Document:

Exhibit 10.1

 

SHEPHERD’S FINANCE, LLC

Series B Cumulative Redeemable

Preferred Unit PURCHASE AGREEMENT

 

THIS Series
B Cumulative Redeemable Preferred Unit PURCHASE AGREEMENT (this “Agreement”) is made and entered into
this 31st day of December, 2014, by and among Investor’s Mark Acquisitions,
LLC (“IMA”), a Delaware limited liability company (the “Purchaser”), and
SHEPHERD’S FINANCE, LLC, a Delaware limited liability company (the “Company”).

 

WHEREAS, the Company,
pursuant to Section 3.05 of the Amended and Restated Limited Liability Company Operating Agreement of the Company dated March 29,
2012 (the “Operating Agreement”), proposes to issue and sell to the Purchaser an aggregate of 10 Series B Cumulative
Redeemable Preferred Units at a liquidation preference $100,000 per unit (the “Preferred Units”) in consideration for
the Purchaser agreeing to convert into Preferred Units an aggregate of $1,000,000 of the balance (the “Investment”)
of the Subordinated Promissory Note executed by the Company in favor of IMA dated December 29, 2010 (the “Note”), through
which IMA made a loan to the Company in the amount of $1,500,000;

 

WHEREAS, subject to
the terms and conditions and representations and warranties set forth in this Agreement, the Purchaser hereby agrees to purchase
10 Preferred Units through a Closing (as defined below);

 

WHEREAS, subject to
the terms and conditions and representations and warranties set forth in this Agreement, the Company further agrees to eliminate
the remaining balance of the Note by: (i) depositing at closing $125,000 into the interest escrow established pursuant to the December
30, 2011 credit agreement by and between the Company, IMA, Mark L. Hoskins, an individual residing in the Commonwealth of Pennsylvania
(“Hoskins”), and Benjamin Marcus Homes, LLC (“BMH”) (as amended, the “Credit Agreement”), and
(ii) refunding the balance of $375,000 to the Purchaser, in immediately available funds, upon the payment in full of the balance
due on the loan extended to BMH for construction of homes on lot 5 of the Tuscany subdivision pursuant to the Sixth Amendment to
Credit Agreement;

 

WHEREAS, the terms
and provisions of the Preferred Units shall be set forth and established in Amendment No. 1 (the “Amendment”), dated
as of the date hereof, to the Operating Agreement, which Amendment and Operating Agreement shall be substantially in the forms
attached hereto as Exhibits A-1 and A-2, respectively;

 

WHEREAS, the Preferred
Units are being offered and sold by the Company to the Purchaser without being registered with the Securities and Exchange Commission
(the “Commission”) under the Securities Act of 1933, as amended (the “1933 Act”), in reliance upon the
Section 4(a)(2) private placement exemption therefrom; and

 

WHEREAS, certain terms
used in this Agreement are defined in Section 14 hereof.

 

 

 

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NOW, THEREFORE, in consideration of the
promises and the mutual covenants contained herein, the parties hereby agree as follows:

 

Section
1.                 Representations
and Warranties of the Company. Except as set forth in the disclosure schedules hereto, the Company represents and warrants
to the Purchaser, as of the date hereof and as of the Closing Date (as defined below) and agree with the Purchaser, as follows:

 

(a)             
As of December 29, 2014, the only subsidiaries of the Company are the subsidiaries listed on Schedule I hereto
(the “Subsidiaries”).

 

(b)            
The Company has been duly organized and is validly existing as a limited liability company, in good standing under
the laws of the jurisdiction of its organization. Each Subsidiary has been duly organized and is validly existing as a corporation,
general or limited partnership, or limited liability company, as the case may be, in good standing under the laws of the jurisdiction
of its organization, except where the failure to be in good standing would not, individually or in the aggregate, result in a Material
Adverse Effect. Each of the Company and the Subsidiaries has full power and authority (limited partnership, corporate and other)
to conduct its business as described in the Registration Statement, and in the case of the Company, to enter into and perform its
obligations under this Agreement and to consummate the transactions contemplated hereby. Each of the Company and the Subsidiaries
is duly qualified or registered to do business in each jurisdiction in which the conduct of its business requires such qualification
or registration, except where the failure to be so qualified or registered would not, individually or in the aggregate, result
in a Material Adverse Effect; and, other than the Subsidiaries, as of the date hereof and as of each Closing, the Company does
not own and will not own any stock or other beneficial interest in any corporation, partnership, joint venture or other business
entity.

 

(c)             
As of November 30, 2014, the Company has 2,629 Class A common units outstanding. All of the issued and outstanding
Class A common units of the Company have been duly authorized and are validly issued, fully paid and non-assessable.

 

(d)            
There is no outstanding option, warrant, or other right requiring the issuance of any equity interests in the Company
or any equity interests in any Subsidiary or any security convertible into or exchangeable for such interests or shares.; however,
such future issuances shall be permitted under this Agreement and the Operating Agreement.

 

(e)             
This Agreement has been duly authorized, executed, and delivered by the Company and constitutes the legal, valid,
and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally or by general principles
of equity.

 

(f)             
The Operating Agreement has been duly authorized by the Company, and constitutes a legal, valid, and binding obligation,
enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency, reorganization, moratorium, or similar
laws affecting creditors’ rights generally or by general principles of equity. The Operating Agreement is in full force and
effect as of the date hereof and the Operating Agreement shall be in full force and effect as of the Closing Date.

 

(g)             
The Amendment has been duly authorized by the Company, and, when executed and delivered by the Company, will constitute
a legal, valid, and binding obligation, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting creditors’ rights generally or by general principles of equity.

 

 

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(h)            
The Preferred Units have been duly and validly authorized by the Company for issuance and sale pursuant to this Agreement
and, when issued and delivered by the Company pursuant to the terms of this Agreement against payment of the consideration therefor
specified herein, will be validly issued, and the Purchaser will not have any obligation to make payments to the Company or its
creditors (other than the purchase price for the Preferred Units) or contributions to the Company or its creditors solely by reason
of the Purchaser’s ownership of Preferred Units. The issuance of the Preferred Units will not be subject to the preemptive
or other similar rights of any security holder or member of the Company arising by operation of law, under the Operating Agreement
or any agreement to which the Company is a party.

 

(i)              
There are no transfer taxes or other similar fees or charges under federal law or the laws of any state, or any political
subdivision thereof, or any other Governmental Authority required to be paid in connection with the execution and delivery of this
Agreement or the issuance and sale by the Company of the Preferred Units.

 

(j)              
The execution, delivery, and performance by the Company of this Agreement and consummation of the transactions contemplated
hereby: (i) have been duly authorized by all necessary limited liability company or corporate action, as applicable, and will not
result in any Default (as defined below) under the limited liability company certificate of formation of the Company or the Operating
Agreement or any other organizational document of the Company, or any organizational document of any Subsidiary; (ii) will not
conflict with or constitute a breach of, or default (or, with the giving of notice or lapse of time, would be in default) (“Default”)
or a Debt Repayment Triggering Event (as defined below) under, or result in the creation or imposition of any Lien upon any property
or assets of the Company, or the Subsidiaries pursuant to, or require the consent of any other party to, any indenture, mortgage,
loan, or credit agreement, deed of trust, note, contract, franchise, lease, or other agreement, obligation, condition, covenant,
or instrument to which the Company or any Subsidiary is a party or by which it or any of its respective properties or assets may
be bound (collectively, “Agreements or Instruments”), and provided, that none of the Company or any Subsidiary
shall enter into any Agreement or Instrument that would restrict or limit in any respect the rights of the Purchaser as set forth
in this Agreement; and (iii) will not result in any violation of any statute, law, rule, regulation, judgment, order, or decree
applicable to the Company or the Subsidiaries of any court, regulatory body, administrative agency, governmental body, arbitrator,
or other authority having jurisdiction over the Company or the Subsidiaries or any of their respective properties or assets. No
consent, approval, authorization, or other order of, or registration or filing with, any Governmental Authority is required for
the execution, delivery, and performance by the Company of this Agreement or the transactions contemplated hereby, except such
as have been obtained or made by the Company and are in full force and effect or as may be required under the 1933 Act, the 1934
Act or applicable state securities or blue sky laws. As used herein, a “Debt Repayment Triggering Event” means any
event or condition which gives, or with the giving of notice or lapse of time would give, the holder of any note, debenture, or
other evidence of indebtedness (or any person acting on such holder’s behalf) the right to require the repurchase, redemption,
or repayment of all or a portion of such indebtedness.

 

 

 

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(k)            
The Company and the Subsidiaries have complied in all respects with all laws, regulations, and orders applicable
to them or their respective businesses, except as would not have a Material Adverse Effect; none of the Company or the Subsidiaries
is in default under any indenture, mortgage, deed of trust, voting trust agreement, loan agreement, bond, debenture, note agreement,
or evidence of indebtedness, lease, contract, or other agreement or instrument to which it is a party or by which it or any of
its respective properties or assets are bound, violation of which would individually or in the aggregate have a Material Adverse
Effect, and no other party under any such agreement or instrument to which the Company or the Subsidiaries are a party is, to the
knowledge of the Company, in default in any material respect thereunder; and the Company and the Subsidiaries are not in violation
of their respective limited liability certificate of formation, Operating Agreement, or other organizational documents, as the
case may be.

 

(l)              
There is not pending or, to the knowledge of the Company, threatened any action, suit, or proceeding to which the
Company and the Subsidiaries or any of their respective officers, directors, or members is a party, or of which any of their properties
or other assets is the subject, before or by any Governmental Authority, that is reasonably likely, individually or in the aggregate,
to result in any Material Adverse Effect or to have a material adverse effect on the ability of the Company to perform its obligations
under this Agreement or to consummate the transactions contemplated hereby.

 

(m)           
Each of the Company and the Subsidiaries holds all material licenses, certificates, and permits from Governmental
Authorities that are necessary to the conduct of its business and is in compliance with the terms and conditions of such licenses,
certificates and permits; and none of the Company or the Subsidiaries has received any notice of proceedings relating to the revocation
or modification of any such permits, licenses or certificates that, if determined adversely to the Company or any Subsidiary, would,
individually or in the aggregate, have a Material Adverse Effect.

 

(n)            
There is no claim by any of the Company or the Subsidiaries pending under any insurance policies which (a) has been
denied or disputed by the insurer other than denials and disputes in the ordinary course of business consistent with past practice
or (b) if not paid, would have a Material Adverse Effect. With respect to each such insurance policy, except as would not, individually
or in the aggregate, have a Material Adverse Effect, (a) the Company and the Subsidiaries have paid, or caused to be paid, all
premiums due under the policy and have not received written notice that they are in default with respect to any obligations under
the policy, and (b) to the knowledge of the Company, as of the date hereof no insurer on the policy has been declared insolvent
or placed in receivership, conservatorship or liquidation. None of the Company or the Subsidiaries have received any written notice
of cancellation or termination with respect to any existing insurance policy that is held by, or for the benefit of, any of the
Company or the Subsidiaries, other than as would not have, individually or in the aggregate, a Material Adverse Effect.

 

(o)            
There are no contracts, agreements or understandings between or among the Company or the Subsidiaries and any person
that would give rise to a valid claim against the Company or the Subsidiaries, or the Purchaser for a brokerage commission, finder’s
fee, or other like payment in connection with the offering, issuance and sale of the Preferred Units or as a result of any transactions
contemplated by this Agreement.

 

 

 

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(p)            
Each of the Company and the Subsidiaries has filed all federal, state, local, and foreign income tax returns which
have been required to be filed by it, except in any case in which the failure so to file would not have a Material Adverse Effect,
and has paid all taxes indicated by said returns and all assessments received by it to the extent that such taxes have become due,
except for any such assessment that is currently being contested in good faith or as would not have a Material Adverse Effect.
No tax deficiency has been asserted against the Company or any Subsidiary, nor does the Company know of any tax deficiency which
is likely to be asserted against the Company or any Subsidiary, except for any such deficiency that would not have a Material Adverse
Effect; all tax liabilities, if any, are adequately provided for on the respective books of the entities in all material respects.

 

(q)            
None of the Company or any Subsidiary is and, after giving effect to the issuance of the Preferred Units and the
application of the proceeds therefrom and the other transactions contemplated by this Agreement, none of the Company or any Subsidiary
will be, an “investment company” or a company “controlled” by an “investment company” within
the meaning of the Investment Company Act of 1940, as amended (the “1940 Act”).

 

(r)             
No Subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company,
from making any other distribution on such Subsidiary’s equity interests or capital stock, from repaying to the Company any
loans or advances to such Subsidiary from the Company or, from transferring any of such Subsidiary’s property or assets to
the Company or any other Subsidiary of the Company.

 

(s)             
Other than the Operating Agreement, there are no existing agreements among the Company and any of its members or
security holders that prohibit the sale, transfer, assignment, pledge, or hypothecation of any of the Company’s securities.

 

Section
2.                 Representations
and Warranties of the Purchaser. The Purchaser represents and warrants to and agrees with the Company as of the date hereof
and as of the Closing Date as follows:

 

(a)             
The Purchaser has been duly organized and is validly existing as a limited liability company in good standing under
the laws of the State of Delaware. The Purchaser has full limited liability company power to execute and deliver this Agreement
and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby.

 

(b)            
This Agreement has been duly authorized, executed, and delivered by the Purchaser, and constitutes the legal, valid,
and binding obligation of the Purchaser, enforceable in accordance with its terms, except as may be limited by bankruptcy, insolvency,
reorganization, moratorium, or similar laws affecting creditors’ rights generally or by general principles of equity.

 

(c)             
The Amendment has been duly authorized by the Purchaser and, when executed and delivered by the Purchaser, will constitute
the legal, valid, and binding obligation of the Purchaser, enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium, or similar laws affecting creditors’ rights generally or by general principles
of equity.

 

(d)            
The Purchaser need not give any notice to, make any filing with, or obtain any authorization, consent, or approval
of any Governmental Authority in order to consummate the transactions contemplated by this Agreement, except for such as have been
obtained and except for such as would not materially impede the transactions contemplated by this Agreement.

 

 

 

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(e)             
Neither the execution and delivery of this Agreement, nor the consummation of the transactions contemplated hereby,
will violate any constitution, statute, regulation, rule, injunction, judgment, order, decree, ruling, charge or other restriction
of any Governmental Authority to which the Purchaser is subject or any provision of its organizational documents, except for such
violations as would not materially impede the transactions contemplated by this Agreement.

 

(f)             
The Purchaser and its representatives have had an opportunity to ask questions and receive answers from the Company
regarding the terms and conditions of the sale of the Preferred Units to the Purchaser and the business, properties, prospects
and financial condition of the Company.

 

(g)             
The Purchaser is acquiring the Preferred Units for its own account for investment purposes and not with a view to
the distribution thereof.

 

(h)            
The Purchaser is an “accredited investor” within the meaning of Rule 501(a) under the 1933 Act.

 

(i)              
The Purchaser has substantial experience making large investments in companies similar to the Company and acknowledges
that it is able to fend for itself, can bear the economic risk of its investment and could afford a complete loss of such investment,
and has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of
an investment in the Preferred Units. The Purchaser acknowledges that in purchasing the Preferred Units it must be prepared to
continue to bear the economic risk of such investment for an indefinite period of time because the Preferred Units have not been
registered under the 1933 Act and cannot be sold unless they are subsequently registered under the 1933 Act and applicable state
securities laws, or unless exemptions from such registration requirements are available, and then will be only transferable in
accordance with the terms of the Operating Agreement, as modified by the Amendment, and pursuant to the terms of this Agreement.

 

(j)              
There are no contracts, agreements, or understandings between the Purchaser and any person that would give rise to
a valid claim against the Company for a brokerage commission, finder’s fee, or other like payment in connection with the
offering, issuance and sale of the Preferred Units to the Purchaser.

 

(k)            
It is understood that any certificate(s) evidencing the Preferred Units shall initially bear substantially the following
legend (in addition to any legend otherwise required under applicable federal or state securities laws or by the Partnership Agreement):

 

“THE SECURITIES EVIDENCED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE,
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM OR NOT SUBJECT TO SUCH REGISTRATION REQUIREMENTS.”

 

 

 

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Section
3.                 Sale and
Delivery to the Purchaser.

 

(a)             
On the basis of the representations and warranties contained herein and subject to the terms and conditions herein
set forth, the Company agrees to sell to the Purchaser, and the Purchaser agrees to purchase from the Company, an aggregate of
10 Preferred Units at the Closing, for the consideration specified in Sections 3(b)-(c) below.

 

(b)            
At the closing of the Investment (the “Closing”), the Company will deliver to the Purchaser a certificate
or an entry on its books and records representing 10 Preferred Units, equal to an Investment of $1,000,000, at which time the remaining
balance due from the Company on the Note shall be reduced by an amount equal to the Investment ($1,000,000). The date of such Investment
being herein referred to as the “Closing Date”).

 

(c)             
On the Closing Date, the Company shall deposit $125,000 into the interest escrow established pursuant to the Credit
Agreement.

 

(d)            
The certificate or book entry for the Preferred Units to be issued to the Purchaser shall be registered in such name
as the Purchaser may request in writing at least one full business day before the applicable Closing Date. If a certificate for
the Preferred Units is issued, the certificate will be made available for examination by the Purchaser in Jacksonville, Florida,
not later than 8:00 a.m. (Eastern Time) on the business day prior to the applicable Closing Date;

 

Section
4.                 Covenants
of the Company. The Company covenants with the Purchaser that:

 

(a)             
The Company agrees that the proceeds received from the sale of the Preferred Units shall be used solely for (i) the
conversion of $1,000,000 of the Company’s debt on the Note into preferred equity in the Company in favor of the Purchaser;
and (ii) for the payment of the costs, expenses, and fees incurred or to be incurred in connection with its entry into this Agreement,
and the transactions contemplated hereby (collectively, the “Approved Uses”).

 

Section
5.                 Payment of
Expenses. Each of Purchaser and the Company agrees to pay its own expenses arising in connection with the preparation of this
Agreement and in connection with the transactions contemplated hereby, including, without limitation, (i) all expenses incident
to the issuance and delivery of the Preferred Units; (ii) all fees and expenses of the Company’s counsel and other advisors;
(iii) all necessary issue, transfer, and other stamp taxes; and (iv) all reasonable out-of-pocket fees and expenses incurred by
the Purchaser, including, without limitation, the fees and expenses of the Purchaser’s outside counsel, title report fees
and costs, survey costs, and costs incurred in obtaining and/or reviewing due diligence materials, including, without limitation,
appraisals, environmental and engineering reports, and travel costs of the Purchaser’s personnel or representatives.

 

Section
6.                 Conditions
of the Purchaser’s Obligations. The obligations of the Purchaser hereunder are subject to the accuracy of the representations
and warranties of the Company herein included, to the performance by the Company of its obligations hereunder, and to the following
further conditions:

 

(a)             
At the Closing Date, (i) no proceedings shall be pending or, to the knowledge of the Company, threatened against
the Company or any Subsidiary before or by any Federal, state, or other commission, board, or administrative agency wherein an
unfavorable decision, ruling, or finding would reasonably be expected to result in any Material Adverse Effect, (ii) the representations
and warranties set forth in Section 1 hereof shall be accurate as though expressly made at and as of such Closing Date; and (iii)
the Company has complied in all material respects with all agreements and satisfied all conditions on its part to be performed
or satisfied at or prior to such Closing Date.

 

 

 

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(b)            
At the Closing Date, the Purchaser shall have received (i) the Amendment and the Operating Agreement, substantially
in the forms attached hereto as Exhibits A-1 and A-2, respectively, duly executed by the Company and on behalf of
the existing members (via power of attorney), and the Purchaser; and (ii) a certificate or book entry registered in the name of
the Purchaser representing the number of Preferred Units to be purchased by the Purchaser pursuant to Section 3 (the “Preferred
Units Certificate”), duly executed by the Company.

 

(c)             
At the Closing Date, counsel for the Purchaser shall have been furnished with such documents as it may reasonably
require in order to evidence the accuracy of any of the representations or warranties, or the fulfillment of any of the conditions,
herein included; and all proceedings taken by the Company that are necessary in connection with the issuance and sale of the Preferred
Units shall be satisfactory in form and substance to the Purchaser and its counsel.

 

If any condition specified
in this Section 6 shall not have been fulfilled when and as required to be fulfilled, this Agreement may be terminated by the Purchaser
by notice to the Company at any time at or prior to the Closing Date, and such termination shall be without liability of any party
to any other party, except that the provisions concerning payment of expenses under Section 5 hereof, the provisions concerning
indemnification under Section 7 hereof, and the provisions relating to governing law shall remain in effect.

 

Section
7.                 Indemnification.

 

(a)             
The Company agrees to indemnify, defend, and hold harmless the Purchaser from and against all actual third party
costs and expenses (including, without limitation, reasonable attorney’s fees and expenses) and any actual losses and damages
(collectively, “Losses”) suffered or incurred by the Purchaser (whether or not due to third party claims) that arise
out of or result from (i) any material inaccuracy in or any material breach of, as of the date hereof or as of the Closing Date,
any representation and warranty made by the Company in this Agreement; and (ii) any material failure by the Company to duly and
timely perform or fulfill any of their covenants or agreements required to be performed by them under this Agreement.

 

(b)            
The Purchaser shall indemnify and hold harmless the Company from and against any and all Losses suffered or incurred
by the Company (whether or not due to third party claims) that arise out of or result from (i) any material inaccuracy in or any
material breach of, as of the date hereof or as of the Closing Date, any representation or warranty made by the Purchaser in this
Agreement, and (ii) any material failure by the Purchaser to duly and timely perform or fulfill any of its covenants or agreements
required to be performed by the Purchaser under this Agreement.

 

 

 

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(c)             
All claims for indemnification by a party seeking indemnification under this Section 7 shall be asserted and resolved
as follows. If an indemnifying party intends to seek indemnification under this Section 7, it shall promptly notify the indemnifying
party in writing of such claim. The failure to provide such notice will not affect any rights hereunder except to the extent the
indemnifying party is materially prejudiced thereby. If such claim involves a claim by a third party against the indemnified party,
the indemnifying party may, within ten (10) days after receipt of such notice and upon notice to the indemnified party, assume,
with counsel reasonably satisfactory to the indemnified party, at the sole cost and expense of the indemnifying party, the settlement
or defense thereof (in which case any Losses associated therewith shall be the sole responsibility of the indemnifying party),
provided, that the indemnified party may participate in such settlement or defense through its own counsel and at its own
cost and expense; provided, further, that, if the indemnified party reasonably determines that representation by the indemnifying
party’s counsel of both the indemnifying party and the indemnified party may present such counsel with a material conflict
of interest, then the indemnifying party shall pay the reasonable fees and expenses of the indemnified party’s counsel, which
counsel will be approved in writing (including, without limitation, as to fee structure) by the indemnifying party, such approval
not to be unreasonably withheld, delayed or conditioned. Notwithstanding the foregoing, (i) the indemnifying party may, at the
sole cost and expense of the indemnifying party, at any time prior to the indemnifying party’s timely delivery of the notice
referred to in the third sentence of this Section 7(c), file any motion, answer or other pleadings or take any other action that
the indemnifying party reasonably believes to be necessary or appropriate to protect its interests, (ii) the indemnifying party
may take over the control of the defense or settlement of a third-party claim at any time if it irrevocably waives its right to
indemnity under this Section 7 with respect to such claim and (iii) the indemnifying party may not, without the consent of the
indemnifying party, settle or compromise any action or consent to the entry of any judgment, such consent not to be unreasonably
withheld. So long as the indemnifying party is contesting any such claim in good faith, the indemnifying party shall not pay or
settle any such claim without the indemnifying party’s consent, such consent not to be unreasonably withheld. If the indemnifying
party is not entitled to assume the defense of the claim pursuant to the foregoing provisions or is entitled but does not contest
such claim in good faith (including if it does not notify the indemnifying party of its assumption of the defense of such claim
within the ten (10)-day period set forth above), then the indemnifying party may conduct and control, through counsel of its own
choosing and at the expense of the indemnifying party, the settlement or defense thereof, and the indemnifying party shall cooperate
with it in connection therewith. The failure of the indemnifying party to participate in, conduct or control such defense shall
not relieve the indemnifying party of any obligation it may have hereunder. Any defense costs required to be paid by the indemnifying
party shall be paid as incurred, promptly against delivery of invoices therefor.

 

(d)            
The parties hereto agree that any indemnification payments made with respect to this Agreement shall be “grossed
up” such that the indemnifying party will pay an amount to the indemnifying party that reflects the hypothetical tax consequences
of the receipt or accrual of such indemnification payment, using the maximum applicable statutory rate (or, in the case of an item
that affects more than one tax, rates) of tax and reflecting, for example, the effect of deductions available for taxes such as
state and local income taxes.

 

 

 

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Section
8.                 Confidential
Information. The Purchaser or the Company or their respective affiliates, as the case may be, will maintain the confidentiality
of Confidential Information in accordance with procedures adopted by such party in good faith to protect confidential information
of third parties delivered to such party; provided, that the Purchaser or the Company or their respective affiliates, as
the case may be, may deliver or disclose Confidential Information to (i) its directors, officers, employees, agents, attorneys
and affiliates (to the extent such disclosure reasonably relates to the administration of the investment represented by the Preferred
Units); (ii) its financial advisors and other professional advisors who agree to hold confidential the Confidential Information
substantially in accordance with the terms of this Section 8; (iii) any other holder of Preferred Units; (iv) any accredited investor
to which the Purchaser or the Company or their respective affiliates, as the case may be, sells or offers to sell Preferred Units
or any part thereof or any participation therein (if such person has agreed in writing prior to its receipt of such Confidential
Information to be bound by the provisions of this Section 8); (v) any person from which the Purchaser or the Company or their
respective affiliates, as the case may be, offers to purchase any security of the Company or any of its respective Subsidiaries
(if such person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this
Section 8); (vi) any federal or state regulatory authority having jurisdiction over the Purchaser or the Company or their respective
affiliates, as the case may be; and (vii) any other person to which such delivery or disclosure may be necessary or appropriate
(1) to effect compliance with any law, rule, regulation or order applicable to the Purchaser or the Company or their respective
affiliates, as the case may be; (2) in response to any subpoena or other legal process; (3) in connection with any litigation
to which the Purchaser or the Company or their respective affiliates, as the case may be, is a party; (4) in connection with the
assumption by the Company of any debt; or (5) if an Event of Default (as such term is defined in the Amendment) or other Optional
Repurchase Event (as such term is defined in the Amendment) has occurred and is continuing, to the extent the Purchaser or the
Company or their respective affiliates, as the case may be, may reasonably determine such delivery and disclosure to be necessary
or appropriate in the enforcement or for the protection of the rights and remedies under this Agreement. Without the prior written
consent of the Company, on the one hand, and the Purchaser, on the other hand, no party hereto may make an announcement, issue
an advertisement or a press release, or otherwise make any publicly available statement concerning this Agreement or the transactions
contemplated hereby, other than as required by or pursuant to U.S. federal or state securities laws. Each holder of Preferred
Units, by its acceptance of such Preferred Units, will be deemed to have agreed to be bound by and to be entitled to the benefits
of this Section 8.

 

Section
9.                 Survival.
Subject to the limitations and other provisions of this Agreement, the representations and warranties included in this Agreement,
or included in certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and
effect, regardless of any investigation made by or on behalf of the Purchaser or any person controlling the Purchaser, or by or
on behalf of the Company, and shall survive delivery of and payment for the Preferred Units until the date that is two (2) years
after the Closing Date; provided, that: (a) the representations and warranties in Section 1(b), Sections 1(e) through 1(h), Section
1(j), Sections 2(a) through 2(c) and Section 2(e) shall survive indefinitely; and (b) the representations and warranties in Section
1(c), Section 1(o), and Section 1(p) shall survive for the full period of all applicable statutes of limitations (giving effect
to any waiver, mitigation or extension thereof) plus sixty (60) days. All covenants, agreements (including as to confidentiality)
and indemnities of the parties contained herein shall survive the Closing Date indefinitely or for the period explicitly specified
therein; provided, that, with respect to indemnities for inaccuracies in or breaches of representations, such indemnities shall
survive for the period specified for the applicable representations.

 

 

 

    	10

    	 

    

 

Section
10.              Notices. All notices and
other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any
standard form of telecommunication. Notices to the Purchaser shall be directed to Investor’s Mark Acquisitions, LLC, 124
Windermere Court, McMurray, Pennsylvania 15317; and notices to the Company shall be directed to Shepherd’s Finance, LLC,
12627 San Jose Blvd., Suite 203, Jacksonville, Florida 32223.

 

Section
11.              Parties. This Agreement
shall inure to the benefit of and be binding upon the Purchaser, the Company, and their respective successors. Nothing expressed
or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation any legal or equitable
right, remedy or claim under or in respect of this Agreement or any provision herein contained. This Agreement and all conditions
and provisions hereof are intended to be for the sole and exclusive benefit of the parties hereto and their respective successors,
and for the benefit of no other person, firm or corporation.

 

Section
12.              Governing Law. This Agreement
shall be governed by and construed in accordance with the laws of the State of Delaware applicable to agreements made and to be
performed in said State.

 

Section
13.              Counterparts. This Agreement
may be signed in two or more counterparts, each of which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument.

 

Section
14.              Certain Defined Terms.
The terms that follow, when used in this Agreement, shall have the meanings indicated.

 

“Confidential
Information” means information delivered either (i) to the Purchaser by or on behalf of the Company or their respective
affiliates or (ii) to the Company or its respective affiliates by or on behalf of the Purchaser, as the context may require,
in each case in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in
nature; provided, that such term does not include information that (a) was publicly known prior to the time of such
disclosure, (b) subsequently becomes publicly known through no act or omission by the Purchaser or the Company or their respective
affiliates, as the case may be, or any person acting on such party’s behalf or (c) otherwise becomes known to the Purchaser
or the Company or their respective affiliates, as the case may be, other than through the disclosure to such party by the Purchaser
or the Company or their respective affiliates, as the case may be.

 

“Closing Date”
shall mean _________ ___, 20__

 

“Governmental
Authority” shall mean any court, board, agency, commission, office or other authority of any nature whatsoever for any
governmental unit (federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence, including
foreign Governmental Authorities.

 

“Lien”
shall mean any liens, mortgages, pledges, security interests, claims, options, rights of first offer or refusal, charges, conditional
or installment sale contracts, claims of third parties of any kind or other encumbrances.

 

 

    	11

    	 

    

 

 

“Material
Adverse Effect” with respect to any person shall mean any event, occurrence, development, change or effect that is, or
is reasonably likely to be, individually or in the aggregate, materially adverse to the business, prospects, properties, operating
assets, financial condition or results of operations of such person and its Subsidiaries, taken as a whole; provided, that,
in no event shall the following, either individually or in the aggregate, in and of itself be deemed to constitute a “Material
Adverse Effect”: (i) the failure by the Company to meet independent, third party projections of earnings, revenue or other
financial performance measures (provided, that the underlying facts, circumstances, operating results or prospects which
cause the Company to fail to meet such projections may be considered in determining whether a “Material Adverse Effect”
has occurred or is reasonably likely to occur); (ii) fluctuations in the price or net asset value of the Common Stock; and (iii)
the failure to obtain any tenant estoppel.

 

“Operating
Agreement” shall have the meaning set forth in the recitals hereto.

 

“Registration
Statement” shall mean the Company’s registration statement on Form S-1, as amended (SEC File No. 333-181360).

 

Section
15.              Headings. The headings
of the sections of this Agreement have been inserted for convenience of reference only and shall not be deemed a part of this
Agreement.

 

 

 

 

[Signature Page Follows.]

 

 

 

 

 

 

 

    	12

    	 

    

 

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

 

	 	
        The Company:

         

        Shepherd’s Finance, LLC

         

	 	
        By: /s/ Daniel M. Wallach

        Name: Daniel M. Wallach

        Title: Chief Executive Officer

         

         

         

	 	
        Purchaser:

         

        Investor’s Mark Acquisitions:

         

	 	
        By: /s/ Mark L. Hoskins

        Name: Mark L. Hoskins

        Title: Member

			

 

 

 

 

 

 

    	13

    	 

    

 

 

 

SCHEDULE I

 

TO Series
B Cumulative Redeemable

Preferred Unit PURCHASE AGREEMENT

 

Subsidiaries of the Company:

 

                
i.          84
REPA, LLC

 

 

 

    	14Exhibit 10.2

 

AMENDMENT NO. 1 TO THE
AMENDED AND RESTATED

LIMITED LIABILITY COMPANY
AGREEMENT

OF

SHEPHERD’S FINANCE,
LLC

ESTABLISHING

SERIES B CUMULATIVE REDEEMABLE
PREFERRED UNITS

 

In accordance with
Section 3.05 and Article IX of the Amended and Restated Limited Liability Company Agreement, effective as of December 31st, 2014
(the “Operating Agreement”), of Shepherd’s Finance, LLC (the “Company”), the Operating
Agreement is hereby amended by this Amendment No. 1 thereto (this “Amendment”) to establish a series of up to
10 preferred units of membership interest in the Company which shall be designated the “Series B Cumulative Redeemable Preferred
Units” (the “Preferred Units”), having the rights, preferences, powers, privileges and restrictions, qualifications
and limitations set forth below and which shall be issued to Investor’s Mark Acquisitions, LLC (“IMA” or the
“Purchaser”). Certain terms used herein are defined in Section 9 of Exhibit I hereto. Capitalized
terms used and not otherwise defined herein shall have the meanings set forth in the Operating Agreement.

 

WHEREAS, the Company
and the Purchaser executed that certain Series B Cumulative Redeemable Preferred Unit Purchase Agreement, dated December 31st,
2014 (the “Purchase Agreement”), pursuant to which the Company agreed to issue, and the Purchaser agreed to
purchase, 10 Preferred Units, on the terms set forth therein and herein; and

 

WHEREAS, pursuant to
Section 3.05 of the Operating Agreement, the Company is issuing 10 Preferred Units to the Purchaser, with the rights, powers, privileges
and restrictions, qualifications, and limitations as set forth below pursuant to the terms of the Purchase Agreement.

 

NOW THEREFORE, in consideration
of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:

 

Section 1. Issuance of Preferred Units

 

Pursuant to Section
3.05 of the Operating Agreement, the Company hereby agrees to issue 10 Preferred Units to the Purchaser. The Preferred Units will
have the rights, powers, privileges, restrictions, qualifications, and limitations specified in Exhibit I hereto. In
consideration for the issuance of the Preferred Units, the Purchaser, in accordance with the terms of the Purchase Agreement, agrees
to convert into Preferred Units an aggregate of $1,000,000 of the balance (the “Investment”)of the Subordinated Promissory
Note executed by the Company in favor of IMA dated December 29, 2010 (the “Note”), through which IMA made a loan to
the Company in the amount of $1,500,000 ,.

 

The admission of the Purchaser as an additional
Member of the Company shall become effective as of the date of this Amendment, which shall also be the date upon which the name
of the Purchaser is recorded on the books and records of the Company and Exhibit A to the Operating Agreement is amended to
reflect such admission.

 

 

    	1

    	 

    

 

Section 2. Amendment to Operating Agreement

 

Pursuant to Section14.09
of the Operating Agreement, the Members holding at least 60% of the outstanding Voting Units hereby amend the Operating Agreement
to set forth the rights, powers, privileges, restrictions, qualifications, and limitations of the Preferred Units, as specified
in Exhibit I hereto.

 

Section 3. Continuation of Operating
Agreement

 

The Operating Agreement
and this Amendment shall be read together and shall have the same force and effect as if the provisions of the Operating Agreement
and this Amendment (including Exhibit I hereto) were contained in one document. Any provisions of the Operating Agreement
not amended by this Amendment shall remain in full force and effect as provided in the Operating Agreement immediately prior to
the date hereof. In the event of a conflict between the provisions of this Amendment and the Operating Agreement, the provisions
of this Amendment shall control.

 

[Signature Page Follows.]

 

 

 

 

 

 

    	2

    	 

    

 

IN WITNESS WHEREOF,
the parties hereto have executed this Amendment to the Operating Agreement as of the 31st day of December, 2014.

 

	 	
        The Company:

         

        Shepherd’s Finance, LLC

         

	 	
        By: /s/ Daniel M. Wallach

        Name: Daniel M. Wallach

        Title: Chief Executive Officer

         

	 	
        The Members:

         

        Daniel M. Wallach and Joyce S. Wallach

         

	 	
        By: /s/ Daniel M. Wallach

        Name: Daniel M. Wallach

         

        By: /s/ Joyce S. Wallach

        Name: Joyce S. Wallach

         

         

	 	
        2007 Daniel M. Wallach Legacy Trust

         

	 	
        By: /s/ Daniel M. Wallach

        Name: Daniel M. Wallach

        Title: Trustee

         

         

	 	
        Investor’s Mark Acquisitions:

         

	 	
        By: /s/ Mark L. Hoskins

        Name: Mark L. Hoskins

        Title: Member

 

 

 

    	3

    	 

    

 

 

EXHIBIT I

 

SHEPHERD’S FINANCE, LLC

 

DESIGNATION OF THE RIGHTS, POWERS, PRIVILEGES,

RESTRICTIONS, QUALIFICATIONS, AND LIMITATIONS

OF THE SERIES B CUMULATIVE REDEEMABLE PREFERRED UNITS

 

The following are the
terms of the Series B Cumulative Redeemable Preferred Units (the “Preferred Units”) established pursuant to
this Amendment:

 

(1) 
Number. The maximum number of authorized Preferred Units shall be 10.

 

(2) 
Rank. The Preferred Units will, with respect to distribution rights (to the extent set forth herein) and rights upon
liquidation, dissolution, or winding up of the Company, rank: (a) senior to all classes or series of Units not designated
as Preferred Units (“Common Units”) and to all equity securities issued by the Company the terms of which provide
that such equity securities shall rank junior to such Preferred Units; (b) on a parity with all equity securities issued by
the Company other than those referred to in clauses (a) and (c); and (c) junior to all equity securities issued by the
Company that rank senior to the Preferred Units. The term “equity securities” shall not include convertible debt securities.

 

(3) 
Distributions.

 

(a)         
Current Distributions.

 

(i)             
Commencing from and including the applicable date of issuance of Preferred Units (the “Date of Issuance”),
current distributions (the “Current Distributions”) on each Preferred Unit shall be payable quarterly, at an annual
fixed rate of 10% (the “Pay Rate”), until the redemption of such Preferred Units in accordance with Section
5, as the case may be (each such period a “Current Distribution Period”).

 

(ii)           
 Current Distributions on the Preferred Units shall be cumulative from the applicable Date of Issuance at the Pay Rate,
and shall be declared and payable quarterly on February 28, May, 31, August 31, and November 30 of each year or, if not a business
day, the next succeeding business day, commencing on May 31, 2015 (each, a “Current Distribution Payment Date”), and
will be computed on the basis of a 360-day year and 90 days in the applicable period. Current Distributions will be payable to
holders of record as they appear in the records of the Company at the close of business on the applicable record date by wire
transfer pursuant to wire instructions provided by such holders. The record date shall be the last calendar day of the calendar
quarter immediately preceding each Current Distribution Payment Date (each, a “Current Distribution Payment Record Date”).

 

 

    	4

    	 

    

 

 

(iii)         
Current Distributions on the Preferred Units are payable only as a distribution on income. In the event that the Company
has no net income during any given Current Distribution Period, the amount due is rolled forward to the next Current Distribution
Period, which may continue only through the fourth quarter distribution of any year (which occurs in the following year), but
no further. If on any Current Distribution Payment Date the Company shall not be permitted under Delaware law to pay all or a
portion of any such Current Distributions, the Company shall take such action as may be lawfully permitted in order to enable
the Company, to the extent permitted by Delaware law, to lawfully to pay such Current Distributions. Accumulated but unpaid Current
Distributions, if any, on the Preferred Units, will not accrue interest.

 

(b)         
Distribution Payments. Any Distribution payment made on Preferred Units shall first be credited against the earliest
accumulated but unpaid Current Distribution due with respect to such Preferred Units which remains payable. Distributions made
in any quarter are based on the Company’s net income from the prior quarter. Taxable income to Purchaser for any quarter
will be allotted to be equal to the following quarter’s Distribution.

 

(4) 
Liquidation Amount.

 

(a)         
Upon any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the Company (referred to herein
as a “liquidation”), the holders of the Preferred Units will be entitled to be paid out of the assets of the Company
legally available for distribution to its unitholders liquidating distributions, in cash, in the amount of $100,000 per unit multiplied
by the number of outstanding Preferred Units (the “Liquidation Amount”), plus an amount equal to any accumulated and
unpaid Current Distributions to the date of such liquidation, before any distribution or payment is made to holders of Common
Units or any other equity securities of the Company ranking junior to the Preferred Units as to the distribution of assets upon
a liquidation. After payment of the full amount of the liquidating distributions to which they are entitled, the holders of Preferred
Units will have no right or claim to any of the remaining assets of the Company.

 

(b)         
In the event that, upon any liquidation of the Company, the available assets of the Company are insufficient to pay the
amount of the liquidating distributions on all outstanding Preferred Units, plus an amount equal to any accumulated and unpaid
Current Distributions to the date of such liquidation and the corresponding amounts payable on all other equity securities of
the Company ranking on a parity with Preferred Units in the distribution of assets upon a liquidation, then the holders of Preferred
Units and all other such equity securities of the Company ranking on a parity with Preferred Units shall share ratably in any
such distribution of assets in proportion to the full liquidating distributions per unit to which they would otherwise be respectively
entitled.

 

(c)         
The consolidation or merger of the Company with or into any other entity, or the merger of another entity with or into
the Company, or a statutory unit exchange by the Company, or the sale, lease or conveyance of all or substantially all of the
property or business of the Company, shall be deemed to constitute a liquidation of the Company.

 

 

    	5

    	 

    

 

 

(d)         
The Liquidation Amount of the outstanding Preferred Units will not be added to the liabilities of the Company for the purpose
of determining whether under the Delaware Revised Uniform Limited Liability Company Act a distribution may be made to unitholders
of the Company whose preferential rights upon dissolution of the Company are junior to those of holders of Preferred Units. This
Section 4(d) shall be without prejudice to the provisions of Sections 3(a) and 4(a) hereof.

 

(5) 
Redemption.

 

(a)         
The Company may redeem the Preferred Units, in whole or in part at the option of the Company at any time or from time to
time, at a redemption price per unit in cash in an amount equal to (the “Redemption Price”) the sum of the Liquidation
Amount plus all accumulated and unpaid Current Distributions thereon to the date of redemption. The Preferred Units to be redeemed
shall be determined at the sole discretion of the board of managers of the Company.

 

(b)         
Notice of a redemption pursuant to Section 5(a) will be mailed by the Company, postage prepaid, not less than ten (10)
nor more than thirty (30) days prior to the redemption date, addressed to the respective holders of the Preferred Units to be
redeemed at their respective addresses as they appear on the books of the Company. Each notice shall state: (i) the redemption
date; (ii) the number of Preferred Units to be redeemed; (iii) the Redemption Price; (iv) the place or places where
certificates representing such Preferred Units, if any, are to be surrendered for payment of the Redemption Price; and (v) 
that Current Distributions on the Preferred Units to be redeemed will cease to accumulate on such redemption date. If fewer than
all the Preferred Units are to be redeemed, the notice mailed to each such holder thereof shall also specify the number of Preferred
Units to be redeemed from each such holder.

 

(c)         
On or after a redemption date, each holder of Preferred Units to be redeemed must present and surrender any certificates,
if any, representing the Preferred Units to the Company at the place designated in the notice of redemption and thereupon the
Redemption Price of such Preferred Units will be paid to or on the order of the Person whose name appears on such certificates,
if any, as the owner thereof by wire transfer pursuant to wire instructions provided by such Person and each surrendered certificate
will be canceled. In the event that fewer than all the Preferred Units are to be redeemed, and if a certificate has been issued
representing the Preferred Units, a new certificate will be issued representing the unredeemed Preferred Units.

 

(d)         
From and after a redemption date (unless the Company defaults in payment of the Redemption Price), all Current Distributions
on the Preferred Units subject to such redemption will cease to accumulate and all rights of the holders thereof, except (i) the
right to receive the Redemption Price thereof (including all accumulated and unpaid Current Distributions to the redemption date)
and (ii) the right to receive any accumulated Deferred Distributions, will cease and terminate and such Preferred Units will not
thereafter be transferred (except with the consent of the Company) on the Company’s records, and such Preferred Units shall
not be deemed to be outstanding for any purpose whatsoever other than with respect to the accumulation of Deferred Distributions
on such Preferred Units. In the event that the Company defaults in the payment of the Redemption Price for any Preferred Units
surrendered for redemption, such Preferred Units shall continue to be deemed to be outstanding for all purposes and to be owned
by the respective holders that surrendered such Preferred Units, and the Company shall promptly return the surrendered certificates
representing such Preferred Units, if any, to such holders (although the failure of the Company to return any such certificates
to such holders shall in no way affect the ownership of such Preferred Units by such holders or their rights thereunder).

 

 

    	6

    	 

    

 

 

(e)         
Any Preferred Units that have been redeemed shall, after such redemption, have the status of authorized but unissued Units,
without designation as to series, until such units are once more designated as part of a particular series.

 

(f)         
The Preferred Units will not have a stated maturity date and will not be subject to any sinking fund.

 

(6) 
Covenants of the Company.

 

(a)         
Protective Provisions. The Company hereby covenants and agrees that, for as long as any Preferred Units are outstanding,
the Company shall not, and the Company shall cause its respective Subsidiaries not to, undertake or permit any of the following
actions, directly or indirectly, without the prior written consent of the holders of record of at least a majority of the Preferred
Units then outstanding:

 

(i)             
engage in a Change of Control; or

 

(ii)           
engage in a sale of all or substantially all of such entity’s assets, tender offer for all or substantially all of
its Common Units, shares of common stock or other common equity securities, as the case may be, or other similar transaction.

 

(b)         
Investment Company Act. The Company hereby covenants and agrees that, for as long as any Preferred Units are outstanding,
the Company shall take such steps as shall be necessary to ensure that neither the Company nor any of its Subsidiaries shall become
an “investment company” within the meaning of such term under the Investment Company Act of 1940, as amended.

 

(c)         
Notices. The Company hereby covenants and agrees that, for as long as any Preferred Units are outstanding, the Company
shall give to each holder of Preferred Units written notice, within three (3) days of the Company having actual knowledge thereof,
of:

 

(i)             
the issuance by any Governmental Authority of any injunction, order, decision or other restraint or the initiation of any
litigation or similar proceeding seeking any such injunction, order or other restraint that would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect;

 

(ii)           
the occurrence of an event or series of events relating to or affecting the Company and its Subsidiaries, taken as a whole,
that, either individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect; or

 

 

 

    	7

    	 

    

 

(iii)         
the occurrence of a Change of Control.

 

The written notice provided
in connection with any of the foregoing events shall specify the nature of the event prompting such notice and the action (if any)
that is proposed to be taken with respect thereto.

 

(7) 
Transfers.

 

(a)          Pursuant
to Section 9.01 of the Operating Agreement, a holder of Preferred Units may not Transfer all or any portion of such holder’s
Preferred Units without the express written consent of the Company, in its sole discretion. The provisions of Section 9.02of the
Operating Agreement shall not apply to the Preferred Units.

 

(8) 
Power of Attorney. Notwithstanding Section 8.01 of the Operating Agreement, no holder of Preferred Units appoints
the board of managers of the Company as its attorney-in-fact, and the board of managers shall not execute any document as attorney-in-fact
or otherwise on behalf of the holders of Preferred Units pursuant to the powers set forth in Section 8.01 of the Operating Agreement.

 

(9) 
Definitions.

 

“Change of
Control” will be deemed to have occurred with respect to the Company on any date after the Initial Date of Issuance on
which Daniel M. Wallach, Joyce Wallach, or the Daniel M. Wallach Legacy Trust fail to own at least 51% of the voting common equity
of the Company.

 

“Common Units” has the
meaning set forth in Section 2.

 

“Control”
means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise and “Controlling,” “Controlled”
and “under common Control” shall have meanings correlative thereto. For purposes of this definition, debt securities
that are convertible into common stock will be treated as voting securities only when converted.

 

“Current Distribution Payment Date”
has the meaning set forth in Section 3(a)(ii).

 

“Current Distribution Payment Record
Date” has the meaning set forth in Section 3(a)(ii).

 

“Current Distribution Period”
has the meaning set forth in Section 3(a)(i).

 

“Current Distributions”
has the meaning set forth in Section 3(a)(i).

 

“Date of Issuance” has
the meaning set forth in Section 3(a)(i).

 

 

    	8

    	 

    

 

 

“GAAP”
means generally accepted accounting principles in the United States of America in effect from time to time.

 

“Governmental
Authority” means any court, board, agency, commission, office or other authority of any nature whatsoever for any governmental
unit (federal, state, county, district, municipal, city or otherwise) whether now or hereafter in existence, including foreign
Governmental Authorities.

 

“Initial Date
of Issuance” means December 31, 2014.

 

“Liquidation”
has the meaning set forth in Section 4(a).

 

“Liquidation
Amount” has the meaning set forth in Section 4(a).

 

“Material
Adverse Effect” with respect to any Person means any event, occurrence, development, change or effect that is, or is
reasonably likely to be, individually or in the aggregate, materially adverse to the business, prospects, properties, operating
assets, financial condition or results of operations of such Person and its Subsidiaries, taken as a whole; provided, that,
in no event shall the following, either individually or in the aggregate, in and of itself be deemed to constitute a “Material
Adverse Effect”: the failure by the Company to meet independent, third party projections of earnings, revenue or other financial
performance measures (provided, that the underlying facts, circumstances, operating results or prospects which cause the
Company to fail to meet such projections may be considered in determining whether a “Material Adverse Effect” has occurred
or is reasonably likely to occur);.

 

“Pay Rate” has the meaning
set forth in Section 3(a).

 

“Person”
means any individual, partnership, limited liability company, corporation, joint venture, trust or other entity.

 

“Preferred
Units” has the meaning set forth in the opening paragraph of this Amendment.

 

“Purchase
Agreement” means that certain Series B Cumulative Redeemable Preferred Unit Purchase Agreement, dated December 31, 2014
among Shepherd’s Finance, LLC, and Investor’s Mark Acquisitions, LLC.

 

“Redemption Price” has
the meaning set forth in Section 5(a).

 

“Set apart
for payment” means the recording by the Company in its accounting ledgers of any accounting or bookkeeping entry which
indicates, pursuant to an authorization of a distribution by the Company, the allocation of funds to be so paid on any series or
class of Units.

 

 

    	9

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