S-1

As filed with the Securities and Exchange Commission on January 27, 2017

Registration No.  xxxxxxxxx

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

 Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 Korth Direct Mortgage LLC

KDM

(Exact Name of Registrant as Specified in Its Charter)

Florida	6162	27-0644172
(State or Other Jurisdiction of	(Primary Standard Industrial	(I.R.S. Employer
Incorporation or Organization	Classification Code No.) Korth Direct Mortgage LLC KDM 2937 SW 27th Avenue Ste. 307 Miami, Florida 33133	Identification No.)

 (Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

James W. Korth, Chief Executive Officer

2937 SW 27^th Avenue Ste. 307

Miami, Florida 33133

 (305) 668-8485

(Name, address, including zip code, and telephone number, including area code, of agent for service)

 Approximate date of commencement of proposed sale to the public: As soon as practicable after this Registration Statement is declared effective.

i

If any of the securities being registered on this form are offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”), check the following box. ☑

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☐ (Do not check if a smaller reporting company)	Smaller reporting company	☑

CALCULATION OF REGISTRATION FEE
Each Class of Securities to be Registered	ProposedMaximum Aggregate Offering Price(1)	Amount of Registration Fee(2)
Mortgage Secured Notes (“MSNs”)SM	$100,000,000	$11,590

(1) Estimated solely for the purpose of computing the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.

(2) Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price. SM Mortgage Secured Notes and MSN are Service Marks of Korth Direct Mortgage LLC.

The information contained in this prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JANUARY 25, 2017

ii

$100,000,000

Mortgage Secured Notes^SM

(“MSNs”) 

This is a public offering of up to $100,000,000 in principal amount of Mortgage Secured Notes issued by KDM. We refer to our Mortgage Secured Notes as the “Notes.”

We will issue the Notes in series. Each series will correspond to a single mortgage loan or a pool of mortgage loans to a specific borrower. In this prospectus, we refer to these as “mortgage loans,” and we refer to the mortgage loan funded with the proceeds we receive from a particular series of Notes as the “corresponding mortgage loan” or “CM Loan” for the series.

Important terms of the Notes include the following, each of which is described in detail in this prospectus:

· Our obligation to make payments on a Note will be limited to an amount equal to the investor’s pro rata share of amounts we receive with respect to the corresponding loan for that Note, net of our 1.00% service charge. We do not guarantee payment of the Notes or the corresponding mortgage loans, and the Notes are not obligations of our borrowers.

· The Notes will have a stated, fixed interest rate, which will be the rate for the corresponding mortgage loan less the servicing fee. The interest rates are determined at the time each loan is originated or acquired by us.

· All Notes will have terms reflective of the CM Loan

· All Notes in the case of a distressed or non-performing CM Loan may have their terms modified to match the terms of the CM Loan which may be modified if in the judgement of the Company, acting as fiduciary, such modification of the CM Loan is in the best interest of the Noteholders.

· We will offer all Notes at prices to be determined at the time of the offering. All Notes may be offered directly or through underwriters to investors, and there will may underwriting discounts or commissions.

· All Notes will be issued in electronic form only and will not be listed on any securities exchange. Notes will be generally transferable from broker to broker for client accounts through the facilities of the Depository Trust Clearing Corporation. There can be no assurance, however; that an active market for any Notes will develop on the trading Program or that the trading Program will be available to residents of all states.

This offering has risks. See “Risk Factors” beginning on page18.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

SM Mortgage Secured Notes and MSNs are Service Marks of Korth Direct Mortgage LLC.

The date of this prospectus is January 25, 2017.

iii

TABLE OF CONTENTS

ABOUT THIS PROSPECTUS	vi
WHERE YOU CAN FIND MORE INFORMATION	vii
PROSPECTUS SUMMARY	1
Overview	1
About the Loan Program	1
The Notes	2
KDM Loans to Borrowers	2
About Korth Direct Mortgage LLC	3
QUESTIONS AND ANSWERS	5
RISK FACTORS	10
RISKS RELATED TO KDM AND THE KDM PROGRAM	13
RISKS RELATING TO COMPLIANCE AND REGULATION	16
FORWARD-LOOKING STATEMENTS	16
ABOUT THE LOAN PROGRAM	17
Overview	17
How the KDM Program Operates for Newly Issued Loans	18
How the KDM Program operates for Acquisition of Existing Loans and the Issuance of Corresponding Notes	20
How KDM Prices Loans and Underlying Corresponding Notes	20
How our Service Charge Applies	20
Verification of Property and Investor Information	21
How to Purchase Notes	21
Loan Servicing	21
Historical Information about Our Borrowers and Outstanding Loans	23
Use of Proceeds	23
Plan of Distribution	23
Description of the Notes	24
General	24
Ranking	25
Payments and Paying Agents	25
Limitations on Payments	25
Prepayments	26
Servicing Covenant	26
Consolidation, Merger, Sale of Assets	26
Denominations, Form and Registration	27
Amortization	27
Events of Default	27
Satisfaction and Discharge of the Indenture	28
Governing Law	29
Information Concerning the Trustee	29
Notes will be Book Entry Only	29

iv

ABOUT KDM	31
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	31
BUSINESS	31
Overview	31
Sales, Marketing and Customer Service	32
Financial Information About Segments	32
Fraud detection	32
Competition	32
Our Loan and Note Rating Program	34
GOVERNMENT REGULATION	38
MANAGEMENT	39
EXECUTIVE COMPENSATION	40
TRANSACTIONS WITH RELATED PERSONS	40
PRINCIPAL SECURITYHOLDERS	40
LEGAL MATTERS	40
EXPERTS	40
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM & FINANCIAL STATEMENTS	40
INFORMATION NOT REQUIRED IN PROSPECTUS	41
SIGNATURES	44

v

ABOUT THIS PROSPECTUS

This prospectus describes our offering of our Mortgage Secured Notes or MSNs, which we refer to in this prospectus as the “Notes.” This prospectus is part of a registration statement filed with the Securities and Exchange Commission, which we refer to as the “SEC.” This prospectus, and the registration statement of which it forms a part, speak only as of the date of this prospectus. We will supplement this registration statement from time to time as described below.

Unless the context otherwise requires, we use the terms “KDM”, “the Company,” “our company,” “we,” “us” and “our” in this prospectus to refer to Korth Direct Mortgage LLC, a Florida Limited Liability Corporation.

The offering described in this prospectus is a continuous offering pursuant to Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”). We will offer Notes from time to time. Before we post a mortgage loan request on our website and thereby offer the series of Notes corresponding to that mortgage loan, as described in “About the Loan Program,” we prepare a supplement to this prospectus, which we refer to as a “posting report.” In that posting report, we provide information about the series of Notes offered for sale on our website that correspond to the posted mortgage loan or loans, if it is funded and closed, as well as information about any other series of Notes then being offered for sale on our website. We file these posting reports pursuant to Rule 424(b) under the Securities Act within two business days of the initial posting of each loan request. We also make at least weekly filings of supplements to this prospectus pursuant to Rule 424(b) under the Securities Act, which we refer to as “sales reports,” in which we report sales of Notes we have issued since the filing of our most recent sales report. The sales reports include information about the principal amount, the terms of the mortgage loan, its rating if any and the interest rate and principal payments of the corresponding series of Notes sold. The sales reports are also posted to our website.

We will prepare prospectus supplements to update this prospectus for other purposes, such as to disclose changes to the terms of our offering of the Notes, provide quarterly updates of our financial and other information included in this prospectus and disclose other material developments after the date of this prospectus. We will file these prospectus supplements with the SEC pursuant to Rule 424(b) and post them on our website. When required by SEC rules, such as when there is a “fundamental change” in our offering or the information contained in this prospectus, or when an annual update of our financial information is required by the Securities Act or SEC rules, we will file post-effective amendments to the registration statement of which this prospectus forms a part, which will include either a prospectus supplement or an entirely new prospectus to replace this prospectus.

The Notes are not available for offer and sale to residents of every state. Our website will indicate the states where residents may purchase Notes. We will post on our website any special suitability standards or other conditions applicable to purchases of Notes in certain states that are not otherwise set forth in this prospectus.

vi

WHERE YOU CAN FIND MORE INFORMATION

We have filed a registration statement on Form S-1 with the SEC in connection with this offering. In addition, we file annual, quarterly and current reports and other information with the SEC. You may read and copy the registration statement and any other documents we have filed at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. Our SEC filings are also available to the public at the SEC’s internet site at http://www.sec.gov.

This prospectus is part of the registration statement and does not contain all of the information included in the registration statement and the exhibits, schedules and amendments to the registration statement. Some items are omitted in accordance with the rules and regulations of the SEC. For further information with respect to us and the Notes, we refer you to the registration statement and to the exhibits and schedules to the registration statement filed as part of the registration statement or incorporated therein by reference. Whenever a reference is made in this prospectus to any of our contracts or other documents, the reference may not be complete and, for a copy of the contract or document, you should refer to the exhibits that are a part of the registration statement.

We “incorporate” into this prospectus information we file with the SEC in our Annual Reports on Form 10-K and Quarterly reports for all the years and quarters for the time this prospectus is valid and Prospectus Supplements that are filed intermittently when loans are made and notes are sold, which either contain new or updated loan listings or loan issuances (sales). This means that we disclose important information to you by referring to these periodic reports. The information incorporated by reference is considered to be part of this prospectus. Information contained in this prospectus automatically updates and supersedes previously filed information.

You may request a copy of any or all of the reports or documents that have been incorporated by reference, which will be provided to you at no cost, by writing, telephoning or emailing us. Requests should be directed to Customer Support, 2937 SW 27^th Ave, Suite 307, Miami, FL, 33133; telephone number (786) 567-3117; or emailed to contact@KDMinvestor.com. In addition, these reports or documents are also available on our website at www.KDMinvestor.com.

vii

PROSPECTUS SUMMARY

This summary highlights information contained elsewhere in this prospectus. You should read the following summary together with the more detailed information appearing in this prospectus, including our financial statements and related notes, and the risk factors beginning on page 13 before deciding whether to purchase our Mortgage Secured Notes.

Overview

KDM is both an online and traditional company that enables its borrowers to borrow money on a first mortgage basis and investors to purchase Mortgage Secured Notes, the proceeds of which fund specific mortgage loans made to borrowers. Each Series of Notes is secured by and corresponds directly to the financial terms of a mortgage owned by KDM.

About the Loan Program

We offer qualified borrowers to obtain commercial mortgage loans with interest rates and other terms that they find attractive. We also purchase existing commercial loans from banks and other lenders. We provide KDM investors with the opportunity to fund specific mortgage loans with credit characteristics, interest rates and other terms the investors find attractive by purchasing interests in Notes that in turn are dependent for payment on the payments we receive from the mortgage loan or pool of loans which correspond to the Note. To identify the mortgage loans we give them an internal identifying number and the corresponding Note has the same number. For example: We may issue Loan Number KDM2017-001 and issue corresponding Note KDM2017-001. A loan number could refer to a pool of loans at which time the corresponding Note would refer to the entire pool of loans.

As a part of operating our lending program, for all loan originations or purchases, we verify the identity of borrowers, obtain borrower s’ credit profiles from consumer reporting agencies (which are also called credit bureaus) such as TransUnion, Experian or Equifax and screen borrowers for eligibility to participate in the Program. We also service the borrower loans on an ongoing basis; and demand and review the property appraisals and verify the assumptions incorporated in those appraisals and make the appraisals available to potential Note purchasers. We then make a loan to value and debt service coverage ratio analysis and determine the experience of the borrow operating the property. Based on these and other factors we assign a rating to the loan (Please see “Our Loan and Note Rating Program”) and propose an interest rate, maturity and pre-payment penalty. If accepted by the borrower, we structure a Note for investors which is secured by and corresponds directly to the terms of the loan. The Note is offered on a when as and if issued basis to investors and if sufficient investors agree to purchase the Note then a closing occurs both for the Note and the underlying loan. Existing loans may also be purchased by us from other lenders and corresponding Notes sold to fund those purchases.

1

The Notes

 The Notes will be special limited obligations of KDM only and not obligations of any borrower. However, each Note is secured by the corresponding mortgage loan or pool of loans and holders of interest in the Note have a security interest in the corresponding loan(s) and the proceeds of those corresponding loan(s).

KDM will pay principal and interest on each Note in an amount equal to the principal and interest payments, if any, KDM receives on the corresponding loan or pool of loans net of KDM’s service charge. KDM will also pay to investors any other amounts KDM receives on each Note, including late fees and prepayments, subject to the service charge, except that KDM will not pay to investors any unsuccessful payment fees, check processing and other processing fees, collection fees we or a third-party collection agency charge. KDM may retain an interest in each loan and if it does so will then issue interests in the Note equivalent to its level of investment not retained in the loan. These interests will be held in an account at a licensed broker dealer who is either a member or a correspondent of a member of Depository Trust Company.

All Notes issued by KDM will have a CUSIP Number and be held at the facilities of the Depository Trust Company. Members of the Depository Trust Company will hold interests in each Note in behalf of investors in the Notes.

Notes are distributed through broker dealers to their clients and financial advisors who manage accounts for clients of broker dealers and we rely on those financial institutions for identifying and managing the interests of their customers.

All broker dealers distributing our Notes are members of FINRA and all financial advisors who we may deal directly with are registered with the Securities and Exchange Commission.

If KDM were to become subject to a bankruptcy or similar proceeding, it is expected the holder of a Note will have a claim against KDM that is secured by the underlying loan.

KDM Loans to Borrowers

KDM generally offers Commercial Loans and may purchase Commercial Loans in the secondary market. Commercial Loans are obligations of single dedicated LLC borrowers, secured by a first mortgage on income producing real estate property. For all loans, KDM completes a rigorous due diligence process before purchasing the loan. Among other things, this process includes reviewing the borrower’s reports, verifying income, receiving independent appraisals of property value, making an environmental review where warranted, and escrowing both taxes and insurance. When a loan is identified for purchase a Preliminary Prospectus Supplement for the sale of the corresponding Note is created which fully describes the loan and the underwriting process. When a loan is finalized a Prospectus Supplement is issued and filed with the Securities and Exchange Commission. For more information, see “Purchases of Notes and Loan Closings.”

2

About Korth Direct Mortgage LLC

We were incorporated in Florida in July 2009 under the name HCMK Consulting, LLC. We changed our name to J W Korth & Company LLC and then Korth Direct Mortgage LLC in August of 2016. Our principal executive offices are located at 2937 SW 27^th Avenue Suite 307, Miami, Florida 33133, and our telephone number is (800) 454-1628. Our website address is www.KDMinvestor.com. Information contained on our website is not incorporated by reference into this prospectus; however, some information on our website may constitute a free writing prospectus.

Our operating history is limited. Since our incorporation we have done only limited business. We are currently 100% supported by J. W. Korth & Company Limited Partnership, an SEC registered member of the Financial Regulatory Authority. J. W. Korth was founded in 1982 and has an extensive history in managing the distribution of debt securities.

Issuer	Korth Direct Mortgage LLC
Notes offered	Mortgage Secured Notes, issued in series, with each Note related to and secured by one corresponding borrower loan or pool. Loans and Notes have the same identifying numbers.
Offering price	To be determined and described in the related Pricing Supplement for that Note.
Maturity date	To be determined and described in the corresponding Pricing Supplement for that Note.
Principal Payment Schedule	To be determined and described in the related Pricing Supplement for that Note.
Interest rate	Each series of Notes will have a stated interest rate on same terms as the underlying mortgage loan net of our servicing fee.
Payments on the Notes	You will receive principal and interest on your pro rata share of any Note you purchase in an amount equal to your pro rata portion of the principal and interest payments, if any, we receive on the corresponding loan or pool of loan, net of our service charge. We will also pay you any other amounts we receive on the Notes, including late fees, penalties, except that we will not pay to investors any unsuccessful payment fees, check or other processing fees, collection fees we or our third-party collection agency charge. We will make any payments on the Notes within four business days after we receive the payments from borrowers on the corresponding loan. The delay is related to the rules of the Automated Clearing House System where we collect most payments. The Notes are not guaranteed or insured by any third party or any governmental agency. See “Description of the Notes” for more information.

3

	CM loans are generally repayable in monthly installments of principal and interest, or interest only. Loans may be repaid at any time by our borrowers. Loans may have pre-payment penalties which will flow through to you, the holder, of an interest in the corresponding Note for the loan. In the case of a partial prepayment of a loan and after payment of any applicable penalty, we use the remainder to automatically reduce the outstanding principal which effectively reduces the term of the loan as the monthly payment amount remains unchanged.
Ranking	The Notes will not be contractually senior or contractually subordinated to any other indebtedness of KDM. The Notes will be special limited obligations of KDM secured by the underlying loan according to the Master Securitization provided in the Trust Indenture . Holders of any Notes do not have a security interest in the assets of KDM but do have a security interest in the corresponding loan, the proceeds of that loan and the underlying mortgaged property.
	In the event of a bankruptcy or similar proceeding of KDM, we believe the relative rights of the holder of a Note would be senior to the holders of other unsecured indebtedness of KDM. We also believe all Notes and Loans would be separate and not subordinate or senior one to the other. If KDM were to become subject to a bankruptcy or similar proceeding, the holder of a Note will have an secured claim against KDM that may be limited in recovery to the corresponding loan payments.
	As of December 31, 2016, KDM had no outstanding debt.
Service charge	Prior to making any payments on a Note, we will deduct a service charge as described in the Pricing Supplement for that Note. See “Loan Servicing” for more information. The service charge will reduce the effective yield on your Notes to their stated interest rate.
Use of proceeds	We will use the proceeds of each Note to fund the corresponding borrower loan originated through our Program.
Electronic form and transferability	The Notes will be issued in electronic form only and will not be listed on any securities exchange. The Notes will only be transferable through the facilities of Depository Trust Clearing Corporation via a registered broker dealer. There can be no assurance, however, that an active market for Notes will develop.

4

KDM Note Ratings KDM rates each Note based on its ratings for the underlying loan. Ratings can range from AAA to D. KDM is not a Statistical Rating Organization registered with the Securities and Exchange Commission and has a conflict of interest in issuing ratings.   The rating is based on a statistical formula that includes hard empirical numbers and certain judgements made by the loan officers at KDM and experienced underwriting personnel at J. W. Korth & Company. (Please see “Our Loan and Note Rating Program”)

QUESTIONS AND ANSWERS

Q: Who is KDM?

A: KDM stands for Korth Direct Mortgage LLC. KDM is a program that loans money to borrowers on a first mortgage basis and securitizes the loans in the form of Notes secured by the underlying loans and sells those notes through broker dealers or directly to investors. KDM’s parent company is J. W. Korth & Company, L.P., a 35 year old FINRA and SEC registered broker dealer.

Q: What are our First Mortgage Secured Notes?

A: Investors may buy interests in our Mortgage Secured Notes issued by KDM. In this prospectus, we refer to our Mortgage Secured Notes as the “Notes.” Each Note will have a stated interest rate, which is the interest rate for the corresponding loan less our service charge. We will pay principal and interest on any Note you purchase in an amount equal to your pro rata portion of the principal and interest payments, if any, we receive on the corresponding loan, net of our service charge. We will also pay you any other amounts we receive on the Notes, including late fees and penalties, except that we will not pay to investors any unsuccessful payment fees, check processing or other processing fees, collection fees we, or our third-party collection agency, charge. The service charge for each Note will reduce the effective yield on your Notes to their stated interest rate. The Notes are special, limited obligations of KDM only and not the borrowers. The Notes are secured by and effectively represent an ownership interest in the corresponding loans, their proceeds, and the underlying mortgage. Specific terms of any of our underlying notes including the service charge will appear in the respective Pricing Supplement for our notes.

5

Q: Who are the investors in our Notes?

A: Investors are individuals and organizations that have the opportunity to buy our Notes. Investors must have an account with a broker dealer who is also a member of the Financial Regulatory Authority. Financial Advisors may also be contracted by you to purchase notes for your account at a broker dealer.

Q: What are the borrower loans?

A:

The loans are secured commercial mortgage loan obligations of, generally, single entity borrowers with the underlying security, the terms, the loan to value and other information described in a Pricing Supplement for each loan. Each loan is originated by us, through our website or loan brokers and can be funded by a bank or from our Trust Account at closing or may be purchased by KDM and funded by issuing Notes to investors. A complete description of the closing process for each Loan and Note will appear in its respective Pricing Supplement.

Q:

Do investors loan funds directly to borrowers?

A: No. Investors do not make loans directly to our borrowers. Instead, investors purchase Notes issued by KDM. Even though investors do not make loans directly to borrowers, they will nevertheless be wholly dependent on borrowers for repayment of any Notes investors may purchase from KDM. If a borrower defaults on the borrower’s obligation to repay a corresponding loan, KDM will not have any obligation to make any payments on the related Notes until money is received from foreclosing on the corresponding loan.

Q: What loan amounts are available to borrowers on our Program?

A: Borrowers may secure commercial loans from $200,000 to $25 million.

Q: Does KDM fund loans itself on the Program?

A: From time to time, KDM itself funds loans or portions of loans. We have no obligation to fund loans. To the extent we fund loans, and issue a Note for the loan, we will do so by purchasing an interest in the respective Note ourselves. Any investment made by us is on the same terms and conditions as all other investors. There is no notation in any loan listing signifying that we have participated in the funding of any loan request.

Q: How does KDM verify a borrower’s identity?

A: During borrower registration, we verify the identities by comparing supplied names, social security numbers, addresses and telephone numbers against the names, social security numbers, addresses and telephone numbers in the records of a consumer reporting agency, as well as other anti-fraud and identity verification databases. We also currently require each new borrower to supply information about the borrower’s bank account. If we purchase loans from another financial institution, we may rely on the selling institution to identify the borrower.

6

Q:

How do we set interest rates on loans?

A:

Interest rates are set by first monitoring various sources of information as to the current levels of commercial loan rates. Using these levels, proposed Note rates and maturities and terms are presented to investors on a To Be Announced (“TBA”) basis. A TBA offering may describe the general characteristics of a loan in the form of a TBA term sheet. Investors are solicited to participate on a TBA basis and orders are subject to final confirmations after a Pricing Supplement is created filed and delivered to investors. Loan rates are therefore primarily set by investor interest at certain levels.

Q:

When are the final payment dates for loans and the corresponding Notes?

A:

The payment dates for each series of loan are different and are described in each loan’s corresponding Note Pricing Supplement. All Note payment dates may be extended if the corresponding loan is in collection and payments are received after the initial stated maturity date. KDM monitors the payments on each loan and will work with the borrower as necessary to maximize the return of any loan to investors. In the case of any loan extension, the interest rate on the note may increase to a much higher default rate. This higher rate will be paid upon foreclosure and sale of the underlying property and will be net of foreclosure expenses and our service charge.

Q: What effects do the service charge and our retaining certain fees have on the expected return of the Notes?

A: Each loan has its own Service Charge described in the Pricing Supplement. The Service Charge is targeted at 1% of the face value of the loan but may be higher or lower depending on fees we may have to pay to brokers to originate loans and other costs. The service charge reduces the interest you receive on your Notes. The service charge also reduces any late fees or amounts obtained from collections (net of any collection fees or other costs charged by us or our outside collection agency) that you may receive. Fees paid by borrowers directly in addition to their required monthly payment have no effect on the payments you receive on your Notes. For a description of our service charge and other fees, see “How our Service Charge Applies” and “Loan Servicing.”

Q: Will KDM make payments on a Note if the corresponding loan borrower for the Note defaults?

A: Yes or No depending on the Loan and circumstances. If the loan corresponding to your Note defaults and the borrower does not pay KDM, KDM will not be obligated to make payments on your Note, and you will not receive any payments on your Note until and if we foreclose and sell the property or we complete and assignment of rents.   We have no obligation to make any payments of principal or interest on a Note unless, and then only to the extent that, we receive payments in respect of the corresponding loan, net of our service charge. All payments are made on a pro rata basis, including any payments due to KDM on account of portions of the corresponding loan, if any, funded by KDM itself. Therefore, if a  borrower makes only a partial payment on a corresponding loan and KDM has funded a portion of the loan, all holders of Notes and KDM will be entitled to receive their pro rata portion of the payment. In the case of most commercial loans, KDM , as lender, pursuant to an assignment of rents, will be able to have the renters of the property pay their rents directly to KDM. In these cases KDM will forward each Noteholder’s pro-rata share of the rents collected less any out of pocket costs such as legal for executing the assignment. In such cases an assignment will not curtail or delay a foreclosure and subsequent sale on the property to recover the principal on the loan.

7

Q: Are the Notes secured by collateral?

A: Yes. The Notes are secured by first mortgage on the property corresponding to the borrower’s loans. They are not guaranteed or insured by any third party or backed by any governmental agency.

Q: If KDM were to become subject to a bankruptcy or similar proceeding, who would service the loans?   Mortgage loan servicing is a service provided by many companies. In the event of a bankruptcy or a wind up of KDM business, such a company could be engaged to manage the loan portfolio and make the payments to investors.

Q: How do investors receive payments on the Notes?

A: All payments on the Notes are processed through the facilities of Depository Trust Clearing Corporation and will be delivered for credit to each investor’s respective brokerage account by delivery of funds to their corresponding brokers.

Q: What is the “in trust for” bank account, and how does FDIC insurance apply to it?

A: We maintain a pooled bank account titled in our name “in trust for” investors, which we refer to as the ITF account. Investors’ unused fund balances are maintained in the ITF account, including funds committed for Note purchases that have not yet closed and payments on Notes that the investor has not withdrawn or invested in additional Notes. We disclaim any economic interest in the assets in the ITF account, and no KDM monies are ever commingled with the assets of investors in the ITF account. Funds in the ITF account are maintained at an FDIC financial institution, currently JP Morgan Chase. The ITF account is FDIC-insured on a “pass through” basis to the individual investors, subject to applicable limits. This means that each individual investor’s balance is protected by FDIC insurance, up to the limits established by the FDIC. Other funds an individual investor has on deposit with JP Morgan Chase for example, may count against any applicable FDIC insurance limits. The ITF account is non-interest bearing.

Q: Can investors collect on late payments themselves?

A: No. Investors must depend on KDM or our third-party collection agents to pursue collection on delinquent loans.

8

Q: What happens if a borrower repays a loan early?

A: We allow borrowers to make extra payments on, or prepay, their loans in part or entirely at any time without penalty. In the event of a prepayment of the entire unpaid balance (which includes interest, fees (if any), and principal) of a loan on which your Notes are dependent, you will receive your share of such prepayment as full repayment of the Note. As a result of this prepayment, you may not receive the full return you had anticipated and will have to redeploy this capital earlier than anticipated. If a borrower partially prepays a loan, we will pay you your share of the prepayment amount we receive. We will then automatically reduce the outstanding principal by the pre-paid amount in excess of the current payment and penalties. The borrower’s monthly payment remains unchanged. With the reduced principal amount and the unchanged monthly payment, the loan will be paid in full earlier than the initial stated term of the loan, effectively reducing its term. The Pricing Supplement will describe any pre-payment penalty associated with any underlying loan. If there is a prepayment penalty, the value of that penalty if paid will be shared pro-rata with the Note holders for that underlying loan.

Q: How does KDM make money from the Program?

A: We earn revenue from the fees we charge our borrowers and investors. We charge borrowers and note investors origination fees that range from 1.00% to 5.00% that are paid upon the issuance of the loan or the issuance of the Notes. We charge investors a service charge on the amounts of interest paid by KDM to investors with respect to each Note. We also earn interest on loans to the extent that we fund those loans ourselves. The details regarding the loans and the fees for any Note are described in the related Pricing Supplement. From the fees we charge we will pay the Trustee for your Notes, and the broker dealers who distributed the Notes to you and safe keep them for you in your account.

Q: How are the Notes being offered?

A: We are offering the Notes through broker dealers and will pay underwriting discounts or charge commissions to investors for acquisition of the notes. The underwriters are responsible for determining suitability of the Notes for their investors and are further responsible for identification of their customers under all anti-terrorism or money laundering statutes. The broker dealers will also be responsible for holding the notes in customer accounts and communicating any information regarding KDM or the Notes to their customers. KDM is not expected in most circumstances to know the identity of the Note interest holders.

Q: Will I receive a certificate for my Notes?

A: No. The Notes are issued only in electronic form. This means that each Note will be stored on our internal system and at the facilities of Depository Trust Company. Evidence of your ownership of Notes will appear on your brokerage statements.

Q: Will the Notes be listed on an exchange?

A: No. The Notes will not be listed on any securities exchange.

9

Q: Will I be able to sell my Notes?

A:

The Notes are generally transferable from broker dealer to broker dealer on behalf of their clients. There can be no assurance, however, that an active market for any particular Note will develop or that there will be a buyer for any particular Note. Further, purchase of notes may not be available in certain states. Our website, KDMinvestor.com, will describe the status of the notes in each state.

Q.

Do the Notes have Risk?

A: Yes. Please see “RISK FACTORS.”

RISK FACTORS

Our Notes involve a degree of risk. In deciding whether to purchase Notes, you should carefully consider the following risk factors. Any of the following risks could have a material adverse effect on the value of the Notes you purchase and could cause you to lose all or part of your initial purchase price or adversely affect future principal and interest payments you expect to receive.

RISKS RELATING TO THE NOTES AND THE CORRESPONDING LOANS ON WHICH THE NOTES ARE DEPENDENT

You may lose some of your initial purchase price for the Notes.

The Notes depend entirely on payments to KDM of borrower’s loans secured by first mortgage obligations and contemporaneous payments on the Notes, which are special, limited obligations of KDM. Notes are suitable purchases only for investors of adequate financial means who, in the instance of a default on the underlying loan, would have to wait for a foreclosure to recover some or all of the principal invested in the Note.

Payments on each Note depend entirely on the payments, if any, we receive on the corresponding loan related to that Note. If a borrower fails to make any payments on the corresponding loan related to your Note, you will have to wait for the underlying loan to be foreclosed, and the property resold, to get a return of principal and interest arrears on your note.

We will make payments pro-rata on a series of Notes, net of our service charge, only if we receive the borrower’s payments on the corresponding loan and such payments clear and therefore become available for distribution to investors. We will not pay to investors any unsuccessful payment fees, check processing fees, or collection fees, we or our third-party collection agency charge. In the unlikely event we do not receive any payments on the corresponding loan related to your Note, you will not be entitled to any payments under the terms of the Notes, and you will not receive any payments. The failure of a borrower to repay a loan is not an event of default by KDM under the terms of the Notes.

10

Borrower credit information may be inaccurate or may not accurately reflect the borrower’s creditworthiness, which may cause you to lose part or all of the purchase price you pay for a Note.

While we primarily focus on the underlying property and its cash flow to repay your Note, we do obtain, where warranted, borrower credit information from consumer reporting agencies, such as TransUnion, Experian, or Equifax. A credit score may not reflect that borrower’s actual creditworthiness because the credit score may be based on outdated, incomplete or inaccurate consumer reporting data, and we do not verify the information obtained from the borrower’s credit report. Additionally, there is a risk that, following the date of the credit report that we obtain and review, a borrower may have:

· become delinquent in the payment of an outstanding obligation;

· defaulted on a pre-existing debt obligation;

· taken on additional debt; or

· sustained other adverse financial events.

Moreover, investors do not, and will not, have access to financial statements of borrowers, or to other detailed financial information about borrowers. A loan to a specific borrower due to fraud or the problems above could result in an early delinquency, default and foreclosure on the loan.

Information supplied by borrower s could be inaccurate or intentionally false.

While, for loans we initiate, we make a reasonable effort for a complete due diligence on each borrower and verify credit reports, property ownership, rent collections, property values, coverage ratios and other concerns there is a chance that a borrower could present us with false information. We cannot be responsible for fraud and investors should be careful and diversify their accounts so that not too much exposure is taken with any single loan. This also holds true for loans we may purchase from other financial institutions.

We rely on third party appraisals to value the property securing the loan, and information from the borrower on cash flow and profitability of the income property.

          While we make every effort to engage responsible licensed third party appraisers, we cannot be certain that the information and presentations they make are reliable. There could be mistakes that would affect the value of a property. Further appraisers may make judgements of value based on cashflow presented by borrowers. If a borrower were to falsify his cashflow it could affect the value shown in the appraisal. To verify cashflows we receive bank statements from borrowers. We cannot be held responsible for mistakes or fraudulent activities of borrowers or appraisers.

We rely on industry default and recovery rates for underwriting our loans and our default rates are untested against industry records and may be higher.

Due to our limited operational and origination history, we do not have significant historical performance data regarding borrower performance and we do not yet know what the long-term loan loss experience will be. It is possible that our default rates may be higher than the industry averages and our recovery rates may be lower than the industry averages.

11

Default rates on the loans may increase as a result of economic conditions beyond our control and beyond the control of borrowers.

 Loan default rates may be significantly affected by economic downturns or general economic conditions beyond our control and beyond the control of individual borrowers. In particular, default rates on loans on which the Notes are dependent may increase due to factors such as prevailing interest rates, the rate of unemployment, the level of consumer confidence, residential or commercial real estate values, the value of the U.S. dollar, energy prices, changes in consumer spending, the number of personal bankruptcies, disruptions in the credit markets and other factors.

If payments on the corresponding loans relating to the Notes become more than 30 days overdue, you may not receive the full principal and interest payments that you expect to receive on the Notes. Due to collection fees and other costs, and you may not recover all of your original purchase price.

If the borrower fails to make a required payment on a loan within 30 days of the due date, we will pursue reasonable collection efforts in respect of the loan. Referral of a delinquent loan to attorney on 31st day of its delinquency will be considered reasonable collection efforts. If we refer a loan to an attorney, we will monitor that loan until the property is foreclosed and resold and investors are paid. We may also handle collection efforts in respect of a delinquent loan directly. In the case of collection efforts, the costs of attorney fees will be charged against the loan and will reduce your net payments on your Note.

If you decide to invest through the Program and concentrate your investment in a single Note, your entire return will depend on the performance of a single loan.

 We expect that some borrowers will default on their loans and we will have to foreclose and sell the underlying property to recover the loan principal and interest in arrears. If you decide to invest through the Program and concentrate your investment in a single Note, your entire return will depend on the performance of a single loan. For example, if you plan to purchase $100,000 of Notes, and choose to invest the entire $100,000 in a single Note instead of in four $25,000 Notes corresponding to the loans of four different borrowers, your entire $100,000 investment will depend on the performance of a single loan. Failing to diversify your investment increases the risk of losing a portion of your investment due to a single borrower’s default, or a small number of borrower defaults. Diversification, however, will not eliminate the risk that you may lose some of the expected principal and interest payments on the Notes.

The KDM Program allows a borrower to prepay a loan at any time.  Borrower loan prepayments will extinguish or limit your ability to receive additional interest payments on a Note.

Borrower loan prepayment occurs when a borrower decides to pay some or all of the principal amount on a loan earlier than originally scheduled. A borrower may decide to prepay all, or a portion of, the remaining principal amount at any time. In the event of a prepayment of the entire remaining unpaid principal amount of a loan on which the Notes are dependent, you will receive your share of such prepayment, net of our service fee. However, further interest will not accrue after the date on which the payment is made. If a borrower prepays a portion of the remaining unpaid principal balance on a loan on which the Notes are dependent, we will reduce the outstanding principal amount and interest will cease to accrue on the prepaid portion. As a result of the combination of the reduced principal amount and the unchanged monthly payment, the effective term of the loan will decline. If a borrower prepays a loan in full or in part, you will not receive all of the interest payments that you originally expected to receive on Notes that are dependent on that loan, and you may not be able to find a similar rate of return on another investment at the time at which the loan is prepaid. Most loans will have an early pre-payment penalty of up to 5% and you will receive your pro-rata portion of this penalty assessment, if it applies, when a loan is paid early. Details of pre-payment penalties for each Loan and the corresponding Note will appear in that Note’s  Pricing Supplement to this prospectus.

12

Prevailing interest rates may change during the term of the loan on which your Note is dependent. If this occurs, you may receive less value from your purchase of the Note in comparison to other investment opportunities. Additionally, borrowers may prepay their loans due to changes in interest rates, and you may not be able to redeploy the amounts you receive from prepayments in a way that offers you the return you expected to receive from the Notes. Further, if interest rates rise, and  you decide to sell your Notes before the borrower pays off the corresponding Loan, you may receive a sale price below par.

Investor funds in a KDM investor account do not earn interest.

Your funds in your KDM investor account represents an interest in a pooled demand deposit account maintained by KDM “in trust for” investors (“ITF account”) that does not earn interest. Investor funds committed to purchase Notes represent binding commitments, and such committed funds may not be withdrawn from accounts (unless and until corresponding loans included in the order are not funded, in which case the corresponding funds become available to the investor again). Funds committed to purchase Notes will not earn interest in the ITF account, and interest will not begin to accrue on a Note until the corresponding Loan has closed and the Note is issued.

The Notes will not be listed on any securities exchange, and generally will be transferable but investors may not find a market for their Note. J. W. Korth & Company plans to make a market in the Notes but is not obligated to do so.

The Notes will not be listed on any securities exchange. All Notes must be held by investors in their brokerage accounts. The Notes are transferable through registered broker dealers. There can be no assurance that an active market for Notes will develop and that there will be a buyer for any particular Notes offered for resale. Therefore, investors must be prepared to hold their Notes to maturity. J. W. Korth & Company, a broker dealer affiliate of KDM, plans to make a market in the Notes but cannot be obligated to do so.

RISKS RELATED TO KDM AND THE KDM PROGRAM

While our parent, J. W. Korth & Company, has a 35 year operating history, we have a limited operating history.

We anticipate that, should we decide to cease operations, our notes will still be serviced by another company. There is no guarantee that another real estate and mortgage servicer will provide the service. In this unlikely event there could be delays in payments of interest and principal on your notes.

13

If we are unable to increase transaction volumes, our business and results of operations will be affected adversely.

To succeed, we must increase transaction volumes on our Program by attracting a large number of borrowers and investors in a cost-effective manner. We intend to do this by using the wholesaling capabilities of our affiliate J. W. Korth & Company to reach out to financial advisors and representatives of broker dealers for investment by their clients in our Notes. We also plan to use mortgage brokers who have client borrowers to provide us with opportunities to make loans. J. W. Korth & Company is funding the development and staff for us. KDM currently has a single dedicated staff member. All others participating in its development have current positions at J. W. Korth & Company. While this process can be expected to continue for a long time, it is possible that we will not develop enough of a following either by loan brokers or securities brokers to sell enough loans or Notes to make KDM profitable. Should this occur, in the judgement of J. W. Korth & Company, then we would shut down new business efforts and turn the loans and notes we have created to a third party real estate loan servicer to wind up the program or we will wind it up ourselves.

The market in which we participate is competitive and, if we do not compete effectively, our operating results could be harmed.

The commercial mortgage market is competitive and rapidly changing. We expect competition to persist and intensify in the future, which could harm our ability to increase volume on our Program.

Our principal competitors include major banking institutions, credit unions, credit card issuers and other consumer finance companies. It is possible that one or more of these companies decide to compete directly with us. The results of such competition could harm our operating results.

We rely on third-party banks to disburse loan proceeds and process loan payments, and we rely on third-party computer hardware and software. If we are unable to continue utilizing these services, our business and ability to service the loans on which the Notes are dependent may be adversely affected.

We rely on a third-party bank to disburse loan amounts. Additionally, because we are not a bank, we cannot belong to and directly access the ACH payment network, and we must rely on an FDIC-insured depository institution to process our transactions, including loan payments and remittances to holders of the Notes. We currently use J P Morgan Chase for these purposes. Under the ACH rules, if we experience a high rate of reversed transactions (known as “chargebacks”), we may be subject to sanctions and potentially disqualified from using the system to process payments. We also rely on computer hardware purchased and software licensed from third parties to operate our Program. This purchased or licensed hardware and software may not continue to be available on commercially reasonable terms, or at all. If we cannot continue to obtain such services from this institution or elsewhere, or if we cannot transition to another processor quickly, our ability to process payments will suffer and your ability to receive principal and interest payments on the Notes will be delayed or impaired.

14

Competition for our employees is intense, and we may not be able to attract and retain the highly skilled employees whom we need to support our business.

Competition for highly skilled technical and financial personnel is extremely intense. We may not be able to hire and retain these personnel at compensation levels consistent with our existing compensation and salary structure. Many of the companies with which we compete for experienced employees have greater resources than we have and may be able to offer more attractive terms of employment.

In addition, we invest significant time and expense in training our employees, which increases their value to competitors who may seek to recruit them. If we fail to retain our employees, we could incur significant expenses in hiring and training their replacements and the quality of our services and our ability to service the loans could diminish, resulting in a material adverse effect on our business.

If we fail to retain our key personnel, we may not be able to achieve our anticipated level of growth and our business could suffer.

Our future depends, in part, on our ability to attract and retain key personnel. Our future also depends on the continued contributions of our executive officers and other key technical personnel, each of whom would be difficult to replace. In particular, our Founder and Chief Executive Officer is critical to the management of our business and operations and the development of our strategic direction. The loss of the services of Mr. Korth, or other executive officers or key personnel, and the process to replace any of our key personnel would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives.

Purchasers of Notes will have no control over KDM and will not be able to influence KDM corporate matters.

The Notes offered through our Program grant no equity interest in KDM to the purchaser nor grant the purchaser the ability to vote on or influence our corporate decisions. As a result, our stockholders will continue to exercise 100% voting control over all our corporate matters, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets.

Events beyond our control may damage our ability to maintain adequate records, maintain our Program or perform our servicing obligations. If such events result in a system failure, your ability to receive principal and interest payments on the Notes would be substantially harmed.

If a catastrophic event resulted in our Program outage and physical data loss, our ability to perform our servicing obligations would be materially and adversely affected. Such events include, but are not limited to, fires, earthquakes, hurricanes, terrorist attacks, natural disasters, computer viruses and telecommunications failures. We store back-up records via cloud storage services via several different companies. If our electronic data storage and back-up storage system are affected by such events, we cannot guarantee that you would be able to recoup your investment in the Notes.

15

RISKS RELATING TO COMPLIANCE AND REGULATION

Federal and State regulatory bodies may create new rules and regulations that could adversely affect our business.

In the wake of the last financial crisis, banking and finance regulation continues to evolve, increasing regulation by federal and state governments becomes more likely. Our business could be negatively affected by the application of existing laws and regulations or the enactment of new laws applicable to lending, mortgages, mortgage servicing, or securities distribution. The cost to comply with such laws or regulations could be significant and would increase our operating expenses, and we may be unable to pass along those costs to our investors in the form of increased fees.

If we discover a material weaknesses in our internal control over financial reporting which we are unable to remedy, or otherwise fail to maintain effective internal control over financial reporting, our ability to report our financial results on a timely and accurate basis may be adversely affected.

We are not currently required to have an audit of our internal control over financial reporting, and our independent registered public accounting firm has not performed such an audit. Should such a requirement arise and should we or our auditors discover a material weakness in our internal controls, our ability to report our financial results on a timely and accurate basis may be adversely affected.

FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this prospectus regarding KDM borrowers, credit scoring, FICO scores, our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about:

· the status of borrowers, the ability of borrowers to repay loans, and the plans of borrowers;

·  expected rates of return and interest rates;

·  our ability to attract additional investors;

·  the attractiveness of our programs;

·  our financial performance;

·  the availability and functionality of the trading Program;

·  our ability to retain and hire competent employees and appropriately staff our operations;

·  regulatory developments;

16

·  our intellectual property; our estimates regarding expenses, future revenue, capital requirements and needs for additional financing; and

·  changes in the regulatory environment.

We may not actually achieve the plans, intentions or expectations disclosed in forward-looking statements, and you should not place undue reliance on forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in forward-looking statements. We have included important factors in the cautionary statements included in this prospectus, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from forward-looking statements contained in this prospectus. Forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

You should read this prospectus and the documents that we have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the understanding that actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

ABOUT THE LOAN PROGRAM

Overview

KDM is a financial Program that enables its borrowers to borrow money and investors to purchase Mortgage Secured Notes, the proceeds of which fund loans made to individual borrowers.

Our lending program operates primarily by email, website, and telephone only. Our investor registration, processing and payment systems are automated and electronic. We encourage the use of electronic payments as the preferred means to disburse loan proceeds and remit cash payments on outstanding loans. We have no physical branches, no deposit-taking and interest payment activities.

We have positioned ourselves in the lending market as a Program for commercial real estate loans of higher quality borrowers, and borrowers who may not qualify for bank loans but otherwise their loans have strong property and mortgage related metrics. Property metrics depend on the type of loan being offered and a described in the related Pricing Supplement for the Notes related to the loan.

All loans are secured obligations of an individual borrower who is a single purpose entity to hold the underlying property. Loans have varying maturities and interest rates. Borrowers whose loans meet our underwriting standards receive commitments subject to distribution and funding of the Notes for the loan. Upon issuance of a distribution commitment, a Preliminary Pricing Supplement is created and distributed to financial advisors and registered representatives in our broker dealer’s Note distribution network. When we receive enough indications of interest for the loan, we set a closing date and collect the funds for the closing in our Investors Trust Account. Money is then disbursed from this account and the loan is closed. Payments received on the loan are generally made by Automated Clearing House collection from the borrowers account(s) and then disbursed through Automated Clearing House delivery through the facilities of Depository Trust Clearing Corporation to be credited to investor’s accounts at their respective DTC Member or those brokerage firms corresponding with DTC Members.

17

As part of operating our Program, we verify the identity of borrowers, obtain borrower s’ credit characteristics from a consumer reporting agency such as TransUnion, Experian or Equifax and screen borrowers for eligibility to participate in the Program and facilitate the posting of loan requests. We also verify the income from the underlying property, the debt service coverage and the loan to value using independent appraisers. We service loans on an ongoing basis.

We rely on the broker dealers who distribute our Notes to know their customers and operate under anti-money laundering and anti-terrorism statues. We manage the verification and identification of borrowers under those statutes.

We offer loans through our Program to borrowers throughout the United States. As of January 1, 2017, we are not dependent on any single party for a material amount of our revenue.

Borrowers who use our Program must identify their intended use of loan proceeds in their initial loan request.

We do not verify or monitor a borrower’s actual use of funds following the funding of a loan.

We attract investors via our website, www.KDMinvestor.com, through a variety of sources, but primarily broker dealers and financial advisors.

How the KDM Program Operates for Newly Issued Loans

Step One: New Loan Registration

As a borrower the first step in using our Program is either directly contacting our lending officer(s) or contacting us through a mortgage broker. The KDM team, led by our Chief Lending Officer and comprised of investment bankers from the staff of J. W. Korth & Company, our parent, analyzes the property (or properties in the case of a pool) and proposed loan or pool of loans. If we believe the proposed loan or pool of loans is sound and a good investment for our lending clients then an application is taken. This application identifies the property location(s), age of the property or properties, the estimated loan(s) to value, the estimated debt service coverage ratio(s), the appraisal(s), the current condition(s), the occupancy rate(s), the maturity of the loan(s), the commission to the brokers (if any). If these facts are acceptable to KDM and the borrower, we issue a Preliminary Loan Term Sheet which describes the investment if summary detail and we seek expressions of interest from broker dealers and registered financial advisors for their clients. If we find enough interest for a loan and the related Note, a Placement Agent Agreement is signed between the client and J. W. Korth & Company or such other broker dealer acceptable to KDM. A Preliminary Pricing Supplement for the Notes related to the Loan is created and the Loan and the related Note receives an internal loan number. This number begins with the year and is designated with a four digit loan number. Two loans were created in 2016 and they received loan numbers 2016-K001 and K002. These loans had Accredited Investors Memorandums created and these memorandums are the format basis for the Pricing Supplements for Future Loans. These memorandums can be accessed at KDMinvestor.com. The Notes related to each Loan or pool of loans will have the same identifying number as the corresponding Loan or pool of Loans.

18

The Preliminary Pricing Supplement at the minimum will contain all of the following information regarding the Loan and the reflective terms of the underlying Note:

· Loan and Note Amount

· Price of Note to Investors

· Type of Property

· Credit Reports for Borrowers or Owners of Borrowers

· Results of an Environmental Assessment where KDM believes it is warranted.

· Date of Construction of Property

· Location of Property

· Appraised Value and identification of appraiser and complete appraisal

· Debt Service Coverage Ratio and Related Analysis

· Servicing Fee for KDM and effect on Note Yield to Investors

· Expected Yield to Maturity of Note

· Maturity Date of Loan and Note

· Any Premium to be paid by investor for Note

· Underwriters Discount or Placement Agent’s Commission, if any.

· Net Proceeds to Borrower

· Borrower’s statement on Use of Proceeds

· Verification of Receipt of Rents, if applicable

· CUSIP Number for the Note

· Name and address of Loan Broker, if any

· Name and address of Lead Underwriter or Lead Placement Agent, if any

· Risks specifically related to the subject property

Step Two: Distribution of Loan and Corresponding Note Information, Orders for Notes, and Underwriting

After signing the Placement Agent Agreement, and completion of the Preliminary Pricing Supplement, a CUSIP Number is acquired for the potential Note and J. W. Korth & Company or another broker dealer engaged by KDM will, as lead manager, solicit participation of its clients or the clients of other broker dealers and financial advisors on a “when, as and if issued basis”. This process can proceed under either as a “best efforts” or “firm underwriting” depending on the Note being sold and the market conditions at the time. Under either format, the participating securities dealers will sign a Master Selected Dealers Agreement or Master Underwriting Agreement. Both these agreements will require the participating dealers to be responsible for client identification under all Anti-Money Laundering and Anti-Terrorism statutes.

Step Three: Collection of Funds, Issuance of Notes, and Closing of the Loan

When the Mortgage Secured Notes are either underwritten or fully subscribed in a best efforts offering, funds will be delivered by the participating brokerage firms on behalf of their clients to the KDM In Trust For account. (This is a segregated account that only handles funds for collection from investing clients and closing of loans and is not comingled with any other account of KDM.) Once funds are collected the loan will be closed and a single master Note for the entire note issue will be delivered to Depository Trust Company (“DTC”) registered to Cede & Company and then the DTC member through which each participating dealer corresponds will be credited with the  appropriate face amount of the Note for further credit to each its client accounts.

19

The Loan will be closed with KDM as the mortgagee and holder of the Borrower’s Note. These documents will be properly filed in the proper local jurisdiction. Under the Master Trust Indenture for the Note, KDM has specifically assigned all interest in the underlying mortgage to the holders of the corresponding Note.

How the KDM Program operates for Acquisition of Existing Loans and the Issuance of Corresponding Notes 

When KDM acquires an existing loan and issues corresponding notes the sale and closing process is same except that the Placement Agent or Underwriting Agreement will be signed by KDM and KDM will purchase the borrower’s loan and mortgage from a third party investor. In these cases, information about the borrower may be more limited and appraisals may be less current. In such instances an estimate of value from a local expert may be acquired to bolster a longer dated appraisal. A history of loan payments will be an added verified feature in the Pricing Supplement for the loan. It is possible that existing loans may be purchased by KDM directly and then have Notes issued against them. In this case the price and yield of the loan at acquisition by KDM will be disclosed in the Pricing Supplement to investors as well as the net mark-up of the loan in the form of the corresponding Note.

How KDM Prices Loans and Underlying Corresponding Notes

Note maturities and yields to investors must be competitive with other options they have for secured investments. Notes are not guaranteed by any federal agency, so they must stand against other types of lower-risk debt, such as lower investment grade corporate bonds or other mortgage loans. Simultaneously, the borrower may have other options for acquiring new mortgage funding and KDM must be competitive with these options to be able to acquire new loans against which Notes may be issued. The dynamic between these two marketplaces is the final determinant of each Note issuance in the relative market conditions on the date an offering is underwriting or becomes fully subscribed on a best efforts or underwritten basis.

How our Service Charge Applies

KDM must service the underlying loans and manage the distribution and payment of interest and principal on the underlying notes. For these services it charges an annual fee targeted at 1.00%; but it could be lower or higher for a given loan based on that Loan and the corresponding Note’s terms, as disclosed in the Pricing Supplement. The service charge accrues to KDM, and is paid by the borrower from the mortgage loan interest payments. It therefore creates a lower net interest on the underlying note to the investor. The service charge is applied to every interest payment received on the underlying loan. Therefore, if we receive 8.00% interest annually from the underlying loan your payments will be 7.00% annually, barring any other expenses. This servicing fee pays the ongoing cost of collection of interest and principal, disbursing your interest and principal to you on your Note, and our monitoring the loan and payment of auditing and trustee fees.

20

Verification of Property and Investor Information

KDM only posts information in its Pricing Supplements that it believes to be reasonably verified. A borrower or other parties could possibly provide us with fraudulent information. While we make every attempt to mitigate this possibility in our due diligence efforts, there can be no guarantee that everything we present is true and correct and therefore the possibility exists that information could be false and investors could lose money because of it.

How to Purchase Notes

Notes may only be purchased through registered broker dealers who participate in the distribution of Notes. You may contact J. W. Korth & Company at 800 454 1628 to learn which broker dealers can help you purchase Notes.

Loan Servicing

Loan payments are transferred to the KDM Clearing Account. This segregated account collects all Loan Payments and disburses the respective payment on the Notes to Depository Trust Company for credit to each participating broker dealer’s account. Broker dealer participants then make further credit to customer accounts of Note holders. We also debit this account for our servicing fees as described above.

In the event it becomes necessary to expend funds for the collection or protection of the Loan, or for the preservation or protection of the Property, including the institution of foreclosure proceedings, such expenses will initially be covered by Lender (to a maximum of $10,000), from funds provided from the Servicing Fee, or from J. W. Korth & Company, pursuant to the Support Agreement. Ultimately, all costs and expenses will be funded (or reimbursed to us) from the proceeds of any foreclosure or settlement. These expenses may reduce your interest payments or principal payments on your Note. (See "Risk Factors")

We disclose on our website to the relevant investors and report to consumer reporting agencies regarding borrowers’ payment performance on our loans. We have also made arrangements for collection procedures in the event of borrower default. When a loan is past due and payment has not been received, we contact the borrower to request payment. After a 15-day grace period, we may, in our discretion, assess a late payment fee. The amount is specific to each loan. This fee may be charged only once per late payment. Amounts equal to any late payment fees we receive are paid to holders of the Notes dependent on the relevant loans, net of our service charge. We often choose not to assess a late payment fee when a borrower promises to return a delinquent loan to current status and fulfills that promise. Each time a payment request is denied due to insufficient funds in the borrower’s account or for any other reason, we may assess an unsuccessful payment fee to the borrower in an amount of $15.00 per unsuccessful payment, or such lesser amount as may be provided by applicable law. We retain 100% of this unsuccessful payment fee to cover our costs incurred due to the denial of the payment.

21

If a loan becomes 31 days overdue, we identify the loan on our website as “Late (31-120),” and we refer the loan to a real estate attorney for foreclosure proceedings. In these cases, the interest rate on the loan moves to the highest legal rate in that state. All the costs and proceeds from a foreclosure and resale of a defaulted loan and mortgaged property are charged against the proceeds to investors on the corresponding Note. If funds remain after the property is resold and all expenses are paid, they will be distributed to the Note investors on a pro-rata basis.

The following table summarizes the fees that we charge and how these fees affect investors:

Description of Fee	Fee Amount	When Fee is Charged	Effect on Investors
Service charge on Notes	Generally, 1.00% of the interest and late fees received by KDM from borrowers in respect of each corresponding loan.1	At the time of any payments on the Notes, including Note payments resulting from prepayments or partial payments on corresponding loans	The difference between the interest paid by the borrower and the stated interest paid to investors on the corresponding note will be the service charge.2
Loan late fee	Assessed in our discretion; if assessed, the late fee is specific to each loan.	In our discretion, when a loan is past due and payment has not been received after a 15-day grace period	Distributed on a pro-rata basis to holders of the Note corresponding to the Loan
Loan unsuccessful payment fee	$35.00 per unsuccessful payment, or such lesser amount as may be provided by applicable law	May be assessed each time a payment request is denied, due to insufficient funds in the borrower’s account or for any other reason	Investors in the Notes do not share in this fee

Loan collection fee	Only charged after a loan becomes 31 days overdue if the collection agency or KDM is able to collect an overdue payment; collection fee is up to 35%, excluding litigation.	At the time of successful collection after a loan becomes 31 days overdue	Foreclosure fees charged by us or independent attorneys will reduce payments and the effective yield on the related Notes; Foreclosure fees will be retained by us or the independent attorney as additional servicing compensation
Check processing fee	$15.00 per check processed for any payments made by check	At the time a payment by check is processed	We retain 100% of this check processing fee to cover our costs

¹ This may be higher or lower on some Notes. Exact charges will be specified in the Pricing Supplement for that note.

² Other fees may apply in certain situations, including foreclosure, and will be detailed in the Pricing Supplement when applicable.

22

Participation in the Funding of Loans by KDM and Its Affiliates

From time to time, qualified loan requests on our Program may not be fully committed to by investors. To address these situations, we may fund portions of certain loan requests. Although we have no obligation to do so, we may fund portions of loan requests in the future. If we do fund loans in the future we will issue Notes directly to ourselves for that portion of the loan we fund.

Our affiliates, including our executive officers, directors and stockholders, may fund portions of loan requests from time to time. Since inception of the program, these affiliates have funded $54,500 of new loan requests and their outstanding principal balance was $54,500.

Historical Information about Our Borrowers and Outstanding Loans

We are a newly organized company and have not yet funded any loans or sold any Notes. Therefore we do not have this historical information.

Use of Proceeds

We will use the proceeds of each series of Notes to fund a loan through the KDM Program designated by the investors purchasing such series of Notes.

Plan of Distribution

The Notes will be offered by KDM or through the efforts of brokers or dealers with whom we may enter into agreements from time to time. In connection with such agreements, we may agree to indemnify these brokers or dealers for certain liabilities, including liabilities under the Securities Act, liabilities arising from breaches of representations and warranties contained in any agreement with such brokers or dealers, and, potentially, to contribute to payments that the brokers or dealers may be required to make for these liabilities. We will pay all commissions to brokers or dealers, or in certain circumstances we, at the request of the broker or dealer, will deliver any payment that would have been paid to the broker or dealer to a specified investor.

23

Notes may be sold on a “best efforts” or “firm commitment” basis and the terms regarding a given Note will be disclosed in the Pricing Supplement for that Note.

All purchases of Notes will be made by investors through broker dealers.

All Notes will be offered to KDM investors at a price which may be at a discount or premium to their stated principal amounts, and there may be underwriting discounts or commissions paid on the Notes to broker dealers. Such information will be fully disclosed on the Pricing Supplement for each Note.

The information on any website maintained by any other third party is not part of the prospectus or this registration statement of which the prospectus forms a part, has not been approved and/or endorsed by us and should not be relied upon by any investor.

Description of the Notes

General

The Notes will be issued in series under an indenture dated ______________2017 as amended or supplemented, between KDM and Delaware Trust Company.

Each Note corresponds to one borrower Loan. All Notes will be U.S. dollar denominated, amortizing, and may have a fixed rate or floating of interest. Each Note will have a stated interest rate that is the same as the interest rate for the corresponding borrower loan and an aggregate stated principal amount equal to the corresponding borrower Loan.

Notwithstanding the foregoing, KDM has no obligation to make any payments on the Notes unless, and then only to the extent that, KDM has received payments on the corresponding Loan, as described under “Payments and Paying Agents” and “Limitations on Payments.” The Notes will also be subject to prepayment without penalty under certain circumstances as described under “Prepayments.”

Notes of each series will have an initial term described in its Pricing Supplement. If there are amounts owing to KDM in respect of the corresponding Loan after the maturity of the Note, such funds will be delivered through their respective broker dealers at that time. The indenture does not limit the aggregate principal amount of Notes that KDM can issue under the indenture or the size of any series. When KDM funds some or all of a loan itself, interests in the Note will be issued to KDM for the amounts of the loan that KDM determines to fund itself or are funded by affiliates. These Notes may be resold by KDM or affiliates in secondary market transactions.

Notes and Loans will receive a designated Number as follows: KDM and four digit year hyphen then number series of four digits beginning 0001.Therefore, Loan Number KDM 2016-0001 will correspond directly to Note Number KDM 2016-0001.

We will use all proceeds we receive from purchases of the Notes to make Loans to borrowers on a first mortgage basis.

24

Ranking

The Notes will be contractually senior to all other indebtedness of KDM and separate and distinct from each other. The Notes will be secured special obligations of KDM. The security for each Note will be the corresponding note and first mortgage obligation of a borrower. KDM will be obligated to pay on each Note in a series only if, and to the extent that, KDM receives principal, interest, or late fee payments from the borrower on the corresponding loan funded by the proceeds of that series, and such borrower loan payments will be shared ratably among all Notes of the series after deduction of KDM’s service charge. In the event of a bankruptcy or similar proceeding of KDM, the relative rights of the holder of a Note should be separate and distinct, related directly to the underlying security, and held separate from the holders of other other indebtedness of KDM. If KDM were to become subject to a bankruptcy or similar proceeding, the holder of a Note will have a secured claim against KDM that will be limited in recovery to the corresponding borrower loan.

The indenture does not contain any provisions that limit KDM’s ability to incur indebtedness in addition to the Notes.

Payments and Paying Agents

Subject to the limitations described under “Limitations on Payments,” KDM will make payments of principal and interest on the Notes within four business days of receiving Loan Payments (as defined below) in respect of the corresponding loan, in accordance with the payment schedule for each Note. Each Note will have a payment schedule described in its related Pricing Supplement. The extra four business days allow us to assure the finality of the transfer of funds under the ACH rules after we receive payments from borrowers.

The stated interest rate on each Note will be the same as the interest rate on the corresponding loan, less the Service Charge. Interest will be computed and will accrue on the Note in the same manner as the interest on the corresponding loan is computed and accrues.

All payments received from Loans with corresponding Notes will be collected in a special segregated account. KDM will be the initial paying agent for the Notes. KDM will make all required payments on each Note to the brokerage account of the holder in whose name the Note is registered on the record date for the relevant payment date. The record date for each payment date shall be the second business day prior to the actual payment date. If a payment date falls on a date that is not a business day, then such payment will be made on the next succeeding business day.

 “Business day” means each Monday, Tuesday, Wednesday, Thursday, and Friday that is (1) not a day on which the ACH system operated by the U.S. Federal Reserve Bank (the “ACH System”) is closed and (2) not a day on which banking institutions in San Francisco, California or New York, New York are authorized or obligated to close.

Limitations on Payments

For each series of Notes, “Loan Net Payments” means the amounts, if any, equal to the Loan Payments from the corresponding loan minus the applicable Service Charge.

“\Loan Payments” for each series of Notes means all amounts received by KDM in connection with the corresponding Loan, including without limitation, all payments or prepayments of principal and interest, any late fees and any amounts received by KDM upon collection efforts with respect to the corresponding Loan, but excluding the Unsuccessful Payment Fee, any check processing fees, any collection fees imposed by KDM or KDM’s third-party collection agency.

25

The “Service Charge” is an amount equal to 1.00% of all Loan Payments or such other amount stated in the Pricing Supplement for a specific series of Notes.

The “Unsuccessful Payment Fee” is a $35.00 fee or such lesser amount permitted by law charged by KDM when KDM’s payment request is denied for any reason, including but not limited to, insufficient funds in the borrower’s bank account or the closing of that bank account.

To the extent that anticipated Loan Payments from a Loan are not received by KDM, no payments will be due and payable by KDM on the Notes related to that Loan until an assignment of rents is completed or a foreclosure is completed and the property has been sold by KDM.

Prepayments

To the extent that a  borrower prepays a corresponding loan, such prepayment amount will be a Loan Payment and holders of Note interests related to that corresponding Loan will be entitled to receive their pro rata share of the prepayment. In the case of a partial prepayment of a corresponding Loan, we automatically reduce the outstanding principal and the term of the Loan is effectively reduced as the monthly payment amount remains unchanged.

Servicing Covenant

KDM is obligated to use commercially reasonable efforts to service and collect the Loans, in good faith, accurately and in accordance with industry standards customary for servicing loans such as the Loans. If KDM refers a delinquent Loan to a licensed attorney for collection, that referral shall be deemed to constitute commercially reasonable servicing and collection efforts. Furthermore, without the consent of the corresponding Noteholders, KDM may, at any time and from time to time, amend or waive any term of a Loan if it believes it is in the best interests of the Note holders. See “About the Loan Program — How the KDM Program Operates — Post-Closing Loan Servicing and Collection” for a description of KDM’s imposition of late fees. KDM will also be obligated to use commercially reasonable efforts to maintain backup servicing arrangements providing for the servicing of the loans.

The indenture contains no financial covenants or other covenants limiting KDM’s operations or activities, including the incurrence of indebtedness.

Consolidation, Merger, Sale of Assets

The indenture prohibits KDM from consolidating with or merging into another business entity or conveying, transferring or leasing our properties and assets substantially as an entirety to any business entity, unless:

· the surviving or acquiring entity is a U.S. corporation, limited liability company, partnership, or trust, and it expressly assumes our obligations with respect to the outstanding Notes by executing a supplemental indenture;

·  immediately after giving effect to the transaction, no default shall have occurred or be continuing; and

26

·  we have delivered to the trustee an officers’ certificate and an opinion of counsel, each stating that the transaction, and if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with the indenture and all conditions precedent relating to such transaction have been complied with.

Denominations, Form and Registration

Except as may be provided otherwise for a particular series of Notes, we will issue Notes in denominations of $1000 or integral multiples of $1000. The Notes will be issued only in registered form and only in a single note in the name of Cede and Company and delivered to the facilities of Depository Trust Company for credit to each broker dealer member and further credit to their affiliated broker dealers and the clients of those broker dealers who own Notes. We will not issue certificates for the Notes. Investors will be required to hold their Notes through their broker dealer.

The laws of some states in the United States require that certain persons take physical delivery in definitive, certificated form, of securities that they own. This may limit or curtail the ability of such persons to purchase Notes.

We reserve the right to issue certificated Notes only if we determine not to have the Notes held solely in electronic form.

Amortization

The amortization of the Notes will be the same as the amortization requirements of the corresponding first mortgage Loan and described in the Pricing Supplement for each series of Notes.

Events of Default

Under the terms of the indenture, any of the following events will constitute an event of default for a series of Notes:

· failure by KDM to make required payments on the Notes for 30 days past the applicable due date, when payments have been received for a corresponding Loan;

· failure by KDM to perform, or the breach of, any other covenant for the benefit of the holders of the Notes of such series which continues for 90 days after written notice from the Trustee or holders of 25% of the outstanding principal amount of the debt securities of all series for which such default exists as provided in the indenture, subject to an additional 90 day cure period; or

·  specified events relating to KDM’s bankruptcy, insolvency or reorganization.

It is not a default or event of default under the terms of the indenture if we do not make payments when a borrower does not make payments to us on the Loan corresponding with the particular series of Notes. In that case, KDM is not required to make payments on Notes, so no default occurs. See “RISK FACTORS.”

An event of default with respect to one series of Notes is not automatically an event of default for any other series.

27

If an event of default occurs due to bankruptcy, insolvency, or reorganization as provided in the indenture, then the stated principal amount of the Notes shall not become due and payable immediately without any act by the trustee or any holder of Notes. Notes shall continue to be due and payable only if the corresponding Loan has made payments.

The holders of a majority in aggregate principal amount of the outstanding Notes of any series, by notice to the trustee (and without notice to any other holder of Notes), may, on behalf of the holders of all such notes, waive an existing default with respect to such Notes and its consequences except (1) a default in the payment of amounts due in respect of such Notes or (2) a default in respect of a provision of the indenture that cannot be amended without the consent of each holder affected by such waiver. When a default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other default or impair any consequent right.

A holder of any Note of any series may not institute a suit against us for enforcement of such holder’s rights under the indenture or pursue any other remedy with respect to the indenture or the Notes unless:

· the holder gives to the trustee written notice stating that an event of default with respect to the Notes is continuing;

· the holders of at least 25% in aggregate principal amount of the outstanding Notes of that series make a written request to the trustee to pursue the remedy;

· such holder or holders offer to the trustee security or indemnity satisfactory to it against any loss, liability or expense satisfactory to the trustee;

· the trustee does not comply with the request within 60 days after receipt of the notice, the request and the offer of security or indemnity; and

· the holders of a majority in aggregate principal amount of the outstanding Notes of that series do not give the trustee a direction inconsistent with such request during such 60-day period.

The indenture requires us every year to deliver to the trustee a statement as to performance of our obligations under the indenture and as to any defaults.

Satisfaction and Discharge of the Indenture

The indenture will generally cease to be of any further effect with respect to a Note if the Note has been fully satisfied with all payments due (either according to its schedule or through foreclosure and sale of the related property) from the underlying Loan being made and such Note has been delivered for cancellation.

28

Governing Law

The indenture and the Notes will be governed by the laws of the State of Florida without regard to any principle of conflict of laws that would require or permit the application of the laws of any other jurisdiction.

Information Concerning the Trustee

Delaware Trust Company is the trustee under the indenture. From time to time, we may maintain deposit accounts and conduct other banking transactions with the trustee and its affiliates in the ordinary course of business. If and when the trustee becomes a creditor of ours, the trustee will be subject to the provisions of the Trust Indenture Act regarding the collection of claims against us. The trustee and its affiliates will be permitted to engage in other transactions; however, if they acquire any conflicting interest, the conflict must be eliminated or the trustee must resign.

Notes will be Book Entry Only

1.          The Depository Trust Company (“DTC”), New York, NY, will act as securities depository for the securities (the “Securities”). The Securities will be issued as fully-registered securities registered in the name of Cede & Co. (DTC’s partnership nominee) or such other name as may be requested by an authorized representative of DTC. One fully-registered Security certificate will be issued for Note, in the aggregate principal amount of such issue, and will be deposited with DTC.

2.          DTC, the world’s largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a “banking organization” within the meaning of the New York Banking Law, a member of the Federal Reserve System, a “clearing corporation” within the meaning of the New York Uniform Commercial Code, and a “clearing agency” registered pursuant to the provisions of Section 17A of the Securities Exchange Act of 1934. DTC holds and provides asset servicing for over 3.6 million issues of U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments (from over 100 countries) that DTC’s participants (“Direct Participants”) deposit with DTC. DTC also facilitates the post-trade settlement among Direct Participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between Direct Participants’ accounts. This eliminates the need for physical movement of securities certificates. Direct Participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation (“DTCC”). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. DTCC is owned by the users of its regulated subsidiaries. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a Direct Participant, either directly or indirectly (“Indirect Participants”). DTC has a Standard & Poor’s rating of AA+. The DTC Rules applicable to its Participants are on file with the Securities and Exchange Commission. More information about DTC can be found at www.dtcc.com.

29

3.          Purchases of Securities under the DTC system must be made by or through Direct Participants, which will receive a credit for the Securities on DTC’s records. The ownership interest of each actual purchaser of each Security (“Beneficial Owner”) is in turn to be recorded on the Direct and Indirect Participants’ records. Beneficial Owners will not receive written confirmation from DTC of their purchase. Beneficial Owners are, however, expected to receive written confirmations providing details of the transaction, as well as periodic statements of their holdings, from the Direct or Indirect Participant through which the Beneficial Owner entered into the transaction. Transfers of ownership interests in the Securities are to be accomplished by entries made on the books of Direct and Indirect Participants acting on behalf of Beneficial Owners. Beneficial Owners will not receive certificates representing their ownership interests in Securities, except in the event that use of the book-entry system for the Securities is discontinued.

4.          To facilitate subsequent transfers, all Securities deposited by Direct Participants with DTC are registered in the name of DTC’s partnership nominee, Cede & Co., or such other name as may be requested by an authorized representative of DTC. The deposit of Securities with DTC and their registration in the name of Cede & Co. or such other DTC nominee do not effect any change in beneficial ownership. DTC has no knowledge of the actual Beneficial Owners of the Securities; DTC’s records reflect only the identity of the Direct Participants to whose accounts such Securities are credited, which may or may not be the Beneficial Owners. The Direct and Indirect Participants will remain responsible for keeping account of their holdings on behalf of their customers.

5.          Conveyance of notices and other communications by DTC to Direct Participants, by Direct Participants to Indirect Participants, and by Direct Participants and Indirect Participants to Beneficial Owners will be governed by arrangements among them, subject to any statutory or regulatory requirements as may be in effect from time to time. Beneficial Owners of Securities may wish to take certain steps to augment the transmission to them of notices of significant events with respect to the Securities, such as redemptions, tenders, defaults, and proposed amendments to the Security documents. For example, Beneficial Owners of Securities may wish to ascertain that the nominee holding the Securities for their benefit has agreed to obtain and transmit notices to Beneficial Owners. In the alternative, Beneficial Owners may wish to provide their names and addresses to the registrar and request that copies of notices be provided directly to them.

6.          Neither DTC nor Cede & Co. (nor any other DTC nominee) will consent or vote with respect to Securities unless authorized by a Direct Participant in accordance with DTC’s MMI Procedures. Under its usual procedures, DTC mails an Omnibus Proxy to Issuer as soon as possible after the record date. The Omnibus Proxy assigns Cede & Co.’s consenting or voting rights to those Direct Participants to whose accounts Securities are credited on the record date (identified in a listing attached to the Omnibus Proxy).

30

7.          Redemption proceeds, distributions, and dividend payments on the Securities will be made to Cede & Co., or such other nominee as may be requested by an authorized representative of DTC. DTC’s practice is to credit Direct Participants’ accounts upon DTC’s receipt of funds and corresponding detail information from Issuer or Agent, on payable date in accordance with their respective holdings shown on DTC’s records. Payments by Participants to Beneficial Owners will be governed by standing instructions and customary practices, as is the case with securities held for the accounts of customers in bearer form or registered in “street name,” and will be the responsibility of such Participant and not of DTC, Agent, or Issuer, subject to any statutory or regulatory requirements as may be in effect from time to time. Payment of redemption proceeds, distributions, and dividend payments to Cede & Co. (or such other nominee as may be requested by an authorized representative of DTC) is the responsibility of Issuer or Agent, disbursement of such payments to Direct Participants will be the responsibility of DTC, and disbursement of such payments to the Beneficial Owners will be the responsibility of Direct and Indirect Participants.

8.          DTC may discontinue providing its services as depository with respect to the Securities at any time by giving reasonable notice to Issuer or Agent. Under such circumstances, in the event that a successor depository is not obtained, Security certificates are required to be printed and delivered.

9.          Issuer may decide to discontinue use of the system of book-entry-only transfers through DTC (or a successor securities depository). In that event, Security certificates will be printed and delivered to DTC.

The information in this section concerning DTC and DTC’s book-entry system has been obtained from sources that KDM believes to be reliable, but KDM takes no responsibility for the accuracy thereof.

ABOUT KDM

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BUSINESS

Overview

Korth Direct Mortgage LLC originated its business in October of 2016 when it engaged its Chief Lending Officer. Since that time KDM has not yet transacted any business. It has applied for its Mortgage Lender Servicer License with the State of Florida and expects to receive that License soon with License Number 1579547. KDM was in Florida in October 2006 under the name HCMK Consulting, LLC in 2009. We changed our name to J W Korth & Company LLC and then Korth Direct Mortgage LLC in August of 2016. Up until now the company has completed essentially no business. Our principal executive offices are located at 2937 SW 27^th Avenue Suite 307, Miami, Florida 33133, and our telephone number is (800) 454-1628. Our website address is www.kdminvestor.com. Information contained on our website is not incorporated by reference into this prospectus; however, some information on our website may constitute a free writing prospectus.

31

Our operating history is limited. We are currently 100% supported by J. W. Korth & Company Limited Partnership, an SEC registered member of the Financial Regulatory Authority founded in 1982. We believe we will continue to be supported by J. W. Korth & Company for the remainder of this fiscal year which will end on December 31, 2017 and the first six months of 2018. During this time we believe we will begin making Loans and selling Notes and the servicing fees we will earn will make us self-sufficient. We do not anticipate the need to raise any funds during this period. During this period any staffing requirements will be supplied by J. W. Korth & Company. During this period we anticipate no research and development expenses and no expenses for plant and equipment and that office space will be provided by J. W. Korth & Company. We intend to hire employees or assign employees from J. W. Korth & Company to KDM as business development requires.

Sales, Marketing and Customer Service

On the borrower side, our marketing efforts are designed to attract borrowers to our website, to enroll them as clients, and to close transactions with them. We employ primarily email correspondence to mortgage brokers to encourage them to present loans to us for possible funding through the issuance of corresponding Notes. We are also contacting other financial institutions who may own commercial mortgages, and will attempt to purchase mortgages for the KDM program.

On the Noteholder side, we market to broker dealers and financial advisors using email, direct visits, and telephone, and are building a syndicate to rapidly distribute our Notes. J W Korth & Company, our affiliate and founder, has extensive experience in developing fixed income distribution programs and will apply its expertise to our Note sales.

Financial Information About Segments

We have a single segment of business which is issuing first mortgage commercial loans and sell Notes to support those loans. To date we have not done any business and as we do business we will file Pricing Supplements reflecting the issuing of loans and sales of Notes corresponding to those loans. Our current monthly expenses are approximately $13,000 and are 100% supported by J. W. Korth & Company.

Fraud detection

We consider fraud detection to be of utmost importance to the successful operation of our business. We employ a combination of proprietary technologies and commercially available licensed technologies and solutions to prevent and detect fraud. We employ techniques such as knowledge based authentication (KBA), out-of-band authentication and notification, behavioral analytics and digital fingerprinting to prevent identity fraud. We use services from third-party vendors for user identification, credit checks and OFAC compliance.

Competition

The market for mortgage lending is competitive and rapidly evolving. We believe the following are the principal competitive factors in the lending market:

32

· pricing and fees;

· website attractiveness;

· experience, including borrower full funding rates and investor returns;

· branding; and

· ease of use.

We face competition from major banking institutions, credit unions, credit card issuers and other consumer finance companies as well as smaller private lenders.

We may also face future competition from new companies entering our market. These companies may have significantly greater financial, technical, marketing and other resources than we do and may be able to devote greater resources to the development, promotion, sale and support of their consumer lending Programs. These potential competitors may be in a stronger position to respond quickly to new technologies and may be able to undertake more extensive marketing campaigns. These potential competitors may have more extensive potential borrower bases than we do. In addition, these potential competitors may have longer operating histories and greater name recognition than we do. Moreover, if one or more of our competitors were to merge or partner with another of our competitors or a new market entrant, the change in competitive landscape could adversely affect our ability to compete effectively.

Our success depends on developing a network of loan brokers who will refer transactions to us and a network of banks, financial advisors and registered representatives of brokerage firms who will place our Notes with their clients. We believe both the mortgage broker network and the distribution network for Notes is accessible through email and direct contacts and advertising in key spots. We also believe that there is a large niche for competitive single asset single borrower mortgage securities (“SASB”). Currently pooled assets guaranteed by government sponsored enterprises have yields to investors as much as 300 basis points less than ours can expect to provide. This difference is the cost of inventorying and pooling loans together with the cost of the guarantee. We believe there a millions of investors who can purchase small pieces of $10,000 of our reasonably low risk loans and build diversified portfolios of 10 different loans with as little as a total of $100,000. Our affiliate, J. W. Korth & Company, has a strong history in developing similar fixed income products and delivering them to a wide variety of retail brokerage firms for distribution to their clients.

It is highly likely that another brokerage firm or mortgage company may use our program as a model and attempt to execute it in a similar fashion. Fortunately, the market for commercial loans is more than $5 trillion and the market for retail securities is estimated by us to be about 3 times that. This makes room for competitors. We as a first mover can be expected to benefit as others enter the marketplace and market saturation can be expected to be several years in the future.

We also intend to make the KDM Program available to other banks and broker dealers who may want to originate loans and acquire and distribute notes. We believe this service may be very economic and beneficial to certain other financial institutions. As we develop our syndicate for distribution of the Notes, we plan to make other institutions aware of the possibility of using KDM as a platform to generate new issue investment banking business.

33

Our Loan and Note Rating Program

We give each of our Loans or Loan pools and the corresponding Notes a rating. This rating is disclosed on our website for each Loan and Note. It is also disclosed in our Pricing Supplement for the issuance of each Note. Loans and corresponding Notes are reviewed periodically and ratings may be changed at any time.

We are not a Nationally Recognized Statistical Rating Agency (NRSRO) as defined by the Securities and Exchange Commission. We have certain conflicts of interest in producing our ratings. We discuss management of these conflicts of interest below. We have no history of performance under our ratings categories. The ratings categories are based on the judgement of experienced mortgage lenders and investment bankers. As we develop a history we will publish our track record in various future filings and on our website.

Our transactions are generally known in the mortgage industry as “Single Asset Single Borrower” or “SASB” transactions. Our SASB transactions generally take one of two forms. The first has a loan secured by one or multiple properties and the second are by grouping of loans to one borrower. In these group loans they are often cross-collateralized and have cross-default terms. Credit risk for these transactions is identified at several levels –the sponsor, property type, property age, property count, geographic location, loan to value, debt service coverage ratio. To account for these risks as we analyze and rate potential loans we look separately at each of these factors and weight each with a score for each factor. Our scoring matrix is below:

Score Categories	Possible Maximum
Loan to Value	7
Credit Score of Borrower	5
Debt Service Coverage	4
Property Type	4
Property Age	5
Property Demand	5
Building Condition	3
Total	33

Loan to Value  – KDM Loan to Value, LTV, is based off of the appraised 90 day liquidation value of the property.  In a foreclosure scenario we believe basing our loan on a 90 liquidation value will allow KDM to more quickly recover our client’s investment proceeds and will hedge against any potential downturn in the real estate market.  Any LTV of 54.99% or less will receive a maximum rating score of 7 and any loan with an LTV of no greater than 80% will receive a 1.

34

Credit Score of Borrower – Our borrowers are single purpose entities and not individuals. Nevertheless, wherever possible, we analyze the credit score from the controlling owner of the single purpose entity. If it is another entity we will look back to the owner of that entity until we identify an individual. Credit Score category values range from 1-5 with the anything above 740 receiving a 5 and less than 660 receiving a 1.

Debt Service Coverage Ratio – For us, DSCR is the cash flow of the property after all management expenses taxes and insurance. The DSCR rating score is broken down as follows:

DSCR > 1.35 = A maximum score of 4

DSCR > 1.30 = 3

DSCR > 1.25 = 2

DSCR > 1.20 = A minimum score of 1

Property Type – Using historical loan performance data we have developed a rating system based on property type.  KDM believes historical loan performance is one of the strongest indicators currently available to us as a measure of risk.  The scoring system is as follows:

Multifamily – 4

Mixed-use – 3

Self-Storage / Warehouse – 2

Retail – 1

Property Age – KDM believes there will generally be stronger demand for a newer property than for an older property.  The scoring system is as follows:

Age < 9 = 5Age > 10 = 4Age > 20 = 3Age > 30 = 2Age > 40 = 1

Property Demand – KDM’s property demand scoring is based off of the year over year growth of the county the subject property is located in.  Historical data has shown a strong correlation between population growth and local economic strength.  KDM will still make the necessary adjustments to large metropolitan statistical areas that may not look as strong as a small community with a sudden population growth. Communities that have fewer than 500,000 inhabitants are automatically scored at 0.  The scoring system is as follows:

35

Growth > 5% = 5Growth > 4% = 4Growth > 3% = 3Growth > 2% = 2Growth > 1% = 1

Building Condition – For all property types, KDM believes property condition is a strong indicator of the property’s potential.  A property in excellent condition is going to have the opportunity to attract more customers and potential to produce more income than a merely serviceable property.  The scoring system is a follows:

Excellent = 3Average = 2 Serviceable = 1

Once the scoring system is completed for each Loan and its corresponding Note, we then apply a standard statistical rating letter formula. This formula is as follows:

Rating	Composite Score
AAA	33
AA	31
A	27
BBB	22
BB	18
B	13

Obligations rated:

AAA - are judged to be highest quality, subject to the lowest level of credit risk.

AA - are judged to be of high quality and are subject to very low credit risk.

A  - are judged to be upper-medium grade and are subject to low credit risk.

BAA - are judged to be medium-grade and subject to moderate credit risk and as such may possess certain speculative characteristics.

BA - are judged to be speculative and are subject to substantial credit risk.

B  - are considered speculative and are subject to high credit risk.

36

Conflicts of Interest Regarding our Ratings

We have a conflict of interest regarding our ratings. The same people doing our ratings may also benefit from the sales of Notes and making new Loans. Further we are 100% owned by J. W. Korth & Company which may be distributing our Notes and making a market in our Notes. Ratings will be reviewed periodically and changed as necessary for each Loan and the corresponding Note. The secondary market prices for our Notes may move up or down if the rating is changed. Therefore to limit the effect of the conflict of interest between traders making markets and changes in ratings it shall be a strict policy of the company that the people reviewing ratings may not communicate or socialize with the traders making markets in our Notes and that all changes in ratings will be published as promptly as possible.

We may change any of our procedures regarding managing our conflicts of interest at any time. We also may amend our rating procedure at any time.

Intellectual Property

We do not believe we have intellectual property as an asset. Rather our strengths lie in our knowledge of how to access the network of loan brokers and the network of Note distributors.

Employees

As of December 31, 2016, we employed 1 full-time employee and 5 J. W. Korth & Company are devoting partial time to developing the business. Our full time employee is our Chief Lending Officer and is responsible for developing the mortgage broker network for origination of loans.

Facilities

As of December 31, 2016 we maintained offices within the office of J. W. Korth & Company at 2937 SW 27^th Avenue, Suite 307, Miami, Florida 33133. This office is provided free of charge until we become profitable under a Support Agreement between  J. W. Korth & Company and us. After we become profitable we expect to lease offices in our own name and repay our development costs to J. W. Korth & Company pursuant to the Support Agreement.

Subsidiaries

As of December 31, 2016 we had no subsidiaries.

Legal Proceedings

We are not currently subject to any material legal proceedings. We are not aware of any litigation matters which have had, or are expected to have, a material adverse effect on us or our parent, J. W. Korth & Company.

Prior Operation of the KDM Program

In May 2016 we completed the securitization of a loan participation known as KDM2016 –K001. This was a test completed under SEC Regulation D and the related document which appears at KDMinvestor.com was used to obtain a CUSIP number and place the documents on the Bloomberg trading system so it was accessible to all brokers who subscribed to that system. In August 2016 we create a second SEC Regulation D offering known as KDM 2016-K002 and placed the offering with a CUSIP number on Bloomberg. J. W. Korth & Company’s wholesale mortgage desk attempted to sell this high quality multi-family offering and we learned that nearly every broker dealer in our selling network was not open to selling Regulation D offerings restricted to accredited investors. After this experience, we chose to file this document and provide a framework for a public offering for future loans. The form of the Regulation D filings is now the basis for our Pricing Supplements for the Notes to be issued by KDM under this prospectus.

37

GOVERNMENT REGULATION

Overview

Regarding Loans. We intend to focus our efforts in the commercial mortgage industry. Mortgages for commercial properties are lightly regulated and we believe there are essentially no restrictions to our creating loans for borrowers of a commercial variety. One area of regulatory concern is anti-money laundering and anti-terrorism federal statutes and we will use all means required to comply.

When and if we enter the residential loan market we will file an amendment of this document to describe how we will deal with the broad regulatory structure of the residential loan industry. 

Regarding Notes. All sales of Notes will proceed through fully licensed broker dealers and member of the Financial Industry Regulatory Authority. These dealers are highly regulated and can be expected to comply with all securities rules and regulations. In every case there will be a Lead Dealer or Underwriter who will be responsible for identifying and delivering Notes to other dealers and who will monitor the program distribution for compliance.

Other Regulations

Electronic Fund Transfer Act and NACHA Rules

The federal Electronic Fund Transfer Act (“EFTA”), and Regulation E, which implements it, provides guidelines and restrictions on the electronic transfer of funds from consumers’ bank accounts. In addition, transfers performed by ACH electronic transfers are subject to detailed timing and notification rules and guidelines administered by the National Automated Clearinghouse Association (“NACHA”). Most transfers of funds in connection with the origination and repayment of the loans are performed by ACH. We obtain necessary electronic authorization from s for such transfers in compliance with such rules. Transfers of funds through the Program are executed by JP Morgan Chase and conform to the EFTA, its regulations, and NACHA guidelines.

Electronic Signatures in Global and National Commerce Act/Uniform Electronic Transactions Act

The federal Electronic Signatures in Global and National Commerce Act (“ESIGN”) and similar state laws, particularly the Uniform Electronic Transactions Act (“UETA”), authorize the creation of legally binding and enforceable agreements utilizing electronic records and signatures. ESIGN and UETA require businesses that want to use electronic records or signatures in consumer transactions to obtain the consumer’s consent to receive information electronically. When a borrower registers on the Program, we obtain his or her consent to transact business electronically and maintain electronic records in compliance with ESIGN and UETA requirements.

38

Bank Secrecy Act

In cooperation with our mortgage broker loan originators and with our broker dealer distributors, we implement the various anti-money laundering and screening requirements of applicable federal law. With respect to new borrowers, we apply the customer verification program rules and screen names against the list of Specially Designated Nationals maintained by OFAC pursuant to the USA PATRIOT Act amendments to the Bank Secrecy Act (“BSA”) and its implementing regulation. We also have an anti-money laundering policy and procedures in place to voluntarily comply with the anti-money laundering requirements of the USA PATRIOT Act and the BSA.

New Laws and Regulations

From time to time, various types of federal and state legislation are proposed and new regulations are introduced that could result in additional regulation of, and restrictions on, the business of consumer lending. We cannot predict whether any such legislation or regulations will be adopted or how this would affect our business or our important relationships with third parties. In addition, the interpretation of existing legislation may change or may prove different than anticipated when applied to our business model. Compliance with such requirements could involve additional costs, which could have a material adverse effect on our business.

In addition, see “Risk Factors — Financial regulatory reform could result in restrictions, oversight and costs that have an adverse effect on our business” regarding the risks of government financial regulatory reform plans.

Foreign Laws and Regulations

We do not permit non-U.S. residents to register as borrowers on the Program and we do not operate outside the United States. It is, therefore, not subject to foreign laws or regulations.

MANAGEMENT

Executive Officers, Directors and Key Employees

The following table sets forth information regarding our executive officers, directors and key employees as of December 31, 2016:

Name	Age	Position(s)
Executive Officers and Directors:
James Korth*	66	Director and Chief Executive Officer
Holly MacDonald-Korth*	41	Chief Financial Officer, Principal Financial/Accounting Officer
Daniel Llorente	37	Chief Lending Officer
James Schaberg*	65	Advisory Board Member
James Ferry*	54	Advisory Board Member

*employed by J. W. Korth & Company

39

EXECUTIVE COMPENSATION

For the year ended December 31, 2016, Daniel Llorente, our Chief Lending Officer was the only employee to receive compensation from us. He earns $120,000 per year as a salary for his services. Daniel also owns an option to acquire 2% of our common equity. Daniel Llorente’s salary is currently paid from money transferred from J. W. Korth & Company pursuant to the Support Agreement.

TRANSACTIONS WITH RELATED PERSONS

Since our inception, we have engaged in the following transactions with our directors, executive officers and holders of more than 5% of our voting securities, and affiliates and immediate family s of our directors, executive officers and 5% stockholders. We believe that all of the transactions described below were made on terms no less favorable to us than could have been obtained from unaffiliated third parties.

Daniel Llorente, Chief Lending Officer and James Schaberg Consultant and Advisory Board Member, and James Ferry Registered Representative of J W Korth & Company and Advisory Board Member each received an option to purchase for the price of $1.00 to purchase 2% of our outstanding equity for services aiding our development. J. W. Korth & Company currently owns 100% our equity.

Indemnification Agreements

Our amended and restated certificate of incorporation provides that we will indemnify our directors and officers to the fullest extent permitted by Florida Law.

PRINCIPAL SECURITYHOLDERS

J. W. Korth & Company owns 100% of the outstanding equity of KDM. Daniel Llorente, Chief Lending Officer and James Schaberg, Consultant and Advisory Board Member, and James Ferry Registered Representative of J W Korth & Company and Advisory Board Member each received a grant of an option for the price of $1.00 to purchase 2% of our outstanding equity for services aiding our development.

LEGAL MATTERS

The validity of the Notes we are offering has been passed upon by an attorney to be named.

EXPERTS

We plan to retain accountants to provide us with audited financial statements after the company becomes active.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM & FINANCIAL STATEMENTS

Financial Statements have been omitted because the entity has not commenced operations.

40

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Other Expenses of Issuance and Distribution

The following table indicates the expenses to be incurred in connection with the offering described in this Registration Statement, all of which will be paid by J. W. Korth & Company under the Support Agreement. All amounts are estimated except the Securities and Exchange Commission registration fee.

	Amount
Securities and Exchange Commission registration fee	$	11,590
Accountants’ fees and expenses	$	10,000
Legal fees and expenses	$	20,000
Blue Sky fees and expenses	$	20,000
Miscellaneous	$	10,000
Total Expenses	$	71,590

Indemnification of Directors and Officers

Our Operating Agreement provides that the liability of the directors of KDM for monetary damages shall be eliminated to the fullest extent under applicable law.

Recent Sales of Unregistered Securities

Daniel Llorente, Chief Lending Officer and James Schaberg Consultant and Advisory Board Member, and James Ferry Registered Representative of J W Korth & Company and Advisory Board Member each received a grant of an option to purchase for the price of $1.00 to purchase 2% of our outstanding equity for services aiding our development. J. W. Korth & Company owns the balance of our equity.

Exhibits

The exhibits to the registration statement are listed in the Exhibit Index to this registration statement and are incorporated by reference herein.

Undertakings

The undersigned registrant hereby undertakes:

1. To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:

i. To include any prospectus required by section 10(a)(3) of the Securities Act of 1933;

41

ii. To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20 percent change in the maximum aggregate offering price set forth in the “Calculation of Registration Fee” table in the effective registration statement.

iii. To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement.

2. That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

3. To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering.

4. That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, if the Registrant is subject to Rule 430C, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use.

5. That, for the purpose of determining liability of the Registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities: The undersigned Registrant undertakes that in a primary offering of securities of the undersigned Registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned Registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser:

i. Any preliminary prospectus or prospectus of the undersigned Registrant relating to the offering required to be filed pursuant to Rule 424;

ii. Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned Registrant or used or referred to by the undersigned Registrant;

42

iii. The portion of any other free writing prospectus relating to the offering containing material information about the undersigned Registrant or its securities provided by or on behalf of the undersigned Registrant; and

iv. Any other communication that is an offer in the offering made by the undersigned Registrant to the purchaser.

6. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

43

SIGNATURES

Pursuant to the requirements of the Securities Act, the Registrant has duly caused Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Miami, Florida on January 3, 2017.

Signature	Title
/s/ James W. Korth	Chief Executive Officer	1/25/2017
	(Principal Executive Officer)
/s/ Holly MacDonald-Korth	Chief Financial Officer
Holly MacDonald-Korth	(Principal Financial & Accounting Officer and director)	1/25/2017

44

Exhibit Index

Exhibit Number	Description
1.1	Underwriting Agreement will be filed from time to time with Pricing Supplements when Notes are subject to such an agreement.
3.1	Members Operating Agreement of Korth Direct Mortgage LLC, a Florida Limited Liability Company
3.2	Articles of Organization for HCMK Consulting LLC filed on July 24, 2009
3.3	Articles of Amendment to Articles of Organization Changing Name from HCMK Consulting LLC to J W Korth & Company LLC filed on November 18, 2010
3.4	Articles of Amendment to Articles of Organization Changing Name from J W Korth & Company LLC to Korth Direct Mortgage LLC filed August 24, 2016
4.1	Form of Indenture between Korth Direct Mortgage LLC and Delaware Trust
5.	Opinion as to Legality of Notes by Counsel to be Named*
10.	Form of Support Agreement
10.2	Form of Assignment of Rents
23.	Consent of Experts and Counsel*
25.	Statement of Eligibility of Trustee*

⁺To be filed with Pre-Effective Amendment

45

EX-1.1

Exhibit 1.1

KORTH DIRECT MORTGAGE LLC

MORTGAGE SECURED NOTES

UNDERWRITING AGREEMENT

BASIC PROVISIONS

New York, New York

    , 2016

Korth Direct Mortgage LLC, a Florida Limited Liability Corporation (the “Company”or “KDM”), may issue and sell from time to time series of its Mortgage Secured Notes registered under the registration statement referred to in Section 1(a) hereof. Such debt securities may have varying, designations, currencies, interest rates and payment dates, maturities, redemption provisions and selling prices. The basic provisions set forth herein are intended to be incorporated by reference in a terms agreement of the type referred to in Section 2 hereof relating to the specific series of debt securities to be issued and sold by the Company pursuant thereto (the “Securities”) to the several underwriters named therein (the “Underwriters”). Unless otherwise specified in the applicable terms agreement, the Securities will be issued under an indenture dated as of                      , between the Company and Delaware Trust Company, as trustee (such trustee or such other replacement or successor trustee as may be named for such senior debt securities, the “Senior Debt Trustee”),  The firm or firms designated as the representative or representatives, as the case may be, of the Underwriters of the Securities in the Terms Agreement relating thereto will act as the representative or representatives (the “Representatives”). To the extent there is only one Underwriter for the sale of the Securities, the term Representatives and the term Underwriters shall mean the Underwriter.

Any reference herein to the Registration Statement, the Base Prospectus, any Preliminary Prospectus or the Final Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-1 which were filed under the Exchange Act on or before the Effective Date of the Registration Statement or the issue date of the Base Prospectus, any Preliminary Prospectus or the Final Prospectus, as the case may be; and any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the Registration Statement, the Base Prospectus, any Preliminary Prospectus or the Final Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the Effective Date of the Registration Statement or the issue date of the Base Prospectus, any Preliminary Prospectus or the Final Prospectus, as the case may be, deemed to be incorporated therein by reference. Certain terms used herein are defined in Section 19 hereof.

1. Representations and Warranties. The Company represents and warrants to, and agrees with, each Underwriter as set forth below in this Section 1.

(a) The Company  has prepared and filed with the Commission a shelf registration statement, under Form S-1 including a related base prospectus, for registration under the Act of the offering and sale of the Securities. Such Registration Statement, including any amendments thereto filed prior to the Execution Time, became effective                 . The Company may have filed with the Commission, as part of an amendment to the Registration Statement or pursuant to Rule 424(b), one or more preliminary prospectus supplements relating to the Securities, each of which has previously been furnished to you. The Company will file with the Commission a final prospectus supplement relating to the Securities in accordance with Rule 424(b). As filed, such final prospectus supplement shall contain all information required by the Act and the rules thereunder, and, except to the extent the Representatives shall agree in writing to a modification, shall be in all substantive respects in the form furnished to you prior to the Execution Time or, to the extent not completed by the Execution Time, shall contain only such specific additional information and other changes (beyond that contained in the Base Prospectus and any Preliminary Prospectus) as the Company has advised you, prior to the Execution Time, will be included or made therein. The Registration Statement, as of the Execution Time, meets the requirements set forth in Rule 415(a)(1)(i). The initial Effective Date of the Registration Statement was not earlier than the date three years before the Execution Time.

1

(b) On each Effective Date, the Registration Statement did, and when the Final Prospectus is first filed in accordance with Rule 424(b) and on the Closing Date (as defined herein), the Final Prospectus (and any supplement thereto) will, comply in all material respects with the applicable requirements of the Act, the Exchange Act and the Trust Indenture Act and the respective rules thereunder; on each Effective Date and at the Execution Time, the Registration Statement did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading; and on the Effective Date and on the Closing Date the Indenture did or will comply in all material respects with the applicable requirements of the Trust Indenture Act and the rules thereunder; on the date of any filing pursuant to Rule 424(b) and on the Closing Date, the Final Prospectus (together with any supplement thereto) will not include any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no representations or warranties as to (i) that part of the Registration Statement which shall constitute the Statement of Eligibility and Qualification (Form T-1) under the Trust Indenture Act of the Trustees or (ii) the information contained in or omitted from the Registration Statement or the Final Prospectus (or any supplement thereto) in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Underwriter through the Representatives specifically for inclusion in the Registration Statement or the Final Prospectus (or any supplement thereto), it being understood and agreed that the only such information furnished by or on behalf of any Underwriters consists of the information described as such in Section 8 hereof.

(c) As of the Execution Time, the Disclosure Package does not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The preceding sentence does not apply to statements in or omissions from the Disclosure Package based upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by or on behalf of any Underwriter consists of the information described as such in Section 8 hereof.

(d) (i) At the time of filing the Registration Statement, has paid the SEC Registration Fees for the Securities.

(e) (i) At the earliest time after the filing of the Registration Statement that the Company or another offering participant made a bona fide offer (within the meaning of Rule 164(h)(2)) of the Securities and (ii) as of the Execution Time (with such date being used as the determination date for purposes of this clause (ii)), the Company was not and is not an Ineligible Issuer (as defined in Rule 405).

2

(f) Neither the Preliminary Prospectus Supplement nor the Final Prospectus Supplement includes any information that conflicts with the information contained in the Registration Statement, including any document incorporated therein and any prospectus supplement deemed to be a part thereof that has not been superseded or modified. The foregoing two sentences do not apply to statements in or omissions from any Preliminary Prospectus Supplement nor Final Prospectus Supplement based upon and in conformity with written information furnished to the Company by any Underwriter through the Representatives specifically for use therein, it being understood and agreed that the only such information furnished by or on behalf of any Underwriter consists of the information described as such in Section 8 hereof.           

(g) On each Effective Date, at the Execution Time and on the Closing Date, the interactive data in eXtensible Business Reporting Language included or incorporated by reference in the Registration Statement fairly presents the information called for in all material respects and has been prepared in accordance with the Commission’s rules and guidelines applicable thereto.

(h) Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries is aware of or has taken any action, directly or indirectly, that would result in a violation or a sanction for violation by such persons of the Foreign Corrupt Practices Act of 1977 or the U.K. Bribery Act 2010, each as may be amended, or similar law of any other relevant jurisdiction, or the rules and regulations thereunder; and the Company and its subsidiaries have instituted and maintained policies and procedures to ensure continued compliance therewith. No part of the proceeds of the offering will be used, directly or indirectly, in violation of the Foreign Corrupt Practices Act of 1977 or the U.K. Bribery Act 2010, each as may be amended, or similar law of any other relevant jurisdiction, or the rules or regulations thereunder.

(i) The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements and the money laundering statutes and the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “Money Laundering Laws”) and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Money Laundering Laws is pending or, to the best knowledge of the Company, threatened.

(j) Neither the Company nor any of its subsidiaries nor, to the knowledge of the Company, any director, officer, agent, employee or affiliate of the Company or any of its subsidiaries (i) is, or is controlled or 50% or more owned by, or is acting on behalf of, an individual or entity that is currently subject to any sanctions administered imposed by the United States (including any administered or enforced by the Office of Foreign Assets Control of the U.S. Treasury Department, the U.S. Department of State, or the Bureau of Industry and Security of the U.S. Department of Commerce), the United Nations Security Council, the European Union, or the United Kingdom (including sanctions administered or controlled by Her Majesty’s Treasury) or other relevant sanctions authority (collectively, “Sanctions” and such persons, “Sanction Persons”), (ii) is located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions that broadly prohibit dealings with that country or territory (collectively, “Sanctioned Countries” and each, a “Sanctioned Country”), or (iii) will, directly or indirectly, use the proceeds of this offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other person in any manner that would result in a violation of any economic Sanctions by, or could result in the imposition of Sanctions against, any person (including any person participating in the offering, whether as underwriter, advisor, investor or otherwise).

(k) Except as has been disclosed to the Underwriters through the Representatives or through publicly available information or is not material to the analysis under any Sanctions, neither the Company nor any of its subsidiaries has engaged in any dealings or transactions with or for the benefit of a Sanctioned Person, or with or in a Sanctioned Country, in the preceding 3 years, nor does the Company or any of its subsidiaries have any plans to increase its dealings or transactions with Sanctioned Persons, or with or in Sanctioned Countries.

3

Any certificate signed by any officer of the Company and delivered to the Representatives or counsel for the Underwriters in connection with the offering of the Securities shall be deemed a representation and warranty by the Company, as to matters covered thereby, to each Underwriter.

2. Purchase and Sale. Sales of the Securities may be made from time to time to the Underwriters of the Securities. The obligation of the Company to issue and sell any of the Securities and the obligation of any Underwriters to purchase any of the Securities shall be evidenced by the Terms Agreement with respect to the Securities specified therein. Each Terms Agreement shall specify the material terms of the offered Securities. The Terms Agreement specifies any details of the terms of the offering that should be reflected in a post-effective amendment to the Registration Statement, any Preliminary Prospectus Supplement or the Final Prospectus Supplement (each as hereafter defined). The obligations of the Underwriters under each Terms Agreement shall be several and not joint.

3. Delivery and Payment. Delivery of and payment for the Securities shall be made on the date and at the time specified in the Terms Agreement or at such time on such later date not more than three Business Days after such date as the Representatives shall designate, which date and time may be postponed by agreement between the Representatives and the Company or as provided in Section 9 hereof (such date and time of delivery of and payment for the securities being herein called the “Closing Date”). Delivery of the Securities shall be made to the Representatives for the respective accounts of the several Underwriters against payment by the several Underwriters directly or through the Representatives of the net purchase price thereof to or upon the order of the Company by wire transfer payable in same-day funds to an account specified by the Company. Delivery of the Securities shall be made through the facilities of The Depository Trust Company unless the Representatives shall otherwise instruct.

It is understood that the Representatives, acting individually and not in a representative capacity, may (but shall not be obligated to) make payment to the Company on behalf of any other Underwriter for Securities to be purchased by such Underwriter. Any such payment by the Representatives shall not relieve any such Underwriter of any of its obligations hereunder.

The Company shall pay to the Representatives on the Closing Date for the accounts of the Underwriters any fee, commission or other compensation specified in the Terms Agreement. Such payment will be made by wire transfer payable in same-day funds to an account specified by the Representatives.

4. Offering by Underwriters. It is understood that the several Underwriters propose to offer the Securities for sale to the public as set forth in the Final Prospectus Supplement.

4

5. Agreements. The Company agrees with the several Underwriters that:

(a) Prior to the termination of the offering of the Securities, the Company will not file any amendment of the Registration Statement or supplement (including the Final Prospectus Supplement or any Preliminary Prospectus Supplement) to the Base Prospectus unless the Company has furnished the Representatives a copy for their review prior to filing and will not file any such proposed amendment or supplement to which they reasonably object. The Company will cause the Final Prospectus Supplement, properly completed, and any supplement thereto, to be filed in a form approved by the Representatives with the Commission pursuant to the applicable paragraph of Rule 424(b) within the time period prescribed and will provide evidence satisfactory to the Representatives of such timely filing. The Company will promptly advise the Representatives (1) when the Final Prospectus Supplement, and any supplement thereto, shall have been filed (if required) with the Commission pursuant to Rule 424(b), (2) when, prior to termination of the offering of the Securities, any amendment to the Registration Statement shall have been filed or become effective, (3) of any request by the Commission or its staff for any amendment of the Registration Statement, or any Rule 462(b) Registration Statement, or for any supplement to the Final Prospectus or for any additional information, (4) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any notice objecting to its use or the institution or threatening of any proceeding for that purpose and (5) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the institution or threatening of any proceeding for such purpose. The Company will use its best efforts to prevent the issuance of any such stop order or the occurrence of any such suspension or objection to the use of the Registration Statement and, upon such issuance, occurrence or notice of objection, to obtain as soon as possible the withdrawal of such stop order or relief from such occurrence or objection, including, if necessary, by filing an amendment to the Registration Statement or a new registration statement and using its best efforts to have such amendment or new registration statement declared effective as soon as practicable.           

(b) The Company will prepare a final term sheet, containing solely a description of final terms of the Securities and the offering thereof, in a form approved by you (the “Final Term Sheet”) and to file such term sheet and Final Prospectus Supplement within the time required by Rule.

(c) If, at any time prior to the filing of the Final Prospectus Supplement pursuant to Rule 424(b), any event occurs as a result of which the Disclosure Package would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made at such time not misleading, the Company will (1) notify promptly the Representatives so that any use of the Disclosure Package may cease until it is amended or supplemented; (2) amend or supplement the Disclosure Package to correct such statement or omission; and (3) supply any amendment or supplement to you in such quantities as you may reasonably request.

 (d) If, at any time when a prospectus relating to the Securities is required to be delivered under the Act (including in circumstances where such requirement may be satisfied pursuant to Rule 172), any event occurs as a result of which the Final Prospectus as then supplemented would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or if it shall be necessary to amend the Registration Statement, file a new registration statement or supplement the Final Prospectus to comply with the Act or the Exchange Act or the respective rules thereunder, including in connection with use or delivery of the Final Prospectus, the Company promptly will (i) notify the Representatives of such event, (ii) prepare and file with the Commission, subject to the second sentence of paragraph (a) of this Section 5, an amendment or supplement or new registration statement which will correct such statement or omission or effect such compliance, (iii) use its best efforts to have any amendment to the Registration Statement or new registration statement declared effective as soon as practicable in order to avoid any disruption in use of the Final Prospectus and (iv) supply any supplemented Final Prospectus to the Representatives in such quantities as the Representatives may reasonably request.

(e) As soon as practicable, the Company will make generally available to its security holders and to the Representatives a consolidated earnings statement or statements of the Company and its subsidiaries, which will satisfy the provisions of Section 11(a) of the Act and Rule 158.

5

(f) Upon request, the Company will furnish to the Representatives and counsel for the Underwriters, without charge, signed copies of the Registration Statement (including exhibits thereto) and to each other Underwriter a copy of the Registration Statement (without exhibits thereto) and, so long as delivery of a prospectus by an Underwriter or dealer may be required by the Act (including in circumstances where such requirement may be satisfied pursuant to Rule 172), as many copies of each Preliminary Prospectus, the Final Prospectus and each Issuer Free Writing Prospectus and any supplement thereto as the Representatives may reasonably request. The Company will pay the expenses of printing or other production of all documents relating to the offering that are required to be prepared, furnished or delivered by it.

(g) The Company will arrange, if necessary, for the qualification of the Securities for sale under the laws of such jurisdictions within the United States as the Representatives reasonably may designate, will maintain such qualifications in effect so long as required for the distribution of the Securities and will pay any fee of the Financial Industry Regulatory Authority, Inc., in connection with its review of the offering; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not now so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Securities, in any jurisdiction where it is not now so subject.

(h) The Company will not, without the prior written consent of the Representatives, offer, sell, contract to sell, pledge, or otherwise dispose of, (or enter into any transaction which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the Company or any affiliate of the Company or any person in privity with the Company or any affiliate of the Company) directly or indirectly, including the filing (or participation in the filing) of a registration statement with the Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Exchange Act, any debt securities, including any guarantee of such securities of the Company, in each case that are substantially similar to the Securities or any security convertible into or exchangeable for the Securities or such substantially similar securities, or publicly announce an intention to effect any such transaction, during the period beginning the date of the Terms Agreement and ending the Closing Date.

(j) The Company will comply with all applicable securities and other laws, rules and regulations, including, without limitation, the Sarbanes Oxley Act of 2002, and use its best efforts to cause the Company’s directors and officers, in their capacities as such, to comply with such laws, rules and regulations, including, without limitation, the provisions of the Sarbanes Oxley Act of 2002.

(k) The Company will not take, directly or indirectly, any action designed to or that would constitute or that might reasonably be expected to cause or result in, under the Exchange Act or otherwise, stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities, except that the Company makes no agreement as to the activities of any Underwriter.

6. Conditions to the Obligations of the Underwriters. The obligations of the Underwriters to purchase the Securities shall be subject to the accuracy of the representations and warranties on the part of the Company contained herein as of the Execution Time and the Closing Date, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions: 

6

(a) The Final Prospectus, and any supplement thereto, have been filed in the manner and within the time period required by Rule 424(b); the Final Term Sheet and any other material required to be filed by the Company pursuant to Rule 433(d) under the Act, shall have been filed with the Commission within the applicable time periods prescribed for such filings by Rule 433; and no stop order suspending the effectiveness of the Registration Statement or any notice objecting to its use shall have been issued and no proceedings for that purpose shall have been instituted or threatened.

(b) The Company shall have requested and caused counsel for the Company to have furnished to the Representatives the opinion, dated the Closing Date and addressed to the Representatives, with respect to the issuance and sale of the Securities, the Indenture, the Registration Statement, the Disclosure Package, the Final Prospectus (together with any supplement thereto) and other related matters as the Representatives may reasonably require.

(c) The Company shall have requested and caused its special tax counsel to the Company, to have furnished to the Representatives an opinion, dated the Closing Date and addressed to the Representatives, with respect to certain United States federal income tax matters related to the Securities and other related matters as the Representatives may reasonably require.

(d) The Representatives shall have received from counsel for the Underwriters, such opinion or opinions, dated the Closing Date and addressed to the Representatives, with respect to the issuance and sale of the Securities, the Indenture, the Registration Statement, the Disclosure Package, the Final Prospectus (together with any supplement thereto) and other related matters as the Representatives may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters.

(e) The Company shall have furnished to the Representatives a certificate of the Company, signed by the Chief Executive Officer, or the Chief Financial Officer, dated the Closing Date, to the effect that the signers of such certificate have carefully examined the Registration Statement, the Final Prospectus, the Disclosure Package and any supplements or amendments thereto, as well as each electronic roadshow used to offer the Securities, and this Agreement and that:

 (i) the representations and warranties of the Company in this Agreement are true and correct on and as of the Closing Date with the same effect as if made on the Closing Date and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date;

(ii) no stop order suspending the effectiveness of the Registration Statement or any notice objecting to its use has been issued and no proceedings for that purpose have been instituted or, to the Company’s knowledge, threatened; and

(iii) since the date of the most recent financial statements included or incorporated by reference in the Final Prospectus (exclusive of any supplement thereto), there has been no material adverse effect on the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Disclosure Package and the Final Prospectus (exclusive of any supplement thereto).

7

(f) The Company shall have requested and caused it’s accountants to have furnished to the Representatives, at the Closing Date, a customary “comfort letter” (which may refer to letters previously delivered to the Representatives), dated as of the Closing Date, that is satisfactory in content and form to the Representatives.

(g) Subsequent to the Execution Time or, if earlier, the dates as of which information is given in the Registration Statement (exclusive of any amendment thereof) and the Final Prospectus (exclusive of any supplement thereto), there shall not have been any change or decrease specified in the letter or letters referred to in paragraph (e) of this Section 6 or (ii) any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Disclosure Package and the Final Prospectus (exclusive of any supplement thereto) the effect of which, in any case referred to in clause (i) or (ii) above, is, in the sole judgment of the Representatives after consultation with the Company, so material and adverse as to make it impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Registration Statement (exclusive of any amendment thereof), the Disclosure Package and the Final Prospectus (exclusive of any supplement thereto) and any Issuer Free Writing Prospectus.

(h) Subsequent to the Execution Time, there shall not have been any decrease in the rating of any of the Company’s debt securities by any “nationally recognized statistical rating organization” (as defined in Section 3(a)(62) of the Exchange Act) or any notice given of any intended or potential decrease in any such rating or of a possible change in any such rating that does not indicate the direction of the possible change.

(i) Prior to the Closing Date, the Company shall have furnished to the Representatives such further information, certificates and documents as the Representatives may reasonably request.

If any of the conditions specified in this Section 6 shall not have been fulfilled when and as provided in this Agreement with respect to an offering of Securities, or if any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be reasonably satisfactory in form and substance to the Representatives and counsel for the Underwriters, this Agreement and all obligations of the Underwriters hereunder may be canceled with respect to such offering at, or at any time prior to, the Closing Date by the Representatives. Notice of such cancellation shall be given to the Company in writing or by telephone or facsimile confirmed in writing.

The documents required to be delivered by this Section 6 shall be delivered at the office of the counsel for the underwriters on the Closing Date.

7. Reimbursement of Underwriters’ Expenses. If the sale of the Securities provided for herein is not consummated because any condition to the obligations of the Underwriters set forth in Section 6 hereof is not satisfied, because of any termination pursuant to Section 10 hereof or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof other than by reason of a default by any of the Underwriters, the Company will reimburse the Underwriters severally through the Representatives on demand for all out-of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with the proposed purchase and sale of the Securities.

8

8. Indemnification and Contribution.

(a) The Company agrees to indemnify and hold harmless each Underwriter, the directors, officers, employees and agents of each Underwriter and each person who controls any Underwriter within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which they or any of them may become subject under the Act, the Exchange Act or other Federal or state statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement for the registration of the Securities as originally filed or in any amendment thereof, or in the Base Prospectus, any Preliminary Prospectus, the Final Prospectus or the information contained in the Final Term Sheet, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Underwriter through the Representatives specifically for inclusion therein. This indemnity agreement will be in addition to any liability which the Company may otherwise have.

(b) Each Underwriter severally and not jointly agrees to indemnify and hold harmless the Company, each of its directors, each of its officers who signs the Registration Statement, and each person who controls the Company within the meaning of either the Act or the Exchange Act, to the same extent as the foregoing indemnity from the Company to each Underwriter, but only with reference to written information relating to such Underwriter furnished to the Company by or on behalf of such Underwriter through the Representatives specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability that any Underwriter may otherwise have. The Company acknowledges that the statements (i) set forth in the second-to-last paragraph of the cover page regarding delivery of the Securities and (ii), under the heading “Underwriting” or “Plan of Distribution”, (1) the list of Underwriters and their respective participation in the sale of the Securities, (2) the sentences related to concessions and reallowances and (3) the paragraphs related to stabilization, syndicate covering transactions and penalty bids in any Preliminary Prospectus, and the Final Prospectus constitute the only information furnished in writing by or on behalf of the several Underwriters for inclusion in any Preliminary Prospectus, and the Final Prospectus.

9

(c) Promptly after receipt by an indemnified party under this Section 8 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 8, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve the indemnifying party from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel of the indemnifying party’s choice at the indemnifying party’s expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the indemnified party or parties except as set forth below); provided, however, that such counsel shall be satisfactory to the indemnified party. Notwithstanding the indemnifying party’s election to appoint counsel to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest, (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding.            

 (d) In the event that the indemnity provided in paragraph (a), (b) or (c) of this Section 8 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company and the Underwriters severally agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively “Losses”) to which the Company and one or more of the Underwriters may be subject in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and by the Underwriters on the other from the offering of the Securities. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and the Underwriters severally shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and of the Underwriters on the other in connection with the statements or omissions which resulted in such Losses as well as any other relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the offering (before deducting expenses) received by the Company, and benefits received by the Underwriters shall be deemed to be equal to the total underwriting discounts and commissions, in each case as set forth on the cover page of the Final Prospectus. Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information provided by the Company on the one hand or the Underwriters on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Underwriters agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation which does not take account of the equitable considerations referred to above. In no case shall any Underwriter (except as may be provided in any agreement among underwriters relating to the offering of the Securities) be responsible for any amount in excess of the underwriting discount or commission applicable to the Securities purchased by such Underwriter hereunder. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 8, each person who controls an Underwriter within the meaning of either the Act or the Exchange Act and each director, officer, employee and agent of an Underwriter shall have the same rights to contribution as such Underwriter, and each person who controls the Company, as applicable, within the meaning of either the Act or the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d).

10

9. Default by an Underwriter. If any one or more Underwriters shall fail to purchase and pay for any of the Securities agreed to be purchased by such Underwriter or Underwriters hereunder and such failure to purchase shall constitute a default in the performance of its or their obligations under this Agreement, the remaining Underwriters shall be obligated severally to take up and pay for (in the respective proportions which the principal amount of Securities set forth opposite their names in the Terms Agreement bears to the aggregate principal amount of Securities set forth opposite the names of all the remaining Underwriters) the Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase; provided, however, that in the event that the aggregate principal amount of Securities which the defaulting Underwriter or Underwriters agreed but failed to purchase shall exceed 10% of the aggregate principal amount of Securities set forth in the Terms Agreement, the remaining Underwriters shall have the right to purchase all, but shall not be under any obligation to purchase any, of the Securities, and if such nondefaulting Underwriters do not purchase all the Securities, this Agreement will terminate without liability to any nondefaulting Underwriter or the Company. In the event of a default by any Underwriter as set forth in this Section 9, the Closing Date shall be postponed for such period, not exceeding five Business Days, as the Representatives shall determine in order that the required changes in the Registration Statement and the Final Prospectus or in any other documents or arrangements may be effected. Nothing contained in this Agreement shall relieve any defaulting Underwriter of its liability, if any, to the Company and any nondefaulting Underwriter for damages occasioned by its default hereunder.

10. Termination. This Agreement shall be subject to termination in the absolute discretion of the Representatives, by notice given to the Company prior to delivery of and payment for the Securities, if at any time prior to such time (i) trading in the Company’s Common Stock shall have been suspended by the Commission or the New York Stock Exchange, or trading in securities generally on the New York Stock Exchange shall have been suspended or limited or minimum prices shall have been established on such Exchange, (ii) a banking moratorium shall have been declared either by Federal or New York State authorities or (iii) there shall have occurred any outbreak or escalation of hostilities, declaration by the United States of a national emergency or war, or other calamity or crisis the effect of which on financial markets is such as to make it, in the sole judgment of the Representatives after consultation with the Company, impractical or inadvisable to proceed with the offering or delivery of the Securities as contemplated by the Final Prospectus (exclusive of any supplement thereto).

11. Representations and Indemnities to Survive. The respective agreements, representations, warranties, indemnities and other statements of the Company or its officers and of the Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company or any of the officers, directors, employees, agents or controlling persons referred to in Section 8 hereof, and will survive delivery of and payment for the Securities. The provisions of Sections 7 and 8 hereof shall survive the termination or cancellation of this Agreement.

12. Notices. All communications hereunder will be in writing and effective only on receipt, and, if sent to the Representatives, will be mailed, delivered or telefaxed to :

13. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers, directors, employees, agents and controlling persons referred to in Section 8 hereof, and no other person will have any right or obligation hereunder.

11

14. No Fiduciary Duty. The Company hereby acknowledges that (i) the purchase and sale of the Securities pursuant to this Agreement is an arm’s-length commercial transaction between the Company, on the one hand, and the Underwriters and any affiliate through which it may be acting, on the other, (ii) the Underwriters are acting as principal and not as an agent or fiduciary of the Company and (iii) the Company’s engagement of the Underwriters in connection with the offering and the process leading up to the offering is as independent contractors and not in any other capacity. Furthermore, the Company agrees that it is solely responsible for making its own judgments in connection with the offering (irrespective of whether any of the Underwriters has advised or is currently advising the Company on related or other matters). The Company agrees that it will not claim that the Underwriters have rendered advisory services of any nature or respect, or owe an agency, fiduciary or similar duty to the Company, in connection with such transaction or the process leading thereto.              

15. Integration. This Agreement supersedes all prior agreements and understandings (whether written or oral) between the Company and the Underwriters, or any of them, with respect to the subject matter hereof.

16. Applicable Law. This Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within the State of New York.

17. Counterparts. This Agreement may be signed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement.

18. Headings. The section headings used herein are for convenience only and shall not affect the construction hereof.

19. Definitions. The terms which follow, when used in this Agreement, shall have the meanings indicated.

“Act” shall mean the Securities Act of 1933, as amended and the rules and regulations of the Commission promulgated thereunder.

“Base Prospectus” shall mean the base prospectus referred to in paragraph 1(a) above contained in the Registration Statement on the Effective Date or any base prospectus subsequently filed by the Company with the Commission pursuant to Rule 424(b) of the Securities Act of 1933 and used in connection with the offering of the Securities.

“Business Day” shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in New York City.

“Commission” shall mean the Securities and Exchange Commission.

“Disclosure Package” shall mean (i) the Base Prospectus, (ii) the Preliminary Prospectus, if any, used most recently prior to the Execution Time, and (iii) the Final Term Sheet described in Section 5(b) hereto.

“Effective Date” shall mean each date and time that the Registration Statement and any post-effective amendment or amendments thereto became or become effective.

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.

“Execution Time” shall mean the date and time specified in the applicable Terms Agreement.

12

“Final Prospectus” shall mean the prospectus supplement relating to the Securities that was first filed pursuant to Rule 424(b) after the Execution Time, together with the Base Prospectus.

“Preliminary Prospectus” shall mean any preliminary prospectus supplement which is used prior to filing of the Final Prospectus, together with the Base Prospectus.

“Registration Statement” shall mean the registration statement referred to in paragraph 1(a) above, including exhibits and financial statements and any prospectus supplement relating to the Securities that is filed with the Commission pursuant to Rule 424(b) and deemed part of such registration statement pursuant to Rule 430B, as amended on each Effective Date and, in the event any post-effective amendment thereto becomes effective prior to the Closing Date, shall also mean such registration statement as so amended.

“Rule 158”, “Rule 163”, “Rule 164”, “Rule 172”, “Rule 405”, “Rule 415”, “Rule 424”, “Rule 430B”, “Rule 433”, “Rule 456”, “Rule 457” and “Rule 462” refer to such rules under the Act.

“Trust Indenture Act” shall mean the Trust Indenture Act of 1939, as amended and the rules and regulations of the Commission promulgated thereunder.

13

EX-3.1

Exh. 3.1

OPERATING AGREEMENTof Korth Direct Mortgage LLC

The Operating Agreement (the "Agreement") made and entered into the 2nd day of September, 2016 (the "Execution Date"), is hereby amended this  10th  day of January 2017.

AMONGST:

J. W. Korth & Company Limited Partnership 2937 SW 27^th Avenue, Miami FL 33133, sole member.

 (individually the "Member" and collectively the "Members").

BACKGROUND:

A. The Members wish to associate themselves as members of a limited liability company.

B. The terms and conditions of this Agreement will govern the Members within the limited liability company.

C. This Florida Limited Liability Company was originally named HCMK Consulting LLC and was renamed J W Korth & Company LLC and contributed 100% to J. W. Korth & Company Limited Partnership who renamed it Korth Direct Mortgage LLC.

D. This is the first amendment of the operating agreement for the Company.

IN CONSIDERATION OF and as a condition of the Members entering into this Agreement and other valuable consideration, the receipt and sufficiency of which is acknowledged, the Members agree as follows:

Formation

1.            By this Agreement, the Members define the operating principals of Korth Direct Mortgage LLC (the "Company” or “KDM”) in accordance with the laws of the State of Florida. The rights and obligations of the Members will be as stated in the Florida Limited Liability Company Act (the "Act") except as otherwise provided in this agreement.

1

Purpose

2.            KDM has been organized to make mortgage loans to borrowers and then sell, through underwriters, investment notes corresponding to, payable from, and secured by, a specific mortgage loan. KDM will then service the mortgage loans and pass the payments through to investors in the Notes. KDM is intended to be a bankruptcy remote entity.

Permitted Activities

3. The Permitted Activities of KDM are:

a. To from time to time, originate, purchase, or participate in mortgage based loans.

b. To issue notes, with no other recourse to note investors, except the collection and pass through to investors of payments of specifically identified corresponding mortgage loans or mortgage loan participations.

c. To service mortgage loans and receive fees therefore.

d. To collect mortgage loan payments and disburse payments to its note holders.

Support Agreement

4.          J. W. Korth & Company, under the terms of the Support Agreement appearing as Exhibit 1  , agrees to provide all legal fees, employee services, and office support to KDM at no charge until KDM shall have an enterprise value comprised of its liquid net worth plus the face value of its retained mortgage participations of at least $1,000.000. Thereafter, it is agreed J. W. Korth & Company shall be released from its obligations to support KDM, and may recover its disbursements to KDM with the retained earnings of KDM, whereby after any reimbursement payments to J. W. Korth & Company it shall retain a liquid net worth of $1,000,000.

2

Limitation on Distributions

5.            The Members’ hereby agree that KDM may not distribute any of its retained earnings to Members until and unless it maintains a tangible net worth including the face value of mortgage loans  retained of $1mm after paying back its development costs to J. W. Korth & Company.

Bank Accounts and Service Accounts

6.            KDM is authorized to open accounts with banks, trustees, registrars, transfer agents, and service bureaus online and any other type account reasonably required to help it complete the Permitted Activities above.

Term

7. The Company will continue until terminated as provided in this Agreement.

Place of Business

8.            The Principal Office of the Company will be located at 2937 SW 27TH Avenue, Suite 307, Miami, FL 33133 or such other place as the Members may from time to time designate.

Capital Contributions

9.            The following is a list of all Members and their Initial Contributions to the Company. Each of the Members agrees to make their Initial Contributions to the Company in full, according to the following terms: All the contributions shown below are based on an estimate of the cash value of their contributions. No cash contribution is required of the members at the time of this agreement.

3

Member	Contribution Description	Value of Contribution
J. W. Korth & Company Limited Partnership	J. W. Korth & Company designed Korth Direct Mortgage, arranged for its development and paid the legal fees related to its original offerings. Further, J W Korth, pursuant to the Support clause provides all employee support and office costs to the Company.	$1,000,000.00

Allocation of Profits/Losses

10.          Subject to the other provisions of this Agreement, the Net Profits or Losses of the Company, for both accounting and tax purposes, will be allocated between the Members in the following manner:

Common Capital Members	Profit/Loss Percentage
Those Individuals and Entities Who Own General and Common Partnership Interests in J. W. Korth & Company LLC	100.00%

11.          Distributions to Members will be made in the same fixed proportions as the allocation of Net Profits or Losses described above.

12.          No Common Capital Member will have priority over any other Common Capital Member for the distribution of Net Profits or Losses.

4

Nature of Interest

13.          A Member's interest in the Company will be considered personal property, and will at no time be considered real property.

Withdrawal of Contribution

14.          No Common Capital Member will withdraw any portion of their Capital Contribution without the unanimous consent of a majority of the other Members. Preferred Capital interest may terminate based on the agreement made with the Company at the time of Contribution.

Liability for Contribution

15.          The contributions identified in Section 6 above are deemed to have been made as of the date of this agreement. In the future, a Member's obligation to make their required Capital Contribution can only be compromised or released with the consent of a majority of the Members or as described elsewhere in this Agreement. If a Member does not make the Capital Contribution when it is due, he is obligated, at the option of any remaining Members, to contribute cash equal to an alternative agreed-upon Capital Contribution. This option is in addition to, and not in lieu of, any others rights, including the right to specific performance that the Company may have against the Member.

Additional Contributions

16.          Capital Contributions may be amended from time to time, according to the business needs of the Company. However if additional capital is determined to be required and an individual Member is unwilling or unable to meet the additional contribution requirement within a reasonable period, the remaining Members may contribute in proportion to their existing Capital Contributions to resolve the amount in default. In such case, the allocation of Net Profits or Losses and the distribution of assets on dissociation or dissolution will be adjusted accordingly.

5

17.          Any advance of money to the Company by any Member in excess of the amounts provided for in this Agreement or subsequently agreed to, will be in a form and under an obligation to be determined by a majority of the members.

Capital Accounts

18.          An individual capital account will be maintained for each Member and their initial Capital Contribution will be credited to this account. Any Additional Contributions made by any Member will be credited to that Member's individual Capital Account.

Interest on Capital

19.          The terms of interest on capital accounts will be agreed to by a majority of the members at the time of contributions. The capital contributions described above bear no interest.

Management

20.          Management of the Company is vested in the following managers (individually the "Manager" and collectively the "Managers") until such time as they are removed by a majority the Members or withdraw from the position:

a. James Korth, Chief Executive Officer

b. Holly MacDonald-Korth, Chief Financial Officer

c. Daniel Llorente, Chief Lending Officer

21.          A Manager will be reimbursed for reasonable expenses directly related to the operation of the Company.

22.          The Members will be consulted and the advice and opinions of the Members will be obtained as much as is practicable. However, the Managers will have management and control of the day-to-day business of the Company for the purposes stated in this Agreement. All matters outside the day-to-day business of the Company will be decided by the Members as outlined elsewhere in this Agreement.

6

23.          In addition to day-to-day management tasks and any other duties and responsibilities already identified in this Agreement, the Managers' duties will include keeping, or causing to be kept, full and accurate business records for the Company according to generally accepted accounting principles (GAAP), and overseeing the preparation of any reports considered reasonably necessary to keep the Members informed of the business performance of the Company.

24.          A Manager will not be liable to the Members for any action or failure to act resulting in loss or harm to the Company except in the case of gross negligence or willful misconduct.

25.          Each Manager will devote such time and attention to the business of the Company as required to carry out their duties and responsibilities for the conduct of the Company's business.

Authority to Bind Company

26.          Only the following individuals have authority to act for or bind the Company in contract:

James W. Korth or Holly MacDonald-Korth.

Duty to Devote Time

27.          Each Member will devote such time and attention to the business of the Company as the majority of the Members will from time to time reasonably determine based on their respective ownership percentages for the conduct of the Company business.

Member Meetings

28.          A meeting may be called by any Member providing that reasonable notice has been provided to the other Members.

7

29.          Member meetings will be held at any location that the Members by majority vote may from time to time designate.

30.          Regular Member meetings will be held only as required.

Voting

31.          Each Member will be entitled to cast votes on any matter based upon the proportion of that Member's Common Capital Percentage in the Company.

Admission of New Members

32.          New Members may be admitted into the Company if accepted by the vote of a majority of the Common Capital Interests.

Voluntary Withdrawal of a Member

33.          Where the Company consists of two or more Members, the voluntary withdrawal of a Member will have no effect upon the continuance of the Company.

34.          It remains incumbent on the withdrawing Member to exercise this dissociation in good faith and to minimize any present or future harm done to the remaining Members as a result of the withdrawal.

Involuntary Withdrawal of a Member

35.          Events leading to the involuntary withdrawal of a Member from the Company will include but not be limited to: death of a Member; Member mental incapacity; Member disability preventing reasonable participation in the Company; Member incompetence; breach of fiduciary duties by a Member; criminal conviction of a Member; Operation of Law against a Member or a legal judgment against a Member that can reasonably be expected to bring the business or societal reputation of the Company into disrepute. Expulsion of a Member can also occur on application by the Company or another Member, where it has been judicially determined that the Member: has engaged in wrongful conduct that adversely and materially affected the Company's business; has willfully or persistently committed a material breach of the Operating Agreement or of a duty owed to the Company or to the other Members; or has engaged in conduct relating to the Company's business that makes it not reasonably practicable to carry on the business with the Member.

8

36.          Where the Company consists of two or more Members, the involuntary withdrawal of a Member will have no effect upon the continuance of the Company.

Dissociation of a Member

37.          In the event of either a voluntary or involuntary withdrawal of a Member, if the remaining Members elect to purchase the interest of the withdrawing Member, the remaining Members will serve written notice of such election, including the purchase price and method and schedule of payment for the withdrawing Member's interest, upon the withdrawing Member, their executor, administrator, trustee, committee or analogous fiduciary within a reasonable period after acquiring knowledge of the change in circumstance to the affected Member. The purchase amount of any buyout of a Member's interest will be determined as set out in the Valuation of Interest section of this Agreement.

38.          The remaining Members retain the right to seek damages from a dissociated Member where the dissociation resulted from a malicious or criminal act by the dissociated Member or where the dissociated Member had breached their fiduciary duty to the Company or was in breach of this Agreement or had acted in a way that could reasonably be foreseen to bring harm or damage to the Company or to the reputation of the Company.

39.          A dissociated Member will only have liability for Company obligations that were incurred during their time as a Member. On dissociation of a Member, the Company will prepare, file, serve, and publish all notices required by law to protect the dissociated Member from liability for future Company obligations.

9

40.          Where the remaining Members have purchased the interest of a dissociated Member, the purchase amount will be paid in full, but without interest, within 90 days of the date of withdrawal. The Company will retain exclusive rights to use of the trade name and firm name and all related brand and model names of the Company.

Right of First Purchase

41.          In the event that a Member's Interest in the Company is or will be sold, due to any reason, the remaining Members will have a right of first purchase of that Member's Interest. The value of that interest in the Company will be the lower of the value set out in the Valuation of Interest section of this Agreement and any third party offer that the Member wishes to accept.

Assignment of Interest

42.          In the event that a Member’s interest in the company is transferred or assigned as the result of a court order or Operation of Law, the trustee in bankruptcy or other person acquiring that Member's interest in the Company will only acquire that Member's economic rights and interests and will not acquire any other rights of that Member or be admitted as a Member of the Company or have the right to exercise any management or voting interests.

Valuation of Interest

43.          In the event of a dissociation or the dissolution of the Company, each Member's financial interest in the Company will be in proportion to the following schedule:

Member	Dissolution Distribution Percent
J. W. Korth & Company Limited Partnership	100%

10

44.          In the absence of a written agreement setting a value, the value of the Company will be based on the fair market value appraisal of all Company assets (less liabilities) determined in accordance with generally accepted accounting principles (GAAP). This appraisal will be conducted by an independent accounting firm agreed to by all Members. An appraiser will be appointed within a reasonable period of the date of withdrawal or dissolution. The results of the appraisal will be binding on all Members. The intent of this section is to ensure the survival of the Company despite the withdrawal of any individual Member.

45.          No allowance will be made for goodwill, trade name, patents, or other intangible assets, except where those assets have been reflected on the Company books immediately prior to valuation.

Dissolution

46.          The Company may be dissolved only after all notes issued are completely satisfied under their terms and then by a unanimous vote of the Members.

47.          Upon Dissolution of the Company and liquidation of Company property, and after payment of all selling costs and expenses, remaining assets will be distributed to the following groups according to the following order of priority:

a.          in satisfaction of liabilities to creditors except Company obligations to current Members;

b.          in satisfaction of Company debt obligations to current Members; and then

c.          to the Members based on Member financial interest, as set out in the Valuation of Interest section of this Agreement.

Records

48.          The Company will at all times maintain accurate records of the following:

11

a.          Information regarding the status of the business and the financial condition of the Company;

b.          A copy of the Company federal, state, and local income taxes for each year;

c.          Name and last known business, residential, or mailing address of each Member and Manager, as well as the date that person became a Member or Manager;

d.          A copy of this Agreement and any articles or certificate of formation, as well as all amendments, together with any executed copies of any written powers of attorney pursuant to which this Agreement, articles or certificate, and any amendments have been executed; and

e.          The cash, property, and services contributed to the Company by each Member, along with a description and value, and any contributions that have been agreed to be made in the future.

49.          Each Member has the right to demand, within a reasonable period of time, a copy of any of the above documents for any purpose reasonably related to their interest as a Member of the Company, at their expense.

50.          Each Manager has the right to examine the above documents for any purpose reasonably related to their position as Manager of the Company.

Books of Account

51.          Accurate and complete books of account of the transactions of the Company will be kept in accordance with generally accepted accounting principles (GAAP) and at all reasonable times will be available and open to inspection and examination by any Member. The books and records of the Company will reflect all the Company’s transactions and will be appropriate and adequate for the business conducted by the Company.

12

Banking and Company Funds

52.          The funds of the Company will be placed in such investments and banking accounts as will be designated by the Members. All withdrawals from these accounts will be made by the duly authorized agent or agents of the Company as appointed by majority consent of the Members. Company funds will be held in the name of the Company and will not be commingled with those of any other person or entity. Funds from the payments of mortgage loans or participation in mortgage loans will be held in a special trust account for payment of the notes issued by the Company and will not be comingled with other company funds except for the payment of service charges due the Company based on the terms of the notes.

Audit

53.          Any Member will have the right to request an audit of the Company books. The cost of the audit will be borne by the Company. The audit will be performed by an accounting firm acceptable to all the Members. Where the Company consists of two or more Members, not more than one (1) audit will be required by any or all of the Members for any fiscal year.

Tax Treatment

54.          This Company is intended to be treated as a partnership for the purposes of Federal and State Income Tax.

Tax Matters Partner

55.          The tax matters partner will be those individuals and entities who own general and common Partnership Interests in J. W. Korth & Company LP (the "Tax Matters Partner"). The Tax Matters Partner will prepare, or cause to be prepared, all tax returns and reports for the Company and make any related elections that the Members may deem advisable.

56.          A Tax Matters Partner can voluntarily withdraw from the position of Tax Matters Partner or can be appointed or replaced by a majority of the Voting Members. In the event of a withdrawal of the Tax Matters Partner from the Company, the remaining Members will appoint a successor as soon as practicable.

13

Annual Report

57.          As soon as practicable after the close of each fiscal year, the Company will furnish to each Member an annual report showing a full and complete account of the condition of the Company including all information as will be necessary for the preparation of each Member's income or other tax returns. This report will consist of at least:

a.          A copy of the Company's federal income tax returns for that fiscal year;

b.          A breakdown of the profit and loss attributable to each Member;

c.          Balance sheet;

d.          Income statement; and

e.          Cash flow statement.

Goodwill

58.          The goodwill of the Company will be assessed at an amount to be determined by appraisal using generally accepted accounting principles (GAAP).

Governing Law

59.          The Members submit to the jurisdiction of the courts of the State of Florida for the enforcement of this Agreement or any arbitration award or decision arising from this Agreement.

Forbidden Acts

60.          No Member may do any act in contravention of this Agreement.

14

61.          No Member may permit, intentionally or unintentionally, the assignment of express, implied or apparent authority to a third party that is not a Member of the Company.

62.          No Member may do any act that would make it impossible to carry on the ordinary business of the Company.

63.          No Member will have the right or authority to bind or obligate the Company to any extent with regard to any matter outside the intended purpose of the Company.

64.          No Member may confess a judgment against the Company.

65.          Any violation of the above forbidden acts will be deemed an Involuntary Withdrawal of the offending Member and may be treated accordingly by the remaining Members.

Indemnification

66.          All Members will be indemnified and held harmless by the Company from and against any and all claims of any nature, whatsoever, arising out of a Member's participation in Company affairs. A Member will not be entitled to indemnification under this section for liability arising out of gross negligence or willful misconduct of the Member or the breach by the Member of any provisions of this Agreement.

Liability

67.          A Member or any employee will not be liable to the Company or to any other Member for any mistake or error in judgment or for any act or omission believed in good faith to be within the scope of authority conferred or implied by this Agreement or the Company. The Member or employee will be liable only for any and all acts and omissions involving intentional wrongdoing.

15

Liability Insurance

68.          The Company may acquire insurance on behalf of any Member, employee, agent or other person engaged in the business interest of the Company against any liability asserted against them or incurred by them while acting in good faith on behalf of the Company.

Life Insurance

69.          The Company will have the right to acquire life insurance on the lives of any or all of the Members, whenever it is deemed necessary by the Company. Each Member will cooperate fully with the Company in obtaining any such policies of life insurance.

Amendment of Operating Agreement

70.          No amendment or modification of this Agreement will be valid or effective unless in writing and signed by a majority of all Members.

Title to Company Property

71.          Title to all Company property will remain in the name of the Company. No Member or group of Members will have any ownership interest in Company property in whole or in part.

Miscellaneous

72.          Time is of the essence in this Agreement.

73.          This Agreement may be executed in counterparts by sending an email to jwkorth@jwkorth.com with the following statement. “I hereby accept my membership in Korth Direct Mortgage LLC pursuant to the Operating Agreement dated September 2, 2016 attached to this email. Signed: (Name of Member).

74.          Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Agreement. Words in the singular mean and include the plural and vice versa. Words in the masculine gender include the feminine gender and vice versa. Words in a neutral gender include the masculine gender and the feminine gender and vice versa.

16

75.          If any term, covenant, condition or provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, it is the parties' intent that such provision be reduced in scope by the court only to the extent deemed necessary by that court to render the provision reasonable and enforceable and the remainder of the provisions of this Agreement will in no way be affected, impaired or invalidated as a result.

76.          This Agreement contains the entire agreement between the parties. All negotiations and understandings have been included in this Agreement. Statements or representations that may have been made by any party to this Agreement in the negotiation stages of this Agreement may in some way be inconsistent with this final written Agreement. All such statements have no force or effect in respect to this Agreement. Only the written terms of this Agreement will bind the parties.

77.          This Agreement and the terms and conditions contained in this Agreement apply to and are binding upon the Member's successors, assigns, executors, administrators, beneficiaries, and representatives.

78.          Any notices or delivery required here will be deemed completed when hand-delivered, delivered by agent, or seven (7) days after being placed in the post, postage prepaid, to the parties at the addresses contained in this Agreement or as the parties may later designate in writing.

79.          All of the rights, remedies and benefits provided by this Agreement will be cumulative and will not be exclusive of any other such rights, remedies and benefits allowed by law.

Definitions

80.          For the purpose of this Agreement, the following terms are defined as follows:

17

a.          "Additional Contribution" means Capital Contributions, other than Initial Contributions, made by a Member to the Company.

b.          "Capital Contribution" means the total amount of cash, property, or services contributed to the Company by any one Member.

c.          "Initial Contribution" means Capital Contributions made by a Member to acquire an interest in the Company.

d.          "Member's Interests" means the Member's collective rights, including but not limited to, the Member's right to share in profits, Member's right to a share of Company assets on dissolution of the Company, Member's voting rights, and Member's rights to participate in the management of the Company.

e.          "Net Profits or Losses" means the net profits or losses of the Company as determined by generally accepted accounting principles (GAAP).

f.          "Operation of Law" means rights or duties that are cast upon a party by the law, without any act or agreement on the part of the individual including, but not limited to, an assignment for the benefit of creditors, a divorce, or a bankruptcy.

g.          "Principal Office" means the office whether inside or outside the State of Florida where the executive or management of the Company maintain their primary office.

IN WITNESS WHEREOF the Majority Member has duly affixed it’s signature under hand and seal on this 7 day of December, 2016.  

  J. W. Korth & Company Limited Partnership

  By__/s/ James W Korth_____________

James W. Korth

Its Managing Partner

18

EX-3.2

Exhibit 3.2

Electronic Articles of Organization L09000071253 For Florida Limited Liability Company Article I The name of the Limited Liability Company is: HCMK CONSULTING, LLC   Article II FILED 8:00 AM July 24, 2009 Sec. Of State jbryan  The street address of the principal office of the Limited Liability Company is:  90 SW 3RD STREET  APT 502  MIAMI, FL. US  33130   The mailing address of the Limited Liability Company is:  90 SW 3RD STREET  APT 502  MIAMI, FL. US  33130   Article III  The purpose for which this Limited Liability Company is organized is:  ANY AND ALL LAWFUL BUSINESS.     Article IV  The name and Florida street address of the registered agent is:  CORPORATION SERVICE COMPANY  1201 HAYS STREET  TALLAHASSEE, FL.  32301   Having been named as registered agent and to accept service of process for the above stated limited liability company at the place designated in this certificate, I hereby accept the appointment as registered agent and agree to act in this capacity. I further agree to comply with the provisions of all statutes relating to the proper and complete performance of my duties, and I am familiar with and accept the obligations of my position as registered agent.   Registered Agent Signature:  CARINA L. DUNLAP

Article V L09000071253 The name and address of managing members/managers are: Title:  MGRM HOLLY C MACDONALD-KORTH 90 SW 3RD STREET, APT 502 MIAMI, FL.  33130 US Signature of member or an authorized representative of a member Signature: HOLLY C. MACDONALD-KORTH FILED 8:00 AM July 24, 2009 Sec. Of State jbryan

EX-3.3

Exhibit 3.3

ARTICLES OF AMENDMENT  TO  ARTICLES OF ORGANIZATION  OF   HCMK Consulting, LLC  (Name of the Limited Liability Company as it now appears on our records.)  (A Florida Limited Liability Company)   The Articles of Organization for this Limited Liability Company were filed on 7/24109 and assigned Florida document number L09000071253   This amendment is submitted to amend the following:   A. If amending name, enter the new name of the limited liability company here:  J W Korth & Company, LLC  The new name must be distinguishable and end with the words "Limited Liability Company," the designation "LLC" or the abbreviation "L.L.C."   Enter new principal offices address, if applicable:  (Principal office address MUST BE A STREET ADDRESS)      Enter new mailing address, if applicable:  (Mailing address MAY BE A POST OFFICE BOX)    B.  If amending the registered agent and/or registered office address on our records, enter the name of the new registered agent and/or the new registered office address here:    Name of New Registered Agent:   New Registered Office Address:  Enter Florida street address   Florida  City Zip Code New Registered Agent's Signature, if changing Registered Agent:   I hereby accept the appointment as registered agent and agree to act in this capacity. I further agree to comply with  the provisions of all statutes relative to the proper and complete performance of my duties, and I am familiar with and accept the obligations of my position as registered agent as provided for in Chapter 608, F.S. Or, if this document is being filed to merely reflect a change in the registered office address. I hereby confirm that the limited liability company has been notified in writing of this change.  If Changing Registered Agent, Signature of New Registered Agent Page 1 of 2

If amending the Managers or Managing Members on our records, enter the title, name, and address of each Manager or Managing_ Member being added or removed from our records:   MGR = Manager  MGRM = Managing Member   Title Name Address Tyne of Action  n Add  ❑ Remove     nAdd  n Remove    ❑ Add  ❑ Remove     ❑ Add  ❑ Remove     ❑Add  fiRemove     nAdd  ❑Remove    D. If amending any other information, enter change(s) here:  (Attach additional sheets, if necessary.)           Dated November 18 2010    Signature o a member or authorized representative of a member  James W. Korth, member  Typed or printed name of signet  Page 2 of 2   Filing Fee:  $25.00

EX-3.4

Exhibit 3.4

(Reguestor's Name)  I (Address) (Address)     (City/State/Zip/Phone #)    E]  PICK-UP WAIT MAIL  500289360405  ❑   (Business Entity Name)      (Document Number)     Certified Copies Certificates of Status      Special Instructions to Filing Officer.                     Office Use Only   06/24/16 - -01015  -014 1425..00    JD r‘-) rri

COVER LETTER   TO: Registration Section Division of Corporations   Korth Direct Mortgage LLC  SUBJECT:  Name of Limited Liability Company   The enclosed Articles of Amendment and fee(s) are submitted lir filing. Please return all correspondence concerning this matter to the following:    holly MacDonald-Korth  Name ot'Person   J W Korth & Company. LP  Firm/Company  2937 SW 27th Ave. Ste 307  Address  Miami. FL 33133  City/State and Zip Code hkorth(twkorth.com E-mail address: (to he used tor future annual report notification)   For further information concerning this matter, please call:   [lolly MacDonald-Korth 786 693-8652 at ( Name of Person Area Code Daytime Telephone Number    hticlosed is a check for the following amount: $25.00 Filing Fee D $30.00 Filing Fee & CI $55.00 Filing Fee & ❑ $60.00 Filing Fee. Certificate of Status Certified Copy Certificate of Status & (additional copy ts imciosed) Certified Copy (additional copy is enclosed)     MAILING ADDRESS: STREET/COURIER ADDRESS: Registration Section Registration Section Division ol'Corporations Division of Corporations P.O. Box 6327 Clifton Building Tallahassee, FL 32314 2661 Executive Center Circle Tallahassee. FI, 32301

ARTICLES OF AMENDMENT  TO  ARTICLES OF ORGANIZATION  OF   .1. W. Korth & Company. LLC  (Name of the Limited liability Company,, as it now smears on our record,.  (A Florida Limited Liability Company)  The Articles of Organization for this Limited Liability Company were tiled on Florida document number L09000071253  This amendment is submitted to amend the following:   7/24/2009 and assigned   A. if amending name, enter the new name of the limited liability company here: Korth Direct Mortgage. LLC  The new name must he distinguishable and contain the words -Limited Liability Company." the designation "LLC'" or the abbreviation -L.L.C."   Enter new principal offices address, if applicable:  (Principal office address MUST BE A STREET ADDRESS)      Enter new mailing address, if applicable:  (Mailinit address MAY BE A POST OFFICE BOX)    B.  If amending the registered agent and/or registered office address on our records, enter the name of the new registered agent and/or the new registered office address here:    Name of New Registered Agent:   New Registered Office Address:  Enter Eltoriyht street rtddress   Florida  City Zip Code New Registered Agent's Signature, if changing,Registered Agent:  I hereby accept the appointment as registered agent and agree to act in this capacity. Ifurther agree to comply with the provisions of all statutes relative to the proper and complete performance of my duties, and I am familiar with and accept the obligations of my position as registered agent as provided.for in Chapter 605, F.S. Or, if this document is being filed to merely reflect a change in the registered office address, 1 hereby confirm that the limited liability company has been notified in writing of this change.      If Changing Registered Agent, Signature of New Registered Agent   Page 1 of 3

If amending Authorized Person,(s) authorized to manage, enter the title, name, and address of each person being added or removed from our records:   MGR =  Manager  AMBR = Authorized Member   Title Name   14 6—   Address    A 099 3T k5k0 Tatni   V +/kit, rz, Page 2 of 3  Type of Action   141/1Cf jk 77eAdd 35 / ❑ Remove   0 Change   ❑ Add   0 Remove          ❑ Rer  e  ❑ Change-   0 Add   ❑ Remove   0 Change   ❑ Add   ❑ Remove   ❑ Change   ❑ Add   ❑ Remove   ❑ Change  

D. if amending any other information, enter change(s) here: E. Effective date, if other than the date of filing:  (Auach additional sheets, if necessary) (optional) (%) 17. :to CI CD c- nt. r—  .g.- '.._.: :-.4i -,--.   Of an etTective date is listed, the date must be specific and cannot be prior to date of tiling or more than 90 days alter filing.) Pursuant to 605.0207 (3)(h) Note:  If the date inserted in this block does not meet the applicable statutory filing requirements, this date will not be listed as the document's effective date on the Department of State's records.   If the record specifies a delayed effective date, but not an effective time, at 12:01 a.m. on the earlier of:  (b)  The 90th day after the record is filed.    Dated     ore of a menthe authorized representative of a member  Flolly MacDonald-Korth Typed or printed name of signet   Page 3 of 3 Filing Fee: 525.00

EX-4.1

Exh. 4.1

KORTH DIRECT MORTGAGE LLC

 MORTGAGE SECURED NOTES

INDENTURE

DATED AS OF [      , 2017]

DELAWARE TRUST COMPANY

AS TRUSTEE

CROSS REFERENCE TABLE¹

TIA		INDENTURE
SECTION		SECTION
310	(a)(1)		6.8; 6.10
	(a)(2)		6.10
	(a)(3)		N.A.
	(a)(4)		N.A.
	(a)(5)		6.10
	(b)		6.8; 6.10
	(c)		N.A.
311	(a)		6.11
	(b)		6.11
	(c)		N.A.
312	(a)		2.6
	(b)		9.3
	(c)		9.3
313	(a)		6.6
	(b)		6.6
	(c)		6.6; 9.2
	(d)		N.A.
314	(a)		3.2; 9.2
	(b)		N.A.
	(c)(1)		9.4
	(c)(2)		9.4
	(c)(3)		N.A.
	(d)		N.A.
	(e)		9.6
	(f)		3.3
315	(a)		6.1
	(b)		6.5; 9.2
	(c)		6.1
	(d)		6.1
	(e)		5.11
316	(a)(1)(A)		5.5
	(a)(1)(B)		5.4
	(a)(2)		N.A.
	(b)		5.7
	(c)		N.A.
317	(a)(1)		5.8
	(a)(2)		5.9
	(b)		2.5
318	(a)		9.1

N.A. means not applicable.

¹ Note: This Cross Reference Table shall not, for any purpose, be deemed to be part of the Indenture.

i

TABLE OF CONTENTS²

ARTICLE I	DEFINITIONS AND INCORPORATION BY REFERENCE	1
	Section 1.1 DEFINITIONS	1
	Section 1.2 OTHER DEFINITIONS	4
	Section 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT	4
	Section 1.4 RULES OF CONSTRUCTION	5
ARTICLE II	THE NOTES	5
	Section 2.1 FORMS GENERALLY	5
	Section 2.2 TITLE, TERMS AND DENOMINATIONS	5
	Section 2.3 EXECUTION, AUTHENTICATION, DELIVERY AND DATING	7
	Section 2.4 REGISTRAR AND PAYING AGENT	8
	Section 2.5 PAYING AGENT TO HOLD MONEY AND NOTES IN TRUST	9
	Section 2.6 NOTEHOLDER LISTS	9
	Section 2.7 TRANSFER
	Section 2.8 OUTSTANDING NOTES; DETERMINATIONS OF HOLDERS’ ACTION	10
	Section 2.9 CANCELLATION	11
	Section 2.10 PAYMENTS	11
	Section 2.11 PERSONS DEEMED OWNERS	11
	Section 2.12 CUSIP NUMBERS	12
ARTICLE III	COVENANTS	12
	Section 3.1 PAYMENT OF NOTES	12
	Section 3.2 SEC REPORTS	12
	Section 3.3 COMPLIANCE CERTIFICATE; STATEMENT BY OFFICERS AS TO DEFAULT	12
	Section 3.4 FURTHER INSTRUMENTS AND ACTS	13
	Section 3.5 MAINTENANCE OF OFFICE OR AGENCY	13
	Section 3.6  LOAN SERVICING	13
ARTICLE IV	SUCCESSOR CORPORATION	14
	Section 4.1 WHEN COMPANY MAY MERGE OR TRANSFER ASSETS	14
ARTICLE V	DEFAULTS AND REMEDIES	14
	Section 5.1 EVENTS OF DEFAULT	14
	Section 5.2 ACCELERATION	16
	Section 5.3 OTHER REMEDIES	16

² Note: This Table of Contents shall not, for any purpose, be deemed to be part of the Indenture.

ii

	Section 5.4 WAIVER OF PAST DEFAULTS	16
	Section 5.5 CONTROL BY MAJORITY	17
	Section 5.6 LIMITATION ON SUITS	17
	Section 5.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT	17
	Section 5.8 COLLECTION SUIT BY TRUSTEE	17
	Section 5.9 TRUSTEE MAY FILE PROOFS OF CLAIM	18
	Section 5.10 PRIORITIES	18
	Section 5.11 UNDERTAKING FOR COSTS	19
	Section 5.12 WAIVER OF STAY, EXTENSION OR USURY LAWS	19
ARTICLE VI	TRUSTEE	19
	Section 6.1 DUTIES OF TRUSTEE	19
	Section 6.2 RIGHTS OF TRUSTEE	20
	Section 6.3 INDIVIDUAL RIGHTS OF TRUSTEE, ETC	22
	Section 6.4 TRUSTEE’S DISCLAIMER	22
	Section 6.5 NOTICE OF DEFAULTS	22
	Section 6.6 REPORTS BY TRUSTEE TO HOLDERS	22
	Section 6.7 COMPENSATION AND INDEMNITY	22
	Section 6.8 REPLACEMENT OF TRUSTEE	23
	Section 6.9 SUCCESSOR TRUSTEE BY MERGER	24
	Section 6.10 ELIGIBILITY; DISQUALIFICATION	25
	Section 6.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY	25
ARTICLE VII	SATISFACTION AND DISCHARGE	25
	Section 7.1 DISCHARGE OF LIABILITY ON NOTES	25
	Section 7.2 REPAYMENT TO THE COMPANY	26
ARTICLE VIII	SUPPLEMENTAL INDENTURES	26
	Section 8.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS	26
	Section 8.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS	27
	Section 8.3 COMPLIANCE WITH TRUST INDENTURE ACT	27

iii

	Section 8.4 REVOCATION AND EFFECT OF CONSENTS, WAIVERS AND ACTIONS	27
	Section 8.5 NOTATION ON OR EXCHANGE OF NOTES	28
	Section 8.6 TRUSTEE TO SIGN SUPPLEMENTAL INDENTURES	28
	Section 8.7 EFFECT OF SUPPLEMENTAL INDENTURES	28
ARTICLE IX	MISCELLANEOUS	28
	Section 9.1 TRUST INDENTURE ACT CONTROLS	28
	Section 9.2 NOTICES	28

Section 9.3 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS	30
Section 9.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT	30
Section 9.5 FORM OF DOCUMENTS DELIVERED TO TRUSTEE	30
Section 9.6 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION	30
Section 9.7 SEPARABILITY CLAUSE	31
Section 9.8 RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR	31
Section 9.9 LEGAL HOLIDAYS	31
Section 9.10 GOVERNING LAW AND JURISDICTION; WAIVER OF JURY TRIAL	31
Section 9.11 NO RECOURSE AGAINST OTHERS	32
Section 9.12 SUCCESSORS	32
Section 9.13 EFFECT OF HEADINGS AND TABLE OF CONTENTS	32
Section 9.14 BENEFITS OF INDENTURE	32
Section 9.15 MULTIPLE ORIGINALS	32
Section 9.16 FORCE MAJEURE	32

EXHIBIT A - FORM OF NOTE A-1

iv

     INDENTURE dated as of [      ], 2008, by and between Korth Direct Mortgage LLC, a Florida corporation (“Company”), and  Delaware Trust Company, a state chartered trust company incorporated and existing under the laws of the Delaware, as trustee (“Trustee”).

RECITALS OF THE COMPANY

     The Company has duly authorized the execution and delivery of this Indenture to provide for the issuance from time to time of special limited obligations of the Company referred to as First Mortgage Secured Notes (herein called the “Notes”) to be issued in series as in this Indenture provided.

     For and in consideration of the premises and the purchase of the Notes by the Holders thereof, it is mutually covenanted and agreed, for the equal and ratable benefit of the Holders of the Notes or each series thereof as follows:

ARTICLE I

DEFINITIONS AND INCORPORATION BY REFERENCE

     Section 1.1 DEFINITIONS.

     “ACH System” means the Automated Clearing House system of the U.S. Federal Reserve Board or a successor system providing electronic funds transfers between banks.

     “Affiliate” of any specified person means any other person directly or indirectly controlling or controlled by or under direct or indirect common control with such specified person. For the purposes of this definition, “Control” when used with respect to any specified person means the power to direct or cause the direction of the management and policies of such person, directly or indirectly, whether through the ownership of voting Notes, by contract or otherwise; and the terms “Controlling” and “Controlled” have meanings correlative to the foregoing.

     .

     “Business Day” means, except as otherwise specified as contemplated by Section 2.2(c), with respect to any Place of Payment or any other particular location referred to in this Indenture or in the Notes, each Monday, Tuesday, Wednesday, Thursday and Friday that is (1) not a day on which the ACH System is closed and (2) not a day on which banking institutions or trust companies are authorized or obligated by law or executive order to close in San Francisco, California, Wilmington, Delaware or New York, New York.

1

     “Capital Stock” for any corporation means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) stock issued by that corporation.

     “Company” means the party named as the “Company” in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor.

     “Company Request” or “Company Order” means a written request or order signed in the name of the Company by its Chairman of the Board, a Vice Chairman, its Chief Executive Officer, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee or, with respect to Sections 2.1, 2.2(c), 2.3, and 6.2, any other employee of the Company named in an Officers’ Certificate delivered to the Trustee.

     “Default” means any event which is, or after notice or passage of time or both would be, an Event of Default.

     “Dollar” or “$” means a dollar or other equivalent unit in such coin or currency of the United States as at the time shall be legal tender for the payment of public and private debts.

     “Exchange Act” means the Notes Exchange Act of 1934, as amended.

     “Holder” or “Noteholder,” when used with respect to any Note, means, the person in whose name a Note is registered on the Registrar’s books.

     “Indenture” means this Indenture, as amended or supplemented from time to time in accordance with the terms hereof and shall include the terms of a particular series of Notes established as contemplated in Section 2.2(c).

     “Unsuccessful Payment Fees” means any fee imposed by the Company in respect of a  Loan when the Company’s payment request is denied for any reason, including but not limited to insufficient funds in the borrower ’s bank account or the closing of such bank account.

     “Interest Payment Date,” when used with respect to any Note, means the Stated Maturity of an installment of interest on such Note.

     “Maturity,” when used with respect to any Note, means the date on which an installment of Principal thereof or interest thereon becomes due and payable as therein or herein provided, whether at the Stated Maturity, by declaration of acceleration, or otherwise.

     “Loan” means a loan to a borrow originated by the Company’s or purchased in the secondary loan market, but only to the extent such  Loan has been financed by the Company with the proceeds of the Notes. Or has been financed by the Company and where the proper amount of Notes have been issued to the Company for such purchase.

     “ Loan Net Payments,” with respect to a  Loan, means all  Loan Payments net of all applicable Service Charges.

     “ Loan Payments,” with respect to a  Loan, means all amounts received by the Company, and not reversed through the ACH System within four Business Days, in connection with the repayment of such  Loan, including without limitation, all payments or prepayments of principal and interest, any late fees and any amounts received by the Company upon collection efforts; PROVIDED, that  Loan Payments shall not include any Unsuccessful Payment Fees received by the Company in respect of such  Loan or any collection fees imposed in connection with collection efforts on a delinquent  Loan by the Company or by a third-party collection agency.

2

     “Note or Notes” has the meaning stated in the first recital of this Indenture and more particularly means any Notes authenticated and delivered under this Indenture.

     “Officer” means the Chairman of the Board, any Vice Chairman, the Chief Executive Officer, the President, any Vice President, the Treasurer, the Secretary, any Assistant Treasurer or any Assistant Secretary of the Company.

     “Officers’ Certificate” means a written certificate containing the information specified in Sections 9.4 and 9.6, signed in the name of the Company by its Chairman of the Board, a Vice Chairman, its Chief Executive Officer, its President or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee.

     “Opinion of Counsel” means a written opinion containing the information specified in Sections 9.4 and 9.6, from legal counsel who is acceptable to the Trustee. The counsel may be an employee of, or counsel to, the Company or the Trustee.

     “Payment Date” means any Principal Payment Date or Interest Payment Date.

     “Person” means any individual, corporation, partnership, joint venture, association, joint-stock company, limited liability company, trust, unincorporated organization, or government or any agency or political subdivision thereof.

     “Place of Payment,” when used with respect to the Notes of any series, means the place or places where, subject to the provisions of Section 3.5, the Principal of and any interest on the Notes of that series are payable as specified as contemplated by Section 2.2(c).

     “Principal” or “Principal Amount” of a Note, except as otherwise specifically provided in this Indenture, means the outstanding principal of the Note.

     “Principal Payment Date,” when used with respect to any Note, means the Stated Maturity of an installment of Principal on such Note.

     “Record Date” for the amounts payable on any Payment Date on the Notes of any series means the date specified for that purpose as contemplated by Section 2.2(c).

     “SEC” means the Notes and Exchange Commission.

     “Securities Act” means the Securities Act of 1933, as amended.

     “Noteholder” or “Holder,” when used with respect to any Note, means a person in whose name a Note is registered on the Registrar’s books.

     “Service Charge” means, with respect to any  Loan, 1.00% of all  Loan Payments received by the Company or such other amount charged by the Company.

     “Stated Maturity,” when used with respect to any installment of Principal thereof or interest thereon, means the date specified in such Note as the fixed date on which an amount equal to such installment of Principal thereof or interest thereon is due and payable.

     “Subsidiary” means, with respect to any person, a corporation of which a majority of the Capital Stock having voting power under ordinary circumstances to elect a majority of the board of directors of such corporation is owned by (i) such person, (ii) such person and one or more Subsidiaries or (iii) one or more Subsidiaries of such person.

     “TIA” means the Trust Indenture Act of 1939 as in effect on the date of this Indenture, except as provided in Section 8.3.

     “Trust Officer” means , when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the Persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person’s knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

3

“Trust Estate” means all right, title and interest of the Company in and to (a) the Loan Documents (b) Revenues, (c) Funds and (d) all other property of every name and nature from time to time hereafter by delivery or by writing mortgaged, pledged, delivered or hypothecated as and for additional

Note under this Indenture by the Company or by anyone on its behalf or with its written consent in favor of the Trustee.

     “Trustee” means the party named as the “Trustee” in the first paragraph of this Indenture until a successor replaces it pursuant to the applicable provisions of this Indenture and, thereafter, shall mean such successor.

     “United States” means the United States of America, its territories, its possessions (including the Commonwealth of Puerto Rico), and other areas subject to its jurisdiction.

     Section 1.2 OTHER DEFINITIONS.

	Defined in
Term	Section
“Bankruptcy Law”		5.1
“Custodian”		5.1
“Defaulted Payment”		2.10
“Event of Default”		5.1
“Legal Holiday”		9.9
“Notice of Default”		5.1
“Outstanding”		2.8
“Paying Agent”		2.4
“Registrar”		2.4

     Section 1.3 INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT. Whenever this Indenture refers to a provision of the TIA, the provision is incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings:

     “Commission” means the SEC.

     “Indenture Notes” means the Notes.

     “Indenture Note Holder” means a Holder or Noteholder.

     “Indenture to be Qualified” means this Indenture.

     “Indenture Trustee” or “Institutional Trustee” means the Trustee.

     “Obligor” on the indenture Notes means the Company.

     All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.

4

     Section 1.4 RULES OF CONSTRUCTION. Unless the context otherwise requires:

          (i) a term has the meaning assigned to it;

          (ii) an accounting term not otherwise defined has the meaning assigned to it in accordance with generally accepted accounting principles in the United States as in effect from time to time;

          (iii) “OR” is not exclusive;

          (iv) “INCLUDING” means including, without limitation; and

          (v) words in the singular include the plural, and words in the plural include the singular.

ARTICLE II

THE NOTES

     Section 2.1 FORMS GENERALLY. The Notes of each series and the certificate of authentication in respect thereof shall be in substantially the form set forth onExhibit Aas shall be established by delivery to the Trustee of a Company Order, in each case with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined by the Officers executing such Notes as evidenced by their execution of the Notes. The Notes shall be in fully registered form only and shall be printed, lithographed, engraved, word processed or evidenced in electronic form or produced by any combination of these methods or may be produced in any other manner, all as determined by the Officers executing such Notes as evidenced by their execution of such Notes.

Section 2.2 TITLE, TERMS AND DENOMINATIONS.

     (a) The aggregate Principal Amount of Notes that may be authenticated and delivered under this Indenture shall be unlimited.

     (b) To the extent provided in, and except as otherwise permitted by, this Indenture, (1) the Notes shall be special limited obligations of the Company and (2) no payments of Principal and interest on the Notes of any series shall be payable unless the Company has received  Loan Payments in respect of the  Loan corresponding to such series, and then shall be payable equally and ratably on the Notes of such series only to the extent of the  Loan Net Payments related to the  Loan corresponding to such series.

     (c)  Each series of Notes shall constitute a valid claim of the respective owners thereof against the corresponding Loan, its notes, its mortgage and all other documents which is pledged to secure the payment of principal of, redemption premium, if any, and interest thereon the corresponding Notes and which shall be utilized for no other purpose.

    (d) No Holder of a Note shall have any recourse against the Company unless and then only to the extent that the Company (1) has failed to pay such Holder the Loan Net Payments in respect of the Loan corresponding to such Holder’s Note or (2) has otherwise breached a covenant in this Indenture.

     (e) For each series of Notes there shall be established and, subject to Section 2.3, set forth, or determined in the manner provided, in a Company Order:

          (1) the title of the Notes of the series (which shall distinguish the Notes of the series from all other Notes);

5

          (2) the limit upon the aggregate Principal Amount of the Notes of the series which may be authenticated and delivered under this Indenture (except for Notes authenticated and delivered upon registration of transfer of Notes of the series pursuant to Sections 2.7 or 8.5);

          (3) the Loan that corresponds to Notes of the series and which secures the Notes in the event of a default under this indenture;

          (4) the Stated Maturity and Payment Dates of the Notes of the series and the Record Date for any amounts payable on any Payment Date;

          (5) the stated rate at which the Notes of the series shall bear interest;

          (6) the place or places where, subject to the provisions of Section 3.5, the Principal of and or interest on Notes of the series shall be payable, any Notes of the series may be surrendered for registration of transfer and notices and demands to or upon the Company in respect of the Notes of the series and this Indenture may be served;

          (7) any restrictions on the transfer or transferability of Notes of the series;

          (8) the obligation, if any, of the Company to redeem Notes of the series at the option of a Holder thereof, the conditions, if any, giving rise to such obligation, and the period or periods within which, the price or prices at which and the terms and conditions upon which Notes of the series shall be purchased, in whole or in part;

          (9) the denominations in which any Notes of the series shall be issuable, if other than denominations of $1,000 and any integral multiple thereof;

          (10) any addition to or change in the Events of Default which apply to any Notes of the series and any change in the right of the Trustee or the requisite Holders of such Notes to declare the principal amount thereof due and payable pursuant to Section 5.2;

          (11) any addition to or change in the covenants set forth in Article III which apply to Notes of the series; and

          (12) any other terms of the series (which terms shall not be inconsistent with the provisions of this Indenture, except as permitted by Section 8.1(7)).

     All Notes of a series shall be substantially identical except as to denomination and except as may otherwise be provided in or pursuant to a Company Order pursuant to this Section 2.2(c) or in any indenture supplemental hereto.

     (f) Prior to the issuance of the initial series of Notes under this Indenture, a copy of the Chief Executive Officers resolution authorizing the execution, delivery and performance of this Indenture, shall be certified by the Chief Financial Officer or an Assistant Chief Financial Officer of the Company and delivered to the Trustee at or prior to the delivery of an Officers’ Certificate setting forth the general terms of the Notes. Such Officers’ Certificate shall provide general terms for Notes and provide either that the specific terms of each series shall be specified in a Company Order or that such terms shall be determined by the Company, or one or more of the Company’s agents designated in an Officers’ Certificate, in accordance with the Company Order as contemplated by Section 2.3.

      (g) Within 5 days after closing the corresponding Loan for each series of Notes, the Company will provide all closing documents to the Trustee in electronic form including

     (h) Unless otherwise provided as contemplated by Section 2.2(e) with respect to any series of Notes, any Notes of a series shall be issuable in denominations of $1,000 and any integral multiple thereof.

6

         Section 2.3 EXECUTION, AUTHENTICATION, DELIVERY AND DATING. The Notes shall be executed on behalf of the Company its Chief Executive Officer or the Chief Financial Officer or the Assistant Chief Financial Officer. The signature of any of these officers on the Notes may be electronic, manual or facsimile.

     Notes bearing the electronic, manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Notes or did not hold such offices at the date of such Notes.

     At any time and from time to time after the execution and delivery of this Indenture (and subject to delivery of the  Officers’ Certificate as set forth in Section 2.2 prior to the issuance of the initial series of Notes), the Company may authenticate and deliver Notes of any series and upon such authentication and delivery shall promptly provide a record of all such Notes executed and authenticated by the Company to the Trustee, together with a copy of the Company Order authorizing the authentication and delivery of such Notes;

     In addition, prior to the issuance of the initial series of Notes, the Trustee shall receive, and shall be fully protected in conclusively relying upon, an Opinion of Counsel stating:

     (a) that the forms of such Notes have been, and the terms of such Notes (when established in accordance with such procedures as may be specified from time to time in a Company Order, all as contemplated by and in accordance with a Chief Executive Officer’s Resolution pursuant to Section 2.2(d), as the case may be) will have been, duly authorized by the Company and established in conformity with the provisions of this Indenture;

     (b) that such Notes, when (1) executed by the Company, (2) completed, authenticated and delivered by the Company in accordance with this Indenture, and (3) issued by the Company in the manner and subject to any conditions specified in such Opinion of Counsel, will constitute valid and legally binding obligations of the Company, enforceable in accordance with their terms, subject to customary exceptions; and

     (c) that all laws and requirements in respect of the execution and delivery by the Company of such Notes have been complied with.

     The Trustee may conclusively rely, as to the authorization by the Company of any series of Notes, the form and terms thereof and the legality, validity, binding effect and enforceability thereof, upon the Opinion of Counsel and other documents delivered pursuant to Sections 2.1, 2.2(c) and 2.2(d) and this Section, as applicable, at or prior to the time of the first authentication of Notes of the initial series of Notes unless and until it has received written notification that such opinion or other documents have been superseded or revoked. In connection with the authentication and delivery of Notes, the Trustee shall be entitled to assume, unless it has received written notice to the contrary or any of its Trust Officers has actual knowledge to the contrary, that the Company’s authentication and delivery such Notes do not violate any rules, regulations or orders of any governmental agency or commission having jurisdiction over the Company.

     Each Note shall be dated the date of its authentication.

     The Company may appoint an authenticating agent, including itself, acceptable to the Trustee to authenticate Notes. Unless otherwise provided in the appointment, an authenticating agent may authenticate Notes whenever the Company may do so. Each reference in this Indenture to authentication by the Company includes authentication by such agent.

7

     No Note shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Note a certificate of authentication substantially in the form provided for herein duly executed by the Company by electronic or manual signature of an authorized signatory, and such certificate upon any Note shall be conclusive evidence, and the only evidence, that such Note has been duly authenticated and delivered hereunder. The Company’s certificate of authentication shall be in substantially the following form:

     This is one of the Notes of the series designated therein referred to in the within-mentioned Indenture.

KORTH DIRECT MORTGAGE LLCas Authenticating Agent
By:
	Name:
	Title:

     Section 2.4 REGISTRAR AND PAYING AGENT. The Company shall maintain, with respect to each series of Notes, an office or agency where such Notes may be presented for registration of transfer or for exchange (“Registrar”) and an office or agency where such Notes may be presented for purchase or payment (“Paying Agent”). The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term Paying Agent includes any additional paying agent.

     The Company shall enter into an appropriate agency agreement with respect to each series of Notes with any Registrar, Paying Agent or co-registrar. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. The Company or any Subsidiary or an Affiliate of either of them may act as Paying Agent, Registrar or co-registrar.

     The Company initially will serve as the Registrar and Paying Agent in connection with such Notes  The Company or its agent shall be solely responsible for making all payments of principal and interest hereunder and the Trustee shall be entitled to rely upon the information of outstanding balances on the Notes and any information provided by the Company on payment of principal and interest without further investigation.  Within thirty (30) days after the end of each fiscal quarter the Paying Agent shall deliver to the Trustee a written report identifying, as of the date of such report, (i) the Principal Amount and accrued interest of each Note, (ii) all Loan Payments received by the Paying Agent, (iii) all Loan Net Payments paid to the Holders, and (iv) and such other information as reasonably requested by the Trustee from time to time in order for the Trustee to determine the Principal Amount and accrued interest of each Note.

8

     Section 2.5 PAYING AGENT TO HOLD MONEY AND NOTES IN TRUST. Except as otherwise provided herein, prior to or on each due date of payments in respect of any series of Notes, the Company shall deposit with the Paying Agent with respect to such Notes a sum of money sufficient to make such payments when so becoming due. The Company shall require each Paying Agent (other than the Trustee or the Company) to agree in writing that the Paying Agent shall hold in trust for the benefit of Holders or the Trustee all money held by such Paying Agent for the making of payments in respect of the Notes of such series and shall notify the Trustee in writing of any default by the Company in making any such payment. At any time during the continuance of any such default, a Paying Agent shall, upon the written request of the Trustee, forthwith pay to the Trustee all money so held in trust with respect to such Notes. If the Company, a Subsidiary or an Affiliate of either of them acts as Paying Agent for a series of Notes, it shall segregate the money held by it as Paying Agent with respect to such Notes and hold it as a separate trust fund. The Company at any time may require a Paying Agent for a series of Notes to pay all money held by it with respect to such Notes to the Trustee and to account for any money disbursed by it. Upon doing so, such Paying Agent shall have no further liability for the money.

     Section 2.6  Securities Depository Provisions. All Initial Notes  shall  be  Book  Entry Notes. All Book Entry Notes shall be registered in the name of Cede & Co., as nominee of The Depository Trust Company (“DTC”). The Company and/or its duly appointed agent acknowledge that they have executed and delivered a Letter of Representations to DTC. All payments of principal of, redemption premium, if any, and interest on the Book Entry Notes and all notices with respect thereto, including notices of full or partial redemption, shall be made and given at the times and in the manner set out in the Letter of Representations. The terms and provisions of the Letter of Representations shall govern in the event of any inconsistency between the provisions of this Indenture and the Letter of Representations. The Letter of Representations may be amended without Noteholder consent.

The book-entry registration system for all of the Book Entry Notes may be terminated and certificates delivered to and registered in the name of the Beneficial Owners, under either of the following circumstances:

(a)          DTC notifies the Company, the Borrower and the Trustee that it is no longer willing or able to act as Notes Depository for the Book Entry Notes and  a successor Notes Depository for the Book Entry Notes is not appointed by the Company at the direction of the Borrower prior to the effective date of such discontinuation; or

(b)          The Borrower [Company] determines that continuation of the book-entry system through DTC (or a successor Notes depository) is not in the best interest of the Borrower [Owners of the Book Entry Notes].

In the event a successor Notes Depository is appointed by the Company, the Book Entry Notes will be registered in the name of such successor Notes Depository or its nominee. In the event certificates are required to be issued to Beneficial Owners, the Trustee, the Borrower and the Company shall be fully protected in relying upon a certificate of DTC or any DTC participant as to the identity of and the principal amount of Book Entry Notes held by such Beneficial Owners.

9

The Beneficial Owners of Notes   will not receive physical delivery of certificates. For so long as there is a Securities  Depository for Notes, all of such Notes shall be registered in the name of the nominee of the Notes Depository, all transfers of beneficial ownership interests in such Notes will be made in accordance with the rules of the Notes Depository, and no investor or other party purchasing, selling or otherwise transferring beneficial ownership of such Notes is to receive, hold or deliver any certificate. The Company, and the Trustee shall have no responsibility or liability for transfers of beneficial ownership interests in such Notes.

The Company, and the Trustee will recognize the Notes Depository or its nominee as the Noteholder of Book Entry Notes for all purposes, including receipt of payments, notices and voting; provided the Trustee may recognize votes by or on behalf of Beneficial Owners as if such votes were made by Noteholders of a related portion of the Notes when such votes are received in compliance with an omnibus proxy of the Notes Depository or otherwise pursuant to the rules of the Notes Depository or the provisions of the Letter of Representations or other comparable evidence delivered to the Trustee by the Noteholders

With respect to Book Entry Notes, the Company and the Trustee shall be entitled to treat the Person in whose name such Note is registered as the absolute owner of such Note for all purposes of this Indenture, and neither the Company, the Borrower nor the Trustee shall have any responsibility or obligation to any Beneficial Owner of such Book  Entry  Note.  Without limiting the immediately preceding sentence, neither the Company nor the Trustee shall have any responsibility or obligation with respect to (a) the accuracy of the records of any Notes Depository or any other Person with respect to any ownership interest in Book Entry Notes, (b) the delivery to any Person, other than a Noteholder, of any notice with respect to Book Entry Notes, including any notice of redemption or refunding, (c) the selection of the particular Notes or portions thereof to be redeemed or refunded in the event of a partial redemption or refunding of part of the Notes Outstanding or (d) the payment to any Person, other than a Noteholder, of any amount with respect to the principal of, redemption premium, if any, or interest on Book Entry Notes.

     Section 2.8 OUTSTANDING NOTES; DETERMINATIONS OF HOLDERS’ ACTION. Notes of any series “Outstanding” at any time are, as of the date of determination, all the Notes of such series theretofore authenticated by the Company for such series except for those cancelled by it, those delivered to it for cancellation and those described in this Section 2.8 as not outstanding. A Note does not cease to be “Outstanding” because the Company or an Affiliate thereof is the Holder of the Note; PROVIDED, HOWEVER, that in determining whether the Holders of the requisite Principal Amount of Outstanding Notes have given or concurred in any request, demand, authorization, direction, notice, consent or waiver hereunder, Notes owned by the Company or any Affiliate of the Company shall be disregarded and deemed not to be outstanding, except that, in determining whether the Trustee shall be protected in conclusively relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Notes which a Trust Officer of the Trustee actually knows to be so owned shall be so disregarded. Notes so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Notes and that the pledgee is not the Company or any

Affiliate of the Company. Subject to the foregoing, only Notes outstanding at the time of such determination shall be considered in any such determination.

10

     If the Paying Agent (other than the Company) holds, in accordance with this Indenture, on the final Stated Maturity, money sufficient to pay Notes payable on that date in full, then on and after that date such Notes shall cease to be Outstanding.

     Section 2.9 CANCELLATION. All Notes surrendered for payment, or registration of transfer, shall, if surrendered to any person other than the Company, be delivered to the Company and all Notes so delivered shall be promptly cancelled by it. The Company may at any time cancel any Notes previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever and may cancel any Notes previously authenticated hereunder that the Company has not issued and sold. The Company may not reissue, or issue new Notes to replace, Notes it has cancelled.

     No Notes shall be authenticated in lieu of or in exchange for any Notes cancelled as provided in this Section, except as expressly permitted in the form of Notes for any particular series or as permitted by this Indenture.

     Section 2.10 PAYMENTS. Payment of Principal and interest on any Note which is payable, and is punctually paid or duly provided for, on any Payment Date shall be paid to the person in whose name that Note is registered at the close of business on the Record Date for such Payment Date.

     Any payments on any Note of any series which is payable, but is not punctually paid or duly provided for, on any Payment Date (herein called “Defaulted Payment”) shall forthwith cease to be payable to the Holder on the relevant Record Date, and such Defaulted Payment may be paid by the Company to the Holder of the Note on a record date chosen by the Company and in any lawful manner, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee.

     Subject to the foregoing provisions of this Section and Section 2.7, each Note delivered under this Indenture upon registration of transfer of any other Note shall carry the rights to payments, which were carried by such other Note.  Except as otherwise set forth herein, the Trustee shall have no duties with regards to payments of the Notes.

     Section 2.11 PERSONS DEEMED OWNERS. Prior to due presentment of a Note for registration of transfer, the Company, the Trustee and any agent of the Company or the Trustee may treat the person in whose name such Note is registered as the owner of such Note for the purpose of receiving payment of Principal of and interest on such Note and for all other purposes whatsoever, whether or not such Note be overdue, and neither the Company, the Trustee nor any agent of the Company or the Trustee shall be affected by notice to the contrary.

11

     Section 2.12 CUSIP NUMBERS. The Company in issuing the Notes may use “CUSIP” numbers (if then generally in use), and, if so, the Trustee shall use “CUSIP” numbers in notices of redemption as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness of such numbers either as printed on the

Notes or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Notes, and any such redemption shall not be affected by any defect in or omission of such numbers. The Company will promptly notify the Trustee in writing of any change in the “CUSIP” numbers.

ARTICLE III

COVENANTS

     Section 3.1 PAYMENT OF NOTES. The Company shall promptly make all payments in respect of each series of Notes in lawful money of the United States on the dates and in the manner provided in the Notes but solely from the sources provided pursuant to Section 2.2(b) and, to the extent not otherwise so provided, pursuant to this Indenture. The Company shall have no liability or obligation with respect to the payment of the purchase price of any Notes except to the extent of the Loan Net Payments in respect of the  Loan corresponding to such series. At the Company’s option, payments of Principal or interest may be made by check or by transfer to an account maintained by the payee.

     Section 3.2 SEC REPORTS. The Company shall file with the Trustee, within 15 days after it files such annual and quarterly reports, information, documents and other reports with the SEC, copies of its annual report and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may by rules and regulations prescribe) which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. The Company also shall comply with the other provisions of TIA Section 314(a).

     Section 3.3 COMPLIANCE CERTIFICATE; STATEMENT BY OFFICERS AS TO DEFAULT. The Company shall deliver to the Trustee within 120 days after the end of each fiscal year (beginning with the fiscal year ending on March 31, 2017[?]) an Officers’ Certificate, one of the signers of which shall be the principal executive officer, principal financial officer or principal accounting officer of the Company, stating whether or not the signers know of any Default that occurred during such period. If they do, such Officers’ Certificate shall describe the Default and its status.

     The Company shall deliver to the Trustee, as soon as possible and in any event within five days after the Company becomes aware of the occurrence of any Event of Default or an event which, with notice or the lapse of time or both, would constitute an Event of Default, an Officers’ Certificate setting forth the details of such Event of Default or default and the action which the Company proposes to take with respect thereto.  Until such time as the Trustee receives in writing a report of any Event of Default the Trustee shall not be deemed to have notice of such.

12

     Section 3.4 FURTHER INSTRUMENTS AND ACTS. Upon request of the Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purposes of this Indenture.

     Section 3.5 MAINTENANCE OF OFFICE OR AGENCY. The Company will maintain in each Place of Payment for such series an office or agency where Notes of that series may be presented or surrendered for payment, where Notes of that series may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company in respect of the Notes of that series and this Indenture may be served. The office of the Company at 440 North Wolfe Road, Sunnyvale, California 94085 shall be such office or agency for all of the aforesaid purposes unless the Company shall maintain some other office or agency for such purposes and shall give prompt written notice to the Trustee of the location, and any change in the location, of such other office or agency.

     The Company may also from time to time designate one or more other offices or agencies where the Notes of one or more series may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; PROVIDED, HOWEVER, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in accordance with the requirements set forth above for Notes of any series for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

     Section 3.6  LOAN SERVICING.

     (a) With respect to each series of Notes, the Company shall use commercially reasonable efforts to service and collect the  Loan corresponding to such series, in good faith, accurately and in accordance with industry standards customary for servicing loans such as the  Loans. Notwithstanding the generality of the foregoing, (1) referral of a delinquent  Loan to a collection attorney on the 31^stday of its delinquency shall be deemed to constitute commercially reasonable servicing and collection efforts; and (2) the Company shall have the right, at any time and from time to time, to amend or waive any term of such  Loan if it deems such actions to be in the best interest of the corresponding Note holders. Should such amendment or waiver occur a letter signed by the Chief Executive Officer shall be delivered to the Trustee with a description of the reasons for taking such action.  The Trustee shall have no duty prior to an Event of Default hereunder to pursue any actions or remedies with regards to the Loans and payments thereon.

     (b) With respect to each series of Notes, the Company shall use commercially reasonable efforts to maintain backup servicing arrangements providing for the Loan corresponding to such series to be serviced and collected in good faith, accurately and in accordance with industry standards customary for servicing loans such as the Loans.  The Company shall promptly notify the Trustee in writing of any appointment or replacement of a third-party servicer of a Loan not identified in a Company Order.

13

ARTICLE IV

SUCCESSOR CORPORATION

     Section 4.1 WHEN COMPANY MAY MERGE OR TRANSFER ASSETS. The Company shall not consolidate with or merge with or into any other person or convey, transfer or lease its properties and assets substantially as an entirety to any person, unless:

     (a) either (1) the Company shall be the continuing corporation or (2) the person (if other than the Company) formed by such consolidation or into which the Company is merged or the person which acquires by conveyance, transfer or lease the properties and assets of the Company substantially as an entirety (i) shall be a corporation, limited liability company, partnership or trust organized and validly existing under the laws of the United States or any state thereof or the District of Columbia and (ii) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all of the obligations of the Company under the Notes and this Indenture;

     (b) immediately after giving effect to such transaction, no Default shall have occurred and be continuing; and

     (c) the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer or lease and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture, comply with this Article and that all conditions precedent herein provided for relating to such transaction have been satisfied.

     The successor person formed by such consolidation or into which the Company is merged or the successor person to which such conveyance, transfer or lease is made shall succeed to, and be substituted for, and may exercise every right and power of the Company under this Indenture with the same effect as if such successor had been named as the Company herein; and thereafter, except in the case of a lease of its properties and assets substantially as an entirety, the Company shall be discharged from all obligations and covenants under this Indenture, and the Notes.

ARTICLE V

DEFAULTS AND REMEDIES

     Section 5.1 EVENTS OF DEFAULT. Unless otherwise specified as contemplated by Section 2.2(c) with respect to any series of Notes, an “Event of Default” occurs, with respect to each series of the Notes individually, if:

          (1) the Company defaults, subject in each case, to the limitations set forth in Sections 2.2(b) and 3.1 and in the Notes in the payment of any Principal of, or interest upon, any Note of such series when the same becomes due and payable and continuance of such default for a period of 30 days after receipt by the Company of a Notice of Default from the Holders of at least a majority in aggregate Principal Amount of the Outstanding Notes of all Series for which such Default exists;

          (2) the Company fails to comply with any of its agreements in the Notes or this Indenture (other than those referred to in clause (1) above and other than a covenant or warranty a default in whose performance or whose breach is elsewhere in this Section specifically dealt with or which has been expressly included in this Indenture solely for the benefit of a series of Notes other than such series) and such failure continues for 90 days after receipt by the Company of a Notice of Default PROVIDED, HOWEVER, that if the Company shall proceed to take curative action which, if begun and prosecuted with due diligence, cannot be completed within a period of 90 days then such period shall be increased to such extent as shall be necessary to enable the Company diligently to complete such curative action. A Default under this clause is not an Event of Default until the Trustee notifies the Company, or the Holders of at least a majority in aggregate Principal Amount of the Outstanding Notes of all Series for which such Default exists, notify the Company and the Trustee, of the Default and the Company does not cure such Default within the time specified after receipt of such notice;

14

          (3) there shall have been the entry by a court of competent jurisdiction of (a) a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Bankruptcy Law or (b) a decree or order adjudging the Company bankrupt or insolvent, or seeking reorganization, arrangement, adjustment or composition of or in respect of the Company under any applicable federal or state law, or appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other similar official) of the Company or of any substantial part of its property, or ordering the wind up or liquidation of its affairs, and any such decree or order for relief shall continue to be in effect, or any such other decree or order shall be unstayed and in effect, for a period of 60 consecutive days;

          (4) (a) the Company commences a voluntary case or proceeding under any applicable Bankruptcy Law or any other case or proceeding to be adjudicated bankrupt or insolvent, (b) the Company consents to the entry of a decree or order for relief in respect of the Company in an involuntary case or proceeding under any applicable Bankruptcy Law or to the commencement of any bankruptcy or insolvency case or proceeding against it, (c) the Company files a petition or answer or consent seeking reorganization or substantially comparable relief under any applicable federal state law, (d) the Company (x) consents to the filing of such petition or the appointment of, or taking possession by, a custodian, receiver, liquidator, assignee, trustee, sequestrator or similar official of the Company or of any substantial part of its property, (y) makes an assignment for the benefit of creditors or (z) admits in writing its inability to pay its debts generally as they become due or (e) the Company takes any corporate action in furtherance of any such actions in this clause (4); or

          (5) any other Event of Default provided with respect to Notes of that series.

     “Bankruptcy Law” means Title 11, United States Code, or any similar federal or state law for the relief of debtors. “Custodian” means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law.

     A Default under clause (2) above is not an Event of Default until the Trustee notifies the Company, or the Holders of at least a majority in aggregate Principal Amount of the Outstanding Notes of all series for which such Default exists notify the Company and the Trustee, of the Default and the Company does not cure such Default within the time specified in clause (2) above after receipt of such notice. Any such notice must specify the Default, demand that it be remedied and state that such notice is a “Notice of Default.”  Notwithstanding anything herein to the contrary, the Trustee shall not be charged with knowledge of any default or Event of Default with respect to the Notes of any Series for which it is acting as Trustee unless written notice of such default or Event of Default (which shall state that such notice is a “Notice of Default” or a “Notice of an Event of Default” hereunder, as the case may be) shall have been given to a Responsible Officer of the Trustee by the Company, or by the Holders of at least a majority in aggregate Principal Amount of the Outstanding Notes of all Series for which such Default exists.

15

     Section 5.2 ACCELERATION. If an Event of Default specified in Section 5.1(3) or (4) occurs and is continuing, the Principal (or portion thereof) of all the Notes shall become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Noteholders, notwithstanding the second sentence of Section 3.1 hereof and without respect to whether there are or will be  Loan Net Payments in respect of the  Loans corresponding to the Notes. The Holders of a majority in aggregate Principal Amount of all Outstanding Notes, by notice to the Trustee (and without notice to any other Noteholder) may rescind an acceleration and its consequences if (i) the rescission would not conflict with any judgment or decree, and (ii) all Events of Default specified in Section 5.1(3) or (4) have been cured or waived. No such rescission shall affect any subsequent Default or impair any right consequent thereto. For avoidance of doubt, there shall be no acceleration of the Principal (or portion thereof) of any Notes upon the occurrence of and Event of Default other than an Event of Default specified in Section 5.1(3) or (4).

     Section 5.3 OTHER REMEDIES. If an Event of Default with respect to a series of Outstanding Notes occurs and is continuing, the Trustee may pursue any available remedy to (a) collect the payment of the whole amount then due and payable on such Notes for Principal and interest, with interest upon the overdue Principal and, to the extent that payment of such interest shall be legally enforceable, upon overdue installments of interest from the date such interest was due, at the rate or rates prescribed therefor in such Notes and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses of collection, including amounts due the Trustee under Section 6.7 or (b) enforce the performance of any provision of the Notes or this Indenture.

     The Trustee may maintain a proceeding even if the Trustee does not possess any of the Notes or does not produce any of the Notes in the proceeding. A delay or omission by the Trustee or any Noteholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of, or acquiescence in, the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. Pursuit of remedies by the Trustee shall be subject to the restrictions and protections by the Holders pursuant to this Indenture.

     Section 5.4 WAIVER OF PAST DEFAULTS. The Holders of a majority in aggregate Principal Amount of the Outstanding Notes of any series, by written notice to the Trustee (and without notice to any other Noteholder), may on behalf of the Holders of all the Notes of such series waive an existing Default with respect to such series and its consequences except (1) an Event of Default described in Section 5.1(1) with respect to such series or (2) a Default in respect of a provision that under Section 8.2 cannot be amended without the consent of the Holder of each Outstanding Note of such series affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right.

16

     Section 5.5 CONTROL BY MAJORITY. If an Event of Default shall have occurred and be continuing with respect to any Series of Notes, the Holders of at least a majority in aggregate Principal Amount of the Outstanding Notes of such Series for which a Default exists may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee with respect to the Notes. If the Series of Notes includes more than one Class, the Holders of Notes of all Classes shall vote together, without distinction among the Classes.  Such direction shall not be in conflict with any rule of law or with this Indenture, and could not involve the Trustee in personal liability in circumstances where indemnity would not in the Trustee’s reasonable discretion be adequate.  Before proceeding to exercise any right or power hereunder at the direction of such Holders, the Trustee shall be entitled to receive from such Holders reasonable security or indemnity, against the costs, expenses and liabilities which might be incurred by it in compliance with any such direction.  However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or that the Trustee determines in good faith is unduly prejudicial to the rights of other Noteholders or would involve the Trustee in personal liability.

     Section 5.6 LIMITATION ON SUITS. A Holder of any Note of any series may not pursue any remedy with respect to this Indenture or the Notes unless:

          (1) the Holder gives to the Trustee written notice stating that an Event of Default with respect to the Notes of that series is continuing;

          (2) the Holders of at least a majority in aggregate Principal Amount of the Outstanding Notes of that series make a written request to the Trustee to pursue the remedy;

          (3) such Holder or Holders offer to the Trustee Note or indemnity satisfactory to it against any loss, liability or expense satisfactory to the Trustee;

          (4) the Trustee does not comply with the request within 60 days after receipt of the notice, the request and the offer of Note or indemnity; and

          (5) the Holders of a majority in aggregate Principal Amount of the Outstanding Notes of that series do not give the Trustee a direction inconsistent with such request during such 60-day period.

     A Noteholder may not use this Indenture to prejudice the rights of any other Noteholder or to obtain a preference or priority over any other Noteholder (it being understood that the Trustee does not have an affirmative duty to ascertain whether or not such actions or forbearances are unduly prejudicial to such Holders).

Section 5.7 RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding any other provision of this Indenture, the right, which is absolute and unconditional, of any Holder of any Note to receive payment of the Principal of and (subject to Section 2.10) interest on such Note on the Stated Maturity or Maturities expressed in such Note held by such Holder, on or after the respective due dates expressed in the Notes, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected adversely without the consent of each such Holder.

     Section 5.8 COLLECTION SUIT BY TRUSTEE. If an Event of Default described in Section 5.1(1) with respect to Notes of any series occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount owing with respect to such series of Notes and the amounts provided for in Section 6.7.

17

     Section 5.9 TRUSTEE MAY FILE PROOFS OF CLAIM. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to the Company or any other obligor upon the Notes or the property of the Company or of such other obligor or their creditors, the Trustee (irrespective of whether the Principal of the Notes shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Trustee shall have made any demand on the Company for the payment of overdue Principal or interest) shall be entitled and empowered, by intervention in such proceeding or otherwise,

     (a) to file and prove a claim for the whole amount of Principal and interest owing and unpaid in respect of the Notes and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel and any other amount due the Trustee under Section 6.7) and of the Holders of Notes allowed in such judicial proceeding,

     (b) to terminate the Company’s rights to service the  Loans and require the substitution of a backup servicer in place of the Company, and

     (c) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute the same; and any custodian, receiver, assignee, trustee, liquidator, sequestrator or similar official in any such judicial proceeding is hereby authorized by each Holder of Notes to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders of Notes, to pay the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, and any other amounts due the Trustee under Section 6.7.

     Nothing herein contained shall be deemed to authorize the Trustee or the holders of Notes to authorize or consent to or accept or adopt on behalf of any Holder of a Note any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Holder of a Note in any such proceeding.

     Section 5.10 PRIORITIES. If the Trustee collects any money pursuant to this Article V, it shall pay out the money in the following order and, in case of the distribution of such money on account of Principal or interest, upon presentation of the Notes, or both, as the case may be, and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid:

     FIRST: to the Trustee for amounts due under Section 6.7;

     SECOND: to Noteholders for amounts due and unpaid for the Principal and interest on the Notes in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Notes for Principal and interest, respectively; and

     THIRD: the balance, if any, to the Company.

     The Trustee may fix a record date and payment date for any payment to Noteholders pursuant to this Section 5.10. At least 15 days before such record date, the Company shall mail or electronically transmit to each Noteholder and the Trustee a notice that states the record date, the payment date and amount to be paid.

18

     Section 5.11 UNDERTAKING FOR COSTS. In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant (other than the Trustee) in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees and expenses, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 5.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 5.7 or a suit by Holders of more than 10% in aggregate Principal Amount of the Outstanding Notes of any series, or to any suit instituted by any Holder of any Note or coupon for the enforcement of the payment of the Principal of or interest on any Note or the payment of any coupon on or after the Stated Maturity or Maturities expressed in such Note.

     Section 5.12 WAIVER OF STAY, EXTENSION OR USURY LAWS. The Company covenants (to the extent that it may lawfully do so) that it will not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury or other law wherever enacted, now or at any time hereafter in force,which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE VI

TRUSTEE

     Section 6.1 DUTIES OF TRUSTEE.

     (a) If an Event of Default has occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in its exercise as a prudent person would exercise or use under the circumstances in the conduct of his or her own affairs.

     (b) Except during the continuance of an Event of Default with respect to Notes of any series:

          (1) the Trustee need perform only those duties that are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and

          (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

     (c) The Trustee may not be relieved from liability for its own gross negligent action, its own gross negligent failure to act or its own willful misconduct, except that:

19

          (1) this paragraph (c) does not limit the effect of paragraph (b) of this Section 6.1;

          (2) the Trustee shall not be liable for any error of judgment made in good faith by a Trust Officer unless it is proved that the Trustee was grossly negligent in ascertaining the pertinent facts; and

          (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 5.5 or exercising any trust or power conferred upon the Trustee under this Indenture.

     (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (e) of this Section 6.1.

     (e)No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of its duties and the Trustee may refuse to perform any duty or exercise any right or power or extend or risk its own funds or otherwise incur any financial liability unless it receives indemnity satisfactory to it against any loss, liability or expense.

     (f) Money held by the Trustee in trust hereunder need not be segregated from other funds except to the extent required by law. The Trustee shall not be liable for any interest on any money received by it except as the Trustee may otherwise agree in writing with the Company.  Notwithstanding anything contained in this Indenture to the contrary, the duties and responsibilities of the Trustee under this Indenture shall be subject to the protections, exculpations and limitations on liability afforded to a Trustee under the provisions of the Trust Indenture Act of 1939 as in effect as of the date of this Indenture.

     Section 6.2 RIGHTS OF TRUSTEE.

     (a) The Trustee may conclusively rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document.

     (b) Before the Trustee acts or refrains from acting, it may require an Officers’ Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officers’ Certificate or Opinion of Counsel.

     (c) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers.

     (d) The Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, Officers’ Certificate, Opinion of Counsel (or both), Company Order or any other certificate, statement, instrument, opinion, report, notice, request, consent, order, bond, debenture, note, coupon, Note or other paper believed to be genuine and to have been signed or presented by the proper party or parties.

     (e) Any request, direction, order or demand of the Company mentioned herein shall be sufficiently evidenced by an Officers’ Certificate (unless other evidence in respect thereof be herein specifically prescribed); and any resolution of the Board of Directors may be evidenced to the Trustee by a copy thereof certified by the secretary or an assistant secretary of the Company.

     (f) The Trustee may consult with counsel of its selection and any advice or Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted to be taken by it hereunder in good faith and in reliance thereon in accordance with such advice or Opinion of Counsel.

20

     (g) The Trustee shall be under no obligation to exercise any of the trusts or powers vested in it by this Indenture at the request, order or direction of any of the Noteholders pursuant to the provisions of this Indenture, unless such Noteholders shall have offered to the Trustee Note or indemnity satisfactory to it against the costs, expenses and liabilities which might be incurred therein or thereby.

     (h) Prior to the occurrence of an Event of Default hereunder and after the curing or waiving of all Events of Default, the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, consent, order, approval, appraisal, bond, debenture, note, Note or other paper or document unless requested in writing to do so by the Holders of not less than a majority in the aggregate principal amount of the Notes of such series then Outstanding; PROVIDED, that, if the payment within a reasonable time to the Trustee of the costs, expenses or liabilities likely to be incurred by it in the making of any such investigation is, in the opinion of the Trustee, not reasonably assured to the Trustee by the Note afforded to it by the terms of this Indenture, the Trustee may require indemnity satisfactory to it against such expense or liabilities as a condition to proceeding; the reasonable expense of every such investigation shall be paid by the Company or, if paid by the Trustee or any predecessor trustee, shall be repaid by the Company upon demand.

     (i) The Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys not regularly in its employ and the Trustee shall not be responsible for any misconduct or negligence on the part of any such agent or attorney appointed with due care by it hereunder.

     (j) The Trustee shall not be liable for any action taken, suffered, or omitted to be taken by it in good faith and reasonably believed by it to be authorized or within the discretion or rights or powers conferred upon it by this Indenture.

     (k) In no event shall the Trustee be responsible or liable for special, indirect, punitive or consequential loss or damage of any kind whatsoever (including, but not limited to, loss of profit) irrespective of whether the Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

     (l) The Trustee shall not be deemed to have notice of any Default or Event of Default unless a Trust Officer of the Trustee has actual knowledge thereof or unless written notice of any event which is in fact such a default is received by the Trustee at the designated corporate trust office of the Trustee, and such notice references the Notes and this Indentureand is given by the Company or by Holders of a at least a majoirty in aggregate Principal Amount of the Outstanding Notes of a Series for which such Default exists..

     (m) The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.

     (n) The Trustee shall not be required to give any bond or surety in respect of the performance of its powers and duties hereunder.

21

     (o) The Trustee may request that the Company deliver a certificate setting forth the names of individuals and/or titles of officers authorized at such time to take specified actions pursuant to this Indenture.

     Section 6.3 INDIVIDUAL RIGHTS OF TRUSTEE, ETC. The Trustee in its individual or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Authenticating Agent, Registrar or co-registrar or any other agent of the Company may do the same with like rights. However, the Trustee must comply with Sections 6.10 and 6.11.

Section 6.4 TRUSTEE’S DISCLAIMER. The recitals contained herein and in the Notes shall be taken as the statements of the Company, and the Trustee assumes no responsibility for the correctness of the same. The Trustee makes no representation as to the validity or adequacy of this Indenture or the Notes. The Trustee shall not be accountable for the Company’s use of the proceeds from the Notes and, shall not be responsible for any statement in the registration statement for the Notes under the Notes Act of 1933, as amended, or in the Indenture or the Notes or for the determination as to which beneficial owners are entitled to receive any notices hereunder.

     Section 6.5 NOTICE OF DEFAULTS. If a Default with respect to the Notes of any series occurs and is continuing and if it is known to the Trustee, the Trustee shall give to each Holder of Notes of such series notice of such Default in the manner set forth in TIA Section 315(b) within 90 days after it occurs. Except in the case of a Default described in Section 5.1(1) with respect to any Note of such series or a Default in the payment of any sinking fund installment with respect to any Note of such series, the Trustee may withhold the notice if and so long as a committee of its Trust Officers in good faith determines that withholding the notice is in the interests of the Holders of Notes of such series.

     Section 6.6 REPORTS BY TRUSTEE TO HOLDERS. If required by Section 313(a) of the TIA, within 60 days after each May 15 beginning with the May 15 following the date of this Indenture, the Trustee shall mail or transmit electronically to each Holder of Notes a brief report dated as of such May 15 that complies with TIA Section 313(a). The Trustee also shall comply with TIA Section 313(b) and (c). A copy of each report at the time of its mailing or transmission to Holders of Notes shall be filed with the SEC.

     Section 6.7 COMPENSATION AND INDEMNITY. The Company agrees:

     (a) to pay to the Trustee from time to time such compensation as shall be agreed in writing between the Company and the Trustee for all services rendered by it hereunder (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);

     (b) to reimburse the Trustee upon its request for all reasonable expenses, disbursements and advances incurred or made by the Trustee in accordance with any provision of this Indenture (including the reasonable compensation for extraordinary services by the Trustee including hourly costs for time rendered in connection with an Event of Default, and the expenses, advances and disbursements of its agents and counsel), except any such expense, disbursement or advance as may be attributable to its gross negligence or willful misconduct; and

22

     (c) to fully indemnify the Trustee for, and to hold it harmless against, any and all loss, liability, damage, claim or expense incurred without negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust, including the costs and expenses of defending itself against any claim (whether asserted by the Company, a Holder or any other Person) or liability in connection with the exercise or performance of any of its powers or duties hereunder(including the reasonable costs and expenses of defending itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder, except to the extent any such loss, demand, claim, liability, cause of action or expense may be attributable to its own gross negligence, willful misconduct or bad faith)  .

     To secure the Company’s payment obligations in this Section 6.7, the Trustee shall have a lien prior to the Notes on all money or property held or collected by the Trustee, except that held in trust to pay the Principal of or interest, if any, on particular Notes.

     The Company’s obligations pursuant to this Section 6.7 shall survive the discharge or other termination of this Indenture or the resignation or removal of the Trustee. When the Trustee incurs expenses after the occurrence of a Default specified in Section 5.1(3) or (4), the expenses are intended to constitute expenses of administration under any Bankruptcy Law.

     Section 6.8 REPLACEMENT OF TRUSTEE. The Trustee may resign by so notifying the Company; PROVIDED, HOWEVER, no such resignation shall be effective until a successor Trustee has accepted its appointment pursuant to this Section 6.8. The Holders of a majority in aggregate Principal Amount of the Outstanding Notes at the time outstanding may remove the Trustee with respect to the Notes by so notifying the Trustee and may appoint a successor Trustee, which successor Trustee shall, in the absence of an Event of Default, be reasonably acceptable to the Company. The Company shall remove the Trustee if:

          (1) the Trustee fails to comply with Section 6.10;

          (2) the Trustee is adjudged bankrupt or insolvent;

          (3) a receiver or public officer takes charge of the Trustee or its property; or

          (4) the Trustee otherwise becomes incapable of acting.

     If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason, with respect to the Notes of one or more series, the Company shall promptly appoint, by resolution of its Board of Directors, a successor Trustee with respect to the Notes of that or those series (it being understood that any such successor Trustee may be appointed with respect to the Notes of one or more or all of such series and that at any time there shall be only one Trustee with respect to the Notes of any series).

     In the case of the appointment hereunder of a successor Trustee with respect to all Notes, every such successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon, the resignation or removal of the retiring Trustee shall become effective and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail or electronically transmit a notice of its succession to Holders of Notes of the particular series with respect to which such successor Trustee has been appointed. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 6.7.

23

     In case of the appointment hereunder of a successor Trustee with respect to the Notes of one or more (but not all) series, the Company, the retiring Trustee and each successor Trustee with respect to the Notes of one or more series shall execute and deliver an indenture supplemental hereto wherein each successor Trustee shall accept such appointment and which (1) shall contain such provisions as shall be necessary or desirable to transfer and confirm to, and to vest in, each successor Trustee all the rights, powers, trusts and duties of the retiring Trustee with respect to the Notes of that or those series to which the appointment of such successor Trustee relates, (2) if the retiring Trustee is not retiring with respect to all Notes, shall contain such provisions as shall be deemed necessary or desirable to confirm that all the rights, powers, trusts and duties of the retiring Trustee with respect to the Notes of that or those series as to which the retiring Trustee is not retiring shall continue to be vested in the retiring Trustee, and (3) shall add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, it being understood that nothing herein or in such supplemental indenture shall constitute such Trustees as co-Trustees of the same trust and that each such Trustee shall be trustee of a trust or trusts hereunder separate and apart from any trust or trusts hereunder administered by any other such Trustee; and upon the execution and delivery of such supplemental indenture the resignation or removal of the retiring Trustee shall become effective to the extent provided therein and each such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee with respect to the Notes of that or those series to which the appointment of such successor Trustee relates; but, on request of the Company or any successor Trustee, such retiring Trustee shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder with respect to the Notes of that or those series to which the appointment of such successor Trustee relates, subject, nevertheless, to its lien, if any, provided for in Section 6.7.

     If a successor Trustee with respect to the Notes of any series does not take office within 30 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of a majority in aggregate Principal Amount of the Outstanding Notes of such series at the time outstanding may petition, at the expense of the Company, any court of competent jurisdiction for the appointment of a successor Trustee with respect to the Notes of such series.

     If the Trustee fails to comply with Section 6.10, any Holder of a Note of such series may petition any court of competent jurisdiction for the removal of such Trustee and the appointment of a successor Trustee.

     Section 6.9 SUCCESSOR TRUSTEE BY MERGER. If the Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee.

24

     Section 6.10 ELIGIBILITY; DISQUALIFICATION. The Trustee shall at all times satisfy the requirements of TIA Section 310(a)(1) and 310(a)(5). The Trustee shall have a combined capital and surplus of at least $50,000,000.00 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA Section 310(b), including the optional provision permitted by the second sentence of TIA Section 310(b)(9). In determining whether the Trustee has conflicting interests as defined in TIA Section 310(b)(1), the provisions contained in the proviso to TIA Section 310(b)(1) shall be deemed incorporated herein.

     Section 6.11 PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The Trustee shall comply with TIA Section 311(a), excluding any creditor relationship listed in TIA Section 311(b). A Trustee who has resigned or been removed shall be subject to TIA Section 311(a) to the extent indicated therein.

ARTICLE VII

SATISFACTION AND DISCHARGE

     Section 7.1 DISCHARGE OF LIABILITY ON NOTES. This Indenture shall upon Company Request cease to be of further effect as to all Outstanding Notes or all Outstanding Notes of any series, as the case may be (except as to any surviving rights of registration of transfer of Notes herein expressly provided for), and the Trustee, at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when:

     (a) either

          (1) all Outstanding Notes or all Outstanding Notes of any series, as the case may be, theretofore authenticated and delivered, (other than Notes or Notes of such series, as the case may be, for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Company and thereafter repaid to the Company or discharged from such trust, as provided in Section 7.2) have been delivered to the Company or the Trustee for cancellation; or

          (2) all such Notes not theretofore delivered to the Company or the Trustee for cancellation,

               (i) have become due and payable, or

               (ii) will become due and payable at their Stated Maturity within one year;

and the Company, in the case of (i) or (ii) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose, an amount sufficient to pay and discharge the entire indebtedness on such Notes not theretofore delivered to the Trustee or the Company for cancellation, for principal and any interest to the date of such deposit (in the case of Notes which have become due and payable) or to the Stated Maturity, as the case may be;

     (b) the Company has paid or caused to be paid all other sums payable hereunder by the Company; and

     (c) the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with.  The Trustee shall join in the execution of a document prepared by the Company acknowledging satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers’ Certificate and Opinion of Counsel and at the cost and expense of the Company.

25

     Notwithstanding the satisfaction and discharge of this Indenture with respect to the Notes of any series, the obligations of the Company to the Trustee with respect to the Notes of that series under Section 6.7, the obligations of the Company to any Authenticating Agent and, if money shall have been deposited with the Trustee pursuant to clause (b) of this Section, Section 7.2 shall survive. The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of Outstanding Notes.

     Section 7.2 REPAYMENT TO THE COMPANY. The Trustee and the Paying Agent shall return to the Company on Company Request any money held by them for the payment of any amount with respect to the Notes that remains unclaimed for two years. After return to the Company, Holders entitled to the money must look to the Company for payment as general creditors with limited recourse as described herein and in the Notes unless an applicable abandoned property law designates another person.

ARTICLE VIII

SUPPLEMENTAL INDENTURES

     Section 8.1 SUPPLEMENTAL INDENTURES WITHOUT CONSENT OF HOLDERS. Without the consent of any Holders of Notes, the Company and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:

          (1) to evidence the succession of another corporation to the Company and the assumption by any such successor of the covenants of the Company herein and in the Notes; or

          (2) to add to the covenants, agreements and obligations of the Company for the benefit of the Holders of all of the Notes or any series thereof, or to surrender any right or power herein conferred upon the Company; or

          (3) to establish the form or terms of Notes of any series as permitted by Sections 2.1 and 2.2(c), respectively; or

          (4) to evidence and provide for the acceptance of appointment hereunder by a successor Trustee with respect to the Notes of one or more series and to add to or change any of the provisions of this Indenture as shall be necessary to provide for or facilitate the administration of the trusts hereunder by more than one Trustee, pursuant to the requirements of Section 6.8; or

          (5) to cure any ambiguity, defect or inconsistency;

          (6) to amend restrictions on transferability of any Notes on any series in any manner that does not adversely affect the rights of any Noteholder in any material respect; or

          (7) to add to, change or eliminate any of the provisions of this Indenture (which addition, change or elimination may apply to one or more series of Notes), PROVIDED that any such addition, change or elimination shall neither (A) apply to any Note of any series created prior to the execution of such supplemental indenture and entitled to the benefit of such provision nor (B) modify the rights of the Holder of any such Note with respect to such provision; or

          (8) to  additionally secure the Notes; or

          (9) to make any other change that does not adversely affect the rights of any Noteholder in any material respect.

26

     Section 8.2 SUPPLEMENTAL INDENTURES WITH CONSENT OF HOLDERS. With the written consent of the Holders of at least a majority in aggregate Principal Amount of the Outstanding Notes of each series affected by such supplemental indenture, the Company and the Trustee may amend this Indenture or the Notes of any series or may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders of the Notes of such series and under this Indenture; PROVIDED, HOWEVER, that no such amendment or supplemental indenture shall, without the consent of the Holder of each Outstanding Note affected thereby:

          (1) change the Stated Maturity of the Principal of, or any installment of Principal or interest on, any such Note, or reduce the Principal Amount thereof or the rate of interest thereon that would be due and payable upon a declaration of acceleration of maturity thereof pursuant to Section 5.2, or change the Place of Payment where, or change the coin or currency in which, any installment of principal of or interest on, any such Note is payable, or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof;

          (2) reduce the percentage in Principal Amount of the Outstanding Notes of any series, the consent of whose Holders is required for any such amendment or supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) with respect to the Notes of such series provided for in this Indenture; or

          (3) modify any of the provisions of this Section, Section 5.4 (clauses (1) and (2)) or 5.7, except to increase the percentage of Outstanding Notes of such series required for such actions to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby.

     A supplemental indenture which changes or eliminates any covenant or other provision of this Indenture which has expressly been included solely for the benefit of one or more particular series of Notes, or which modifies the rights of the Holders of Notes of such series with respect to such covenant or other provision, shall be deemed not to affect the rights under this Indenture of the Holders of Notes of any other series.

     It shall not be necessary for the consent of the Holders under this Section 8.2 to approve the particular form of any proposed amendment or supplemental indenture, but it shall be sufficient if such consent approves the substance thereof.

     After an amendment or supplemental indenture under this Section 8.2 becomes effective, the Company shall mail or electronically transmit to each Holder of the particular Notes affected thereby a notice briefly describing the amendment.

     Section 8.3 COMPLIANCE WITH TRUST INDENTURE ACT. Every supplemental indenture executed pursuant to this Article shall comply with the TIA as then in effect.

     Section 8.4 REVOCATION AND EFFECT OF CONSENTS, WAIVERS AND ACTIONS. Until an amendment or waiver with respect to a series of Notes becomes effective, a consent to it or any other action by a Holder of a Note of that series hereunder is a continuing consent by the Holder and every subsequent Holder of that Note or portion of that Note that evidences the same obligation as the consenting Holder’s Note, even if notation of the consent, waiver or action is not made on the Note. However, any such Holder or subsequent Holder may revoke the consent, waiver or action as to such Holder’s Note or portion of the Note if the Trustee receives the notice of revocation before the Company or an agent of the Company certifies to the Trustee that the consent of the requisite aggregate Principal Amount of the Notes of that series has been obtained. After an amendment, waiver or action becomes effective, it shall bind every Holder of Notes of that series.

27

     The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment or waiver with respect to a series of Notes. If a record date is fixed, then notwithstanding the first two sentences of the immediately preceding paragraph, those persons who were Holders of Notes of that series at such record date (or their duly designated proxies), and only those persons, shall be entitled to revoke any consent previously given, whether or not such persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 90 days after such record date.

     Section 8.5 NOTATION ON OR EXCHANGE OF NOTES. Notes of any series authenticated and delivered after the execution of any supplemental indenture with respect to such series pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture. If the Company shall so determine, new Notes of such series so modified as to conform, in the opinion of the Trustee and the Board of Directors, to any such supplemental indenture may be prepared ,executed, authenticated and delivered by the Company in exchange for outstanding Notes of that series.

     Section 8.6 TRUSTEE TO SIGN SUPPLEMENTAL INDENTURES. The Trustee may but shall not be obligated to sign any supplemental indenture authorized pursuant to this Article VIII if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. In signing such amendment, the Trustee shall receive, and shall be fully protected in conclusively relying upon, an Officers’ Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture.

  Section 8.7 EFFECT OF SUPPLEMENTAL INDENTURES. Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Notes theretofore or thereafter authenticated and delivered hereunder shall be bound thereby, except to the extent otherwise set forth thereon.

ARTICLE IX

MISCELLANEOUS

     Section 9.1 TRUST INDENTURE ACT CONTROLS. If any provision of this Indenture limits, qualifies or conflicts with another provision hereof which is required to be included in this Indenture by the TIA, the required provision shall control.

     Section 9.2 NOTICES. Any notice or communication shall be in writing and delivered in person, mailed by first-class mail, postage prepaid or transmitted electronically to any Holder at the registered address maintained in the Company’s records; PROVIDED, that any notice or communication by and among the Trustee and the Company may be made by telecopy and shall be effective upon receipt thereof and shall be confirmed in writing, mailed by first-class mail, postage prepaid, and addressed as follows:

28

if to the Company:

Korth Direct Mortgage LLC2937 SW 27^th Avenue Ste. 307

Miami, Florida 33133

Email: info@jwkorth.com

if to the Trustee:

Delaware Trust Company

Attention:  Corporate Trust Administration

2711 Centerville Road

Wilmington, DE 19808

Email:  trust@delawaretrust.com

     The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.

     Any notice or communication given to a Holder of Notes shall be transmitted electronically to or mailed to such Noteholder at the Noteholder’s address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed.  The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.

     Where this Indenture provides for notice in any manner, such notice may be waived in writing by the person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

     Failure to electronically transmit or mail a notice or communication to a Noteholder or any defect in it shall not affect its sufficiency with respect to other Holders of Notes of the same series. If a notice or communication is electronically transmitted or mailed in the manner provided above, it is duly given, whether or not received by the addressee.

     If the Company electronically transmits or mails a notice or communication to the Holders of Notes of a particular series, it shall electronically transmit or mail a copy to the Trustee and each Registrar, co-registrar or Paying Agent, as the case may be, with respect to such series.

     In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give notice to Holders of Notes as set forth above, then such notification as shall be made with the acceptance of the Trustee shall constitute a sufficient notification for every purpose hereunder. In any case where notice to Holders of Notes is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder of a Note shall affect the sufficiency of such notice with respect to other Holders of Notes.

29

     Section 9.3 COMMUNICATION BY HOLDERS WITH OTHER HOLDERS. Noteholders may communicate pursuant to TIA Section 312(b) with other Noteholders with respect to their rights under this Indenture or the Notes. The Company and the Trustee, the Registrar or the Paying Agent with respect to a particular series of Notes, and anyone else, shall have the protection of TIA Section 312(c).

Section 9.4 CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT. Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee:

          (1) an Officers’ Certificate stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and

          (2) an Opinion of Counsel stating that, in the opinion of such counsel, all such conditions precedent have been complied with.

Section 9.5 FORM OF DOCUMENTS DELIVERED TO TRUSTEE. In any case where several matters are required to be certified by, or covered by an opinion of, any specifiedPerson, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

     Any certificate or opinion of an officer of the Company may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is based are erroneous. Any such Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Company stating that the information with respect to such factual matters is in the possession of the Company, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.

     Section 9.6 STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each Officers’ Certificate or Opinion of Counsel with respect to compliance with a covenant or condition provided for in this Indenture shall include:

          (1) statement that each person making such Officers’ Certificate or Opinion of Counsel has read such covenant or condition;

          (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such Officers’ Certificate or Opinion of Counsel are based;

          (3) a statement that, in the opinion of each such person, he has made such examination or investigation as is necessary to enable such person to express an informed opinion as to whether or not such covenant or condition has been complied with; and

30

          (4) a statement that, in the opinion of such person, such covenant or condition has been complied with.

     Section 9.7 SEPARABILITY CLAUSE. In case any provision in this Indenture or in the Notes shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

     Section 9.8 RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR. With respect to the Notes of a particular series, the Trustee with respect to such series of Notes may make reasonable rules for action by or a meeting of Holders of such series of Notes. With respect to the Notes of a particular series, the Registrar and the Paying Agent with respect to such series of Notes may make reasonable rules for their functions.

     Section 9.9 LEGAL HOLIDAYS. A “Legal Holiday” is any day other than a Business Day. If any specified date (including an Interest Payment Date or Stated Maturity of any Note, or a date for giving notice) is a Legal Holiday at any Place of Payment or place for giving notice, then (notwithstanding any other provision of this Indenture or of the Notes other than a provision in the Notes of any series which specifically states that such provision shall apply in lieu of this Section) payment of interest or Principal need not be made at such Place of Payment, or such other action need not be taken, on such date, but the action shall be taken on the next succeeding day that is not a Legal Holiday at such Place of Payment with the same force and effect as if made on the Interest Payment Date, or at the Stated Maturity or such other date.

     Section 9.10 GOVERNING LAW AND JURISDICTION; WAIVER OF JURY TRIAL. THIS INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO ANY PRINCIPLE OF CONFLICTS OF LAW THAT WOULD REQUIRE OR PERMIT THE APPLICATION OF THE LAWS OF ANY OTHER JURISDICTION. THE COMPANY, THE TRUSTEE, AND EACH HOLDER OF A NOTE (BY ACCEPTANCE THEREOF) THEREBY, (I) SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN CONNECTION WITH ANY SUIT, ACTION OR PROCEEDING RELATED TO THIS INDENTURE, (II) IRREVOCABLY WAIVES ANY DEFENSE OF LACK OF PERSONAL JURISDICTION IN SUCH SUITS AND (III) IRREVOCABLY WAIVES TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE OF ANY SUIT, ACTION OR PROCEEDING BROUGHT IN THE FEDERAL AND NEW YORK STATE COURTS LOCATED IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK AND THAT SUCH SUIT, ACTION OR PROCEEDING HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

31

     EACH OF THE COMPANY AND THE TRUSTEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE, THE NOTES OR THE TRANSACTION CONTEMPLATED HEREBY.

     Section 9.11 NO RECOURSE AGAINST OTHERS. A director, officer, employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Notes or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Note, each Holder of such Note shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Notes.

     Section 9.12 SUCCESSORS. All agreements of the Company in this Indenture and the Notes shall bind its successor. All agreements of the Trustee in this Indenture shall bind its successor.

     Section 9.13 EFFECT OF HEADINGS AND TABLE OF CONTENTS. The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

     Section 9.14 BENEFITS OF INDENTURE. Nothing in this Indenture or in the Notes, express or implied, shall give to any person, other than the parties hereto and their successors hereunder and the Holders of Notes, any benefits or any legal or equitable right, remedy or claim under this Indenture.

     Section 9.15 MULTIPLE COUNTERPARTS. The parties may sign any number of copies of this Indenture. One signed copy is enough to prove this Indenture.  This Indenture may be executed in multiple counterparts, each of which shall be regarded for all purposes as an original, and such counterparts shall constitute but one and the same instrument.  In addition, the transaction described herein may be conducted and related documents may be stored by electronic means.  Copies, telecopies, facsimiles, electronic files and other reproductions of original executed documents shall be deemed to be authentic and valid counterparts of such original documents for all purposes, including the filing of any claim, action or suit in the appropriate court of law.

     Section 9.16 FORCE MAJEURE. In no event shall the Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including, without limitation, strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services; it being understood that the Trustee shall use reasonable efforts which are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

32

Section 9.17 U.S.A. PATRIOT ACT.  The parties hereto acknowledge that in accordance with Section 326 of the U.S.A. Patriot Act, the Trustee, like all financial institutions and in order to help fight the funding of terrorism and money laundering, is required to obtain, verify, and record information that identifies each person or legal entity that establishes a relationship or opens an account with the Trustee.  The parties to this Indenture agree that they will provide the Trustee with such information as it may request in order for the Trustee to satisfy the requirements of the U.S.A. Patriot Act.

KORTH DIRECT MORTGAGE LLC

By:

Name:

Title:

Attest:

Name:

Title: 

DELAWARE TRUST

COMPANY, solely in its capacity
as Trustee

By:

Name:

Title:

33

EXHIBIT A

Form of Note

FOR PURPOSES OF SECTIONS 1272, 1273 AND 1275 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THIS NOTE IS BEING ISSUED WITH ORIGINAL ISSUE DISCOUNT BECAUSE PAYMENTS ON THE NOTE ARE DEPENDENT ON PAYMENTS ON THE CORRESPONDING  LOAN. THE ISSUE PRICE OF THE NOTE IS THE STATED PRINCIPAL AMOUNT OF THIS NOTE, AND THE ISSUE DATE IS THE ORIGINAL ISSUE DATE. UPON REQUEST, THE COMPANY WILL PROMPTLY MAKE AVAILABLE TO THE HOLDER THE AMOUNT OF OID AND YIELD TO MATURITY OF THIS NOTE. A HOLDER SHOULD CONTACT J. W. KORTH AT 800 454 1628 FOR ANY TRANSFER, PLEDGE OR OTHER USE OF THIS NOTE FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL unless (1) such transfer is effected on a trading system that is recognized by the Company, and (2) this Note has been presented by the registered Holder (as defined below) to the Company or its agent for registration of transfer.

A-1

 PAYMENT DEPENDENT NOTE SERIES NO.¹

KORTH DIRECT MORTGAGE LLC

No. [CUSIP]

HOLDER:²

CORRESPONDING LOAN:³

STATED PRINCIPAL AMOUNT OF THIS NOTE: U.S. $⁴

AGGREGATE PRINCIPAL AMOUNT OF THIS SERIES OF NOTES: U.S. $⁵

INTEREST RATE:⁶

SERVICE CHARGE:   ⁷ OF ALL  LOAN NET INTEREST PAYMENTS.

ORIGINAL ISSUE DATE:⁷

1	Insert loan ID number for Corresponding  Loan.
2	Insert lender ’s screen name.
3	Insert description of Corresponding  Loan.
4	Insert principal amount of lender ’s Corresponding  Loan.
5	Insert maximum aggregate principal amount of series, which should be aggregate principal amount of Corresponding  Loan that is being funded by lender s.
6	Insert coupon stated on Corresponding Loan.
7	Insert percentage rate of Service Charge
8	Insert date corresponding to date of closing of Corresponding  Loan.

A-2

INITIAL MATURITY DATE:⁹

FINAL MATURITY DATE:¹⁰

EXTENSION OF MATURITY DATE: Each Note will mature on the Initial Maturity Date, unless the maturity of the Note is extended to the Final Maturity Date subject to conditions described below. In no event will the maturity of the Notes be extended beyond the Final Maturity Date.

PAYMENT DATES: Subject to the limitations on payment described below, the Company will make payments of principal and interest on or before the fourth Business Day following receipt of any  Loan Net Payments by the Company in accordance with the payment schedule for this Note, which is available on the Holder’s account page at www.lendingclub.com, subject to prepayment at any time without penalty.

          Korth Direct Mortgage LLC, a corporation duly organized and existing under the laws of the Florida (herein called the “Company”), for value received, hereby promises to pay to the person identified as the “Holder” above (the “Holder”), principal and interest on this Note in U.S. dollars in an amount equal to the Holder’s equal and ratable share of the  Loan Net Payments on each Payment Date (in accordance with the payment schedule for this Note), which is available on  www.KDMinvestor.com and subject to prepayment) until the Maturity Date or such later date if Loan Payments are collected after a default on the Loan by the borrower. For the avoidance of doubt, (1) no payments of principal and interest on this Note shall be payable unless the Company has received  Loan Payments, and then only to the extent of  Loan Net Payments in respect of those  Loan Payments related to the Corresponding  Loan identified above that have been received by the Company, and (2) no Holder of the Note shall have any recourse against the Company unless, and then only to the extent that, the Company has failed to pay such Holder the  Loan Net Payments or otherwise breached a covenant in the Indenture described below that is applicable to the series of Notes of which this Note forms a part. Subject to certain exceptions provided in the Indenture referred to below, the principal and interest payable on any Payment Date will be paid to the person in whose name this Note is registered at the close of business on the Record Date next preceding such Payment Date or maturity date.

          “Record Date” shall mean the second Business Day immediately preceding each Interest Payment Date.

          “Business Day” shall mean each Monday, Tuesday, Wednesday, Thursday and Friday that is not a day on which the Automated Clearing House system operated by the U.S. Federal Reserve Bank (the “ACH System”) is closed and (2) not a day on which banking institutions are authorized or obligated by law or executive order to close in San Francisco, California or New York, New York.

8	Insert date corresponding to stated maturity of Corresponding  Loan plus four Business Days.
9	Insert date that is the first anniversary of the stated maturity of Corresponding  Loan plus four Business Days.

A-3

          If, on the  Maturity Date, any principal or interest payments in respect of the Corresponding  Loan remain due and payable to the Company, the maturity date of this Note will be extended to the date we receive final payment on the Corresponding Loan identified above.

          If, on the Maturity Date, no principal or interest payments in respect of the Corresponding Loan remain due and payable to the Company, the Note will mature on the Maturity Date and no Consumer Loan Net Payments that the Company receives in respect of the Corresponding Consumer Loan after such Initial Maturity Date shall be required to be paid to the Holder of the Note.

          All payments of principal and interest on this Note due to the Holder hereof shall be made in U.S. dollars, in immediately available funds, by intra-institution book entry transfer to the Holder’s designated sub-account in the trust account maintained by the Company at JP Morgan Chase, or such alternate account of the Holder designated by the Trustee in accordance with the Indenture.

     All U.S. dollar amounts used in or resulting from the calculation of amounts due in respect of this Note shall be rounded to the nearest cent (with one-half cent being rounded upward).

          This Note is one of a duly authorized series of special limited obligations of the Company (hereinafter called the “Notes”) all issued or to be issued under and pursuant to an Indenture dated as of [, 2017] (hereinafter called the “Indenture”), duly executed and delivered by the Company and JP Morgan Chase, as trustee (hereinafter called the “Trustee”), to which Indenture and all indentures supplemental thereto reference is hereby made for a description of the rights, duties and immunities thereunder of the Trustee and the rights thereunder of the holders of the Notes. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (the “TIA”), as in effect on the date of the Indenture. The Notes are subject to, and qualified by, all such terms, certain of which are summarized hereon, and Holders are referred to the Indenture and the TIA for a statement of such terms. As provided in the Indenture, the Notes may be issued in one or more separate series, which different series may be issued in various aggregate principal amounts, mature at different times, bear interest at different rates, be subject to different covenants and events of default, and otherwise vary as provided or permitted in the Indenture.

     If an Event of Default described in Section 5.1(3) or (4) of the Indenture occurs and is continuing, the unpaid stated principal amount hereof will become and be immediately due and payable in the manner, with the effect and subject to the conditions provided in the Indenture.

A-4

     The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than a majority in aggregate principal amount of each series of Notes affected thereby, at the time Outstanding, evidenced as provided in the Indenture, to execute supplemental indentures adding any provisions to or changing in any manner or eliminating any of the provisions of the Indenture or of any indenture supplemental thereto or

modifying in any manner the rights of the holders of this Note;provided,however, that no such supplemental indenture shall (1) change the Stated Maturity of the principal of, or any installment of principal or interest on, any Note, or reduce the principal amount thereof or the rate of interest thereon that would be due and payable upon a declaration of acceleration of maturity thereof or change the place of payment where, or change the coin or currency in which, any any installment of principal and interest on any such Note is payable or impair the right to institute suit for the enforcement of any such payment on or after the Stated Maturity thereof, (2) reduce the percentage in principal amount of the Outstanding Notes, the consent of whose Holders is required for any such amendment or supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of the Indenture or certain defaults thereunder and their consequences) with respect to the Notes, or (3) modify any of the provisions of Section 8.2, Section 5.4 (clauses (1) and (2)) or Section 5.7 of the Indenture, except to increase the percentage of Outstanding Notes required for such actions to provide that certain other provisions of the Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Note affected thereby. The Indenture also contains provisions permitting the holders of a majority in aggregate principal amount of the Notes of all affected series at the time outstanding, on behalf of the holders of all the Notes of such series, to waive, insofar as those series are concerned, compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent by the Holder of this Note (unless revoked as provided in the Indenture) shall be conclusive and binding upon such Holder and upon all future holders and owners of this Note and any Notes which may be issued upon the registration of transfer hereof or, irrespective of whether or not any notation thereof is made upon this Note or other such Notes.

     This Note is not entitled to any sinking fund. This Note is not redeemable at the option of the Holder.

     The Notes are in registered form without coupons in denominations of $1000 and integral multiples of $1000 in excess thereof. Upon due presentment for registration of transfer of this Note at the office or agency of the Company in Miami, Florida a new Note or Notes in authorized denominations in Dollars for an equal aggregate principal amount and like interest rate and maturity will be issued to the transferee in exchange therefor, subject to the limitations provided in the Indenture, without charge except for (1) any stamp tax or other governmental charge imposed in connection therewith.

     The Company, the Trustee, and any paying agent may deem and treat the registered Holder hereof as the absolute owner of this Note at the Holder’s address as it appears on the register books of the Company as kept by the Company or duly authorized agent of the Company (whether or not this Note shall be overdue), for the purpose of receiving payment of or on account hereof and for all other purposes, and neither the Company nor the Trustee nor any paying agent shall be affected by any notice to the contrary. All payments made to or upon the order of such registered Holder shall, to the extent of the sum or sums paid, effectively satisfy and discharge liability for moneys payable on this Note.

     No recourse under or upon any obligation, covenant or agreement contained in the Indenture or any indenture supplemental thereto or in any Note, or because of any indebtedness evidenced thereby, shall be had against any incorporator, or against any past, present or future shareholder, officer or director, as such, of the Company, either directly or through the Company, under any rule of law, statute or constitutional provision or by the enforcement of any assessment or penalty or otherwise, all such personal liability of every such incorporator, shareholder, officer and director, as such, being expressly waived and released by the acceptance hereof and as a condition of and as part of the consideration for the issuance of this Note.

A-5

     Unless otherwise defined herein, terms used herein which are defined in the Indenture shall have the respective meanings assigned thereto in the Indenture. To the extent that provisions contained in this Note are inconsistent with the provisions set forth in the Indenture, the provisions contained herein will apply.

     This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to any principle of conflict of laws that would require or permit the application of the laws of any other jurisdiction.

     This Note shall not be valid or become obligatory for any purpose until the Certificate of Authentication hereon shall have been signed by an authorized officer of the Company or its duly authorized agent under the Indenture referred to above.

     IN WITNESS WHEREOF, KORTH DIRECT MORTGAGE has caused this instrument to be signed by its duly authorized officers.

Dated:

KORTH DIRECT MORTGAGE LLC
By:
	Name:
	Title:

CERTIFICATE OF AUTHENTICATION

Dated:

This is one of the Notes of the series of Notes designated therein referred to in the within-mentioned Indenture.

KORTH DIRECT MORTGAGE LLC,

as Authenticating Agent

By:
	Name:
	Title:

A-6

EX-10

EXHIBIT 10

Form of Support Agreement

1

Exhibit 10

J. W. Korth & Company

Support Agreement

For

Korth Direct Mortgage LLC

(“KDM”)

In consideration for 100% of the Membership Interests in Korth Direct Mortgage LLC,  J. W. Korth & Company, hereby agrees to provide such moneys and staff support as it determines in its sole discretion necessary and reasonable to organize KDM, and allow KDM to pursue its Purpose as stated in its First Amended Operating Agreement. J W Korth & Company further agrees to seek reimbursement for the support provided only after such time as KDM shall maintain a liquid net worth of $1,000,000 for a period of 90 days.

Signed and Sealed the October 1, 2016

Korth Direct Mortgage LLC

_/s/ James W Korth______

James W. Korth, Chief Executive Officer

J. W. Korth & Company Limited Partnership

 /s/ James W Korth_______

James W. Korth

Managing Partner

2

EX-10.4

Exhibit 10.4

PREPARED BY 

AND UPON RECORDATION

RETURN TO:

KDM

2937 SW 27^th Avenue

Suite 307

Miami, Florida 33156

Attention:

KDM Loan Number: 

Tax Parcel Number: 

[property owning LLC], as grantor

(Borrower)

to

KORTH DIRECT MORTGAGE LLC, as grantee

(Lender)

ASSIGNMENT OF LEASES AND RENTS

(First Priority - [property address])

Dated: As of August 25, 2010

Location: [property address]

County:                                    

ASSIGNMENT OF LEASES AND RENTS

(First Priority - [property address])

This Assignment of Leases and Rents (First Priority - [property address]) (this “Assignment”) is made as of the       day of      , by [property owning LLC],                    , having its principal place of business at                                                  , as grantor (“Borrower”), to Korth Direct Mortgage LLC, 2937 SW 27^th Avenue, Suite 307 Miami, Florida 33133 (“Lender”).

RECITALS:

A. Borrower is the sole owner and holder of (a) the premises described in Exhibit A attached hereto and incorporated herein (“Property”) and (b) the landlord’s interest under the Leases, including, without limitation, the leases described in Exhibit B attached hereto and incorporated herein;

B. Lender has made a loan to Borrower in the principal sum of  Dollars ($) (“Loan”) evidenced by that certain Promissory Note ([property address]) (“Note”) dated as of the date of this Assignment and secured by that certain Deed of Trust and Security Agreement (First Priority - [property address]) (“Instrument”) dated as of the date of this Assignment (capitalized terms used without definition shall have the meanings ascribed to them in the Instrument) and the Documents; and

C. Lender was willing to make the Loan to Borrower only if Borrower assigned the Leases and Rents to Lender in the manner provided below to secure payment of the Obligations.

IN CONSIDERATION of the principal sum of the Note and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower agrees as follows:

1. Assignment. Borrower irrevocably, absolutely and unconditionally assigns, transfers, and sets over to Lender, its successors and assigns, all of the right, title, interest, and estate that Borrower may now or later have in, to and under (a) the Leases now or hereafter entered into; (b) the Rents; (c) all proceeds from the cancellation, surrender, sale or other disposition of the Leases, including, but not limited to, any Termination Fee (as defined in the Note); (d) the right to collect and receive all the Rents; and (e) the right to enforce and exercise, whether at law or in equity or by any other means, all terms and conditions of the Leases. This Assignment is intended by Borrower and Lender to constitute a present, absolute assignment and not a collateral assignment for additional security only. Upon full payment and satisfaction of the Obligations and written request by Borrower, Lender shall transfer, set over, and assign to Borrower all right, title, and interest of Lender in, to, and under the Leases and the Rents.

2. Borrower’s License. Until an Event of Default occurs, Borrower shall have a revocable license (“License”) from Lender to exercise all rights extended to the landlord under the Leases. Borrower shall hold the Rents, or an amount sufficient to discharge all current sums due on the Obligations, in trust for the payment of current sums due on the Obligations and, prior to the occurrence of an Event of Default, Borrower may use, distribute and enjoy all Rents remaining thereafter. Upon an Event of Default, whether or not legal proceedings have commenced and without regard to waste, adequacy of security for the Obligations or the solvency of Borrower, the License shall automatically terminate without notice by Lender (any such notice being expressly waived by Borrower). Upon such termination, Borrower shall deliver to Lender within seven (7) days after written notice from Lender (a) all Rents (including prepaid Rents) held or collected by Borrower from and after the date of the Event of Default, (b) all security or other deposits paid pursuant to the Leases, and (c) all previously paid charges for services, facilities or escalations to the extent allocable to any period after the Event of Default. Borrower agrees and stipulates that upon execution of this Assignment, Borrower’s only interest in the Leases or Rents is as a licensee revocable upon an Event of Default.

3. Lender as Creditor of Tenant. Upon the occurrence of an Event of Default, Lender, and not Borrower, shall be the creditor of any Tenant in respect of assignments for the benefit of creditors and bankruptcy, reorganization, insolvency, dissolution or receivership proceedings affecting any such Tenant; provided, however, that Borrower shall be the party obligated to make timely filings of claims in such proceedings or to otherwise pursue creditor’s rights therein. At any time after the occurrence of an Event of Default, Lender shall have the right, but not the obligation, to file such claims instead of Borrower and if Lender does file a claim, Borrower agrees that Lender (a) is entitled to all distributions on such claim to the exclusion of Borrower and (b) has the exclusive right to vote such claim and otherwise to participate in the administration of the estate in connection with such claim. At any time after the occurrence of an Event of Default, Lender shall have the option to apply any monies received by it as such creditor to the Obligations in the order set forth in the Documents. If a petition is filed under the Bankruptcy Code by or against Borrower, and Borrower, as landlord under any Lease, decides to reject such Lease pursuant to Section 365(a) of the Bankruptcy Code, then Borrower shall give Lender at least ten (10) days’ prior written notice of the date when Borrower shall apply to the bankruptcy court for authority to reject the Lease. Lender may, but shall not be obligated to, send Borrower within such ten-day period a written notice stating that (a) Lender demands that Borrower assume and assign the Lease to Lender pursuant to Section 365 of the Bankruptcy Code and (b) Lender covenants to cure or provide adequate assurance of future performance under the Lease. If Lender sends such notice, Borrower shall not reject the Lease provided Lender complies with clause (b) of the preceding sentence.

4. Notice to Tenant of an Event of Default. Upon the occurrence of an Event of Default and written demand sent by Lender to any of the Tenants (in each case, a “Rent Direction Letter”), Borrower hereby irrevocably authorizes each Tenant to (a) pay all Rents to Lender and (b) rely upon any such Rent Direction Letter from Lender without any obligation to inquire as to the actual existence of the Event of Default, notwithstanding any claim of Borrower to the contrary. Borrower shall have no claim against any Tenant for any Rents paid by Tenant to Lender pursuant to any Rent Direction Letter.

5. Indemnification of Lender. Borrower hereby agrees to indemnify and hold Lender harmless from any and all Losses that Lender may incur under the Leases or by reason of this Assignment, except for Losses incurred as a direct result of Lender’s willful misconduct or gross negligence. Nothing in this Assignment shall be construed to bind Lender to the performance of any of the terms of the Leases or to otherwise impose any liability on Lender including, without limitation, any liability under covenants of quiet enjoyment in the Leases in the event that any Tenant shall have been joined as party defendant in any action to foreclose the Instrument and shall have been barred thereby of all right, title, interest, and equity of redemption in the premises. This Assignment imposes no liability upon Lender for the operation and maintenance of the Property or for carrying out the terms of any Lease before Lender has entered and taken actual possession and complete control of all operations of the Property. Any Losses incurred by Lender, by reason of actual entry and taking possession under any Lease or this Assignment or in the defense of any claims shall, at Lender’s request, be reimbursed by Borrower. Such reimbursement shall include interest at the Default Rate from the date of demand by Lender and any and all Costs incurred by Lender. Lender may, upon entry and taking of possession, collect the Rents and apply them to reimbursement for any such items.

6. Representations and Warranties. Borrower represents and warrants that (a) Borrower is the absolute owner of the landlord’s interest in the Leases, (b) Borrower has the right, power and authority to assign, transfer, and set over all of its right, title and interest in, to and under the Leases and Rents and no other person has any right, title or interest therein, (c) to Borrower’s actual knowledge, the Leases are valid and in full force and effect and have not been modified, amended or terminated, nor have any of the terms and conditions of the Leases been waived, except as expressly stated in the Leases, (d) to Borrower’s actual knowledge, there are no outstanding assignments or pledges of the Leases or Rents, (e) there are no outstanding leasing commissions due under the Leases for the initial term or for any extensions, renewals or expansions, (f) to Borrower’s actual knowledge, except as disclosed to Lender in writing, there are no existing material defaults or any state of facts which, with the giving of notice and/or passage of time, would constitute a material default under the Leases by any party thereto, (g) to Borrower’s actual knowledge, no Tenant has any defense, set-off or counterclaim against Borrower, (h) to Borrower’s actual knowledge, each Tenant is in possession of its leased premises and paying Rent and other charges as provided in its Lease, except as otherwise indicated on the Rent Roll (defined below), (i) no Rents have been or will later be anticipated, discounted, released, waived, compromised or otherwise discharged, except as may be expressly permitted by the Lease or herein, (j) except as specified in the Leases and shown on the rent roll delivered to Lender in connection with the funding of the Loan (the “Rent Roll”), there are no (i) unextinguished rent concessions, abatements or other inducements relating to the Leases, (ii) options or other rights to acquire any interest in the Property in favor of any Tenant, or (iii) options or other rights (whether in the form of expansion rights, purchase rights, rights of first refusal to lease or purchase, or otherwise) relating to property which is not part of the Property and/or would require Borrower and/or Lender to possess or control any property (other than the Property) to honor such rights, and (k) to Borrower’s actual knowledge, the Rent Roll discloses all currently existing Leases and is true, complete and accurate in all material respects.

7. Leasing Restrictions.

Borrower shall lease the Property at market rents and on market terms (based on the type, quality and location of the Property) using Borrower’s standard lease form that has been approved by Lender, and Borrower’s standard lease form shall prohibit any Tenant from using or storing any dry cleaning solvents on the Property. All Leases shall be bona fide, binding contracts, duly authorized and executed with third party tenants unrelated to Borrower, any guarantor or indemnitor of the Loan or any of their affiliates. All free rent and similar concessions shall be given only at the beginning of the term of the Lease, the Tenant’s share of operating expenses shall not decrease over the term of the applicable Lease, and there shall be no economic obligations on the landlord under a Lease beyond maintaining the Property.

8. Covenants. Borrower shall not, except with the prior written consent of Lender in each instance, (a) sell, assign, pledge, mortgage or otherwise transfer or encumber (except hereby) any of the Leases, Rents or any right, title or interest of Borrower therein; (b) accept prepayments of any Rents for a period of more than one (1) month in advance of the due dates thereof except with respect to Rents in an amount not to exceed five percent (5%) of the annual gross revenue of the Property; (c) in any manner intentionally or materially impair the value of the Property or the benefits to Lender of this Assignment; (d) except in connection with Borrower’s normal and customary business practices in the exercise of Borrower’s prudent business judgment for the benefit of the Property, waive, excuse, condone, discount, set off, compromise, or in any manner release or discharge any Tenant from any of its obligations under the Leases; (e) except in connection with Borrower’s normal and customary business practices in the exercise of Borrower’s prudent business judgment for the benefit of the Property, enter into any settlement of any action or proceeding arising under, or in any manner connected with, the Leases or with the obligations of the landlord or the Tenants thereunder; (f) except in connection with Borrower’s normal and customary business practices in the exercise of Borrower’s prudent business judgment for the benefit of the Property, modify, cancel or terminate any guaranties under any Lease; or (g) lease any portion of the Property to a dry cleaner that uses dry cleaning solvents on the Property. Borrower shall, at its sole cost and expense, duly and timely keep, observe, perform, comply with and discharge all of the material obligations of the landlord under the Leases, or cause the foregoing to be done, and Borrower shall not take any actions that would, either presently or with the passage of time, cause a default by Borrower under any of the Leases. At Borrower’s expense, Borrower shall (a) [intentionally omitted], (b) enforce the Leases and all remedies available to Borrower upon any Tenant’s default, (c) upon Lender’s request, deliver to Lender copies of all papers served in connection with any such enforcement proceedings, and (d) upon Lender’s request, consult with Lender, its agents and attorneys with respect to the conduct thereof. Borrower shall not enter into any settlement of any such proceeding without Lender’s prior written consent.

9. No Merger. Each Lease shall remain in full force and effect, notwithstanding any merger of Borrower’s and Tenant’s interest thereunder.

10. Documents Incorporated. The terms and conditions of the Documents are incorporated into this Assignment as if fully set forth in this Assignment.

11.  Governing Law. This Assignment shall be governed by and construed in accordance with the laws of .

12. WAIVER OF TRIAL BY JURY. EACH OF BORROWER AND LENDER HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, THE RIGHT TO TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM FILED BY EITHER PARTY, WHETHER IN CONTRACT, TORT OR OTHERWISE, RELATING DIRECTLY OR INDIRECTLY TO THE LOAN, THE DOCUMENTS, OR ANY ALLEGED ACTS OR OMISSIONS OF LENDER OR BORROWER IN CONNECTION THEREWITH.

13. Tenant Recovery. Borrower covenants and agrees that it shall pay the amount of any Tenant Recovery (as defined below) to Lender to be disbursed by Lender for the payment of Lender approved out-of-pocket (1) tenant improvement costs and/or (2) market leasing commissions; provided, however, any such amount held by Lender shall be released to Borrower upon written request at such time as a replacement tenant (x) has executed a bona-fide, binding Lease on market terms and conditions for the entire leased premises that was vacated in connection with such Lease termination, cancellation or expiration, (y) is in actual occupancy of the leased premises that was vacated in connection with such Lease termination, cancellation or expiration and (z) is paying non-discounted monthly rent under its Lease; provided further, however, that if an Event of Default occurs under the Documents, Lender, at its option and in its sole discretion, shall have the right to apply all such remaining undisbursed amounts to the Obligations in such order as Lender in its sole discretion shall determine. Tenant Recovery means, with respect to any Lease that provides more than five percent (5%) of the gross annual income from the Property during any twelve month period during the term of the Loan, the amount of any Recovery (as defined in the Note) if such Recovery is greater than one (1) month’s base rent payable under the applicable Lease, which is received by, or, on behalf of, any of the Recourse Parties at any time during the term of the Loan.

IN WITNESS WHEREOF, Borrower has duly executed this Assignment the date first above written.

BORROWER:
[property owning LLC], a       limited liability company
By:
By:	/s/

        )

COUNTY OF         )

I, , a notary public in and for the state and county aforesaid do certify that _____________________________, whose name is signed to the writing above, being the ______________ of Korth Direct Mortgage, LLC, a Florida limited liability company, as manager of ______________________ a limited liability company, bearing date on the 25^th day of August, 2010, have acknowledged the same before me in my county aforesaid.

Notary Public

Name:  

My Commission Expires: 

Notary Registration No. 

[NOTARY SEAL]