will be insufficient, to complete fully and to pay for the Project, then within ten (10) days after receipt of a written request
from Lender, Borrower shall deposit in the Loan Fund an amount equal to the deficiency as determined by Lender. The judgment and
determination of Lender under this section shall be final and conclusive. Any such amounts deposited by Borrower shall be disbursed
prior to any Loan proceeds.


 


Final
Payment to General Contractor. Upon completion of the Project and fulfillment of the Construction Contract to the satisfaction
of Lender and provided sufficient Loan Funds are available, Lender shall make an Advance to cover the final payment due to the
General Contractor upon delivery to Lender of endorsements to the ALTA title insurance policy following the posting of the completion
notice, as provided under applicable law. Construction shall not be deemed complete for purposes of final disbursement unless
and until Lender shall have received all of the following:


 


(1)Evidence
satisfactory to Lender that all work under the Construction Contract requiring inspection by any governmental authority with jurisdiction
has been duly inspected and approved by such authority, that a certificate of occupancy has been issued, and that all parties
performing work have been paid, or will be paid, for such work;


 


(2)A
certification by an engineer, architect, or other qualified inspector acceptable to Lender that the Improvements have been completed
substantially in accordance with the Plans and Specifications and the Construction Contract, that direct connection has been made
to all utilities set forth in the Plans and Specifications, and that the Project is ready for occupancy; and


 


(3)
Acceptance of the completed Improvements by Lender and Borrower.




 


Construction
Default. If Borrower fails in any respect to comply with the provisions of this Agreement or if construction ceases before
completion regardless of the reason, Lender, at its option, may refuse to make further Advances, may accelerate the indebtedness
under the terms of the Note, and without thereby impairing any of its rights, powers, or privileges, may enter into possession
of the construction site and perform or cause to be performed any and all work and labor necessary to complete the improvements,
substantially in accordance with the Plans and Specifications.


 


Damage
or Destruction. If any of the Collateral or Improvements is damaged or destroyed by casualty of any nature, within sixty (60)
days thereafter Borrower shall restore the Collateral and Improvements to the condition in which they were before such damage
or destruction with funds other than those in the Loan Fund. Lender shall not be obligated to make disbursements under this Agreement
until such restoration has been accomplished.


 


Adequate
Security. When any event occurs that Lender determines may endanger completion of the Project or the fulfillment of any condition
or covenant in this Agreement, Lender may require Borrower to furnish, within ten (10) days after delivery of a written request,
adequate security to eliminate, reduce, or indemnify Lender against, such danger. In addition, upon such occurrence, Lender in
its sole discretion may advance funds or agree to undertake to advance funds to any party to eliminate, reduce, or indemnify Lender
against, such danger or to complete the Project. All sums paid by Lender pursuant to such agreements or undertakings shall be
for Borrower’s account and shall be without prejudice to Borrower’s rights, if any, to receive such funds from the
party to whom paid. All sums expended by Lender in the exercise of its option to complete the Project or protect Lender’s
interests shall be payable to Lender on demand together with interest from the date of the Advance at the rate applicable to the
Loan. In addition, any Advance of funds under this Agreement, including without limitation direct disbursements to the General
Contractor or other parties in payment of sums due under the Construction Contract, shall be deemed to have been expended by or
on behalf of Borrower and to have been secured by Lender’s Mortgage and Security Agreement, if any, on the Collateral.


 




    	 	Page 7	 



     


    


 


CONSTRUCTION
LOAN AGREEMENT


(Continued)



 


CESSATION
OF ADVANCES. If Lender has made any commitment to make any Loan to Borrower, whether under this Agreement or under any other
agreement, Lender shall have no obligation to make Loan Advances or to disburse Loan proceeds if: (A) Borrower or any Guarantor
is in default under the terms of this Agreement or any of the Related Loan Documents or any other agreement that Borrower or any
Guarantor has with Lender; (B) Borrower or any Guarantor dies, becomes incompetent or becomes insolvent, files a petition in bankruptcy
or similar proceedings, or is adjudged a bankrupt; (C) there occurs a material adverse change in Borrower’s financial condition,
in the financial condition of any Guarantor, or in the value of any Collateral securing any Loan; or (D) any Guarantor seeks,
claims or otherwise attempts to limit, modify or revoke such Guarantor’s guaranty of the Loan or any other loan with Lender;
or (E) Lender in good faith deems itself insecure, even though no Event of Default shall have occurred.


 


LIMITATION
OF RESPONSIBILITY. The making of any Advance by Lender shall not constitute or be interpreted as either (A) an approval or
acceptance by Lender of the work done through the date of the Advance, or (B) a representation or indemnity by Lender to any party
against any deficiency or defect in the work or against any breach of any contract. Inspections and approvals of the Plans and
Specifications, the Improvements, the workmanship and materials used in the Improvements, and the exercise of any other right
of inspection, approval, or inquiry granted to Lender in this Agreement are acknowledged to be solely for the protection of Lender’s
interests, and under no circumstances shall they be construed to impose any responsibility or liability of any nature whatsoever
on Lender to any party. Neither Borrower nor any contractor, subcontractor, materialman, laborer, or any other person shall rely,
or have any right to rely, upon Lender’s determination of the appropriateness of any Advance. No disbursement or approval
by Lender shall constitute a representation by Lender as to the nature of the Project, its construction, or its intended use for
Borrower or for any other person, nor shall it constitute an indemnity by Lender to Borrower or to any other person against any
deficiency or defects in the Project or against any breach of any contract.


 


AFFIRMATIVE
COVENANTS. Borrower covenants and agrees with Lender that, so long as this Agreement remains in effect, Borrower will:


 


Repayment.
Repay the Loan in accordance with its terms and the terms of this Agreement.


 


Notices
of Claims and Litigation. Promptly inform Lender in writing of (1) all material adverse changes in Borrower’s financial
condition, and (2) all existing and all threatened litigation, claims, investigations, administrative proceedings or similar actions
affecting Borrower or any Guarantor which could materially affect the financial condition of Borrower or the financial condition
of any Guarantor. In addition, Borrower shall provide Lender with written notice of the occurrence of any Event of Default, the
occurrence of any Reportable Event under, or the institution of steps by Borrower to withdraw from, or the institution of any
steps to terminate, any employee benefit plan as to which Borrower may have any liability.


 


Financial
Records. Maintain its books and records in accordance with GAAP, applied on a consistent basis, and permit Lender to examine
and audit Borrower’s books and records at all reasonable times.


 


Financial
Statements. Furnish Lender with such financial statements and other related information at such frequencies and in such detail
as Lender may reasonably request.


 


Additional
Information. Furnish such additional information and statements, lists of assets and liabilities, agings of receivables and
payables, inventory schedules, budgets, forecasts, tax returns, and other reports with respect to Borrower’s financial condition
and business operations as Lender may request from time to time.


 


Other
Agreements. Comply with all terms and conditions of all other agreements, whether now or hereafter existing, between Borrower
and any other party and notify Lender immediately in writing of any default in connection with any other such agreements.


 


Insurance.
Maintain fire and other risk insurance, hail, federal crop insurance, public liability insurance, and such other insurance
as Lender may require with respect to Borrower’s properties and operations, in form, amounts, coverages and with insurance
companies acceptable to Lender. Borrower, upon request of Lender, will deliver to Lender from time to time the policies or certificates
of insurance in form satisfactory to Lender, including stipulations that coverages will not be cancelled or diminished without
at least ten (10) days prior written notice to Lender. Each insurance policy also shall include an endorsement providing that
coverage in favor of Lender will not be impaired in any way by any act, omission or default of Borrower or any other person. In
connection with all policies covering assets in which Lender holds or is offered a security interest for the Loans, Borrower will
provide Lender with such lender’s loss payable or other endorsements as Lender may require.


 




    	 	Page 8	 



     


    


 CONSTRUCTION
                                         LOAN AGREEMENT


(Continued)


 


Insurance
Reports. Furnish to Lender, upon request of Lender, reports on each existing insurance policy showing such information as
Lender may reasonably request, including without limitation the following: (1) the name of the insurer; (2) the risks insured;
(3) the amount of the policy; (4) the properties insured; (5) the then current property values on the basis of which insurance
has been obtained, and the manner of determining those values; and (6) the expiration date of the policy. In addition, upon request
of Lender (however not more often than annually), Borrower will have an independent appraiser satisfactory to Lender determine,
as applicable, the actual cash value or replacement cost of any Collateral. The cost of such appraisal shall be paid by Borrower.


 


Guaranties.
Prior to disbursement of any Loan proceeds, furnish executed guaranties of the Loans in favor of Lender, executed by the guarantor
named below, on Lender’s forms, and in the amount and under the conditions set forth in those guaranties.


 


	Name
    of Guarantor	 	Amount
	Steven
    Hanson	 	Unlimited


 


Loan
Fees, Charges and Expenses. Whether or not the Project is completed, Borrower also shall pay upon demand all out-of-pocket
expenses incurred by Lender in connection with the preparation of loan documents and the making of the Loan, including, without
limitation, all closing costs, fees, and disbursements, all expenses of Lender’s legal counsel, and all title examination
fees, title insurance premiums, appraisal fees, survey costs, required fees, and filing and recording fees.


 


Loan
Proceeds. Use all Loan proceeds solely for the following specific purposes:


 


CONSTRUCTION
OF A SINGLE FAMILY RESIDENCE LOCATED AT:


 


The
real estate legally described as:


 


See
“Exhibit A” attached to this document and made a part of this document as if fully set forth herein.


 


Its
address is commonly known as:


 


Real
Property located at 1333 Vista Dr., Sarasota, FL 34239.


 


Taxes,
Charges and Liens. Pay and discharge when due all of its indebtedness and obligations, including without limitation all assessments,
taxes, governmental charges, levies and liens, of every kind and nature, imposed upon Borrower or its properties, income, or profits,
prior to the date on which penalties would attach, and all lawful claims that, if unpaid, might become a lien or charge upon any
of Borrower’s properties, income, or profits. Provided however, Borrower will not be required to pay and discharge any such
assessment, tax, charge, levy, lien or claim so long as (1) the legality of the same shall be contested in good faith by appropriate
proceedings, and (2) Borrower shall have established on Borrower’s books adequate reserves with respect to such contested
assessment, tax, charge, levy, lien, or claim in accordance with GAAP.


 


Performance.
Perform and comply, in a timely manner, with all terms, conditions, and provisions set forth in this Agreement, in the Related
Loan Documents, and in all other instruments and agreements between Borrower and Lender, and in all other loan agreements now
or in the future existing between Borrower and any other party. Borrower shall notify Lender immediately in writing of any default
in connection with any agreement.


 


Operations.
Maintain executive and management personnel with substantially the same qualifications and experience as the present executive
and management personnel; provide written notice to Lender of any change in executive and management personnel; conduct its business
affairs in a reasonable and prudent manner.


 


Compliance
with Governmental Requirements. Comply with all laws, ordinances, and regulations, now or hereafter in effect, of all governmental
authorities applicable to the use or occupancy of the Collateral, including without limitation, the Americans With Disabilities
Act. Borrower may contest in good faith any such law, ordinance, or regulation and withhold compliance during any proceeding,
including appropriate appeals, so long as Borrower has notified Lender in writing prior to doing so and so long as, in Lender’s
sole opinion, Lender’s interests in the Collateral are not jeopardized. Lender may require Borrower to post adequate security
or a surety bond, reasonably satisfactory to Lender, to protect Lender’s interest.


 




    	 	Page 9	 



     


    


 


CONSTRUCTION
                                         LOAN AGREEMENT


(Continued


 


Environmental
Compliance and Reports. Borrower shall comply in all respects with any and all Environmental Laws; not cause or permit to
exist, as a result of an intentional or unintentional action or omission on Borrower’s part or on the part of any third
party, on property owned and/or occupied by Borrower, any environmental activity where damage may result to the environment, unless
such environmental activity is pursuant to and in compliance with the conditions of a permit issued by the appropriate federal,
state or local governmental authorities; shall furnish to Lender promptly and in any event within thirty (30) days after receipt
thereof a copy of any notice, summons, lien, citation, directive, letter or other communication from any governmental agency or
instrumentality concerning any intentional or unintentional action or omission on Borrower’s part in connection with any
environmental activity whether or not there is damage to the environment and/or other natural resources.


 


Inspection.
Permit employees or agents of Lender at any reasonable time to inspect any and all Collateral for the Loan or Loans and Borrower’s
other properties and to examine or audit Borrower’s books, accounts, and records and to make copies and memoranda of Borrower’s
books, accounts, and records. If Borrower now or at any time hereafter maintains any records (including without limitation computer
generated records and computer software programs for the generation of such records) in the possession of a third party, Borrower,
upon request of Lender, shall notify such party to permit Lender free access to such records at all reasonable times and to provide
Lender with copies of any records it may request, all at Borrower’s expense.


 


Notice
of Default, Litigation and ERISA Matters. Forthwith upon learning of the occurrence of any of the following, Borrower shall
provide Lender with written notice thereof, describing the same and the steps being taken by Borrower with respect thereto: (1)
the occurrence of any Event of Default, or (2) the institution of, or any adverse determination in, any litigation, arbitration
proceeding or governmental proceeding, or (3) the occurrence of a Reportable Event under, or the institution of steps by Borrower
to withdraw from, or the institution of any steps to terminate, any employee benefit plan as to which Borrower may have any liability.


 


Construction
of the Project. Commence construction of the Project no later than May 31, 2016, and cause the Improvements to be constructed
and equipped in a diligent and orderly manner and in strict accordance with the Plans and Specifications approved by Lender, the
Construction Contract, and all applicable laws, ordinances, codes, regulations, and rights of adjoining or concurrent property
owners. Borrower agrees to complete the Project for purposes of final payment to the General Contractor on or before February
28, 2017, regardless of the reason for any delay.


 


Defects.
Upon demand of Lender, promptly correct any defect in the Improvements or any departure from the Plans and Specifications
not approved by Lender in writing before further work shall be done upon the portion of the Improvements affected.


 


Project
Claims and Litigation. Promptly inform Lender of (1) all material adverse changes in the financial condition of the General
Contractor; (2) any litigation and claims, actual or threatened, affecting the Project or the General Contractor, which could
materially affect the successful completion of the Project or the ability of the General Contractor to complete the Project as
agreed; and (3) any condition or event which constitutes a breach or default under any of the Related Loan Documents or any contract
related to the Project.


 


Payment
of Claims and Removal of Liens. (1) Cause all claims for labor done and materials and services furnished in connection with
the Improvements to be fully paid and discharged in a timely manner and (2) take all reasonable steps necessary to remove all
claims of liens against the Collateral, the Improvements or any part of the Collateral or Improvements, or any rights or interests
appurtenant to the Collateral or Improvements. Upon Lender’s request, Borrower shall make such demands or claims upon or
against laborers, materialmen, subcontractors, or other persons who have furnished or claim to have furnished labor, services,
or materials in connection with the Improvements, which demands or claims shall under the laws of the State of Florida require
diligent assertions of lien claims upon penalty of loss or waiver thereof. Borrower shall, within ten (10) days after the filing
of any claim of lien that is disputed or contested by Borrower, provide Lender with a surety bond issued by a surety acceptable
to Lender sufficient to release the claim of lien or deposit with Lender an amount satisfactory to Lender for the possibility
that the contest will be unsuccessful. If Borrower fails to remove any lien on the Collateral or Improvements or provide a bond
or deposit pursuant to this provision, Lender may pay such lien, or may contest the validity of the lien, and Borrower shall pay
all costs and expenses of such contest, including Lender’s reasonable attorneys’ fees.


 




    	 	Page 10	 



     


    


 CONSTRUCTION
                                         LOAN AGREEMENT


(Continued)


 


Taxes
and Claims. Pay and discharge when due all of Borrower’s indebtedness, obligations, and claims that, if unpaid, might
become a lien or charge upon the Collateral or Improvements; provided, however, that Borrower shall not be required to pay and
discharge any such indebtedness, obligation, or claim so long as (1) its legality shall be contested in good faith by appropriate
proceedings, (2) the indebtedness, obligation, or claim does not become a lien or charge upon the Collateral or Improvements,
and (3) Borrower shall have established on its books adequate reserves with respect to the amount contested in accordance with
GAAP. If the indebtedness, obligation, or claim does become a lien or charge upon the Collateral or Improvements, Borrower shall
remove the lien or charge as provided in the preceding paragraph.


 


Environmental
Studies. Promptly conduct and complete, at Borrower’s expense, all such investigations, studies, samplings and testings
as may be requested by Lender or any governmental authority relative to any substance, or any waste or by-product of any substance
defined as toxic or a hazardous substance under applicable federal, state, or local law, rule, regulation, order or directive,
at or affecting any property or any facility owned, leased or used by Borrower.


 


Additional
Assurances. Make, execute and deliver to Lender such promissory notes, mortgages, deeds of trust, security agreements, assignments,
financing statements, instruments, documents and other agreements as Lender or its attorneys may reasonably request to evidence
and secure the Loans and to perfect all Security Interests in the Collateral and Improvements.


 


LENDER’S
EXPENDITURES. If any action or proceeding is commenced that would materially affect Lender’s interest in the Collateral
or if Borrower fails to comply with any provision of this Agreement or any Related Loan Documents, including but not limited to
Borrower’s failure to discharge or pay when due any amounts Borrower is required to discharge or pay under this Agreement
or any Related Loan Documents, Lender on Borrower’s behalf may (but shall not be obligated to) take any action that Lender
deems appropriate, including but not limited to discharging or paying all taxes, liens, security interests, encumbrances and other
claims, at any time levied or placed on any Collateral and paying all costs for insuring, maintaining and preserving any Collateral.
All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note
from the date incurred or paid by Lender to the date of repayment by Borrower. All such expenses will become a part of the Indebtedness
and, at Lender’s option, will (A) be payable on demand; (B) be added to the balance of the Note and be apportioned among
and be payable with any installment payments to become due during either (1) the term of any applicable insurance policy; or (2)
the remaining term of the Note; or (C) be treated as a balloon payment which will be due and payable at the Note’s maturity.


 


GENERAL
PROJECT PROVISIONS. The following provisions relate to the construction and completion of the Project:


 


Change
Orders. All requests for changes in the Plans and Specifications, other than minor changes involving no extra cost, must be
in writing, signed by Borrower and the architect, and delivered to Lender for its approval. Borrower will not permit the performance
of any work pursuant to any change order or modification of the Construction Contract or any subcontract without the written approval
of Lender. Borrower will obtain any required permits or authorizations from governmental authorities having jurisdiction before
approving or requesting a new change order.


 


Purchase
of Materials; Conditional Sales Contracts. No materials, equipment, fixtures, or articles of personal property placed in or
incorporated into the Project shall be purchased or installed under any Security Agreement or other agreement whereby the seller
reserves or purports to reserve title or the right of removal or repossession, or the right to consider such items as personal
property after their incorporation into the Project, unless otherwise authorized by Lender in writing.


 


Lender’s
Right of Entry and Inspection. Lender and its agents shall have at all times the right of entry and free access to the Property
and the right to inspect all work done, labor performed, and materials furnished with respect to the Project. Lender shall have
unrestricted access to and the right to copy all records, accounting books, contracts, subcontracts, bills, statements, vouchers,
and supporting documents of Borrower relating in any way to the Project.


 


Lender’s
Right to Stop Work. If Lender in good faith determines that any work or materials do not conform to the approved Plans and
Specifications or sound building practices, or otherwise depart from any of the requirements of this Agreement, Lender may require
the work to be stopped and withhold disbursements until the matter is corrected. In such event, Borrower will promptly correct
the work to Lender’s satisfaction. No such action by Lender will affect Borrower’s obligation to complete the Improvements
on or before the Completion Date. Lender is under no duty to supervise or inspect the construction or examine any books and records.
Any inspection or examination by Lender is for the sole purpose of protecting Lender’s security and preserving Lender’s
rights under this Agreement. No default of Borrower will be waived by any inspection by Lender. In no event will any inspection
by Lender be a representation that there has been or will be compliance with the Plans and Specifications or that the construction
is free from defective materials or workmanship.


 




    	 	Page 11	 



     


    


 CONSTRUCTION
                                         LOAN AGREEMENT


(Continued)



 


Indemnity.
Borrower shall indemnify, defend, and hold Lender harmless from any and all claims asserted against Lender or the Property
by any person, entity, or governmental body, or arising out of or in connection with the Property, Improvements, or Project. Lender
shall be entitled to appear in any proceedings to defend itself against such claims, and all costs and expenses reasonable attorneys’
fees incurred by Lender in connection with such defense shall be paid by Borrower to Lender. Lender shall, in its sole discretion,
be entitled to settle or compromise any asserted claims against it, and such settlement shall be binding upon Borrower for purposes
of this indemnification. All amounts paid by Lender under this paragraph shall be secured by Lender’s security agreement
or Mortgage or Deed of Trust, if any, on the Property, shall be deemed an additional principal Advance under the Loan, payable
upon demand, and shall bear interest at the rate applicable to the Loan.


 


Publicity.
Lender may display a sign at the construction site informing the public that Lender is the construction lender for the Project.
Lender may obtain other publicity in connection with the Project through press releases and participation in ground-breaking and
opening ceremonies and similar events.


 


Actions.
Lender shall have the right to commence, appear in, or defend any action or proceeding purporting to affect the rights, duties,
or liabilities of the parties to this Agreement, or the disbursement of funds from the Loan Fund. In connection with this right,
Lender may incur and pay reasonable costs, expenses and reasonable attorneys’ fees. Borrower covenants to pay to Lender
on demand all such expenses, together with interest from the date Lender incurs the expense at the rate specified in the Note,
and Lender is authorized to disburse funds from the Loan Fund for such purposes.


 


DEFAULT.
Each of the following, at Lender’s option, shall constitute an Event of Default under this Agreement and Related Documents:


 


Payment.
Default will occur if payment in full is not made immediately when due.


 


Failure
to Perform. Default will occur if Borrower, and/or any co-borrower, guarantor, or any other person liable for the Loan, fails
to perform any provision of this Agreement.


 


Construction
Commencement. Be advised that Shepherd’s Finance, LLC Construction Loan Program is not designed for long term financing,
including without limitation, lot financing. For this reason and pursuant to this Agreement and other related documents, failure
by the Borrower to commence continuous construction immediately after closing but no later than 90 days from the closing date
shall be an Event of Default.


 


Timely
Completion. Construction is less than 90% complete within nine (9) months of Note date as evidenced by actual work/materials
installed per Lender’s inspection schedule.


 


Subdividing
the Collateral. Partitioning or subdividing the collateral at any time during the loan term without prior written consent
from Lender, which may be withheld at Lender’s discretion. In addition to any other remedies Lender may have with regard
to default, Borrower may be charged an administration fee of up to $1,000.


 


Judgments
and Liens. Execution shall have been levied against the Land, or any part thereof, or any other property subject to the Mortgage
and Security Agreement or any creditor’s suit to enforce a judgment or other lien against the Property or such other property
shall have been brought and (in either case) shall continue unstayed and in effect for a period of more than 30 consecutive calendar
days; or


 


One
or more judgments for the payment of money in excess of an amount that would materially adversely affect the financial condition
shall have been entered against the Borrower or Guarantor, which judgment or judgments shall have remained undischarged and unstayed
for a period of thirty (30) consecutive days; or


 


A
writ or warrant of attachment, garnishment, execution, distraint or similar process shall have been issued against the Borrower
or Guarantor which shall have remained undischarged and unstayed for a period of thirty (30) consecutive days.




 


Title
Transfer. The Borrower shall violate any prohibition on transfer or attempted transfer of all or any portion of the Land,
or shall violate any other provision related to the transfer or attempted transfer of all or any portion of the Land as contained
in this Agreement.


 




    	 	Page 12	 



     


    


 CONSTRUCTION
                                         LOAN AGREEMENT


(Continued)



 


Misrepresentations.
Any representation, warranty or statement made by the Borrower under this Agreement or the Loan Documents or in any financial
statement, certificate, report , exhibit or document furnished by the Borrower to Lender pursuant to this Construction Loan 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 becomes
false or misleading at any time thereafter.


 


Material
Adverse Change. Lender shall have determined (which determination shall be conclusive) that a material adverse change has
occurred in the financial condition, assets, properties, management, operations or business of the Borrower or that the prospect
of payment or performance of any covenant, agreement or duty under this Construction Loan Agreement, or the other Loan Documents
is impaired or that Lender is insecure.


 


Death
of Guarantor. The death, incarceration or incapacitation of any of the Guarantors.


 


Bankruptcy.
A proceeding shall have been instituted in respect of the Borrower or Guarantor:


 


(i)seeking
to have an order for relief entered in respect of any Borrower or Guarantor or seeking a declaration or entailing a finding that
any Borrower or Guarantor 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 any Borrower
or Guarantor, their assets or their 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 any Borrower or
Guarantor or for all or any substantial part of their 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


 


Insolvency.
The Borrower or Guarantor shall become insolvent, shall become generally unable to pay their debts as they become due, shall voluntarily
suspend transaction of their business, shall make a general assignment for the benefit of creditors, shall institute a proceeding
described above or shall consent to any such order for relief, declaration, finding or relief described therein, shall institute
a proceeding described above or 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 shall take any action in furtherance of any of the foregoing.


 


CROSS-DEFAULT.
The Borrower and Lender acknowledge and agree that, at the discretion of the Lender, a default or Event of Default under any
Loan Document shall constitute a default or Event of Default under all other Loan Documents, notwithstanding any term or terms
of a Loan Document to the contrary.


 


EFFECT
OF AN EVENT OF DEFAULT; REMEDIES. Upon the occurrence of any Event of Default and such default is not cured within ten (10)
business days following notice thereof, Lender may, at its option, but without any obligation to do so, and in addition to any
other right Lender may have, do any one or more of the following without further notice to Borrower: (a) Cancel this Agreement;
(b) Institute appropriate proceedings to enforce the performance of this Agreement; (c) Withhold further disbursement of Loan
Funds; (d) Expend funds necessary to remedy the default; (e) Take possession of the Property and continue construction of the
Project; (f) Accelerate maturity of the Note and/or Indebtedness and demand payment of all sums due under the Note and/or Indebtedness;
(g) Bring an action on the Note and/or Indebtedness; (h) Foreclose Lender’s security agreement or Mortgage or Deed of Trust,
if any, on the Property in any manner available under law; and (i) Exercise any other right or remedy which it has under the Note
or Related Loan Documents, or which is otherwise available at law or in equity or by statute.


 




    	 	Page 13	 



     


    


 CONSTRUCTION
                                         LOAN AGREEMENT


(Continued)



 


COMPLETION
OF IMPROVEMENTS BY LENDER. If Lender takes possession of the Collateral, it may take any and all actions necessary in its
judgment to complete construction of the Improvements, including but not limited to making changes in the Plans and Specifications,
work, or materials and entering into, modifying or terminating any contractual arrangements, subject to Lender’s right at
any time to discontinue any work without liability. If Lender elects to complete the Improvements, it will not assume any liability
to Borrower or to any other person for completing the Improvements or for the manner or quality of construction of the Improvements,
and Borrower expressly waives any such liability. Borrower irrevocably authorizes Lender, with full power of substitution, at
Lender’s option, to complete the Improvements either in Borrower’s name or in its own name. It is understood that
nothing set forth herein shall require Lender to take any such action. In any event, all sums expended by Lender in completing
the construction of the Improvements will be considered to have been disbursed to Borrower and will be secured by the Collateral
for the Loan. Any such sums that cause the principal amount of the Loan to exceed the face amount of the Note will be considered
to be an additional Loan to Borrower, bearing interest at the Note rate and being secured by the Collateral. For these purposes,
Borrower assigns to Lender all of its right, title and interest in and to the Project Documents; however Lender will not have
any obligation under the Project Documents unless Lender expressly hereafter agrees to assume such obligations in writing. Lender
will have the right to exercise any rights of Borrower under the Project Documents upon the occurrence of an Event of Default.
Except as may be prohibited by applicable law, all of Lender’s rights and remedies, whether evidenced by this Agreement
or by any other writing, shall be cumulative and may be exercised singularly or concurrently.


 


ADDITIONAL
DOCUMENTS. Borrower shall provide Lender with the following additional documents:


 


Articles
of Organization and Company Resolutions. Borrower has provided or will provide Lender with a certified copy of Borrower’s
Articles of Organization, together with a certified copy of resolutions properly adopted by the members of the company, under
which the members authorized one or more designated members or employees to execute this Agreement, the Note and any and all Security
Agreements directly or indirectly securing repayment of the same, and to consummate the borrowings and other transactions as contemplated
under this Agreement, and to consent to the remedies following any default by Borrower as provided in this Agreement and in any
Security Agreements.


 


Opinion
of Counsel. When required by Lender, Borrower has provided or will provide Lender with an opinion of Borrower’s counsel
certifying to and that: (1) Borrower’s Note, any Security Agreements and this Agreement constitute valid and binding obligations
on Borrower’s part that are enforceable in accordance with their respective terms; (2) Borrower is validly existing and
in good standing; (3) Borrower has authority to enter into this Agreement and to consummate the transactions contemplated under
this Agreement; and (4) such other matters as may have been requested by Lender or by Lender’s counsel.


 


MISCELLANEOUS
PROVISIONS. The following miscellaneous provisions are a part of this Agreement:


 


Amendments.
This Agreement, together with any Related Loan Documents, constitutes the entire understanding and agreement of the parties
as to the matters set forth in this Agreement. No alteration of or amendment to this Agreement shall be effective unless given
in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.


 


Attorneys’
Fees; Expenses. Borrower agrees to pay upon demand all of Lender’s costs and expenses, including Lender’s reasonable
attorneys’ fees and Lender’s legal expenses, incurred in connection with the enforcement of this Agreement. Lender
may hire or pay someone else to help enforce this Agreement, and Borrower shall pay the costs and expenses of such enforcement.
Costs and expenses include Lender’s reasonable attorneys’ fees and 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), appeals, and any anticipated post-judgment collection services. 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.


 


Authority
to File Notices. Borrower authorizes Lender to file for the record any notice that Lender deems necessary to protect its interest
under this Agreement. This authorization shall be deemed coupled with an interest and shall be irrevocable while any sum or performance
remains due and owing under any of the Related Loan Documents.


 


Caption
Headings. Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define
the provisions of this Agreement.


 


Borrower
Information. Borrower consents to the release of information on or about Borrower by Lender in accordance with any court order,
law or regulation and in response to credit inquiries concerning Borrower.


 


Counterparts.
This Agreement may be executed in multiple counterparts, each of which, when so executed, shall be deemed an original, but
all such counterparts, taken together, shall constitute one and the same Agreement.


 




    	 	Page 14	 



     


    

 CONSTRUCTION
                                         LOAN AGREEMENT


(Continued)



 


Governing
Law. This Agreement 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 Agreement 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.


 


Indemnification
of Lender. Borrower agrees to indemnify, to defend and to save and hold Lender harmless from any and all claims, suits, obligations,
damages, losses, costs and expenses (including, without limitation, Lender’s reasonable attorneys’ fees, as well as
Lender’s architect’s and engineering fees), demands, liabilities, penalties, fines and forfeitures of any nature whatsoever
that may be asserted against or incurred by Lender, its officers, directors, employees, and agents arising out of, relating to,
or in any manner occasioned by this Agreement and the exercise of the rights and remedies granted Lender under this, as well as
by: (1) the ownership, use, operation, construction, renovation, demolition, preservation, management, repair, condition, or maintenance
of any part of the Collateral; (2) the exercise of any of Borrower’s rights collaterally assigned and pledged to Lender
hereunder; (3) any failure of Borrower to perform any of its obligations hereunder; and/or (4) any failure of Borrower to comply
with the environmental and ERISA obligations, representations and warranties set forth herein. The foregoing indemnity provisions
shall survive the cancellation of this Agreement as to all matters arising or accruing prior to such cancellation and the foregoing
indemnity shall survive in the event that Lender elects to exercise any of the remedies as provided under this Agreement following
default hereunder. Borrower’s indemnity obligations under this section shall not in any way be affected by the presence
or absence of covering insurance, or by the amount of such insurance or by the failure or refusal of any insurance carrier to
perform any obligation on its part under any insurance policy or policies affecting the Collateral and/or Borrower’s business
activities. Should any claim, action or proceeding be made or brought against Lender by reason of any event as to which Borrower’s
indemnification obligations apply, then, upon Lender’s demand, Borrower, at its sole cost and expense, shall defend such
claim, action or proceeding in Borrower’s name, if necessary, by the attorneys for Borrower’s insurance carrier (if
such claim, action or proceeding is covered by insurance), or otherwise by such attorneys as Lender shall approve. Lender may
also engage its own attorneys at its reasonable discretion to defend Borrower and to assist in its defense and Borrower agrees
to pay the fees and disbursements of such attorneys.


 


Consent
to Loan Participation. Borrower agrees and consents to Lender’s sale or transfer, whether now or later, of one or more
participation interests in the Loan to one or more purchasers, whether related or unrelated to Lender. Lender may provide, without
any limitation whatsoever, to any one or more purchasers, or potential purchasers, any information or knowledge Lender may have
about Borrower or about any other matter relating to the Loan, and Borrower hereby waives any rights to privacy Borrower may have
with respect to such matters. Borrower additionally waives any and all notices of sale of participation interests, as well as
all notices of any repurchase of such participation interests. Borrower also agrees that the purchasers of any such participation
interests will be considered as the absolute owners of such interests in the Loan and will have all the rights granted under the
participation agreement or agreements governing the sale of such participation interests. Borrower further waives all rights of
offset or counterclaim that it may have now or later against Lender or against any purchaser of such a participation interest
and unconditionally agrees that either Lender or such purchaser may enforce Borrower’s obligation under the Loan irrespective
of the failure or insolvency of any holder of any interest in the Loan. Borrower further agrees that the purchaser of any such
participation interests may enforce its interests irrespective of any personal claims or defenses that Borrower may have against
Lender.


 


Non-Liability
of Lender. The relationship between Borrower and Lender created by this Agreement is strictly a debtor and creditor relationship
and not fiduciary in nature, nor is the relationship to be construed as creating any partnership or joint venture between Lender
and Borrower or any contractor. Lender is not an agent or representative of Borrower. This Agreement does not create a contractual
relationship with and shall not be construed to benefit or bind Lender in any way or create any contractual duties by Lender to
any contractor, subcontractor, materialman, laborer, or any other person. Borrower is exercising Borrower’s own judgment
with respect to Borrower’s business. All information supplied to Lender is for Lender’s protection only and no other
party is entitled to rely on such information. There is no duty for Lender to review, inspect, supervise or inform Borrower of
any matter with respect to Borrower’s business. Lender and Borrower intend that Lender may reasonably rely on all information
supplied by Borrower to Lender, together with all representations and warranties given by Borrower to Lender, without investigation
or confirmation by Lender and that any investigation or failure to investigate will not diminish Lender’s right to so rely.


 




    	 	Page 15	 



     


    


 CONSTRUCTION
                                         LOAN AGREEMENT


(Continued)



 


Notices.
Any notice required to be given under this Agreement shall be given in writing, and shall be effective when actually delivered,
when actually received by telefacsimile (unless otherwise required by law), when deposited with a nationally recognized overnight
courier, or, if mailed, when deposited in the United States mail, as first class, certified or registered mail postage prepaid,
directed to the addresses shown near the beginning of this Agreement. Any party may change its address for notices under this
Agreement by giving formal written notice to the other parties, specifying that the purpose of the notice is to change the party’s
address. For notice purposes, Borrower agrees to keep Lender informed at all times of Borrower’s current address. Unless
otherwise provided or required by law, if there is more than one Borrower, any notice given by Lender to any Borrower is deemed
to be notice given to all Borrowers.


 


Notice
of Lender’s Breach. Borrower must notify Lender in writing of any breach of this Agreement or the Related Loan Documents
by Lender and any other claim, cause of action or offset against Lender within thirty (30) days after the occurrence of such breach
or after the accrual of such claim, cause of action or offset. Borrower waives any claim, cause of action or offset for which
notice is not given in accordance with this paragraph. Lender is entitled to rely on any failure to give such notice.


 


No
Waiver by Lender. Lender shall not be deemed to have waived any rights under this Agreement unless such waiver is given in
writing and signed by Lender. No delay or omission on the part of Lender in exercising any right shall operate as a waiver of
such right or any other right. A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver
of Lender’s right otherwise to demand strict compliance with that provision or any other provision of this Agreement. No
prior waiver by Lender, nor any course of dealing between Lender and Borrower, or between Lender and any Grantor, shall constitute
a waiver of any of Lender’s rights or of any of Borrower’s or any Grantor’s obligations as to any future transactions.
Whenever the consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall
not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be
granted or withheld in the sole discretion of Lender.


 


Severability.
If a court of competent jurisdiction finds any provision of this Agreement to be illegal, invalid, or unenforceable as to
any circumstance, that finding shall not make the offending provision illegal, invalid, or unenforceable as to any other circumstance.
If feasible, the offending provision shall be considered modified so that it becomes legal, valid and enforceable. If the offending
provision cannot be so modified, it shall be considered deleted from this Agreement. Unless otherwise required by law, the illegality,
invalidity, or unenforceability of any provision of this Agreement shall not affect the legality, validity or enforceability of
any other provision of this Agreement.


 


Sole
Discretion of Lender. Whenever Lender’s consent or approval is required under this Agreement, the decision as to whether
or not to consent or approve shall be in the sole and exclusive discretion of Lender and Lender’s decision shall be final
and conclusive.


 


Successors
and Assigns. All covenants and agreements by or on behalf of Borrower contained in this Agreement or any Related Loan Documents
shall bind Borrower’s successors and assigns and shall inure to the benefit of Lender and its successors and assigns. Borrower
shall not, however, have the right to assign Borrower’s rights under this Agreement or any interest therein, without the
prior written consent of Lender.


 


Survival
of Representations and Warranties. Borrower understands and agrees that in extending Loan Advances, Lender is relying on all
representations, warranties, and covenants made by Borrower in this Agreement or in any certificate or other instrument delivered
by Borrower to Lender under this Agreement or the Related Loan Documents. Borrower further agrees that regardless of any investigation
made by Lender, all such representations, warranties and covenants will survive the extension of Loan Advances and delivery to
Lender of the Related Loan Documents, shall be continuing in nature, shall be deemed made and redated by Borrower at the time
each Loan Advance is made, and shall remain in full force and effect until such time as Borrower’s Indebtedness shall be
paid in full, or until this Agreement shall be terminated in the manner provided above, whichever is the last to occur.


 




    	 	Page 16	 



     


    

 CONSTRUCTION
                                         LOAN AGREEMENT


(Continued)



 


Time
is of the Essence. Time is of the essence in the performance of this Agreement.


 


Waive
Jury. All parties to this Agreement hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought
by any party against any other party.


 


DEFINITIONS.
The following capitalized words and terms shall have the following meanings when used in this Agreement. Unless specifically
stated to the contrary, all references to dollar amounts shall mean amounts in lawful money of the United States of America. Words
and terms used in the singular shall include the plural, and the plural shall include the singular, as the context may require.
Words and terms not otherwise defined in this Agreement shall have the meanings attributed to such terms in the Uniform Commercial
Code. Accounting words and terms not otherwise defined in this Agreement shall have the meanings assigned to them in accordance
with generally accepted accounting principles as in effect on the date of this Agreement:


 


Advance.
The word “Advance” means a disbursement of Loan funds made, or to be made, to Borrower or on Borrower’s
behalf on a line of credit or multiple advance basis under the terms and conditions of this Agreement.


 


Agreement.
The word “Agreement” means this Construction Loan Agreement, as this Construction Loan Agreement may be amended
or modified from time to time, together with all exhibits and schedules attached to this Construction Loan Agreement from time
to time.


 


Architect’s
Contract. The words “Architect’s Contract” mean the architect’s contract between Borrower and the
architect for the Project.


 


Borrower.
The word “Borrower” means Lex Partners II, LLC and includes all co-signers and co-makers signing the Note and
all their successors and assigns.


 


Closing
Date. The words “Closing Date” shall mean the date of Closing.


 


Collateral.
The word “Collateral” means all property and assets granted as collateral security for a Loan, whether real or
personal property, whether granted directly or indirectly, whether granted now or in the future, and whether granted in the form
of a security interest, mortgage, collateral mortgage, deed of trust, assignment, pledge, crop pledge, chattel mortgage, collateral
chattel mortgage, chattel trust, factor’s lien, equipment trust, conditional sale, trust receipt, lien, charge, lien or
title retention contract, lease or consignment intended as a security device, or any other security or lien interest whatsoever,
whether created by law, contract, or otherwise. The word “Collateral” includes without limitation all collateral described
in the Required Collateral section of this Agreement.


 


Completion
Date. The words “Completion Date” means February 28, 2017.


 


Construction
Contract. The words “Construction Contract” mean the contract between Borrower and the general contractor for
the Project, and any subcontracts with subcontractors, materialmen, laborers, or any other person or entity for performance of
work on the Project or the delivery of materials to the Project.


 


Default.
The word “Default” means the Default set forth in this Agreement in the section titled “Default”.


 


Environmental
Laws. The words “Environmental Laws” mean any and all state, federal and local statutes, regulations and ordinances
relating to the protection of human health or the environment, including without limitation the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et seq. (“CERCLA”), the Superfund Amendments
and Reauthorization Act of 1986, Pub. L. No. 99-499 (“SARA”), the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801, et seq., the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., or other applicable state
or federal laws, rules, or regulations adopted pursuant thereto.


 


ERISA.
The word “ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and
including all regulations and published interpretations of the act.


 


Event
of Default. The words “Event of Default” mean individually, collectively, and interchangeably any of the events
of default set forth in this Agreement in the default section of this Agreement.


 


GAAP.
The word “GAAP” means generally accepted accounting principles.


 


Guarantor.
The word “Guarantor” means any guarantor, surety, or accommodation party of any or all of the Loan and any guarantor
under a completion guaranty agreement, and, in each case, Borrower’s successors, assigns, heirs, personal representatives,
executors and administrators of any guarantor, surety, or accommodation party.


 




    	 	Page 17	 



     


    


 CONSTRUCTION
                                         LOAN AGREEMENT


(Continued)



 


Hazardous
Substances. The words “Hazardous Substances” mean materials that, because of their quantity, concentration or
physical, chemical or infectious characteristics, may cause or pose a present or potential hazard to human health or the environment
when improperly used, treated, stored, disposed of, generated, manufactured, transported or otherwise handled. The words “Hazardous
Substances” are used in their very broadest sense and include without limitation any and all hazardous or toxic substances,
materials or waste as defined by or listed under the Environmental Laws. The term “Hazardous Substances” also includes,
without limitation, petroleum and petroleum by-products or any fraction thereof and asbestos.


 


Improvements.
The word “Improvements” means all existing and future buildings, structures, facilities, fixtures, additions,
and similar construction on the Collateral.


 


Indebtedness.
The word “Indebtedness” means the indebtedness evidenced by the Note or Related Loan Documents, including all
principal and interest together with all other indebtedness and costs and expenses for which Borrower is responsible under this
Agreement or under any of the Related Loan Documents.


 


Lender.
The word “Lender” means Shepherd’s Finance, LLC, its successors and assigns.


 


Loan.
The word “Loan” means the loan or loans made to Borrower under this Agreement and the Related Loan Documents as
described herein.


 


Loan
Fund. The words “Loan Fund” mean the undisbursed proceeds of the Loan under this Agreement together with any equity
funds or other deposits required from Borrower under this Agreement.


 


Note.
The word “Note” means the promissory note dated February 19, 2016, in the original principal amount
of $3,600,000.00 from Borrower to Lender, together with all renewals of, extensions of, modifications of, refinancings of,
consolidations of, and substitutions for the promissory note or agreement.


 


Plans
and Specifications. The words “Plans and Specifications” mean the plans and specifications for the Project which
have been submitted to and initialed by Lender, together with such changes and additions as may be approved by Lender in writing.


 


Project.
The word “Project” means the construction project as described in the “Project Description” section
of this Agreement.


 


Project
Documents. The words “Project Documents” mean the Plans and Specifications, all studies, data and drawings relating
to the Project, whether prepared by or for Borrower, the Construction Contract, the Architect’s Contract, and all other
contracts and agreements relating to the Project or the construction of the Improvements.


 


Property.
The word “Property” means the property as described in the “Project Description” section of this Agreement.


 


Real
Property. The words “Real Property” mean the real property, interests and rights, as further described in the
“Project Description” section of this Agreement.


 


Related
Loan Documents. The words “Related Loan Documents” mean all promissory notes, credit agreements, loan agreements,
environmental agreements, guaranties, security agreements, deeds of trust, security deeds, assignment of rents, and all other
instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Loan.


 


Security
Agreement. The words “Security Agreement” mean and include without limitation any agreements, promises, covenants,
arrangements, understandings or other agreements, whether created by law, contract, or otherwise, evidencing, governing, representing,
or creating a Security Interest.


 


Security
Interest. The words “Security Interest” mean, individually, collectively, and interchangeably, without limitation,
any and all types of collateral security, present and future, whether in the form of a lien, charge, encumbrance, deed of trust,
security deed, assignment, pledge, crop pledge, chattel mortgage, collateral chattel, chattel trust, factor’s lien, equipment
trust, conditional sale, trust receipt, lien or title retention contract, lease or consignment intended as a security device,
or any other security or lien interest whatsoever whether created by law, contract, or otherwise.


 




    	 	Page 18	 



     


    


 CONSTRUCTION
                                         LOAN AGREEMENT


(Continued)






 


BORROWER
ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS CONSTRUCTION LOAN AGREEMENT AND BORROWER AGREES TO ITS TERMS. THIS CONSTRUCTION
LOAN AGREEMENT IS DATED February 19, 2016.


 


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


 


BORROWER:


 


Lex
Partners II, LLC


 


	 	 	(Seal)
	 	 	 
	By:	/s/
    Steven Hanson	
	 	Steven
    Hanson, Manager and Member of Lex Partners II, LLC	 


 


LENDER:


 


	Shepherd’s
    Finance, LLC	 
	 	 	 
	By:	/s/
    Shannon R. Lee	 
	Name:
    	Shannon
    R. Lee	 
	Title:	Authorized
    Signatory	 


 




    	 	Page 19	 



     


    


 


EXHIBIT
A


 


Lot
136, Harbor Acres, Section 2, according to the map or plat thereof as recorded in Plat Book 4, Page 63, Public Records of Sarasota
County, Florida.