Document:

EX-4.2

 EXHIBIT 4.2 

FORM OF STOCK OPTION AGREEMENT 
 OPTIONEES TO
WHOM INCENTIVE STOCK OPTIONS ARE GRANTED MUST MEET CERTAIN HOLDING PERIOD AND EMPLOYMENT REQUIREMENTS FOR FAVORABLE TAX TREATMENT. 
 UNLESS
OTHERWISE STATED, ALL TERMS DEFINED IN THE PLAN SHALL HAVE THE SAME MEANING HEREIN AS SET FORTH IN THE PLAN. 
 STOCK OPTION AGREEMENT

 COMMUNITY WEST BANCSHARES 

2014 STOCK OPTION PLAN 
  

	 	 ̈	Incentive Stock Option 

  

	 	 ̈	Non-Qualified Stock Option 

 THIS AGREEMENT, dated the ______ day of ________________________,
by and between Community West Bancshares, a California corporation (the “Company”), and ________________________________ (“Optionee”); 

WHEREAS, pursuant to the Community West Bancshares 2014 Stock Option Plan (the “Plan”), the Stock Option Committee has authorized
the grant to Optionee of a Stock Option to purchase all or any part of ______________________________ (______) authorized but unissued shares of the Company’s Common Stock at the price of __________________________ Dollars ($_______________)
per share, such Stock Option to be for the term and upon the terms and conditions hereinafter stated; 
 NOW, THEREFORE, it is hereby
agreed: 
 1. Grant of Stock Option. Pursuant to said action of the Stock Option Committee and pursuant to authorizations granted by
all appropriate regulatory and governmental agencies, the Company hereby grants to Optionee the option to purchase, upon and subject to the terms and conditions of the Plan, which is incorporated in full herein by this reference, all or any part of
_____________________________ (______) Option Shares of the Company’s Common Stock at the price of _________________________________ Dollars ($__________ ) per share. For purposes of this Agreement and the Plan, the date of grant shall be
___________________. At the date of grant, Optionee does not own / owns stock possessing more than 10% of the total combined voting power of all classes of capital stock of the Company or any Subsidiary. 

 The Stock Option granted hereunder is / is not intended to qualify as an Incentive
Stock Option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended. 
 2. Exercisability. This
Stock Option shall be exercisable as to _____________ Option Shares on ______________; as to ______________ Option Shares on ______________; as to ______________ Option Shares on ______________; as to ______________ Option Shares on ______________;
and as to ______________ Option Shares on ______________. This Stock Option shall remain exercisable as to all of such Option Shares until ______________ ,______ (but not later than ten (10) years from the date hereof), at which time it shall
expire in its entirety, unless this Stock Option has expired or terminated earlier in accordance with the provisions hereof or of the Plan. Option Shares as to which this Stock Option become exercisable may be purchased at any time prior to
expiration of this Stock Option. 
 3. Exercise of Stock Option. This Stock Option may be exercised by: (i) delivering written
notice substantially in the form of Exhibit 1 hereto to the Company stating the number of Option Shares with respect to which this Stock Option is being exercised; (ii) delivering cash (or bank, cashier’s or certified check) and/or, if
permitted at or before the time of exercise by the Stock Option Committee, shares of Common Stock of the Company which when added to the cash payment, if any, have an aggregate Fair Market Value equal to the full amount of the purchase price of such
Option Shares; and (iii) unless the shares of Common Stock covered by the Plan have been registered with the Securities and Exchange Commission pursuant to the registration requirements under the Securities Act of 1933, delivering a written
representation letter in the form required by the Company. Not less than ten (10) Option Shares may be purchased at any one time unless the number purchased is the total number which remains to be purchased under this Stock Option and in no
event may the Stock Option be exercised with respect to fractional shares. Upon exercise, Optionee shall make appropriate arrangements and shall be responsible for the withholding of all federal and state income taxes then due, if any. 

4. Prior Outstanding Stock Options. Pursuant to Section 8(b) of the Plan, an Incentive Stock Option held by Optionee may be
exercisable while the Optionee has outstanding and unexercised any Incentive Stock Option previously granted to him or her by the Company, or a bank or corporation which (at the time of grant) is a parent or Subsidiary of the Company, or a
predecessor corporation of any such entity. 
 5. Cessation of Affiliation. Except as provided in Paragraph 6 hereof, if, for any
reason other than Optionee’s disability or death, Optionee ceases to be employed by or affiliated with the Company or a Subsidiary, this Stock Option shall expire ninety (90) days thereafter or on the date specified in Paragraph 2 hereof,
whichever is earlier. During such period after cessation of employment or affiliation, this Stock Option shall be exercisable only as to those increments, if any, which had become exercisable as of the date on which the Optionee ceased to be
employed by or affiliated with the Company or Subsidiary, and any Stock Options or increments which had not become exercisable as of such date shall expire and terminate automatically on such date. 

 6. Termination for Cause. If Optionee’s employment by or affiliation with the Company
or a Subsidiary is terminated for cause, this Stock Option shall expire thirty (30) days thereafter unless reinstated by the Stock Option Committee within thirty (30) days of such termination by giving written notice of such reinstatement
to Optionee. In the event of such reinstatement, Optionee may exercise this Stock Option only to such extent, for such time, and upon such terms and conditions as if Optionee had ceased to be employed by or affiliated with the Company or a
Subsidiary upon the date of such termination for a reason other than cause, disability or death. Termination for cause shall include, but shall not be limited to, termination for malfeasance or gross misfeasance in the performance of duties or
conviction of illegal activity in connection therewith, or any conduct detrimental to the interests of the Company or a Subsidiary, and, in any event, the determination of the Stock Option Committee with respect thereto shall be final and
conclusive. 
 7. Disability or Death of Optionee. If Optionee becomes disabled or dies while employed by or affiliated with the
Company or a Subsidiary, or during the ninety-day period referred to in Paragraph 5 hereof, this Stock Option shall automatically expire and terminate one (1) year after the date of Optionee’s disability or death or on the day specified in
Paragraph 2 hereof, whichever is earlier. After Optionee’s disability or death but before such expiration, the person or persons to whom Optionee’s rights under this Stock Option shall have passed by order of a court of competent
jurisdiction or by will or the applicable laws of descent and distribution, or the executor, administrator or conservator of Optionee’s estate, subject to the provisions of Paragraph 13 hereof, shall have the right to exercise this Stock Option
to the extent that increments, if any, had become exercisable as of the date on which Optionee ceased to be employed by or affiliated with the Company or a Subsidiary. For purposes hereof, “disability” shall have the same meaning as set
forth in Section 14 of the Plan. 
 8. Nontransferability. This Stock Option shall not be transferable except by will or by the
laws of descent and distribution, and shall be exercisable during Optionee’s lifetime only by Optionee. 
 9. Employment. This
Agreement shall not obligate the Company or a Subsidiary to employ Optionee for any period, nor shall it interfere in any way with the right of the Company or a Subsidiary to increase or reduce Optionee’s compensation. 

10. Privileges of Stock Ownership. Optionee shall have no rights as a stockholder with respect to the Option Shares unless and until
said Option Shares are issued to Optionee as provided in the Plan. Except as provided in Section 15 of the Plan, no adjustment will be made for dividends or other rights in respect of which the record date is prior to the date such stock
certificates are issued. 

 11. Modification and Termination by Board of Directors. The rights of Optionee are subject
to modification and termination upon the occurrence of certain events as provided in Sections 16 and 17 of the Plan. 
 12. Notification
of Sale. Optionee agrees that Optionee, or any person acquiring Option Shares upon exercise of this Stock Option, will notify the Company in writing not more than five (5) days after any sale or other disposition of such Shares. 

13. Approvals. This Agreement and the issuance of Option Shares hereunder are expressly subject to the approval of the Plan and the
form of this Agreement by the holders of not less than a majority of the voting stock of the Company. This Stock Option may not be exercised unless and until all applicable requirements of all regulatory agencies having jurisdiction with respect
thereto, and of the securities exchanges upon which securities of the Company are listed, if any, have been complied with. 
 14.
Notices. All notices to the Company provided for in this Agreement shall be addressed to it in care of its Chief Executive Officer at its main office and all notices to Optionee shall be addressed to Optionee’s address on file with the
Company or a Subsidiary, or to such other address as either may designate to the other in writing, all in compliance with the notice provisions set forth in Section 25 of the Plan. 

15. Incorporation of Plan. All of the provisions of the Plan are incorporated herein by reference as if set forth in full in this
Agreement. In the event of any conflict between the terms of the Plan and any provision contained herein, the terms of the Plan shall be controlling and the conflicting provisions contained herein shall be disregarded. 

16. 409A Savings Clause. (i) No action shall be taken hereunder or under the Plan which shall cause a Stock Option to fail to
comply with Section 409A of the Internal Revenue Code (the “Code”) or the Treasury Regulations thereunder, to the extent applicable to such Stock Option. If the Company determines that a Stock Option may be subject to
Section 409A of the Code and related Department of Treasury guidance (including such Department of Treasury guidance as may be issued after the date of this Agreement), the Company may take any action that it determines to be necessary or
appropriate to (a) exempt the Stock Option from Section 409A of the Code and/or preserve the intended tax treatment of the benefits provided with respect to the Stock Option, or (b) comply with the requirements of Section 409A of
the Code and related Department of Treasury guidance and thereby avoid the application of any penalty taxes under Section 409A of the Code. 

(ii) The Plan, this Agreement and the Stock Option granted hereunder are intended to comply with, or otherwise be exempt from,
Section 409A of the Code. The Plan, this Agreement and the Stock Option shall be administered, interpreted, and construed in a manner consistent with Section 409A of the Code. Should any provision of the Plan or this Agreement be found not
to comply with, or otherwise be exempt from, the provisions of Section 409A of the Code, such provision shall be modified and given effect (retroactively if necessary), in the sole discretion of the Company, and without the consent of Optionee,
in such manner as the Company determines to be necessary or appropriate to comply with, or to effectuate an exemption from, Section 409A of the Code. 

 (iii) Notwithstanding anything in the Plan or this Agreement to the contrary, in no event shall
the Company exercise its discretion to accelerate the payment or settlement of this Stock Option where such payment or settlement would constitute deferred compensation within the meaning of Section 409A of the Code unless and to the extent
that such accelerated payment or settlement is permissible under Treasury Regulation 1.409A-3(j)(4) or any successor provision. 
 IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. 
  

			
	COMMUNITY WEST BANCSHARES
		
	By:	 	  

		
	By:	 	  

	
	OPTIONEE
		
	By:	 	  

 ACKNOWLEDGMENT: 
 I hereby
acknowledge receipt of a copy of this Agreement as well as a copy of the Community West Bancshares 2014 Stock Option Plan. 
 OPTIONEE 

 

			
	By:	 	  

 EXHIBIT 1 

NOTICE OF EXERCISE OF STOCK OPTION 

Community West Bancshares 
 445 Pine Avenue 

Goleta, California 93117 
 Attention: Chief Executive Officer

 Board of Directors: 
 Pursuant to a Stock
Option Agreement dated ________________, _____, Community West Bancshares granted to me an option covering _________________ shares of its Common Stock at a price of $_____________ per share. Taking into account all appropriate adjustments for stock
splits and dividends and the like, as well as for option shares already exercised, if any, that Stock Option Agreement presently covers ________________ shares at approximately $_______________ per share. 

By executing this Notice, the undersigned hereby exercises the option as to ____________ shares (the “Shares”), for an aggregate
purchase price of $_______________, which Shares are currently vested and exercisable pursuant to the terms of the Stock Option Agreement. The exercise of the stock options effected hereby is subject to and pursuant to the terms of the Community
West Bancshares 2014 Stock Option Plan and the Stock Option Agreement by and between the undersigned and the Company. 
 In accordance with
the terms of the Community West Bancshares 2014 Stock Option Plan and my Stock Option Agreement, I hereby tender payment for, and the amount to be held withheld for taxes upon, the purchase of the Shares as follows: 

1. Purchase Price Paid: $___________________ 

Form of Payment: 
  

	 	 ̈	Cash 

  

	 	 ̈	Company, Cashier’s of Certified Check 

  

	 	 ̈	Funds Transfer From Account No. __________________ 

  

	 	 ̈	__________ Shares of the Company’s Common Stock (requires special approvals) 

 2. Withholding taxes: 

 ̈    (a) Submitted herewith is $__________________; or 

 ̈    (b) I have instructed my employer not to deposit with the Internal
Revenue Service and the California Franchise Tax Board any amount required to be withheld, as I will personally assume responsibility for the amounts and timing of my estimated tax withholding. 

As reported to me by _______________________, an officer of Community West Bancshares, the fair market value per share of Community West
Bancshares’s common stock as of this date is $_______________. 
 Please register the Shares in the following manner: 

 

	
	  

	Print or Type Name

 Please mail certificate to the following address: 
  

	
	  

	
	  

	
	  

  

									
	                                    
                                         
                	 		 		 	
	(Signature)	 		 		 		 	
				
	Dated:                                   
                                         
    	 		 	  
	 	
		 		 		 	(Type or Print Your Name)Exhibit 10.1

 

LOAN PURCHASE AND SALE AGREEMENT

 

This LOAN PURCHASE AND SALE AGREEMENT (this
“Agreement”) dated as of the 24th day of December, 2014 between SHEPHERD’S FINANCE, LLC, a Delaware
limited liability company (“Seller”) having an address at 12627 San Jose Boulevard, Suite 203, Jacksonville,
Florida 32223, and 1st FINANCIAL BANK USA, a South Dakota chartered banking corporation (“Buyer”)
having an address at 331 Dakota Dunes Blvd, Dakota Dunes, South Dakota 57049.

 

 

RECITALS

 

A.Seller is engaged
in the business of originating commercial loans (hereinafter referred to individually as a “Loan” or collectively
as “Loans”) to certain builders (hereinafter referred to individually as a “Borrower” or
collectively as “Borrowers”) for the construction of residential dwellings and/or the development of residential
buildings lots (hereinafter referred to individually as a “Property” or collectively as “Properties”).
The Loans will be evidenced by certain notes (hereinafter referred to individually as a “Note” or collectively
as “Notes”). The obligations under the Notes will be secured by, among other things, mortgages or deeds of trust
encumbering the Properties (hereinafter referred to individually as a “Mortgage” or collectively as “Mortgages”),
as more particularly described in the Mortgages.

 

B.Seller desires
to sell and Buyer desires to buy, from time to time, senior priority interests in certain Loans made to fund the vertical construction
of one to four family residential dwellings, that have been approved by Buyer’s internal credit committee, in its sole and
absolute discretion (hereinafter referred to individually as a an “Eligible Loan” and collectively as “Eligible
Loans”).

 

C.Subject to the
terms and conditions contained herein, Seller will service the Eligible Loans and act as administrative agent for Buyer and Seller
in respect of the Loans.

 

ARTICLE 1

 

INCORPORATION OF RECITALS; DEFINITIONS

 

1.1Incorporation of Recitals.
The above recitals are incorporated herein by this reference as if they were set forth herein in their entirety.

 

1.2Definitions.

 

As used in this Agreement, the following
terms have the following respective meanings:

 

“Accepted
Servicing Practices” shall mean a contractual (non-fiduciary) duty of Seller to Buyer to exercise the same degree of
care that administrative agents customarily apply in administering Loans similar to the Eligible Loans, or that Seller would exercise
if it owned one hundred percent (100%) of and were administering the Eligible Loans solely for Seller’s own account, whichever
is higher; in each case with a view to the maximization of timely recovery of principal and interest on the Eligible Loans on a
cost-effective basis, and without regard to conflicting interests; provided, however, that (i) prior to the Title Insurance Requirement
Date, Seller shall not be required to purchase title insurance on any Eligible Loans and (ii) for all Eligible Loans with a Senior
Loan Amount less than $250,000, Buyer accepts Seller’s practice of allowing the Borrower to select the appraiser.

 

    	1

    	 

    

 

 

“Advances(s)”
means any monies advanced or credit extended to a Borrower by Seller under the Loan Documents.

 

“Affiliate”
of a specified Person means a Person that (at the time when the determination is to be made) directly, or indirectly through
one or more intermediaries, controls, or is controlled by, or is under common control with, the specified Person. As used in the
foregoing sentence, the term “control” (including, with correlative meaning, the terms “controlling,”
“controlled by” and “under common control with”) means the possession, directly or indirectly, of the
power to vote 10% or more of the voting securities of any Person.

 

“Aggregate
Receipts” means, for any specified period, the aggregate amount of all Receipts during such period.

 

“Applicable
Law” means any order, law, statute, regulation, rule, ordinance, writ, injunction, directive, judgment, decree, principle
of common law, constitution or treaty enacted, promulgated, issued, enforced or entered by any Governmental Authority applicable
to the Parties, or any of their respective businesses, properties or assets.

 

“Assumed Obligations”
means all obligations and liabilities of Seller with respect to, or in connection with, the Transferred Rights resulting from facts,
events or circumstances arising or occurring on or after the Effective Date; excluding, however, the Retained Obligations.

 

“Business
Day” means all days except (i) Saturdays and Sundays, and (ii) days which are observed by the federal or state governments
or commercial banks as legal holidays.

 

“Buyer Event
of Default” has the meaning given to such term in Section 9.1.

 

“Buyer’s
Investment Amount” means the aggregate amount of Buyer’s commitments (funded and unfunded) under Eligible Loans
purchased by Buyer in connection with this Agreement and the Senior Loans.

 

“Closing”
means the occurrence of all acts required by this Agreement to assign and transfer the Transferred Rights from Seller to Buyer.

 

“Closing Conditions”
has the meaning given to such term in Section 2.2(b).

 

“Default Interest
Rate” means, as to each Eligible Loan, the Interest Rate plus a margin of six percent (6%) (the “Seller Default
Margin”). The Default Interest Rate is the rate at which interest shall accrue on the Senior Loans during the existence
of a Seller Event of Default under this Agreement. For the avoidance of doubt, during any period of time when a Borrower is in
default under the Loan Documents for a Senior Loan and therefore the Interest Rate applicable to such Senior Loan has been increased
by the Default Rate Margin (as defined in the underlying Loan Documents) payable by the Borrower under the Loan Documents for such
Senior Loan, then the Seller Default Margin shall not be applicable to such Senior Loan during such period of time.

 

“Distribution”
means any payment or distribution of Receipts to Buyer pursuant to and in accordance with Section 4.8.

 

“Effective
Date” means, with respect to this Agreement, the date of execution, and for each Eligible Loan, the date upon which each
of the conditions set forth in Section 2.2 have been satisfied by Seller or otherwise waived in writing by Buyer.

 

    	2

    	 

    

 

“Eligible
Balance” means, at any specific point in time for any Eligible Loan, an amount equal to (a) all Advances made by Seller
to a Borrower pursuant to an Eligible Loan minus (b) the sum of (i) all accrued lender fees, (ii) all escrowed builder deposit
amounts, (iii) all accrued or net funded builder deposit amounts, (iv) all accrued or net funded amounts for the payment of interest
that are, as of yet, not earned, (v) all other cash escrow amounts, including but not limited to, interest escrows funded
by Borrower, and (vi) any payoff made by Borrower.

 

“Exclusivity
Period” means the period of time commencing on the Effective Date of this Agreement and ending one hundred eighty (180)
days following the first funding made by Buyer to Seller pursuant to the terms of this Agreement, which period shall be extended
by ninety (90) days (to two hundred seventy (270) days) if, as of such one hundred eightieth (180th) day, Buyer’s
Investment Amount exceeds One Million ($1,000,000.00) Dollars. The Exclusivity Period shall also include any period of time during
the Term of this Agreement when Buyer’s Investment Amount exceeds Five Million ($5,000,000.00) Dollars. However, in no event
shall the Exclusivity Period include any period of time during which Buyer requires Seller to purchase title insurance on Eligible
Loans.

 

“Governmental
Authority” means the United States of America, and any federal, national, state, provincial, local or similar government,
governmental, regulatory or administrative authority, agency or commission, including any state insurance regulatory authority,
or any court, tribunal, or judicial or arbitral body within the United States of America.

 

“Guaranty”
means any guaranty of a Borrower’s obligations under a Loan.

 

“Interest
Rate” means, for each Eligible Loan, a per annum interest rate which is the greater of (i) ten percent (10%) per annum,
or (ii) the effective interest rate of the Loan pursuant to the Loan Documents, including any Default Interest Rate Interest payable
by a Borrower.

 

“Loan Collateral”
means any property, whether real or personal, tangible or intangible, of whatever kind and wherever located, whether now owned
or hereafter acquired or created, which has been pledged, mortgaged, assigned or otherwise transferred by a Borrower to, or in
or over which an encumbrance has been, or is purported to have been, granted to (or otherwise created) for the benefit of, Seller
and/or Buyer under the Loan Documents.

 

“Loan
Documents” means collectively the Note, Mortgage and all other agreements, instruments and documents executed and/or
delivered in connection with an Eligible Loan, all as may be supplemented, restated, superseded, amended or replaced from time
to time.

 

“Major Decision”
means (i) the release of any Loan Collateral; (ii) the release of any party from any liability under the Loan; (iii) except as
expressly set forth in the Loan Documents, the changing of the interest rate payable under the Loan; (iv) any amendment or modification
of any of the Loan Documents, including without limitation, the changing of the maturity date or amount of the Loan; (v) the granting
of consent to or acceptance of any cancellation or termination of any of the Loan Documents; (vi) the waiver of a material obligation
of, or release of any material claim against, Borrower or any co-maker, guarantor or endorser of the Loan; (vii) the pursuit of
any remedy upon a default under any of the Loan Documents; or (viii) acceptance of a deed in lieu of foreclosure.

 

    	3

    	 

    

 

“Material
Adverse Change” means any event, occurrence or change in conditions of any nature which could materially and adversely
affect the Loan, the Loan Collateral or Borrower’s or guarantor’s ability to perform its respective obligations under
any Loan Document. In determining whether any individual event would result in a “Material Adverse Change”, notwithstanding
that such event does not in and of itself have such an effect, a “Material Adverse Change” also shall be deemed to
have occurred if the cumulative effect of such event and all other than occurring events, occurrences and changes in conditions
would result in a “Material Adverse Change”.

 

“Person”
means any individual, partnership (whether general or limited), corporation, joint stock company, limited liability company,
trust (including a business or statutory trust), estate, association, custodian, nominee, joint venture or other entity, or a Governmental
Authority.

 

“Protective
Advance” means an advance made by Buyer or Seller to preserve or protect the Loan Collateral or Buyer's and Seller’s
interest therein upon a default by Borrower in its obligation to do so, including but not limited to payment of taxes, insurance
premiums, and amounts to remove or prevent imposition of liens (other than the Mortgage) on the Property, and reasonable attorneys’
fees and court costs incurred in connection therewith. Without limiting the generality of the foregoing, any advance made to finish
completion of renovations or construction of a Property, to fund a receivership estate relating to a Property, to fund operating
shortfalls, or to fund capital improvements to a Property, shall be considered a Protective Advance.

 

“Qualified
Transferee” means a bank, saving and loan association, investment bank, insurance company, trust company, commercial
credit corporation, pension plan, pension fund or pension advisory firm, or real estate investment trust, or any entity controlled
by any of the foregoing, provided that any such entity ) has total assets in excess of $100,000,000 and is regularly engaged
in the business of making or owning commercial real estate loans (or interests in commercial real estate loans) or operating commercial
properties.

 

“Receipts”
means any payments or other distributions received by Seller in respect of an Eligible Loan, whether received by voluntary payment,
involuntary payment setoff or otherwise, and whether in the form of cash, notes, securities, or other property (including Loan
Collateral), including, without limitation, all payments of principal, interest, default interest, late charges, prepayment fees,
commitment fees, exit fees and other fees of any kind or character, indemnification payments, reimbursements of expenses, insurance
proceeds and condemnation awards.

 

“Retained Obligations” means all obligations and liabilities of Seller relating to the Transferred Rights
that (i) as to each Eligible Loan, result from facts, events or circumstances arising or occurring prior to the Effective Date
of such Eligible Loan, (ii) result from Seller’s breach of its representations, warranties, covenants, or agreements under
this Agreement or the Loan Documents, (iii) result from Seller’s bad faith, gross negligence, or willful misconduct, or (iv)
are attributed to Seller’s actions or obligations in any capacity under the Loan Documents.

 

“Seller Event
of Default” has the meaning given to such term in Section 7.1.

 

“Senior Loan”
means the portion of an Eligible Loan purchased by Buyer.

 

“Senior Loan
Amount” means the amount (expressed in Dollars) of the portion of an Eligible Loan purchased by Buyer. Unless
another amount is set forth in the Loan Notification, such amount shall be equal to the lowest of (i) fifty-five percent (55%)
of the Seller-approved appraised value of the Property securing the Loan (as evidenced by an appraisal satisfactory to Buyer
in all respects), (ii) Two Hundred Forty-Nine Thousand Nine Hundred Ninety-Nine and 00/100 Dollars ($249,999.00), and (iii)
fifty percent (50%) of the maximum principal amount of the Eligible Loan after deducting the loan fee.

 

    	4

    	 

    

 

"Senior Loan Percentage" means the Senior
Loan Amount divided by the amount of the maximum principal amount of the Eligible Loan after deducting the loan fee.

 

“Subordinated
Loan” means the remaining portion of an Eligible Loan not purchased by Buyer.

 

“Subordinated
Loan Amount” means the principal amount of an Eligible Loan less the Senior Loan Amount.

 

“Subordinate Loan Percentage"
means the amount of the Subordinate Loan divided by the amount of the Eligible Loan.

 

“Title Insurance Requirement Date”
means the date on which Buyer elects pursuant to Section 3.28(e) to start requiring Seller to obtain title insurance for all new
Loans.

 

“Title Insurance Requirement Notice”
means a notice delivered to Seller by Buyer informing Seller that title insurance is required for all new Loans as provided for
in Section 3.28(e).

 

“Transferred
Rights” means any and all of Seller’s right, title and interest in, to and under the Senior Loans (including any
commitment to make Advances) and, to the extent related thereto, the following:

 

(a)all amounts funded by or payable
to Seller under the Loan Documents, and all obligations owed to Seller in connection with the Senior Loan;

 

(b)the Note, the Mortgage and the
other Loan Documents;

 

(c)all claims (including “claims”
as defined in Bankruptcy Code §101(5)), suits, causes of action, and any other right of Seller, whether known or unknown,
against Borrower, Guarantor or any other obligor, or any of their respective Affiliates, agents, representatives, contractors,
advisors, or any other entity that in any way is based upon, arises out of or is related to any of the foregoing, including, to
the extent permitted to be assigned under Applicable Law, all claims (including contract claims, tort claims, malpractice claims,
and claims under any law governing the purchase and sale of, or indentures for, securities), suits, causes of action, and any other
right of Seller against any attorney, accountant, financial advisor, or other entity arising under or in connection with the Loan
Documents or the transactions described therein;

 

(d)all Guaranties and all Loan Collateral and security
of any kind for or in respect of the foregoing; and

 

(e)all proceeds of the foregoing.

 

    	5

    	 

    

 

 

ARTICLE 2

 

PURCHASE AND SALE OF ELIGIBLE LOANS;
ADVANCES

 

2.1Purchase and Sale.

 

(a)Subject to the terms and conditions
of this Agreement, Buyer shall have the right from time to time to purchase from Seller a Senior Loan interest in each Eligible
Loan which Seller agrees to sell to Buyer (or is required to sell to Buyer in accordance with the terms of this Agreement relating
to the Exclusivity Period). Seller shall sell to Buyer a Senior Loan interest in each such offered Eligible Loan which Buyer elects
to purchase in its sole discretion. Except as to Loans in existence prior to the date of this Agreement (which Loans may be presented
by Seller to Buyer at any time), Seller shall notify Buyer no later than fourteen (14) days after Seller has originated and closed
a Loan transaction with a Borrower by notification in the form of Exhibit “A” annexed hereto (a “Loan Notification”).
Each Loan Notification shall include copies of the documents set forth in Section 2 of the Loan Notification with respect to such
Loan (the “Due Diligence Documents”). Each Loan Notification (i) shall constitute, as to each Eligible Loan
as to which Seller elects to or is required to offer to sell a Senior Loan interest in, an offer for Buyer to purchase a Senior
Loan interest therein, and (ii) shall set forth, among other things, the total Eligible Loan, the Eligible Balance, the Senior
Loan Amount and the Senior Loan Percentage being offered to Buyer. The commencement of the 14-day requirement shall not be triggered
by delivery by Seller to Buyer of a term sheet or other loan information concerning a Loan prior to closing of the Loan or by any
preapproval of a Loan by Buyer.

 

(b)Buyer shall have seven (7)
Business Days from receipt of a Loan Notification (the “Due Diligence Period”) to complete its due diligence,
to determine if a particular Loan qualifies as an Eligible Loan, and to determine whether Buyer shall purchase the applicable Senior
Loan. If Buyer notifies Seller at any time during the Due Diligence Period that Buyer will purchase an applicable Senior Loan,
the parties will proceed to a Closing of Buyer’s purchase of such Senior Loan on the terms set forth in the Loan Notification
and in accordance with the terms of this Agreement. From time to time upon written request by Seller, Buyer shall provide to Seller,
as to Eligible Loans which have not yet closed, a preapproval in writing within seven (7) Business Days after receipt by Buyer
of a term sheet or other information concerning an Eligible Loan.

 

(c)In the event of a conflict between
the terms of a Loan Notification and this Agreement, the terms of the Loan Notification shall prevail, provided that this sentence
shall not be interpreted to permit Seller to disregard the terms of this Agreement or to excuse a breach of this Agreement by Seller.

 

2.2 Purchase Price; Closing
Conditions; Closing.

 

(a)The purchase price for each
Senior Loan purchased by Buyer shall be expressed in the Loan Notification and, unless otherwise agreed by Seller and Buyer, shall
be an amount (the “Purchase Price”) equal to the lesser of (i) an amount equal to fifty percent (50%) of the
Eligible Balance at the time of the Closing of sale of the Senior Loan interest in such Eligible Loan and (ii) the Senior Loan
Amount; provided that in no event shall the Purchase Price include any loan fee or portion thereof.

 

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(b)Buyer shall pay the Purchase Price to Seller
by cash or wire transfer of immediately available funds at each Closing, provided the following conditions have been satisfied
by Seller (the “Closing Conditions”):

 

(i)Seller has been, and continues to,
provide reporting to Buyer on its entire portfolio of Loans, which reporting shall be satisfactory to Buyer, in its sole and absolute
discretion;

 

(ii)Seller has been, and continues
to, provide specific and detailed reporting to Buyer on all Eligible Loans purchased by Buyer, which specifications and details
shall be satisfactory to Buyer, in its sole and absolute discretion;

 

(iii)The Eligible Loan is performing
in all respects at the time of the Closing;

 

(iv)All representations of Seller in
this Agreement are accurate at the time of the Closing;

 

(v)Seller makes such additional representations
to Buyer relating to the Eligible Loan as Buyer shall request;

 

(vi)Seller delivers the original Note
duly endorsed to Buyer in a form approved by Buyer;

 

(vii)Seller delivers an original and
duly executed assignment of Mortgage in customary form for the jurisdiction in which the Property is located and reasonably acceptable
to Buyer, which assignment may be recorded against the Property by Buyer only in accordance with Section 7.2, Remedies;

 

(viii)Seller delivers to Buyer copies
of all other Loan Documents relating to the Eligible Loan, and, after recording, the original recorded Mortgage (Buyer and Seller
agree that a recorded mortgage may not be available for delivery to Buyer at the initial funding, but delivery thereof to Buyer
shall be a condition precedent to all subsequent advances by Buyer in respect of that Loan;

 

(ix)Seller delivers proof satisfactory
to Buyer that the Mortgage securing the Eligible Loan has been (or, if Buyer is purchasing a Senior Loan interest in such loan
on the date of closing of such loan with the Borrower, satisfactory proof that the Mortgage will be) properly recorded in the applicable
recording office in which the Property is located;

 

(x)Prior to the Title Insurance Requirement
Date, Seller delivers to Buyer a copy of all title work related to the Eligible Loan and provides representations and warranties
to Buyer to the effect that (1) Seller is performing title work consistent with its current procedures and policies, and (2) title
to the Property securing such Loan is reasonably clear and defect-free.

 

(xi)On and after the Title Insurance
Requirement Date, Seller shall deliver to Buyer a copy of all title work related to the Eligible Loan and upon receipt by Seller,
a copy of the title insurance policy insuring such Eligible Loan.

 

(xii)Seller delivers to Buyer any contracts
of sale, purchase agreements and leases relating to the Property; and

 

(xiii)Seller delivers to Buyer any
other items or documents that Buyer may reasonably request in connection with the purchase of the Senior Loan.

 

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(c)At the Closing, and in consideration
of the payment of the Purchase Price and the mutual covenants and agreements contained herein, and subject to the terms and conditions
of, this Agreement:

 

(i)Seller shall irrevocably sell, assign,
transfer, grant and convey the Transferred Rights to Buyer;

 

(ii)Buyer shall acquire the Transferred
Rights and agree to perform and comply with the Assumed Obligations; and

 

(iii)Seller shall remain responsible
for, and shall assume and agree to perform and comply with the Retained Obligations. Buyer assumes no obligations other than the
Assumed Obligations.

 

2.3Reserved.

 

2.4Advances to Borrowers; Senior
Loan Fundings.

 

(a)Subject
to the terms and conditions of this Agreement, each time during the term of an Eligible Loan that a Borrower requests an Advance
from Seller under an Eligible Loan (the “Advance Request”), Seller shall fund such Advance from Seller’s
own funds and provide Buyer with a written request (a “Senior Loan Funding Request”) for Buyer to reimburse
Seller for a portion of such Advance in an amount equal to the Senior Loan Percentage of such Advance (each such reimbursement,
a “Senior Loan Funding”). Each Senior Loan Funding Request shall include: (i) the amount of the Advance requested
by Borrower; (ii) the amount of the requested Senior Loan Funding; (iii) electronic funds transfer instructions for the account
of Seller to which Buyer is to remit the Senior Loan Funding; (iv) a copy of Borrower’s draw notice, certifications and all
other items required in connection with an Advance under the Loan Documents; (v) an inspection report confirming the status of
construction and percent of work complete, if requested by Buyer; (vi) evidence that Seller has funded the Advance to Borrower,
(vii) evidence that all Closing Conditions have been satisfied, and (viii) such other items as may be reasonably requested by Buyer.
Subject to the terms of this Agreement, Buyer shall, within three (3) Business Days of receipt of the Advance Request together
with all of the foregoing items, reimburse Seller for a portion of the Advance in an amount equal to the Senior Loan Percentage
of such Advance. Each Senior Loan Funding by Buyer shall be deemed the direct funding by Buyer to Borrower of the Senior Loan Percentage
of the Advance in question.

 

(b)Notwithstanding anything to
the contrary contained herein, Buyer shall not be obligated to reimburse Seller for Advances in respect of an Eligible Loan (i)
in an amount which, when combined with all other Senior Loan Fundings in respect of such Eligible Loan, would exceed the Senior
Loan Amount, (ii) if there has been a Material Adverse Change with respect to the Borrower, the Eligible Loan, the Loan Collateral
or the Loan Documents, from the date of the Closing, (iii) if there has been, or currently exists, an Seller Event of Default by
Seller under this Agreement, (iv) any default exists under the Loan Documents for such Eligible Loan or (v) any loan fee or portion
thereof.

 

2.5Protective
Advances. Seller shall monitor and evaluate the need for Protective Advances and shall notify Buyer from time to time if
Seller recommends that it is in the best interests of Seller and Buyer to make a Protective Advance
in accordance with Accepted Servicing Practices. If Buyer agrees to make a Protective Advance recommended by Seller, Buyer
shall remit the Senior Loan Percentage of the Protective Advance and Seller shall fund the balance. For purposes of this Section
2.5, such a Protective Advance shall be deemed to have been made concurrently by both Buyer and Seller on the date that both parties
have funded their respective shares thereof, and shall constitute an Advance under the Eligible Loan. Protective Advances shall
bear interest at the Interest Rate.

 

2.6Interest
Rate. Except as otherwise expressly provided herein, interest on the Purchase Price and all Advances shall accrue at the
Interest Rate and shall be calculated as specified in the Loan Documents. Buyer’s share of such interest shall be calculated
based on the actual days funded by Buyer. All other amounts payable by Borrower in respect of the obligations under the Loan,
whether for fees, reimbursement of expenses or otherwise, shall be determined in accordance with the other Loan Documents.

 

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2.7Exclusivity. Provided
Buyer has purchased a Senior Loan from Seller or has made an Advance within the past three hundred sixty five (365) days, then
as to any Borrower to which Buyer has previously participated in an Eligible Loan by purchasing a Senior Loan from Seller (a “Qualifying
Borrower”), Seller hereby agrees as follows:

 

(a) during any Exclusivity Period, Seller
shall be obligated, as to each additional Loan for such Qualifying Borrower, to offer to Buyer the right to purchase a Senior Loan
in such Loan; provided, however, if Buyer elects not to purchase an offered Loan, Seller is not restricted in any manner from using
the Loan, including without limitation as collateral for any type of financing, selling such Loan or selling participation interest
in such Loan to any third-party; and provided, further, on and after the Title Insurance Requirement Date, Seller may alternatively
use such Loan as secured collateral in a non-Line of Credit financing, provided the new lender does not require, and will not obtain,
title insurance in respect of such loan; and

 

(b) during any time period which is not
within an Exclusivity Period, Seller may elect to either (i) offer Buyer the right to purchase a Senior Loan in such Loan ; provided,
however, if Buyer elects not to purchase an offered Loan, Seller is not restricted in any manner from using the Loan, including
without limitation as collateral for any type of financing, selling such Loan or selling participation interest in such Loan to
any third-party, (ii) hold the Loan in its portfolio on an unencumbered basis, (iii) use the Loan as secured collateral for a Line
of Credit or (iv) on or after the Title Insurance Requirement Date, use such Loan as secured collateral in a non-Line of Credit
financing, provided the new lender does not require, and will not obtain, title insurance in respect of the Loan.

 

For purposes of this Section 2.7,
the term “Line of Credit” means only a loan or credit facility extended to Seller which is secured by either
a pledge of all assets of Seller or an assignment of all or substantially all first mortgage construction loan assets of Seller.
The outstanding amounts under any Line of Credit shall not exceed than the greater of (i) One Million Five Hundred Thousand ($1,500,00.00)
Dollars, or (ii) twenty percent (20%) of the total amount of all Loans outstanding based upon the highest point of total Loan commitments
by Seller in the past three hundred sixty five (365) days.

 

Seller shall certify to Buyer in writing
at least quarterly that Seller is in compliance with the terms of this Section 2.7.

 

2.8Non-Compete. Buyer
shall not originate loans to Borrowers with whom Buyer developed a relationship solely pursuant to Buyer’s participation
in the funding of Loans through the purchase of Senior Loans from Seller under this Agreement, or as to which Buyer has received
Confidential Information as a result of its relationship with Seller in connection with this Agreement. However, Buyer may originate
loans to Borrowers whom Buyer has developed a relationship outside the terms of this Agreement and not in violation of the August
6, 2014 Confidentiality Agreement between Buyer and Seller.

 

SECTION 3

 

SELLER’S REPRESENTATIONS, WARRANTIES
AND COVENANTS

 

Seller hereby represents
and warrants to Buyer that as of the Effective Date of this Agreement and as to any particular Eligible Loan, as of the date of
the sale of any applicable Senior Loan to Buyer:

 

3.1Status. Seller has
been duly organized and validly exists as a limited liability company in good standing under the laws of its jurisdiction.

 

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3.2Authority. Seller
has been duly authorized and empowered by all necessary limited liability company action to execute and deliver this Agreement
and any other document or instrument executed and delivered in connection herewith, and to perform its obligations thereunder.
The execution and delivery of this Agreement and the performance of the obligations to be performed hereunder do not, and will
not, violate any provisions of any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award presently
in effect applying to it or its limited liability company agreement.

 

3.3Licensing. Seller
holds all applicable federal, state, local and other licenses or permits, authorizations and approvals required for the proper
conduct of its business and to perform its obligations under this Agreement in compliance with Applicable Law, is not in violation
of any of the requirements of any such licenses, permits, authorizations and approvals, and has not received any notice of proceedings
relating to the revocation or modification of any such license.

 

3.4No Breach. Seller
is not in default with respect to any order or decree of any court or any order, regulation or demand of any federal, state, municipal
or governmental agency, which default would materially and adversely affect the condition (financial or other) or operations of
Seller or its properties or would materially adversely affect its performance hereunder. The execution and delivery of this Agreement
and the performance of the obligations by Seller to be performed hereunder do not and will not result in a breach of or constitute
a default under any indenture, loan or credit agreement, lease, or any other agreement or instrument to which it is a party or
by which it or its assets may be bound or affected.

 

3.5Validity. When
duly executed and delivered, this Agreement constitutes the legal, valid and binding obligation of Seller. Seller is in full compliance
with all applicable federal and state regulatory capital requirements and is not operating under any order by any federal or state
agency regulating its activities that would restrict its ability to enter into or perform this Agreement.

 

3.6No Litigation
and Claims. There is no civil, criminal or administrative notice, action, suit, demand, claim, hearing, proceeding,
notice of violation, inquiry or investigation from, by or before any Government Authority pending or, to the knowledge of the Seller
threatened, against the Seller or any of its Affiliates that, individually or in the aggregate, would have a Material Adverse Change
on this Agreement or on any action taken or to be taken in connection with Seller’s obligations contemplated herein, or which
would be likely to impair materially its ability to perform under the terms of this Agreement. The Seller is not subject to any
order, writ, judgment, award, injunction or decree of any Governmental Authority of competent jurisdiction or any arbitrator or
arbitrators that, individually or in the aggregate, would be likely to impair materially its ability to perform under the terms
of this Agreement.

 

3.7No Material Misstatements.
No representation, warranty or written statement made by or on behalf of Seller in this Agreement, or in any schedule, exhibit,
report, written statement, certificate or other document furnished by Seller in connection with the transactions contemplated
herein, or with respect to any Loans, contains or will contain any untrue statement of a material fact or omits to state a material
fact necessary to make the statements contained herein or therein not misleading.

 

3.8No Adverse Selection.
Seller has not used any means to adversely select Loans for sale from the rest of Seller’s portfolio which is not the subject
of the sale, including without limitation, identifying Loans subject to additional levels of risk to Buyer which risks are known
to Seller but not disclosed to Buyer.

 

 

    	10

    	 

    

 

3.9Right to Transfer.
The sale of the Transferred Rights hereunder is and will be free of any lawful claim by any party claiming by, through or under
Seller.

 

3.10No Modification.
Seller has not modified any Mortgage or Note or any other Loan Document in any material respect, or satisfied, canceled or subordinated
any Mortgage or Note in whole or in part or released all or any material portion from the lien of the Mortgage, or executed any
instrument of release, cancellation or satisfaction.

 

3.11Loan Documents.
The list of loan documents attached to this Agreement as Exhibit “B” is a true, complete and correct list of
all documents for a typical Loan.

 

3.12No Previous Transfers.
In the event Seller has previously pledged, encumbered, sold, conveyed or assigned any interest in the Loan or the Loan Documents
to any other party, such previous holder of any interest in the Loan or the Loan Documents has duly released or reassigned such
interest to Seller and Seller has identified such circumstance(s) to Buyer. At the time of the sale of the Transferred Rights to
Buyer, each of the Loan and the Loan Documents is free from any liens, contract rights or other encumbrances whatsoever.

 

3.13Ownership of Loan.
Subject to the interest of Buyer pursuant to this Agreement, Seller is the sole legal and beneficial owner and holder of the Loans
and the Transferred Rights. The Senior Loans were originated, closed, funded and transferred to Buyer in full compliance with all
applicable federal, state and local laws and regulations, and any and all other consumer protection and applicable disclosure requirements.
Without limiting the foregoing, Seller has disclosed to Borrowers, as required by applicable law, all compensation paid to Seller
in connection with the origination and sale of Loans.

 

3.14Defenses. There
is no right of rescission, offset, defense (including the defense of usury) or counterclaim to the Note or Mortgage, including
the obligation of the Borrower to pay the unpaid principal and interest on such Note. As of the date of purchase of the Senior
Loans, there are no mechanics’ liens or other claims or encumbrances that affect the lien priority of the Mortgage relating
to the Loan.

 

3.15Origination and Servicing
Practices. The origination, servicing and collection practices used by Seller with respect to the Loans comply with all
Applicable Laws and investor or insurer guidelines, and have been, in all respects, legal and proper. With respect to escrow payments,
all such payments are in the possession of Seller and there exists no deficiencies in connection therewith for which customary
arrangements for repayment thereof have not been made. Any party which holds (directly or through an agent) any Loan Documents
shall promptly deliver the Loan Documents for any Eligible Loan to any attorney who is commencing an enforcement action against
a Borrower in respect of such Eligible Loan and who has requested such Loan Documents in writing.

 

3.16Enforceability.
The original Notes and Mortgages are genuine and each is the sole legal, valid and binding obligation of the maker thereof, enforceable
in accordance with its respective terms. All parties to the Notes and Mortgages had the legal capacity to execute and deliver the
Notes and Mortgages, and the Notes and Mortgages have been duly and properly executed by such parties.

 

3.17No Proceedings.
To the best of Seller’s knowledge, there are no proceedings or investigations pending or threatened before any court or
governmental body (i) asserting the invalidity of the Loans, (ii) asserting the bankruptcy or insolvency of a Borrower, (iii)
seeking to prevent payment and discharge of the Loans, or (iv) seeking any determination or ruling that might materially and adversely
affect the validity or enforceability of the Loans.

 

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3.18Full Disclosure.
Seller has disclosed to Buyer all material information in Seller’s possession or control relating to the Loans and the Borrower.

 

3.19Affiliate Transactions.
Except as a lender to Borrower or as otherwise disclosed in writing by Seller to Buyer, neither Seller nor any of its Affiliates
has engaged in any kind of business with Borrower, any guarantor on the Loans or any of their respective subsidiaries, owners (direct
or indirect and including partners, shareholders and members) or Affiliates. Seller has no interest in any Borrower.

 

3.20Due Diligence.
Seller has obtained copies of all documents and instruments required to be provided by Borrower in connection with the Loans pursuant
to Seller’s policies and procedures, and all conditions to making any Advances set forth in the Loan Documents have been
satisfied.

 

3.21Information. Seller
shall timely deliver to Buyer all financial and non-financial information regarding the Borrowers and the Loans received from time
to time, including (i) all notices of default given or received under the Loan Documents, and (ii) all financial statements, if
any, and copies of other reports obtained under the Loan Documents.

 

3.22Books and
Records.  Seller shall maintain books and records reflecting all transactions relating to the Loans, and shall make
copies available to Buyer upon request.

 

3.23Segregated Accounts.
Seller shall segregate from its own funds Buyer’s share of any Receipts received by Seller.

 

3.24Amendment of Loan Documents.
Seller agrees that Seller will not modify, cancel or otherwise change in any manner any of the terms, covenants, or conditions
of any of the Loan Documents nor enter into any other agreements affecting the Loans without the prior written consent of Buyer.

 

3.25Compliance Certificate.
Seller shall deliver to Buyer, within fifteen (15) calendar days after the end of each calendar quarter, a certificate dated as
of the end of the quarter in question and signed by a responsible officer of Seller stating (i) that as of the date thereof no
default or event of default has occurred and is continuing under the terms of this Agreement, (ii) that Seller has notified Buyer
of any default or event of default that has occurred under the terms of the Loan Documents and (iii) that all representations and
warranties of Seller set forth in this Agreement remain true and correct as of the date of such compliance certificate.

 

3.26Reserved.

 

3.27Reporting. In addition
to any other reports required to be delivered herein, Seller shall deliver to Buyer the following reports and notifications:

 

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(a)Monthly Aggregate Receipts.
Not later than the twentieth (20th) day of each calendar month, a report of Aggregate Receipts during the preceding
month, which report shall include (i) a reasonably detailed breakdown by payment category and by Loan of all Receipts received
by Seller from Borrowers during the preceding calendar month, and (ii) an accounting of the total amount, as of the end of such
calendar month, of all payments made by Seller to Buyer;

 

(b)Distribution Report.In
conjunction with each Distribution, Seller shall provide Buyer a statement indicating the amount of the Distribution with (i) a
reasonably detailed breakdown by payment category of the Receipts underlying the Distribution (i.e., interest, principal or other
fee payable under the Loan Documents) and (ii) a reasonably detailed breakdown by category of the Distribution to Buyer and Seller
pursuant to Section 4.8;

 

(c)Interest Report: Not
later than the twentieth (20th) day of each calendar month, a report of interest accrued and paid under Eligible Loans,
which report shall include, without limitation, (i) the amount of accrued interest which a Borrower is not obligated to pay on
a monthly basis pursuant to the Loan Documents, and (ii) the amount of accrued interest which Seller pays to Buyer which is not
collected from a Borrower; for avoidance of doubt, amounts not yet due and payable under a Senior Loan are not yet due and payable
hereunder;

 

(d)Seller Event of Default.
Immediately upon any officer or manager of Seller becoming aware of the occurrence of any default or event of default by any Borrower
under the Loan Documents, a certificate of an authorized officer or manager of Seller setting forth the details thereof and, the
action which Seller proposes to take with respect thereto; and

 

(e)Financial Condition. Prompt
notification of any change in the financial condition of any Borrower that could result in a Material Adverse Change on repayment
of the Loan.

 

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3.28Representations Regarding
the Properties. Seller represents and warrants that Seller has conducted a due diligence investigation of each Borrower
and each Loan and, based on such investigation, further represents and warrants as follows:

 

(a)Title. Each Borrower
is the owner of the respective Property(ies) in fee simple, subject only to those liens and encumbrances in favor of Seller in
accordance with the Loan Documents.

 

(c)Utilities. All utility
services necessary for the construction of the proposed improvements on the Property are available at the boundaries of the Property.

 

(d)Environmental Matters.
Seller has no knowledge of the existence of any violation with respect to the Property of any Applicable Laws of any Governmental
Authority relating to environmental, pollution, health or safety matters that will or threatens to impose a material liability
on the Borrower or the Property or would require a material expenditure by the Borrower to cure, except any matters disclosed in
written reports delivered by Seller to Buyer prior to Buyer’s purchase of an interest in the Loan secured by the Property.

 

(e)First Lien Priority, Title
Insurance. Each Mortgage is a valid and enforceable first lien on the Property and for mortgages dated on and after the Title
Insurance Requirement Date, is insured by an American Land Title Association (“ALTA”) lenders’ loan title
insurance policy issued by an underwriter acceptable to Buyer, which policy is subject only to the lien of current real estate
taxes and assessments, and covenants, conditions and restrictions, rights of way, easements and other matters of public record
as of the date of recording of such Mortgage, such exceptions appearing of record and being acceptable to mortgage lending institutions
generally or specifically reflected in the survey of the Property. The title insurance policy relating to the Loan, if applicable,
is in full force and effect and will be in force and effect upon the consummation of the transactions contemplated by this Agreement.
No claims have been made under such title insurance policy.

 

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(f)Insurance. The Properties
are insured by customary property insurance policies issued by an insurer acceptable to Buyer, and name the Seller as mortgagee/loss
payee. The Mortgage obligates the Borrower thereunder to maintain the property insurance policy at Borrower’s cost and expense,
and on Borrower’s failure to do so, the Mortgage authorizes the holder of the Mortgage to obtain and maintain such insurance
at such Borrower’s cost and expense, and to seek reimbursement from Borrower. Seller has not engaged in, and has no knowledge
of any Borrower having engaged in, any act or omission which would impair the coverage of any such policy, the benefits of the
endorsement provided for herein, or the validity and binding effect of the policy. If the Property is located in a flood hazard
area, the Property is insured by a flood insurance policy acceptable to Buyer, and all federal, state and local requirements with
respect to both hazard and flood insurance have been complied with in all material respects.

 

(g)No Impairment. No action,
error, omission, misrepresentation, negligence, fraud or similar occurrence with respect to the Loans have taken place on the part
of any person, including, without limitation, the Borrower, any appraiser, any builder or developer or insurer or any party involved
in the origination of the Loans or in the application for any insurance relating to the Loans that might result in a denial, failure
or impairment of full and timely coverage under any insurance policies required to be obtained or any pool insurance policy covering
the Loans.

 

(h)Seller
Compensation. Seller has not received any fee or other compensation except as permitted by applicable law and regulation, and
that it has disclosed any fee or other compensation in writing to the Borrower and Buyer as required by applicable law and regulation.

 

(j)Fair Consideration. In the
opinion of Seller, Seller has received fair consideration and reasonably equivalent value in exchange for the sale of each Senior
Loan to Buyer pursuant to this Agreement.

 

3.29Consent to a Transfer
by Borrower. Seller shall not consent to Borrower’s assignment or transfer of any Property or of any of Borrower’s
rights or obligations under the Loan Documents without the prior written consent of Buyer.

 

3.30Compliance with Loan
Documents. Seller has complied with, and has performed, all obligations required to be complied with or performed by it
under the Loan Documents, and Seller has not breached any of its representations, warranties, obligations, agreements or covenants
under any of the Loan Documents.

 

Each of the above representations and warranties
in this Article 3 (i) applies to all Senior Loans sold by Seller to Buyer, (ii) is for the benefit of Buyer and its successors
and/or assigns, and (iii) is in addition to any specific representation and warranties contained elsewhere herein. Each representation
relating to a specific Property is made only as of the date Buyer acquires an interest in the Loan secured by such Property. Each
representation regarding a specific Property or a specific Loan shall survive only until the Senior Loan relating thereto has been
paid to Buyer in full.

 

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ARTICLE 4

 

BUYER’S REPRESENTATIONS AND WARRANTIES

 

Buyer hereby represents
and warrants to Seller that as of the Effective Date of this Agreement and as to any particular Eligible Loan, as of the date of
the sale of any applicable Senior Loan to Buyer:

 

4.1Organization and Good
Standing. Buyer has been duly organized and shall be validly existing as a South Dakota chartered banking corporation,
and has power and authority to own its properties and to conduct its business as such properties shall then be owned and such business
is then conducted.

 

4.2Power and Authority.
Buyer has the organizational power and authority to execute and deliver this Agreement and to carry out its terms; Buyer shall
have full power and authority to purchase the property to be purchased and shall have duly authorized such purchase; and the execution,
delivery and performance of this Agreement shall have been duly authorized by Buyer by all necessary corporate action.

 

4.3Binding Obligation.
This Agreement shall constitute a legal, valid and binding obligation of Buyer, enforceable in accordance with its terms, except
as enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and other similar laws affecting creditors’
rights generally or by general principles of equity.

 

4.4No Conflicts or Breaches.
Buyer’s actions and conduct in consummating the transactions contemplated by this Agreement and the fulfillment of the terms
hereof do not and will not violate or breach any of the terms or provisions of, or constitute an event of default under, any agreement
to which it is a party or by which it is bound; not violate any order, judgment or decree applicable to each of any federal or
state court, regulatory body, administrative agency or other governmental instrumentality having jurisdiction over it or its properties;
which violation, breach or default (other than with respect to the formation documents) would have a material adverse effect on
the validity or enforceability of this Agreement, or on the ability of it to perform its obligations under this Agreement;

 

4.5No Litigation
and Claims. There is no civil, criminal or administrative notice, action, suit, demand, claim, hearing, proceeding,
notice of violation, inquiry or investigation from, by or before any Government Authority pending or, to the knowledge of the Buyer
threatened, against the Buyer or any of its Affiliates that, individually or in the aggregate, would have a Material Adverse Change
on this Agreement or on any action taken or to be taken in connection with Buyer’s obligations contemplated herein, or which
would be likely to impair materially its ability to perform under the terms of this Agreement. The Buyer is not subject to any
order, writ, judgment, award, injunction or decree of any Governmental Authority of competent jurisdiction or any arbitrator or
arbitrators that, individually or in the aggregate, would be likely to impair materially its ability to perform under the terms
of this Agreement.

 

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ARTICLE 5

 

ADMINISTRATION AND SERVICING OF THE LOAN;
PUT AND CALL OPTIONS; DISTRIBUTION WATERFALL

 

5.1.Seller
to Administer the Loans. Subject to the terms of this Agreement (including without limitation Article 9), Seller, as administrative
agent for Buyer, shall administer and service the Senior Loans in accordance with Accepted Servicing Practices, consistent with
applicable law and regulations, and in accordance with the Loan Documents, subject to the specific rights, duties and limitations
set forth herein.

 

5.2.Collections and Distributions.

 

(a) While
Seller is administrative agent and servicer for any Eligible Loans, Seller shall collect all payments due from Borrowers under
the Loan Documents for such Loans (other than payoff amounts, which are to be paid by Borrowers directly to Buyer) and distribute
them in accordance with Sections 5.8 and 5.9 of this Agreement on the last Business Day of each calendar month. Seller
shall pay to Buyer within ten (10) days after receipt of any Receipts all sums due to Buyer in respect of such Receipts as provided
in Section 5.8 and 5.9 of this Agreement; provided that in the event Seller receives any Receipts representing the payment
of principal due under an Eligible Loan, Seller shall within one Business Day deposit all such Receipts into an account with Buyer
that is controlled by Buyer. All fees associated with the account controlled by Buyer shall be paid by Buyer.

 

(b)Buyer shall distribute to
Seller and Buyer payoff amounts deposited with Buyer under this section (i) on the same Business Day if received by Buyer before
12:00 pm New York time, or (ii) on the next Business Day if received by Buyer after 12:00 pm New York time, and in any event in
accordance with the distribution priorities set forth in Section 5.8 and 5.9 of this Agreement.

 

(c)If either party fails to distribute
funds in accordance with this Section 5.2 when due, the party failing to make such distribution shall be obligated to pay
interest on the undistributed amount to the other party at the rate of the Interest Rate.

 

5.3.Servicing. Except
as otherwise expressly set forth in this Agreement (including without limitation Article 9), Seller shall be responsible for all
servicing duties required pursuant to the Loan Documents in connection with the administration of the Eligible Loans, including,
without limitation, making Advances, monitoring compliance by Borrower under the Loan Documents, conducting periodic lien and title
searches and undertaking all other duties relating to the administration of the Loans; provided, however, that in
the event Seller desires to undertake any act constituting a Major Decision, Seller shall be required to notify and obtain the
consent of Buyer and Buyer shall have five (5) Business Days to notify Seller in writing of its approval or disapproval of Seller’s
proposed course of action. If Buyer does not approve the proposed course of action, Seller shall refrain from taking such action.
In the event Buyer approves Seller’s proposed Major Decision, Seller shall carry out the proposed action.

 

5.4.Deposits.
Seller shall be entitled to receive and retain all interest earned on Borrower deposits held by Seller which Seller is not obligated
to pay over to the Borrower (collectively, “Deposit Earnings”). 

 

5.5.Call
Option. Seller, upon written notice to Buyer (a “Call Notice”), shall have the right at any time (the
“Call Option”) to repurchase from Buyer at any time the Transferred Rights pertaining to any Senior Loan or
two (2) or more Senior Loans. The purchase price (the “Call Price”) for each Senior Loan shall be an amount
equal to the outstanding principal amount of the Senior Loan held by Buyer plus accrued interest at the Interest Rate, provided
that if the aggregate interest paid to Buyer in respect of such Senior Loan as of the repurchase date shall be less than an amount
equal to four percent (4%) of the total commitment amount of Buyer in respect of such Senior Loan, then the purchase price shall
be increased by an amount equal to such shortfall (such that Buyer’s minimum return is four percent (4%) of such commitment
amount).

 

5.6Put Option. Buyer,
upon written notice to Seller (a “Put Notice”), shall have the right at any time (the “Put Option”),
in its sole and absolute discretion, to elect to require Seller to repurchase the Transferred Rights pertaining to any Senior
Loan, or any portion of a Senior Loan, or two (2) or more Senior Loans held by Buyer. The purchase price (the “Put Price”)
shall be an amount equal to the outstanding principal amount of the Senior Loan held by Buyer plus accrued interest at the Interest
Rate, provided that the aggregate Put Prices payable in respect of all Senior Loans put to Seller under this Section 5.6
during any trailing twelve (12) month period ending on the date of the Put Notice shall never exceed the Put Option Limit. The
“Put Option Limit” means an amount equal to ten percent (10%) of all fundings made by Buyer to Seller under
the Senior Loans during such twelve (12) month period. If the aggregate Put Prices would exceed the Put Option Limit, Seller shall
notify promptly Buyer of such fact and Buyer shall revoke the Put Notice as to any portion of a Senior Loan, or one or more Senior
Loans, such that the Put Price shall be brought below the Put Option Limit, and then the Put Option shall be completed in accordance
with Section 5.7.

 

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5.7Put-Call Procedure.
If Buyer exercises the Put Option or Seller exercises the Call Option, Buyer and Seller shall consummate the transactions contemplated
thereby in accordance with the following procedures (the “Put-Call Procedure”):

 

(a)The
transfer date for a Call Option will be the date which is ten (10) days after the delivery of the Call Notice.

 

(b)The
transfer date for a Put Option will be the date which is forty-five (45) days after the delivery of the Put Notice.

 

(c)At
any Put Option closing, Seller shall pay the Put Price to Buyer by wire transfer of immediately available funds to an account designated
by Buyer.

 

(d)At
any Call Option closing, Seller shall pay the Call Price to Buyer by wire transfer of immediately available funds to an account
designated by Buyer.

 

5.8Distributions Waterfall.
Except as otherwise specifically provided herein, all Receipts received by Seller will be applied in the following order of priority
on a Loan by Loan basis:

 

(a)From all collections of interest
payments under the Loan, an amount equal to all accrued, unpaid interest due to Buyer on the Senior Loan, calculated at the Interest
Rate, shall be paid to Buyer;

 

(b)All remaining collected interest
payments and all fee income shall be paid to Seller;

 

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(c)From all collections of principal
payments under the Loan, an amount equal to the outstanding balance of the Senior Loan shall be paid to Buyer, including without
limitation all Protective Advances made by Buyer under the Senior Loan, shall be paid to Buyer; and

 

(d)All remaining collected principal
payments shall be paid to Seller.

 

5.9Waterfall
After a Put Default. All Receipts received by Seller while a Put Default (as defined in Section 8.1(e)) exists under
this Agreement will be applied in the following order of priority on a Loan by Loan basis:

 

(a)First, an amount equal to all sums
then due and payable under all Senior Loans held by Buyer, including without limitation principal and interest calculated at the
Interest Rate, shall be paid to Buyer; for the avoidance of doubt, Receipts shall not be applied to pay any principal amounts
that are not yet due and payable;

 

(b)Second,
an amount equal to the aggregate unpaid amount of the Put Prices in respect of which Buyer has previously exercised a Put Option
shall be paid to Buyer;

 

(c)Third,
an amount equal to all sums then due and payable under all Subordinate Loans held by Seller, including without limitation principal
and interest calculated at the Interest Rate, shall be paid to Seller; for the avoidance of doubt, Receipts shall not be applied
to pay any principal amounts that are not yet due and payable; and

 

(d)Finally,
any remaining amounts shall be paid to Seller and Buyer in accordance with their respective initial Senior Loan Percentage and
Subordinate Loan Percentage of such Eligible Loan.

 

5.10Priority
of Senior Loan. Seller hereby irrevocably agrees that, notwithstanding any term or provision to the contrary set forth
in this Agreement (including, but not limited to, Section 5.8) or any of the Loan Documents, until the prior indefeasible
payment in full of all amounts due to Buyer in respect of the Senior Loan and the Transferred Rights:

 

(a) all amounts or
other payments by Seller or Buyer from or on behalf of Borrowers under or pursuant to the Loan Documents will be applied first,
to the payment of any amounts due to Buyer in respect of the Senior Loan and the other Transferred Rights, and second, to
the payment of any amounts due to Seller in respect of the Subordinated Loan;

 

(b) all amounts or
other payments received by Seller or Buyer in connection with the foreclosure upon or other realization on any Loan Collateral
will be applied first, to the payment of any amounts due to Buyer in respect of the Senior Loan and the Transferred Rights,
and second, to the payment of any amounts due to Seller in respect of the Subordinated Loan; and

 

(c) the rights of Seller
in and to the Loan Collateral or any security interests granted under the Mortgage or other Loan Documents shall be subordinated
to any and all rights of Buyer in and to the Loan Collateral and any security interests granted under the Mortgage or other Loan
Documents.

 

ARTICLE 6

 

INDEMNIFICATION

 

6.1Indemnification
by Seller. Seller, as an Indemnifying Party, hereby agrees to indemnify, defend and hold harmless Buyer and its successors
and assigns and their respective Affiliates, as an Indemnified Party, from and against any and all claims, losses, damages, fines,
penalties, forfeitures, legal fees, judgments and any other costs, fees and expenses relating to a breach by Seller or its agents
of any covenant, representation, warranty or obligation contained in this Agreement. 

 

6.2Indemnification
by Buyer. Buyer, as an Indemnifying Party, hereby agrees to indemnify, defend and hold harmless Seller and its successors
and assigns and their respective Affiliates, as an Indemnified Party, from and against any and all claims, losses, damages, fines,
penalties, forfeitures, legal fees, judgments and any other costs, fees and expenses relating to a breach by Buyer or its agents
of any covenant, representation, warranty or obligation contained in this Agreement.

 

6.3Indemnification
Procedures. If at any time a party entitled to indemnification hereunder ("Indemnified Party")
learns of any claim or loss for which indemnification by an indemnifying party hereunder ("Indemnifying Party")
may be asserted, the Indemnified Party shall give to the Indemnifying Party written notice within such time as is reasonable under
the circumstances, describing such claim or loss in reasonable detail. In the event that a demand or claim for indemnification
is made hereunder with respect to losses the amount or extent of which is not yet known or certain, the notice of demand for indemnification
shall so state, and, where practicable, shall include an estimate of the amount of the losses. In the case of any notice of indemnification
hereunder involving any claim of any third party, the Indemnifying Party shall have responsibility for, and shall assume all expense
with respect to, the defense or settlement of such claim; provided however, that:

 

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(a)the
Indemnified Party shall be entitled to participate in the defense of such claim and to employ counsel at its own expense to assist
in the handling of such claim; and

 

(b)the
Indemnifying Party shall obtain the prior written approval of the Indemnified Party before entering into any settlement of such
claim or ceasing to defend against such claim if, pursuant to or as a result of such settlement or cessation, (a) injunctive or
other relief (excepting the payment of money damages) would be imposed against any Indemnified Party, or (b) settlement would
involve admission of guilt or other action resulting in any criminal law sanctions, or (c) the settlement or cessation shall result
in an indemnification obligation of the Indemnifying Party that, in the reasonable judgment of the Indemnified Party, cannot be
fulfilled by the Indemnifying Party in accordance with the terms of this Agreement. If the Indemnifying Party does not provide
to the Indemnified Party, within fifteen (15) days after receipt of a notice of indemnification, a written acknowledgement that
the Indemnifying Party shall assume responsibility for the defense or settlement of such claim as provided in this Section
6.3, the Indemnified Party shall have the right to defend and settle the claim in such manner as it may deem appropriate at
the cost and expense of the Indemnifying Party, and the Indemnifying Party shall promptly reimburse the Indemnified Party therefor
in accordance with this Agreement.

 

ARTICLE 7

 

GUARANTY

 

7.1Guaranty.
If at any time Buyer shall not have acquired a Senior Loan from Seller within the immediately preceding six (6) month period, Seller
shall thereupon automatically deemed to be a guarantor of (and Seller hereby agrees to guaranty) the full payment of interest to
Buyer when due of all sums payable by Borrower in respect of all Senior Loans then held by Buyer. Such guaranty shall remain in
effect as to each Senior Loan until it has been paid in full.

 

ARTICLE 8

 

SELLER EVENTS OF DEFAULT; BUYER’S
REMEDIES

 

8.1Seller
Default. The occurrence of any one or more of the following events shall constitute a “Seller Event of Default”
under this Agreement:

 

(a)Representations
and Warranties. Any representation or warranty made by Seller pursuant to this Agreement, or any statement or other document
furnished pursuant hereto or in connection with the transactions contemplated hereby shall prove to be false, misleading, incomplete
or untrue in any material respect as of the date on which such representation or warranty is made;

 

(b)Covenants.
Any breach by Seller of any covenant, term, agreement or condition contained in this Agreement shall occur and shall continue unremedied
for a period of thirty (30) calendar days after Seller has or reasonably should have had notice thereof (provided that such
thirty (30) calendar day grace period shall only be allowed to Seller if Seller uses diligent efforts during such time to cure
such breach) or such shorter amount of time permitted for cure that is specifically provided herein;

 

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(c)Bankruptcy
or Insolvency. (i) The commencement of any proceeding under any bankruptcy or insolvency laws by or against Seller or its
principal Daniel Wallach and such proceeding shall not be dismissed within sixty (60) calendar days after the date of filing; (ii)
Seller is unable, or admits in writing its inability, to pay its recourse debts as they become due; (iii) Seller makes an assignment
for the benefit of creditors; (iv) Seller files a petition or applies to any tribunal for the appointment of a custodian, receiver
or any trustee for all or any portion of its assets; (v) Seller, by any act or omission, indicates its consent, approval of, or
acquiescence in the appointment of a receiver, custodian or trustee for all or any portion of its property; (vi) Seller is adjudicated
a bankrupt; (vii) Seller becomes insolvent however otherwise evidenced; or (viii) Seller ceases doing business as a going concern;

 

(d)Failure
to Collect or Pay Interest. Any failure on the part of Seller to pay to Buyer any distributions to Buyer in accordance
with Sections 5.8 and 5.9, which failure is not cured within ten (10) days;

 

(e)Put
Option. Any failure to repurchase a Loan under a Put Option and pay the Put Price to Buyer, which failure continues for
sixty (60) calendar days after delivery of a Put Notice by Buyer to Seller (a “Put Default”); or

 

(f)Maturity.
Any Eligible Loan remains outstanding for more than twelve (12) months from the date of closing of such Eligible Loan, except for
Loans where the Seller has executed a Call Option and is waiting for Buyer to complete transaction.

 

(g)Key
Person Event. Daniel Wallach no longer remains as a senior officer or manager of Seller, or has become disabled for a period
exceeding thirty (30) days, or has died.

 

8.2Buyer’s Remedies.
Upon the occurrence of any Seller Event of Default, Buyer shall have the following rights and remedies:

 

(a)In
calculating all Distributions to Buyer under this Agreement, interest shall accrue and be payable to Buyer at the Default Interest
Rate rather than the Interest Rate;

 

(b)Buyer
may record assignments of mortgage;

 

(c)Buyer
may exercise any and all rights available to Buyer at law or in equity;

 

(d)Buyer
may exercise all other rights and remedies expressly provided under this Agreement; and

 

(e)Such
other remedies as are available at law or in equity.

 

In addition, except in the case of a default
solely under Section 8.1(g), amounts advanced by Buyer hereunder and still outstanding shall bear interest at the Default
Interest Rate.

 

8.3Transfer
of Servicing. Upon the occurrence of an Seller Event of Default under Section 8.1(a), (b), (c) or (g), Buyer shall
have the right to relieve Seller from, and to assume, all loan administration and servicing rights and responsibilities under this
Agreement with respect to all Eligible Loans in which Buyer holds an interest. Upon the occurrence of a Seller Event of Default
under Section 8.1 (D), (E) or (F), Buyer shall have the right to relieve Seller from, and to assume, all loan administration
and servicing rights and responsibilities under this Agreement as to such Eligible Loan. Buyer may exercise its rights under this
Section 8.3 by giving not less than two (2) Business Days prior written notice to Seller, provided that as to each Seller
Event of Default, any such notice shall be given within forty five (45) days of the occurrence of such Seller Event of Default.

 

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8.4Remedies
Cumulative. All remedies available to Buyer are cumulative and not exclusive.

 

ARTICLE 9 

 

BUYER EVENTS OF DEFAULT; SELLER’S
REMEDIES

 

9.1Buyer
Default. The occurrence of any one or more of the following events shall constitute a “Buyer Event of Default”
under this Agreement: 

 

(a)Failure to Fund an Advance.
Any failure by Buyer to fund an Advance that Buyer is required to fund under the terms of this Agreement, provided that if Buyer
fails to advance within the time period required under this Agreement, Seller shall provide notice to Buyer and Buyer shall have
ten days from receipt of such notice to cure such failure;

 

(b)Bankruptcy or Insolvency.
(i) The commencement of any proceeding under any bankruptcy or insolvency laws by or against Buyer and such proceeding shall not
be dismissed within sixty (60) calendar days after the date of filing; (ii) Buyer is unable, or admits in writing its inability,
to pay its recourse debts as they become due; (iii) Buyer makes an assignment for the benefit of creditors; (iv) Buyer files a
petition or applies to any tribunal for the appointment of a custodian, receiver or any trustee for all or any portion of its assets;
(v) Buyer, by any act or omission, indicates its consent, approval of, or acquiescence in the appointment of a receiver, custodian
or trustee for all or any portion of its property; (vi) Buyer is adjudicated a bankrupt; (vii) Buyer becomes insolvent however
otherwise evidenced; (viii) control of Buyer is taken by a regulatory agency; or (ix) Buyer ceases doing business as a going concern;

 

(c)Failure to Distribute Principal.
Buyer fails to distribute to Seller cash from payoffs received by Seller in accordance with this Agreement which is not cured within
ten (10) days of written notice;

 

(d)Failure to Release Documents.
Buyer fails to release and deliver (or cause its agent to release and deliver), promptly following written demand, (i) to a closing
attorney a Mortgage or Note in Buyer’s possession or control when the related Mortgage Loan is paid in full (or into escrow
with the closing attorney in anticipation of a payoff when required under local law) or (ii) to an attorney handling an enforcement
action a Mortgage or Note in Buyer’s possession or control when required by such attorney in connection with the enforcement
action; provided that if Buyer fails to release such documents within the time period required under this Agreement, Seller shall
provide notice to Buyer and Buyer shall have ten days from receipt of such notice to cure such failure; or

 

(e)Call Option. Any failure
to transfer a Loan under a Call Option within the time period required under this Agreement; provided that if Buyer fails to transfer
the Loan within the time period required under this Agreement, Seller shall provide notice to Buyer and Buyer shall have ten days
from receipt of such notice to cure such failure.

 

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9.2Seller’s Remedies.
During the existence of any Buyer Event of Default, Seller shall have the following rights and remedies:

 

(a)the
four percent (4%) minimum interest requirement under Section 5.5 shall not apply;

 

(b)Seller
may offset against any payments due to Buyer under this Agreement an amount equal to the Advance amount that Buyer has failed to
fund;

 

(c)The
control account in Section 5.2 will be reversed, with funds going into a Seller controlled account, and Seller being obligated
to send Buyer’s proceeds (after giving effect to Section 9.2(b)) to Buyer under the same timing requirements;

 

(d)Section
2.7(a) of this Agreement shall not be applicable; and

 

(e)Such
other remedies as are available at law or in equity.

 

Upon a cure of any Events of Default, Seller’s
right to exercise any remedies as to such default shall cease.

 

9.3Remedies Cumulative.
All remedies available to Seller are cumulative and not exclusive.

 

ARTICLE 10

 

TERM; TERMINATION

 

10.1Term. The term
of this Agreement shall commence on the Effective Date and shall continue until terminated in accordance with Section 10.2
below (hereinafter the “Term”).

 

10.2Termination.
Unless otherwise agreed to in writing by the parties at the time, this Agreement shall terminate:

 

(a) when the entire indebtedness due under
the Loan Documents for all Senior Loans held by Buyer shall have been paid in immediately available funds, and Seller has paid
to Buyer, in immediately available funds, all amounts due under this Agreement, and no new amounts become due hereunder within
30 days thereafter, provided that no termination shall occur due to operation of this clause (a) during an Exclusivity Period;
or

 

(b) when all Senior Loans and Subordinate
Loans and the rights under this Agreement relating thereto shall be owned and held by one person, firm or corporation for its own
account for a period exceeding 30 days, provided that no termination shall occur due to operation of this clause (b) during an
Exclusivity Period; or

 

(c) upon written notice by either party
to the other if Buyer has not purchased a Senior Loan on or before March 1, 2015.

 

Each party will execute and deliver all
instruments, in recordable form, as may be necessary and appropriate to reflect the satisfaction of their respective interests
and/or the termination of this Agreement.

 

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ARTICLE 11

 

GENERAL PROVISIONS

 

11.1Modification.
Neither this Agreement nor any term hereof may be changed, waived, discharged or terminated orally, except by an instrument in
writing signed by the parties hereto.

 

11.2Successors
and Assigns. This Agreement shall be binding upon the parties hereto and their respective successors and assigns; provided,
however, that Seller may not transfer or assign any or all of its rights or obligations hereunder without the prior written
consent of Buyer, and Buyer may not transfer or assign any or all of its rights or obligations hereunder to any person other than
a Qualified Transferee without the prior written consent of Seller, which consent shall not be unreasonably withheld. In connection
with any such transfer, assignment or sale or proposed transfer, assignment or sale, Buyer may furnish any information concerning
this Agreement, the Loan or Seller to such actual or potential assignees or transferees provided that the actual or potential assignee
or transferee agrees to keep all such information confidential.

 

11.3Captions.
Captions used in this Agreement are for ease of reference only and do not define or limit provisions.

 

11.4Severability.
The provisions of this Agreement are specifically agreed to be severable. If any part hereof is unenforceable, the remainder of
the Agreement may be enforced as if such portion were not contained herein.

 

11.5Governing
Law. This Agreement shall be governed, interpreted and construed in accordance with the internal laws of the State of New
York, without regard to any conflict of law provision thereof that would require the application of the laws of any other jurisdiction.
Each of the parties hereto, to the extent permitted by law, knowingly, intentionally and voluntarily (i) submits to personal jurisdiction
in the State of New York over any suit, action or proceeding by any person arising from or relating to this Agreement, (ii) agrees
that any such action, suit or proceeding may be brought in any state or federal court of competent jurisdiction sitting in the
State of New York, (iii) submits to the jurisdiction of such courts, (iv) to the fullest extent permitted by law, agrees that it
will not bring any action, suit or proceeding in any other forum other than in the State of New York, and (v) agrees that the State
of New York is the proper venue for any suit, action or proceeding by any person arising from or relating to the Agreement.

 

11.6Attorneys’
Fees. In the event suit is filed with respect to this Agreement, or any documents executed pursuant hereto, the prevailing
party, in addition to all other sums which it may be entitled to, shall be entitled to recover its actual, reasonable attorneys’
fees from the other party.

 

11.7Notices.
All notices (including without limitation notices of default), demands or requests provided for or permitted to be given pursuant
to this Agreement must be in writing and given by both (i) personal delivery or by prepaid overnight delivery service and (ii)
email. Notices so given shall be effective when personally served, or one Business Day after sending when sent by prepaid overnight
delivery service. Notwithstanding the foregoing, all Loan Notifications, funding requests and reports shall be sent by electronic
mail only. The time period in which a response of any such notice, demand or request must be given, however, shall commence to
run from the date of receipt on the return receipt of the notice, demand or request by the addressee thereof. Rejection or other
refusal to accept or the inability to deliver because of change of address of which no notice was given shall be deemed to be receipt
of the note, demand or request sent. Such notice, demand or request shall be addressed as follows: 

 

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	 	To Seller:	Shepherd’s Finance, LLC
	 	 	12627 San Jose Blvd.
	 	 	Suite 203
	 	 	Jacksonville, FL  32223
	 	 	Attention: Dan Wallach
	 	 	Email:  danwallach@shepherdsfinance.com

 

 

 

	 	To Buyer:	1st Financial Bank USA
	 	 	Box 98 Main Street
	 	 	Dupree, SD 57623
	 	 	Attention:  Home Builder Finance
	 	 	Email: builderfinance@1fbusa.com
	 	 	 
	 	with a copy to:	1st Financial Funding & Investment Corporation
	 	 	55 E. 59th Street, 6th Floor
	 	 	New York, NY 10022
	 	 	Attention: Andrew Hegyi
	 	 	andrewhegyi@1fbusa.com

 

11.8Counterparts.
This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which together
shall be deemed to be one and the same instrument when each party has signed one such counterpart.

 

11.9Entire
Agreement; Amendments. This Agreement contains the entire agreement between the parties respecting the matters herein set
forth and supersedes all prior agreements between the parties hereto respecting such matters. This Agreement may be amended by
written agreement of amendment executed by both parties hereto, but not otherwise.

 

11.10.Time
of the Essence; Non-Business Days. Subject to the next full sentence, time is of the essence of this Agreement. Whenever
action must be taken (including the giving of notice or the delivery of documents) under this Agreement during a certain period
of time or by a particular date that ends or occurs on a non-Business Day, then such period or date shall be extended until the
immediately following Business Day. 

 

11.11.No
Third Party Beneficiaries. Nothing in this Agreement, expressed or implied, is intended to confer any rights or remedies
upon any person, other than the parties hereto and, subject to any restrictions on assignment herein contained, their respective
successors and assigns.

 

11.12Relationship
Between Buyer and Seller. The relationship between Seller and Buyer shall be that of seller and buyer. This Agreement shall
not be construed to create a partnership or joint venture between Buyer and Seller. In no event shall the transactions contemplated
by this Agreement be deemed or be construed, in whole or in part, as a loan from Buyer and Seller. 

 

11.13Reserved.

 

11.14Waivers.
Neither party shall be deemed to have waived any of its rights or remedies hereunder unless such waiver is (i) in writing,
and (ii) signed by such party, and then only to the extent specifically recited. No failure to exercise and no delay or omission
in exercising any right, remedy or recourse on the right of any party shall operate or be deemed as a waiver of such right, remedy
or recourse hereunder or thereunder or preclude any other or further exercise thereof. A waiver or release on any one occasion
shall not be construed as continuing, as a bar to, or as a waiver or release of any subsequent right, remedy or recourse on any
subsequent occasion. 

 

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11.15Dispute
Resolution. Any controversy regarding any provision of this Agreement, any Exhibit, or addendum hereto, shall be submitted
to binding arbitration in accordance with the then existing rules of the American Arbitration Association of JAMS, Inc. Any award
made by the arbitrator(s) may be enforced as a final judgment in any court of competent jurisdiction. The site for any such arbitration
shall be New York, New York. The arbitration shall be heard before an arbitrator mutually agreeable to by the parties; provided,
that if the parties cannot agree on the choice of arbitrator within ten (10) days after the first party seeking arbitration has
given written notice, then the arbitration shall be heard by three (3) arbitrators, one (1) chosen by each party, and the third
chosen by those two (2) arbitrators. The arbitrators will be selected from a panel of persons having experience with and knowledge
of the mortgage lending industry and at least one (1) of the arbitrators selected will be an attorney. Each party shall bear its
own attorneys’ fees, expert witness fees and costs in connection with such arbitration. A party shall be determined by the
arbitrator to be the prevailing party if its proposal for the resolution of the dispute is the closer to that adopted by the arbitrator.

 

11.16True
Sale; Not a Loan or Pledge. The purchase and sale of the Transferred Rights are intended to be a sale by Seller and a purchase
by Buyer of the Senior Loans. From and after the date hereof, Buyer and Seller shall own beneficially their respective Senior Loan
Percentage and Subordinate Loan Percentage in the Eligible Loan and the Loan Documents. This Agreement shall not be deemed to represent
a loan by Buyer to Seller, or a pledge by either party to the other party. In the event, however, that any court of competent jurisdiction
or binding arbitration were to hold that any transaction made pursuant hereto constitutes a loan and not a purchase and sale, it
is the intention of the parties hereto that this Agreement shall constitute a security agreement under applicable law and that
the Assignments of Mortgage and Endorsed Promissory Notes held by Buyer are security for the loan.

 

11.17Undivided
Interest in Loan Documents and Loan Collateral. Buyer and Seller shall each have an undivided interest in the Loan Documents
and in any property taken as security for each Eligible Loan, and if any such property or the proceeds thereof shall be applied
in reduction of the principal balance of the Eligible Loan, then each party shall be entitled to receive its pro rata share of
such application in accordance with the terms of this Agreement (giving due consideration to the priority of distributions provided
for herein). The parties acknowledge and agree that the Loan represents a single "claim" under Section 101 of the
Bankruptcy Code, and that neither party shall be a separate creditor of Borrower under the Bankruptcy Code.

 

11.18Notes
are Not Securities. No Note shall be deemed to be a security within the meaning of the Securities Act of 1933 or the Securities
Exchange Act of 1934.

 

11.19Confidentiality.
In no event shall either party to this Agreement issue any press release to any media of general circulation regarding this Agreement
or the transactions contemplated hereby or otherwise disclose any Confidential Information; provided, however, that nothing herein
shall be deemed to limit or impair in any way any party’s ability to disclose the details of the transaction contemplated
hereby to its legal and financial advisors or as may be necessary pursuant to any court or governmental order or applicable law
or in litigation. Notwithstanding the foregoing, no party hereunder shall have any liability by reason of the details of the transaction
contemplated hereby becoming known by means beyond the reasonable control of such party. The term “Confidential Information”
shall mean this Agreement and all proprietary information, data, trade secrets, business information and other information of any
kind whatsoever that a party discloses, in writing, digitally, orally or visually, to the other party or to which is obtained in
connection the negotiation and performance of this Agreement.

 

[signatures on next page]

 

 

    	26

    	 

    

 

IN WITNESS WHEREOF, the parties have executed
this Agreement as of the day and year first above written.

 

	 	SELLER:
	 	 
	 	 
	 	SHEPHERD’S FINANCE, LLC 
	 	a Delaware limited liability company
	Date:  December 24, 2014	 
	 	By: /s/
    Daniel M. Wallach
	 	Daniel M. Wallach
	 	Chief Executive Officer and Manager
	 	 
	 	 
	 	 
	 	BUYER:
	 	1st FINANCIAL BANK USA
	 	a South Dakota chartered banking corporation
	 	 
	Date:  December 24, 2014	 
	 	 
	 	By:
    /s/ Wayne R. Nesje
	 	Wayne R. Nesje
	 	SVP

 

 

    	27

    	 

    

 

EXHIBIT A

 

Shepherd’s Finance, LLC

LOAN NOTIFICATION AND OFFER FORM

 

Reference is made to that certain the Loan Purchase and Sale Agreement
between Seller and Buyer dated ________________, 201_ ( the “Loan PSA”). All capitalized terms used herein which are
defined in the Loan PSA shall have the meanings given to them in the Loan PSA. Seller hereby offers to sell to Buyer a Senior Loan
in the following Eligible Loan:

 

Section 1: Eligible Loan Information

 

	1.Loan Number:	 
	2.Borrower:	 
	3.Resume:	 
	4.Relationship/Affiliate Transactions:	
        ☐Borrower               ☐
        Investor $              

        ☐Other:

	5.History with SF:	0 Closed Loan; 0 Open loans;
	6.History with 1FB:	0 Closed Loan; 0 Open loans;
	7.Loan Collateral:	 
	8.Status:	☐ Spec          ☐ Pre-sale
	9.Current % Complete:	 
	10.Exceptions:	 
	11.Initial Interest Rate:	 
	12.Closing Date:	 

 

    	 

    	 

    

 

	Loan Size and Funding by Buyer	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	Appraised Value	$0	 	 	 	 	 	 
	Loan Amount	$0	 	 	 	 	 	 
	LTV	0%	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	Senior Loan Percentage	0%	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	Purchase Price (lesser of)	 	 	 	 	 	 
	$0.00	(i) the Senior Loan Amount	 	 	 	 	 
	$0.00	(ii) 50% of Eligible Balance	 	 	 	 	 	 
	$0.00	Purchase Price 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	(i) Senior Loan Amount (lesser of)	 	 	(ii) Eligible Balance ("a" less other line items)	 
	$0.00	(a) 55% of appraised value	 	 	$0.00	 	(a) Outstanding balance	 
	$249,999.00	(b) $249,999	 	 	$0.00	 	(b) lender fees	 
	$0.00	(c) 50% of loan, less loan fee	 	$0.00	 	(c) builder deposit	 
	$0.00	Senior Loan Amount	 	 	$0.00	 	(d) remaining interest escrow
	 	 	 	 	$0.00	 	(e) other cash 	 
	 	 	 	 	$0.00	 	(f) payoffs	 
	 	 	 	 	$0.00	 	Eligible Balance	 
	 	 	 	 	 	 	 	 
	 	 	 	 	$0.00	 	50% of Eligible Balance	 
	 	 	 	 	 	 	 	 

 

    	 

    	 

    

 

Section 2: Due Diligence Documents

 

	Included with Loan Notification Form	Buyer requires for Final Approval	Document
	☐Y   ☐N   ☐NA	☐	1.Appraisal
	☐Y   ☐N   ☐NA	☐	2.Application
	☐Y   ☐N   ☐NA	☐	3.Credit References
	☐Y   ☐N   ☐NA	☐	4.Credit Report
	☐Y   ☐N   ☐NA	☐	5.Business registration/licenses
	☐Y   ☐N   ☐NA	☐	6.Proof of registration with State Sec. of State/Certificate of Good Standing (if obtained)
	☐Y   ☐N   ☐NA	☐	7.Project Estimate
	☐Y   ☐N   ☐NA	☐	8.Land Purchase Contract
	☐Y   ☐N   ☐NA	☐	9.Home Purchase Contract (if applicable)
	☐Y   ☐N   ☐NA	☐	
        10.Insurance:

        Builder’s Risk / General Liability/ Flood Cert
        / Flood Insurance (if applicable)

	☐Y   ☐N   ☐NA	☐	11.Copy of Promissory Note with allonge (unexecuted)
	☐Y   ☐N   ☐NA	☐	12.Copy of Recorded Mortgage/Deed of Trust
	☐Y   ☐N   ☐NA	☐	13.Copy of Mortgage/Deed of Trust Assignment (unexecuted)
	☐Y   ☐N   ☐NA	☐	14.Copy of Recorded Assignment of Rents
	☐Y   ☐N   ☐NA	☐	15.Copy of Assignment of Rents Assignment (unexecuted)
	☐Y   ☐N   ☐NA	☐	16.Construction Loan Agreement/Building Loan Agreement
	☐Y   ☐N   ☐NA	☐	17.Settlement Statement (HUD-1), if applicable
	☐Y   ☐N   ☐NA	☐	18.Disbursement Request and Authorization
	☐Y   ☐N   ☐NA	☐	19.Guaranty(s)
	☐Y   ☐N   ☐NA	☐	20.Resolution
	☐Y   ☐N   ☐NA	☐	21.Builder Deposit Agreement
	☐Y   ☐N   ☐NA	☐	22.Interest Escrow Agreement
	☐Y   ☐N   ☐NA	☐	23.W-9
	☐Y   ☐N   ☐NA	☐	24.Customer Information Profile with ID
	☐Y   ☐N   ☐NA	☐	25.Title Search before closing or title commitment 
	☐Y   ☐N   ☐NA	☐	26.Title Search after closing
	☐Y   ☐N   ☐NA	☐	27.Foundation Survey
	☐Y   ☐N   ☐NA	☐	28.Inspection (most recent)
	☐Y   ☐N   ☐NA	☐	29.Plans (if obtained)
	☐Y   ☐N   ☐NA	☐	30.Other: 

 

    	 

    	 

    

 

Section 3: Submission & Receipt

 

Seller hereby represents and warrants to Buyer that;

1.The Loan described in this Loan Notification is an Eligible
Loan.

2.All information in this Loan Notification is true and correct.

3.No default or event of default exists under the Loan or the
Loan PSA.

 

	Submitted by Seller
	
         

        By _________________________________

         

        Name: _______________________________

         

        Title ________________________________

         

        Date ________________________________

 

 

Section 4: Acceptance or Rejection by Buyer

 

	
        Buyer’s due diligence is complete and Buyer:

        ☐ Declines to purchase a Senior Loan in the above Loan.

        ☐ Agrees to purchase a Senior Loan in the above Loan.

        ☐ Agrees to purchase a Senior
        Loan in the above Loan contingent upon receipt and acceptance of remaining due diligence documents indicated
	
        1st FINANCIAL BANK

         

        By: ______________________________

         

        Name: _____________________________

         

        Title: ______________________________

         

         

        Date: ______________________________

         

 

 

 

 

    	 

    	 

    

 

 

EXHIBIT B

 

List of Typical Loan Documents

 

Builder Deposit Agreement

Closing instructions

Construction Loan Agreement

Customer Information Profile 

Disbursement Request

Disburser's Notice-the original will arrive in your  office
today by USPS overnight mail

Deed of trust/mortgage

Draw Request

Guaranty

Hazardous Substance Agreement

Interest Escrow

Promissory Note

W-9

Customer Information Profile Instructions

ACH AGREEMENT

Assignment

Resolution

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