SECURED PROMISSORY NOTE
(Pine Trace Village – Lot / Land Loan)

U.S. $5,250,000.00                                                                                                                                March
29, 2010

FOR VALUE RECEIVED, PINE TRACE VILLAGE, LLC, a Texas limited liability company
(the “Borrower”), hereby makes and issues this Secured Promissory Note (this
“Note”) and promise to pay to the order of UNITED DEVELOPMENT FUNDING IV, a real
estate investment trust organized under the laws of the state of Maryland
(together with its successors and assigns, “Lender”), the principal sum of U.S.
FIVE MILLION TWO HUNDRED FIFTY THOUSAND AND NO/100 DOLLARS ($5,250,000.00) or,
if greater or less, the aggregate amount of all funds advanced to Borrower under
this Note, together with accrued, unpaid interest thereon, and all other amounts
due to Lender hereunder.  This Note is subject to the foregoing and the
following terms:

1.           Certain Definitions.  Certain terms which are defined in the text
of this Note shall have the respective meanings given to such terms herein, and
the following terms shall have the following meanings:

“Accrued Interest Payments” means monthly interest payments equal to the amount
of accrued interest on the outstanding principal balance of this Note,
calculated at the applicable rate of interest provided herein, and payable as
provided herein.

“Advance” shall mean an advance by Lender under this Note including, without
limitation, an Interest Reserve Advance, a Commitment Advance, or a
Discretionary Advance.

“Advance Conditions” has the meaning set forth in Section 7 of this Note.

“Advance Request” shall mean Lender’s standard form of Advance Request in the
form attached hereto as Exhibit “E”, which includes means a certificate executed
by the Principal Officer certifying that (i) no Event of Default has occurred
and is continuing under this Note, (ii) all representations and warranties made
by Borrower in this Note and the other Loan Documents are true and correct in
all respects, and (iii) Borrower has complied with and performed, in all
respects, all covenants, conditions and agreements which are then required by
this Note and the other Loan Documents to have been complied with or performed.

“Affiliate” shall mean an individual or legal entity that directly or
indirectly, through one or more intermediaries, controls or is controlled by, or
is under common control with, another Person.  The term “Control” as utilized
herein means the possession, directly or indirectly, of the power to direct or
cause direction of the management and policies of a Person, whether through
management, ownership, by contract, or otherwise; provided, however, in no event
shall any Lender be deemed an Affiliate of Borrower.

“Approved Budget” means a budget approved by Lender for the management and
development of the Property reflecting all related costs and expenses, a copy of
which is attached hereto as Exhibit “C” and incorporated by reference.

“Approved Builder” means Meritage, and each other residential homebuilder
acquiring Lots from Borrower for the purpose of constructing single family
residences thereon which is approved by Lender, such approval not to be
unreasonably withheld, conditioned or delayed.

 
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“Assignment and Subordination Agreements” means, collectively, (i) that certain
Assignment and Subordination of Lot Sale and Purchase Contract with respect to
the Meritage Lot Sale Contract, executed by Borrower in favor of Lender, and
(ii) each other Assignment and Subordination of Lot Sale and Purchase Contract
executed by Borrower in favor of Lender with respect to any Lot Sale Contract
entered into after the Effective Date, as each may be amended, modified,
renewed, superseded, or replaced from time to time. .

“Assignment of Contract Rights” means each Assignment of Contract Rights
executed by Borrower in favor of Lender, assigning Lender all of the rights of
Borrower under the Reimbursement Contracts.

“Assignment of Distributions” means, collectively, those certain assignments of
the distributions of Borrower being executed and delivered by the Pledgor to
Lender in further security for the Loan, pursuant to the requirements of this
Note and the Pledge Agreement.

“Base Rate” means the lesser of (i) thirteen percent (13%) per annum, accrued
monthly and compounded annually, or (ii) the Highest Lawful Rate.

“Borrower” means Pine Trace Village, LLC, a Texas limited liability company.

“Borrower-Related Party” means, collectively, the Pledgor, the Guarantor, and
any other Person who becomes a Guarantor or a Pledgor after the Effective Date.

“Business Day” means any day other than a Saturday, Sunday, or other day on
which Lender is closed for business.

“Closing” means the execution and delivery of the Loan Documents by Lender,
Borrower and the Borrower-Related Parties.

“Closing Deliveries” has the meaning given to such term in Section 6.

“Closing Expense Advance” means an advance of the Commitment by Lender for the
benefit of Borrower in the aggregate amount of up to $325,000.00, which shall
fund the following costs and expenses:  the Origination Fee in the amount of
$52,500.00, property taxes due and owing for 2009 in the approximate amount of
$201,800.00, mortgagee title policy in the approximate amount of $25,000, and
endorsement costs, recording fees, and other closing expenses shown on the
settlement statement (all of which are subject to the prior approval of Lender),
plus outstanding Loan Expenses.

“Collateral” means, collectively, all property, assets and rights in which a
Lien, in favor of Lender is or has been granted or arises or has arisen or may
hereafter be granted or arise, under or in connection with any Loan Document or
otherwise, to secure payment or performance of all or any part of the
Debt.  Without limitation of the foregoing, the term “Collateral” includes,
without limitation, (i) all “Pledged Collateral” as such term is defined and
used in the Pledge Agreement, (ii) all “Mortgaged Property” as such term is
defined and used in the Deed of Trust, (iii) each Lot Sale Contract, (iv) all
Earnest Money, if any and (v) each Reimbursement Contract.

“Commitment” means the maximum dollar amount that Lender has committed to fund
under this Note, excluding Interest Reserve Advances, in the aggregate dollar
amount of up to U.S. Four Million Eight Hundred Thousand and No/100 Dollars
($4,800,000.00), which amount includes (and is not in addition to) the Initial
Commitment Advance and the Closing Expense Advance.

 
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“Commitment Advance” means any full or partial advance of the Commitment
pursuant to the terms hereof including, without limitation, the Initial Advance,
future Advances of Commitment, and the Closing Expense Advance.

“Company Certificate” means a certificate certifying the existence, good
standing, formation and organizational documents, and authorizing resolutions,
of a Person that is an entity.

“Construction Contracts” has the meaning assigned to such term in Section 10
hereof.

“Debt” means all Indebtedness (principal, interest or other) evidenced by this
Note and all Indebtedness (principal, interest or other) owing to Lender
incurred under or evidenced by the other Loan Documents.  The Debt includes
interest and other obligations accruing or arising after (i) commencement of any
case under any bankruptcy or similar laws by or against Borrower or any
Borrower-Related Party or (ii) the obligations of Borrower or Borrower-Related
Party shall cease to exist by operation of law or for any other reason.  The
Debt also includes all reasonable attorneys’ fees and any other reasonable
expenses incurred by Lender in enforcing any of the Loan Documents.

“Deed of Trust” shall mean, collectively, (i) that certain Deed of Trust,
Assignment of Leases and Rents, Security Agreement, and Fixture Filing recorded
or to be recorded in the real property records of Harris County, Texas at the
Closing of the Loan, naming Borrower as the grantor and Lender as the
beneficiary thereunder, granting Lender a security interest in and a Lien on the
Large Tract to secure the payment and performance of Borrower’s obligations
under this Note and the other Loan Documents, subject only to Permitted
Exceptions and being superior in priority over all Liens, as it may be amended,
modified, renewed, extended, supplemented, or replaced from time to time (the
“Large Tract Deed of Trust”), and (ii) that certain Deed of Trust, Assignment of
Leases and Rents, Security Agreement, and Fixture Filing recorded or to be
recorded in the real property records of Harris County, Texas within sixty (60)
days following the Closing of the Loan, naming Borrower as the grantor and
Lender as the beneficiary thereunder, granting Lender a security interest in and
a Lien on the Small Tract to secure the payment and performance of Borrower’s
obligations under this Note and the other Loan Documents, subject only to
Permitted Exceptions and being superior in priority over all Liens, as it may be
amended, modified, renewed, extended, supplemented, or replaced from time to
time (the “Small Tract Deed of Trust”).

“Default Rate” means the lesser of (i) eighteen percent (18.0%), accrued monthly
and compounded annually, or (ii) the Highest Lawful Rate.

“Discretionary Advance” has the meaning given to such term in Section 3(c).

“Disposition” means any sale, lease, transfer, assignment, exchange or
conveyance in whole or in part.

“Distribution” means all proceeds, products, cash, securities, dividends,
increases, distributions and profits received from or on the Pledged Securities
or the Pledged Collateral or distributable to Pledgors, including, without
limitation, distributions or payments in partial or complete liquidation or
redemption, or as a result of reclassifications, readjustments, reorganizations
or changes in the capital structure of the Pledged Securities.

 
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“District” means Harris County Municipal Utility District No. 480, a political
subdivision of the State of Texas, organized pursuant to the provisions of
Article XVI, Section 59 of the Texas Constitution and Chapters 49 and 54 of the
Texas Water Code, as amended.

“District Consent” means a written consent and agreement executed by the
District for the benefit of Lender, which, among other things, provides that the
District grants its consent to Lender’s Lien on and security interest in the
Reimbursement Contracts, and the Assignment of Contract Rights.

“Earnest Money” means any form of earnest money supporting a Lot Sale Contract
including, without limitation, cash on deposit with a title company or released
to Borrower, and letters of credit.

“Earnest Money Assignment” means, for each Lot Sale Contract supported by
Earnest Money an Assignment of Earnest Money Proceeds executed by Borrower in
favor of Lender, providing for a Lien and security interest on the Earnest Money
supporting such Lot Sale Contract, in the form approved by Lender in its sole
discretion, if any.

“Effective Date” means March 29, 2010.

“Environmental Indemnity Agreement” shall mean that certain Environmental
Indemnity Agreement to be executed by Borrower and the Guarantor in favor of
Lender, pursuant to which Borrower and the Guarantor agree to indemnify Lender
from environmental liabilities associated with the Property, as it may be
amended, modified, renewed, extended, increased, superseded, or replaced from
time to time.

“Errors Agreement” means that certain errors and omissions agreement executed by
Borrower and the Borrower-Related Parties in favor of Lender dated as of the
Effective Date.

“Event of Default” has the meaning given to such term in Section 11(a).

“Financial Statement Certifications” means those certain certifications of
Borrower and the Borrower-Related Parties attesting to the accuracy and
completeness of the financial statements in the form approved by Lender in its
sole discretion.

“Finished Lot” means a fully developed finished single-family residential lot
owned by Borrower which is deemed by Lender to be a “finished” single-family
residential lot and has been accepted by each of the city in which such Lot is
located, and each municipal district, municipality, water district, municipal
utility district, public improvement district or other Governmental Authority
for the subdivision of Pine Trace Village, Harris County, Texas.

“Funding Conditions” means, collectively, Borrower’s and the Borrower-Related
Parties’ strict compliance with each of the requirements of the Closing
Deliveries in Section 6 and each of the Advance Conditions in Section 7, as
determined by Lender in its sole discretion.

“Good Accounting Practice” shall mean such accounting practice as, in the
opinion of independent certified public accountants satisfactory to Lender,
conforms at the time to generally accepted accounting principles or, with the
express prior written consent of Lender in any applicable case, cash basis of
accounting or the federal income tax basis of accounting, consistently
applied.  Each accounting term not defined in this Note shall have the meaning
given to it under Good Accounting Practice.

 
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“Governmental Authority” shall mean the United States, the State of Texas, the
County where the Property, in whole or in part, is located, the City, if any,
where the Property, in whole or in part, is located, the District where the
Property, in whole or in part, is located, the Texas Commission for
Environmental Quality, the Texas Water Development Board, the Texas Water
Quality Board, the Department of Housing and Urban Development, the
Environmental Protection Agency, any political subdivision of any of the
foregoing and any agency, department, commission, board, bureau, court or
instrumentality of any of them which now or hereafter has jurisdiction over
Lender, Borrower, any Borrower-Related Party, or any part of the Property.

“Guarantor” means CTMGT Houston, LLC, a Texas limited liability company, and
each other Person who executes a Guaranty Agreement as a Guarantor thereunder.

“Guaranty Agreement” means each Guaranty Agreement dated as of the Effective
Date or thereafter executed by a Guarantor in favor of Lender, as it may be
amended, modified, renewed, superseded, replaced or joined from time to time.

“Highest Lawful Rate” means the maximum lawful rate of interest which may be
contracted for, charged, taken, received or reserved by Lender in accordance
with the applicable laws of the State of Texas (or applicable United States
federal law, to the extent that it permits Lender to contract or charge, take,
receive or reserve a greater amount of interest than under Texas law), taking
into account all fees and expenses contracted for, charged, received, taken or
reserved by Lender in connection with the transaction relating to this Note and
the Debt evidenced hereby or by the other Loan Documents which are treated as
interest under applicable law.

“Indebtedness” shall mean and include (a) all items which in accordance with
Good Accounting Practice would be included on the liability side of a balance
sheet on the date as of which indebtedness is to be determined (excluding
capital stock, surplus, surplus reserves and deferred credits), (b) guaranties,
endorsements and other contingent obligations in respect of indebtedness of
others, or any obligations to purchase or otherwise acquire any such
indebtedness of others, and (c) indebtedness secured by any mortgage, pledge,
security interest or lien existing on property owned subject to or burdened by
such mortgage, pledge, security interest or lien whether or not the indebtedness
secured thereby shall have been assumed.

“Initial Commitment Advance” means the aggregate dollar amount of up to U.S.
Three Million and No/100 Dollars ($3,000,000.00), to be advanced to or for the
benefit of Borrower at the Closing.

“Interest Reserve” means a fixed interest reserve in an amount of up to U.S.
Four Hundred Fifty Thousand and No/100 Dollars ($450,000.00) that may be
advanced by Lender hereunder on the last day of each month for interest accrued
during that month on the outstanding principal balance of this Note (subject to
the provisions of Sections 4(b) and 4(c)) and applied against Accrued Interest
Payments on this Note.

 
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“Interest Reserve Advance” means an advance of Interest Reserve by Lender
hereunder applied against Accrued Interest Payments on this Note, subject to the
terms and conditions of Sections 4(b) and 4(c).

“Land Development” means UMTH Land Development, L.P., a Delaware limited
partnership.

“Large Tract” means the Lots located in Pine Trace Village, a subdivision
located in the Jesse Pruitt Survey, A-629, Harris County, Texas and the
Undeveloped Land, all of which is more particularly described on Exhibit “A”
attached hereto and incorporated herein by reference.

 “Lease” has the meaning given to such term in Section 9(v).

“Lender” means United Development Funding IV, a real estate investment trust
organized under the laws of the state of Maryland, and its successors and
assigns.

“Lender Representatives” has the meaning given to such term in Section 9(m).

“Liabilities and Costs” has the meaning given to such term in Section 13.

“Lien” means any lien, security interest, charge, tax lien, pledge, encumbrance,
collateral assignment, conditional sales or other title retention arrangement or
any other interest in property designed to secure the repayment of Indebtedness
or the satisfaction of any other obligation, whether arising by agreement or
under any statute or law, or otherwise.

“Loan” means the full amount of loan made to Borrower pursuant to this Note
including all principal advanced and accrued interest thereon and all other
amounts owing to Lender under the Loan Documents.

“Loan Documents” means, collectively, together with all exhibits and schedules
thereto: this Note, the Deed of Trust, the Environmental Indemnity Agreement,
the Advance Requests, the Guaranty Agreement, the Financial Statement
Certifications, the Errors Agreement, the IRS tax disclosure forms, the Company
Certificates, the Assignment and Subordination Agreements, the Lot Purchaser
Consents, the Origination Fee Letter, the Earnest Money Assignments (if any),
the Assignment of Contract Rights, the Pledge Agreement, the Pledge Assignment,
the Subordination Agreement, the District Consent and all other documents,
instruments, agreements, assignments and certificates relating thereto,
including, without limitation, any and all loan or credit agreements, promissory
notes, deeds of trust, mortgages, pledge agreements, financing statements,
security agreements, assignments of rents, assignments of leases, assignments of
contracts, environmental indemnities, guaranties, contractor’s consent
agreements, lender’s title insurance policies, opinions of counsel, evidences of
authorization or incumbency, escrow instructions, and architect’s and/or
engineer’s consent agreements, letters of credit, each of which is to be
executed (and acknowledged where applicable) by the Borrower and/or Lender (as
and where applicable) in connection with Lender making the Loan to Borrower, as
the same may be amended, modified, renewed, supplemented or replaced from time
to time.

“Loan Expenses” has the meaning given to such term in Section 2(a).

 
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“Lot” shall mean each of the one hundred twenty-one (121) Finished Lots that are
a part of the Mortgaged Property, as referenced on Exhibit “A” attached hereto
and incorporated by reference.

“Lot Purchaser” means (i) an Approved Builder or (ii) any other Person acquiring
Lots from Borrower, subject to approval by Lender in its sole discretion.

“Lot Purchaser Consents” means, collectively, (i) that certain Consent to
Assignment, Subordination and Estoppel Certificate and Agreement executed by
Meritage for the benefit of Lender, and (ii) each other Consent to Assignment,
Subordination and Estoppel Certificate and Agreement executed by a Lot Purchaser
in favor of Lender with respect to any Lot Sale Contract entered into after the
Effective Date, as each may be amended, modified, renewed, superseded, or
replaced from time to time.

“Lot Sale Contract” means, collectively, each contract or agreement entered into
by and between Borrower and a Lot Purchaser relating to the acquisition from
Borrower of Lots, including, without limitation, (i) the Meritage Lot Sale
Contract, and (ii) each other contract or agreement between Borrower, as the
seller thereunder, and a Lot Purchaser, as the buyer thereunder, providing for
the acquisition of Lot(s), in each case, as it may be amended, modified,
renewed, superseded, or replaced from time to time. .

“Maturity Date” means March 29, 2012.

“Member Loans” means, collectively, loans from partners, members or managers or
affiliates of Borrower made in accordance with the terms of the Organizational
Agreement of Borrower, which are subordinate both in payment and priority of
Liens to the Loan and the Loan Documents pursuant to a subordination agreement
binding upon such Person.

“Meritage” means Meritage Homes of Texas, LLC, an Arizona limited liability
company and its assigns.

“Meritage Lot Sale Contract” means that certain Purchase and Sale Agreement and
Joint Escrow Instructions dated December [undated], 2009 between 170 Dowdell,
Ltd., a Texas limited partnership (“Original Seller”), as the seller thereunder,
and Meritage or its assigns as the buyer thereunder, as assigned by Original
Seller to Borrower pursuant to that certain Assignment of Purchase and Sale
Agreement and Joint Escrow Instructions dated effective as of March 2, 2010, as
so assigned, and as it may be further assigned, amended, modified, renewed,
superseded, or replaced from time to time.

“Mortgaged Property” has the meaning given to such term in the Deed of
Trust.  The Mortgaged Property includes the Lots and the Undeveloped Land.

“Note” means this Secured Promissory Note as defined in the introductory
paragraph hereof, together with all exhibits and schedules hereto, as it may be
amended, modified, renewed, extended, increased, supplemented or replaced from
time to time.

“Organizational Agreement” shall mean (a) in respect of a corporation, the
Articles of Incorporation certified to a current date by the Secretary of State
in which such corporation is incorporated and the Bylaws of a corporation
certified to a current date as true and correct by the secretary or assistant
secretary of a corporation; (b) in respect of a general partnership, a
partnership agreement; (c) in respect of a joint venture, a joint venture
agreement; (d) in respect of a limited partnership, a partnership agreement and
the certificate of limited partnership certified to a current date by an
appropriate Governmental Authority of the state in which the limited partnership
is organized; (e) in respect of a trust, a trust agreement; and (f) in respect
of a limited liability company, the certificate of organization certified to a
current date by the Secretary of State in which such limited liability company
is organized and the regulations of a limited liability company certified to a
current date as true and correct by the manager of a limited liability company;
and any and all future modifications thereof which are consented to by Lender.

 
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“Origination Fee” shall mean a fee payable to Lender, charged in consideration
of the origination of the Loan and payable as provided in the Origination Fee
Letter.

“Origination Fee Letter” shall mean that certain letter agreement between
Borrower and Lender, pursuant to which Borrower agrees to pay Land Development
the Origination Fee as provided in the Origination Fee Letter.

“Partial Release Price” shall mean, for each closing of a Lot or Lots under a
Lot Sale Contract and Borrower’s request for Lender’s release of its Lien
against such Lot or Lots, the sales price for such Lot set forth in such Lot
Sale Contract, less the following reductions:  (x) any credit to the Purchase
Price resulting from the application of Earnest Money, if any, to the Purchase
Price pursuant to the applicable Lot Sale Contract, and (y) any other closing
expense shown on the settlement statement that is approved by Lender’s prior
written consent to be deducted from the release price that would otherwise be
due to Lender.

“Permitted Exceptions” has the meaning given to such term in the Deed of Trust.

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

“Pledge Agreement” means that certain Pledge Agreement executed by the Pledgor
in favor of Lender dated as of the Effective Date or thereafter, pursuant to
which the Pledgor pledges and grants a security interest in, and a Lien on, the
Pledged Collateral to Lender to secure the Loan, as it may be amended, modified,
renewed, superseded, replaced or joined from time to time.

“Pledge Assignment” means that certain assignment of limited liability company
interests relating to the pledge of such limited liability company interests of
Borrower being executed and delivered to Lender by the Pledgor pursuant to the
requirements of the Pledge Agreement, as it may be amended, modified, renewed,
extended, superseded, replaced or joined from time to time.

“Pledged Collateral” has the meaning given to such term in the Pledge Agreement.

“Pledged Securities” has the meaning given to such term in the Pledge Agreement.

“Pledgor” means CTMGT Houston, LLC, a Texas limited liability company, and each
other Person who executes the Pledge Agreement as a Pledgor thereunder.

“Principal Officer” means Mehrdad Moayedi.

 
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“Pro Forma” means Borrower’s schedule for the sale of the Lots and the projected
proceeds from the sale of the Lots prepared by Borrower in good faith and in
accordance with industry standards, a copy of which is attached hereto as
Exhibit “D” and incorporated by reference.

“Property” means, collectively, the Large Tract and the Small Tract.

“Released Party” has the meaning given to such term in Section 8(q).

“Reimbursement Contract” means, collectively, (i) that certain agreement entered
into between 170 Dowdell, Ltd. and the District for the construction of certain
water, sewer and drainage improvements on the Mortgaged Property, (ii) that
certain Agreement for Financing Operation Expenses dated February 21, 2008 in
favor of 170 Dowdell, Ltd.,  the District and Arete Real Estate and Development
Company,  (iii) that certain Financing Agreement for Creation and Organizational
Costs dated as of April 12, 2007 in favor of 170 Dowdell, Ltd., the District and
Arete Real Estate and Development Company, (iv) that certain Agreement dated on
or about January 12, 2010 executed by 170 Dowdell, Ltd., and the District
regarding the re-construction of two separate left turn lanes as one continuous
left turn lane on Stuebner Airline Road between F.M. 2920 and Hufsmith
Kuykendahl Road at existing entrances to Pine Trace subdivision, (v) any
assignments, amendments, restatements, supplements, or replacements of the
foregoing agreements referenced in clauses (i) through (iv) above, whether with
Borrower or any other Person, and (vi) any other contract or agreement with any
city, county, water district, municipal utility district, public improvement
district, or other Governmental Authority providing for the sharing, payment
and/or reimbursement of the costs of planning, development and/or construction
with respect to the Mortgaged Property such as, but not limited to, a municipal
utility district or public improvement district reimbursement agreement.

“Revenue Event” means income, revenue, reimbursements, proceeds or other payment
of any kind or nature under or pursuant to, or in connection with, any
Reimbursement Contract.

“Small Tract” means that certain tract of land consisting of 19.842 acres,
located in the James Coulter Survey, Abstract 214, Harris County, Texas, which
is more particularly described on Exhibit “B” attached hereto and incorporated
herein by reference.

"Subordination Agreement” shall mean that certain Subordination Agreement among
Lender, UDF, and Borrower dated as of the Effective Date, pursuant to which UDF
shall subordinate its deed of trust Lien on the Property to Lender.

“Title Policy” shall mean one or more policies of mortgagee title insurance and
all endorsements thereto requested by Lender, issued in favor of Lender and
naming Lender and its assigns as insured mortgagee by a title company acceptable
to Lender and insuring that title to the Property covered by the Deed of Trust
is vested in Borrower, free and clear of any Lien, objection, exception or
requirement other than the Permitted Exceptions, and that Lender has a first and
prior Lien against the Property, in such amount and containing such endorsements
as Lender may require.

“UDF” means United Development Funding, L.P., a Delaware limited partnership.

“UDF III” means United Development Funding III, LP, a Delaware limited
partnership.

 
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“UDF Loans” means, collectively, loans from UDF, UDF III, Lender, or any of
their Affiliates.

“Undeveloped Land” means all of the Mortgaged Property described on Exhibit “A”
attached hereto and incorporated by reference, other than the Lots.

2.           Loan Expenses; Fees.

(a)           To the extent not prohibited by applicable law, Borrower will pay
all reasonable costs and expenses and reimburse Lender for any and all
expenditures of every character incurred or expended from time to time,
regardless of whether an Event of Default shall have occurred, in connection
with any of the following (collectively, “Loan Expenses”):
 
(i)           the preparation, negotiation, documentation, closing, renewal,
revision, modification, increase, administrating, monitoring, review or
restructuring of any loan or credit facility represented by or secured by the
Loan Documents, including legal, accounting, auditing, architectural,
engineering, due diligence, title company, and inspection services and
disbursements, or in connection with collecting or attempting to enforce or
collect pursuant to any Loan Document;
 
(ii)           Lender’s evaluating, monitoring, administering and protecting the
Mortgaged Property, or any other Collateral or employing others to do so or to
perform due diligence for Lender with respect thereto; and
 
(iii)           Lender’s creating, perfecting and realizing upon Lender’s
security interest in, and the Liens on, the Mortgaged Property, or any other
Collateral, and all costs and expenses relating to Lender’s exercising any of
its rights and remedies under any Loan Document or at law, including all
appraisal fees, consulting fees, filing fees, taxes, brokerage fees and
commissions, title review and abstract fees, litigation report fees, UCC search
fees, other fees and expenses incident to title searches, reports and security
interests, investigations, escrow fees, attorneys’ fees, legal expenses, court
costs, other fees and expenses incurred in connection with any complete or
partial liquidation of the Mortgaged Property, or any other Collateral, and all
fees and expenses for any professional services or any operations conducted in
connection therewith.  Notwithstanding the foregoing, no right or option granted
by Borrower to Lender or otherwise arising pursuant to any provision of any Loan
Document shall be deemed to impose or admit a duty on Lender to supervise,
monitor or control any aspect of the character or condition of the Mortgaged
Property, or any other Collateral or any operations conducted in connection with
it for the benefit of Borrower or any other Person other than Lender.
 
(b)           Origination Fee.  Borrower agrees to pay Land Development an
Origination Fee in the amount of $52,500.00, as further provided in the
Origination Fee Letter.  Borrower has requested, and Lender has agreed, to fund
the Origination Fee from the Closing Expense Advance proceeds.

(c)           Usury Savings Clause Applies.  Borrower agrees that Lender has
provided, and shall provide, separate and distinct consideration for the
Origination Fee and the fees and expenses described in Section 2(a) above and
elsewhere in the Loan Documents and that the Origination Fee and such fees and
expenses represent bona fide fees and expenses incurred by Borrower or
Lender.  Borrower further agrees that such fees and expenses are not, are not
intended to be, and shall not be characterized as, interest or as compensation
for the use, forbearance or detention of money.  Despite the foregoing and
notwithstanding anything else in this Note and the other Loan Documents to the
contrary, if any fees or expenses charged or chargeable to Borrower hereunder
are determined to constitute interest and such fees or expenses, when added to
the interest charged hereunder, would cause the aggregate interest charged
hereunder to exceed the Highest Lawful  Rate, then Section 12 of this Note shall
automatically apply to reduce the interest charged hereunder so as not to exceed
the Highest Lawful Rate.

 
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3.           Closing; Commitment; Discretionary Advances.

(a)           Closing; Commitment.  Subject to the Funding Conditions, Lender
agrees to fund the Initial Commitment Advance to Borrower at the Closing and to
fund the remainder of the Commitment to Borrower through future Commitment
Advances to be made during the term of the Loan; provided, however, that all
Commitment Advances shall be made subject to, and in accordance with, the terms
and conditions of Section 3(b).  Notwithstanding anything else to the contrary
contained herein, Lender shall have no obligation to make any Advance unless
each of the Funding Conditions has been satisfied.  This Note is not a revolver
and thus, the portion of the Commitment borrowed may not be repaid to Lender and
subsequently borrowed again under this Note.  The Interest Reserve is not
included in the Commitment.

(b)           Procedure for Borrowing.  Each Commitment Advance shall be made
pursuant to Borrower’s delivery of an Advance Request to Lender, accompanied by
documentation supporting the Commitment Advance.  Borrower agrees to provide,
all information, documents and agreements as may be requested by Lender in
connection with each such Advance Request.  Commitment Advances shall be made no
more frequently than once per month.   Each Advance Request must be received by
Lender by no later than the 10th day of each month for which funding is
requested.  Notwithstanding anything else to the contrary contained herein,
Lender shall have no obligation to make any Advance unless each of the Funding
Conditions has been satisfied.

(c)           Discretionary Advances.  Lender is hereby authorized from time to
time to make Advances to or for the benefit of Borrower hereunder that Lender,
in its sole discretion, deems necessary or desirable upon the occurrence of any
of the following (such Advances made upon the occurrence of the following events
are referred to herein as the “Discretionary Advances”): (i) Lender determines,
in its sole discretion, that an Advance is be necessary or desirable for the
purpose of paying any Loan Expense, cost, expense, fee or other amount to or for
the benefit of Borrower or chargeable to Borrower under the Loan Documents, (ii)
any Event of Default occurs, or (iii) upon request by Borrower for an Advance
that (A) if a Commitment Advance, would cause the aggregate amount of all
Commitment Advances made hereunder to exceed the Commitment amount, or (B) if an
Interest Reserve Advance, would cause the aggregate amount of all Interest
Reserve Advances made hereunder to exceed the amount of the Interest
Reserve.  Each Discretionary Advance shall, upon disbursement, automatically
constitute principal outstanding hereunder and cause a corresponding increase in
the aggregate amount of the Debt (even if such Discretionary Advance causes the
aggregate amount outstanding hereunder to exceed the face amount of this
Note).  Borrower agrees that each Discretionary Advance shall automatically
reduce the amount of Commitment available hereunder.  The making by Lender of
any Discretionary Advance shall not cure or waive any Event of Default hereunder
(except only for an Event of Default that has been cured to Lender’s
satisfaction as confirmed by Lender’s execution of a written agreement
specifically acknowledging and describing the Event of Default so cured, and for
an Event of Default that has been waived by Lender as confirmed by Lender’s
execution of a written agreement specifically acknowledging and describing the
Event of Default so waived).

 
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4.           Interest; Payments.

(a)           Interest Rate.  The outstanding principal amount of this Note
shall bear interest on each day outstanding at the Base Rate in effect on such
day, unless the Default Rate shall apply.  Subject to the other provisions of
this Note, upon the occurrence and during the continuation of an Event of
Default, the outstanding principal amount of this Note shall, at Lender’s
option, automatically and without the necessity of notice, bear interest from
the date of such Event of Default at the Default Rate, until all such delinquent
amounts are paid and such breach or Event of Default has been cured to Lender’s
satisfaction as confirmed by Lender’s execution of a written agreement
specifically acknowledging and describing the Event of Default so cured, and or
waived by Lender as confirmed by Lender’s execution of a written agreement
specifically acknowledging and describing the Event of Default so waived.

(b)           Interest Payments; Interest Reserve Advances.  Borrower agrees to
make Accrued Interest Payments to Lender on the last day of each month while the
Loan is outstanding, in an amount equal to the interest accrued on the
outstanding principal balance of this Note during each such
month.  Notwithstanding the foregoing sentence, on each date that an Accrued
Interest Payment becomes due and payable hereunder, provided that the Advance
Conditions are then satisfied and that a sufficient amount of Interest Reserve
is available for the funding of an Interest Reserve Advance, Lender shall make
an Interest Reserve Advance hereunder in the amount of such Accrued Interest
Payment which shall be applied to the Accrued Interest Payment then due and
payable. Lender may, but is not obligated to, make Interest Reserve Advances
hereunder whether or not the Advance Conditions have been met, provided,
however, that if the Advance Conditions are not then met, any such Interest
Reserve Advances shall be made at Lender’s option and in its sole
discretion.  Provided that Borrower met all of the Advance Conditions for an
Interest Reserve Advance, upon Lender funding such Interest Reserve Advance
hereunder, the corresponding Accrued Interest Payment for such month shall be
deemed to be satisfied.  Upon each Interest Reserve Advance, irrespective of
whether the Advance Conditions were met, (i) the amount of remaining Interest
Reserve (if any) shall be reduced by the amount of such Interest Reserve Advance
and (ii) such Interest Reserve Advance funded by Lender hereunder shall
automatically become principal outstanding under this Note upon such
funding.  Borrower agrees that the Interest Reserve Advances may be funded by
Lender in Lender’s sole discretion even if such funding causes the outstanding
principal balance of this Note to exceed its face amount, and that any such
Interest Reserve Advances funded in excess of the face amount of this Note shall
be repaid to Lender in accordance with the provisions of this
Note.  Notwithstanding anything else to the contrary contained herein, (i) if at
any time an Event of Default has occurred and is continuing under this Note,
Lender shall not be obligated to make any further Interest Reserve Advances, and
thereafter, shall do so only in its sole discretion, unless and until the Event
of Default has been cured to Lender’s satisfaction as confirmed by Lender’s
execution of a written agreement specifically acknowledging and describing the
Event of Default so cured, or waived by Lender as confirmed by Lender’s
execution of a written agreement specifically acknowledging and describing the
Event of Default so waived, and (ii) in no event shall Lender be obligated to
make any Interest Reserve Advance that would cause the aggregate amount of
Interest Reserve Advances made hereunder to exceed the remaining Interest
Reserve.

 
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(c)           Interest and Principal Payments.  Except earlier upon any
acceleration of this Note:

(i)           Borrower promises to pay to Lender monthly Accrued Interest
Payments on the last day of each month for interest accrued during that month,
unless Lender applies the Interest Reserve to such Accrued Interest Payment as
provided in Section 4(b) of this Note;

(ii)           in addition to the payments required by the provisions of clause
(i) above, concurrently with each Disposition of the Lots pursuant to a Lot Sale
Contract, Borrower promises to pay or cause to be paid to Lender, the Partial
Release Price for each Lot released from Lender’s Lien thereon;

(iii)           in addition to the payments required by the provisions of
clauses (i) and (ii) above, concurrently with any Disposition of the Mortgaged
Property or any part or parcel thereof or other than pursuant to a Lot Sale
Contract, Borrower promises to pay to Lender the full amount of the proceeds
received by or due to Borrower from such Disposition (such Disposition being
subject to Lender’s prior written consent which may be given or withheld in its
sole discretion, unless the Disposition results in the Debt being paid in full);
and

(iv)           in addition to the payments required by the provisions of clauses
(i) and (ii) above, upon any Revenue Event, concurrently with any Revenue Event,
Borrower promises to pay to Lender the full amount of the proceeds from or
relating to such Revenue Event up to, but not exceeding the amount of, the
unpaid Debt, and

(v)           in addition to the payments required by the provisions of clauses
(i), (ii), (iii) and (iv) above, Borrower promises to pay to Lender the
outstanding principal balance of this Note, together with all accrued, unpaid
interest thereon, unpaid Loan Expenses and other unpaid amounts due under the
Loan Documents, on or prior to the Maturity Date.

5.           Terms and Conditions of Payment.

(a)           Application of Payments.  Subject to the application of Interest
Reserve Advances to Accrued Interest Payments as provided in Section 4(b) of
this Note, all payments on this Note shall be applied first, to unpaid Loan
Expenses due hereunder, next, to unpaid accrued interest, and last, to principal
outstanding under this Note (being applied first to any portion of principal
attributable to Interest Reserve Advances).  Notwithstanding the foregoing
sentence, if any Event of Default occurs and is existing under this Note or any
other Loan Document, Lender shall have the right to apply payments toward
amounts due under this Note as Lender determines in its sole discretion.

(b)           General.  All amounts are payable to Lender in lawful money of the
United States of America at the address for Lender provided in this Note, or at
such other address as from time to time may be designated by Lender.  Borrower
shall make each payment which it owes under this Note and the other Loan
Documents to Lender in full and in lawful money of the United States, without
set-off, deduction or counterclaim.  Under no circumstance may Borrower offset
any amount owed by Borrower to Lender under this Note with an amount owed by
Lender to Borrower under any other arrangement.  All payments shall be made by
cashier's check or wire transfer of immediately available funds.  Should any
such payment become due and payable on a day other than a business day, the date
for such payment shall be extended to the next succeeding business day, and, in
the case of a required payment of principal, interest or Loan Expenses or other
amounts then due, interest shall accrue and be payable on such amount for the
period of such extension.  Each such payment must be received by Lender not
later than 3:00 p.m., Grapevine, Texas time on the date such payment becomes due
and payable.  Any payment received by Lender after such time will be deemed to
have been made on the next succeeding business day.

 
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(c)           Prepayment.  Borrower may prepay this Note in whole or in part at
any time and from time to time without incurring any prepayment fee or penalty,
by giving Lender no less than ten (10) days prior written notice of such
termination; provided, that interest shall accrue on the portion of this Note so
prepaid through the date of such prepayment.

6.           Loan Deliveries.  At or prior to the Closing, Borrower shall
deliver or cause to be delivered to Lender, the following items, each of which
shall be satisfactory in form and substance to Lender (the “Closing
Deliveries”):

(a)           originals duly executed by Borrower other party (other than
Lender) who is a signatory thereto, of this Note and each other Loan Document
including, without limitation, the Large Tract Deed of Trust, the Environmental
Indemnity Agreement, the initial Advance Request, the Guaranty Agreement, the
Financial Statement Certifications, the Errors Agreement, the IRS tax disclosure
forms, the Company Certificates, the Assignment and Subordination Agreement for
the Meritage Lot Sale Contract,  the Lot Purchaser Consent for the Meritage Lot
Sale Contract, the Assignment of Contract Rights, the Origination Fee Letter,
the Pledge Agreement, the Pledge Assignment, the Subordination Agreement, and
the District Consent;

(b)           a certified copy of the Organizational Agreements of Borrower and
each Borrower-Related Party that is an entity;

(c)           certificates of existence and good standing for Borrower and each
Borrower-Related Party that is an entity issued by the appropriate state
authorities;

(d)           resolutions of the general partner, manager or other governing
body (as evidenced by the Organizational Agreements) of Borrower and each
Borrower-Related Party, authorizing the execution, delivery, and performance of
this Note and the other Loan Documents, and the transactions contemplated hereby
and thereby;

(e)           copies of the liability insurance and casualty insurance policies
covering Borrower and the Mortgaged Property, evidence of payment of the
premiums therefor through at least one year and endorsements of such policies to
Lender (in accordance with and meeting the requirements of Sections 9(o) and (p)
hereof);

(f)           all written consents that are required with respect to or
necessitated by this Note and the other Loan Documents and the transactions
contemplated hereby and thereby;

(g)           all written consents that are required with respect to or
necessitated by this Note and the other Loan Documents and the transactions
contemplated hereby and thereby;

 
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(h)           the following documents and materials: (i) a current appraisal
assessing the fair market value of the Mortgaged Property, subject to Lender’s
review and acceptance, completed by an appraiser acceptable to Lender (ii) all
environmental site assessments and reports with respect to the Mortgaged
Property, including, but not limited to, a wetlands assessment; (iii) all
engineering reports and studies, soil analysis, construction, structural and
mechanical feasibility reports; all surveys, survey maps, plats and proposed
plats; all development plans, construction plans, and other plans and
specifications; all topographic, drainage and contour maps and all other
reports, maps, studies and surveys of engineers, architects and others; (iv) the
fully executed Meritage Lot Sale Contract, (v) all sales and marketing plans for
the Mortgaged Property, (vi) all contracts and agreements with developers,
engineers, contractors, subcontractors, consultants and others relating to
supervision and maintenance of, and other professional services relating to the
Mortgaged Property; (vii) copies of all easements and encumbrances affecting the
Mortgaged Property, including land use, water use, mineral rights, surface
rights, zoning, subdivision, grading, environmental restrictions, and
neighborhood association rights and restrictions, (viii) the commitment for the
issuance of the Title Policy for the Large Tract, and the title exception
documents, and (ix) all permits, approvals, and authorizations necessary to
develop the Mortgaged Property in compliance with applicable governmental laws,
rules, and regulations; and

(i)           such other and further information, documents, agreements and
certificates as are reasonably requested by Lender.

No waiver by Lender of the timely delivery of any Closing Delivery will
constitute a waiver of any condition precedent to any obligation of Lender to
make any Advance or to require delivery of any Closing Delivery prior to the
funding of any Advance.

7.           Conditions Precedent to Advances.  Borrower agrees that,
notwithstanding anything to the contrary contained herein or in the other Loan
Documents, Lender’s obligation to fund any Advance shall be conditioned upon the
satisfaction by Borrower of each of the following conditions, on and as of the
funding date for the Advance (the “Advance Conditions”):

(a)           no event constituting an Event of Default shall have occurred and
be continuing;

(b)           the Principal Officer shall have executed and delivered to Lender
an Advance Request dated the funding date, and all matters certified in the
Advance Request shall be true and correct in all respects;

(c)           all statements contained in all Loan Documents and all other
certificates, statements and data furnished to Lender by or on behalf of
Borrower or in connection with the transactions contemplated by this Note or any
of the other Loan Documents (including all of the documents and information
required to be delivered to Lender by Section 6) shall be true and complete in
all material respects, and there are no facts or events actually known to
Borrower that, if disclosed to Lender, would make such statements, certificates
or date untrue in any material respect (and Borrower agrees to inform Lender,
prior to Lender making any such Advance, of any such facts or events actually
known to Borrower);

(d)            all of the Loan Documents shall be valid and subsisting,
enforceable and in full force and effect and in the priority Lien position
stated therein;

(e)           the Origination Fee and all fees and expenses owed to Lender under
any of the Loan Documents shall have been paid in full;

 
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(f)           the title agent shall have delivered to Lender the title company’s
unconditional commitment to issue the Title Policy for the Large Tract Deed of
Trust to the Lender pursuant to a commitment, in form and content satisfactory
to Lender, wherein the title company agrees to provide the Title Policy to
Lender, and all endorsements thereto required by Lender, obtained at Borrower’s
expense;

(g)           if the date of the proposed Advance is more than sixty (60) days
following the Effective Date, the title agent shall have delivered to Lender the
title company’s unconditional commitment to issue the Title Policy for the Small
Tract Deed of Trust to the Lender pursuant to a commitment, in form and content
satisfactory to Lender, wherein the title company agrees to provide the Title
Policy to Lender, and all endorsements thereto required by Lender, obtained at
Borrower’s expense; and

(h)           Borrower shall have complied with each other reasonable request of
Lender made in connection with the Advance.

No Advance will constitute a waiver of any condition precedent to any obligation
of Lender to make any further Advances.

8.           Representations and Warranties.  Borrower and each Borrower-Related
Party represents and warrants  to Lender as follows:

(a)           Due Organization, Existence and Authority.  Borrower and each
Borrower-Related Party that is an entity (i) is duly organized, validly existing
and in good standing under the laws of its jurisdiction of organization, and
(ii) has full power and authority to own its properties, carry on its business
as presently conducted and as proposed to be conducted, and to enter into and
perform its obligations under this Note and the other Loan Documents to which it
is a party.

(b)           Loan Documents Authorized.  The execution and delivery by Borrower
and each Borrower-Related Party of this Note and the other Loan Documents and
the full and timely performance of all obligations thereunder have been duly
authorized by all necessary action under the Organizational Agreement of
Borrower and each Borrower-Related Party and otherwise.

(c)           Loan Documents Valid, Binding and Enforceable.  This Note and the
other Loan Documents have been duly and validly executed, issued and delivered
by Borrower and each Borrower-Related Party, and constitutes the valid and
legally binding obligations of Borrower and each Borrower-Related Party
enforceable in accordance with their respective terms, except as limited by
bankruptcy, insolvency, reorganization or other similar laws relating to or
affecting enforcement of creditor’s rights.

(d)           No Violation.  The execution, delivery and performance by Borrower
and each Borrower-Related Party of the Loan Documents does not and will not
(i) contravene the Organizational Agreement of Borrower and each
Borrower-Related Party, (ii) contravene any law, rule or regulation, or any
order, writ, judgment, injunction or decree or any contractual restriction
binding on or affecting Borrower or any Borrower-Related Party or the
Collateral, (iii) require any approval or consent of any general partner, board,
manager, member, lender or any other Person, other than approvals or consents
that have been previously obtained and disclosed in writing to the Lender, (iv)
result in a breach of or constitute a default under any indenture or loan or
credit agreement or any other agreement, lease or instrument to which Borrower
or any Borrower-Related Party is a party or by which Borrower or any
Borrower-Related Party or the Collateral may be bound or affected, or (v) result
in, or require the creation or imposition of, any Lien (other than the Liens
contemplated by the Loan Documents) with respect to the Collateral.

 
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(e)           Governmental Consents.  No authorization or approval or other
action by, and no notice to or filing with, any Governmental Authority is
required for the due execution, delivery and performance by Borrower of the Loan
Documents, other than approvals or consents that have been previously obtained
and disclosed in writing to the Lender.

(f)           Government Regulations.  Neither Borrower nor any Borrower-Related
Party is subject to regulation under the Investment Company Act of 1940, the
Federal Power Act or the Public Utility Holding Company Act of 1935, the
Interstate Commerce Act, as the same may be amended from time to time, or any
federal or state statute or regulation limiting its ability to incur
Indebtedness

(g)           Securities Activities Neither Borrower nor any Borrower-Related
Party is engaged principally, or as one of its important activities, in the
business of extending credit for the purpose of purchasing or carrying any
margin stock (as defined in Regulation U of the Board of Governors of the
Federal Reserve System in effect from time to time) and not more than twenty
five (25%) of the value of the assets of said entities consists of such margin
stock.

(h)           Suits.  There are no actions, suits or proceedings pending, or to
the knowledge of Borrower, threatened, against or affecting Borrower, any
Borrower-Related Party or the Collateral, or involving the validity or
enforceability of the Loan Documents or the priority of the Liens created or
evidenced thereby, at law or in equity, or before or by any Governmental
Authority.

(i)           Financial Statements Complete and Accurate.  All information
supplied and statements made to Lender by or on behalf of Borrower or any
Borrower-Related Party is in any financial statement furnished or application
for credit made prior to, contemporaneously with or subsequent to the execution
of this Note are and shall be true, correct, complete, valid and genuine; such
financial statements and applications for credit have been prepared in
accordance with Good Accounting Practice and fully and accurately present the
financial condition of the subject thereof as of the date thereof and no
material adverse change has occurred in the financial condition reflected
therein since the respective dates thereof; and no additional borrowings have
been made by Borrower or any Borrower-Related Party since the respective dates
thereof other than (i) the borrowing contemplated hereby and (ii) other
borrowings approved by Lender’s prior written consent.

(j)           Environmental Liability.  To the knowledge of Borrower, no
hazardous substances or solid wastes have been disposed of or otherwise released
on the Property in violation of Environmental Laws, nor is the Property
including its soil, ground, water, air and other elements, contaminated by
hazardous substances or solid wastes in violation of Environmental Laws.  The
terms “hazardous substance” and release” shall have the meanings specified in
the Comprehensive Environmental Response Compensation and Liability Act of 1980,
as amended (42 U.S.C. Section 9601 et. seq.)  (“CERCLA”), and the terms “solid
waste” and “disposal” (or “disposed”) shall have the meanings specified in the
Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C. Section
6901 et. seq.) (“RCRA”); provided, to the extent that the laws of the State of
Texas establish a meaning for “hazardous substance”, “release”, “solid waste”,
or “disposal” or “disposed”) that is broader than that specified in either
CERCLA or RCRA, such broader meaning shall apply.

 
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(k)           Tax Liabilities.  Borrower has filed all tax returns required to
be filed, or has obtained an extension which is currently valid and in effect,
for all federal, state, county, local, and foreign tax returns and reports
required to be filed, including, without limitation, taxes on the Collateral and
all applicable income, payroll, personal property, real property, employee
withholding, social security, unemployment, franchise, excise, use and sales
taxes.  Borrower has paid in full all taxes that have become due as reflected on
all such returns and reports including any interest and penalties, expect for
taxes being contested in good faith and for which such taxpayer has set aside
adequate reserves for the payment thereof.  Borrower as established adequate
reserves for all taxes payable but not yet due.  No governmental claim for
additional taxes, interest, or penalties is pending or, to the knowledge of
Borrower, threatened against Borrower or the Collateral.

(l)           Compliance With Legal Requirements.  Borrower and each
Borrower-Related Party is in compliance with all legal requirements in respect
of the conduct of its business and the ownership of its assets.  Borrower and
each Borrower-Related Party owns or has the continuing right to use all permits,
licenses, patents, patent rights or licenses, trademarks, trademark rights,
trade names, trade name rights and copyrights which are required to conduct its
business.

(m)           Full Disclosure.  None of the representations, warranties,
covenants, agreements or statements contained in any Loan Document or any
schedule, exhibit, report, statement or certificate furnished to Lender by or on
behalf of Borrower or any Borrower-Related Party in connection with the Loan
contains or will contain any untrue statement of a material fact, or omits or
will omit any material fact required to be stated therein or necessary to make
the statements made therein, in light of the circumstances under which they are
made, not misleading.

(n)           No Known Material Adverse Fact.  Neither Borrower nor any
Borrower-Related Party knows of any fact which materially and adversely affects
the Collateral, or the business, operations, prospects or condition, financial
or otherwise, of Borrower.

(o)           Survival of Representations and Warranties.  All representations
and warranties made by or on behalf of Borrower or any Borrower-Related Party
herein or in any other Loan Document shall survive the delivery of this Note and
the making of the Loan and any investigation at any time made by or on behalf of
Lender shall not diminish its rights to rely thereon.

(p)           No Usury.  Without limiting the generality of any other
representation or warranty set forth herein or in any other Loan Document, the
Loan is a commercial loan and not usurious under the laws of the State of Texas.

(q)           Advisement by Lender.  Prior to entering into this Note and the
other Loan Documents, Borrower and each Borrower-Related Party has been advised
by Lender to seek the advice of an attorney and an accountant in connection with
the Loan.  Borrower and each Borrower-Related Party has had the opportunity to
seek the advice of an attorney and accountant of its choice in connection with
the Loan.

(r)           Adequate Consideration.  Prior to entering into this Note and the
other Loan Documents, Borrower and each Borrower-Related Party has reviewed the
benefits to be provided to it as a result of the Lender making the Loan and have
concluded that the benefits are reasonably equivalent in value to the Collateral
to be pledged to secure the Loan and the obligations assumed and to be assumed
by it pursuant to the Loan Documents.

 
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(s)           No Partnership, Joint Venture or Agency Intended.  Nothing in this
Note or the other Loan Documents is intended or shall in any way be construed so
as to create any form of partnership, joint venture or agency relationship
between the Borrower and each Borrower-Related Party, on the one hand, and the
Lender on the other hand, the parties hereto having expressly disclaimed any
intention of any kind to create any partnership or agency relationship between
them resulting from or arising out of the Loan Documents.

(t)           No Reimbursement Contract.  No Reimbursement Contract exists or
has ever existed with respect to the Mortgaged Property except as described in
clauses (i) through (iv) of the defined term “Reimbursement Contract”.

(u)           Lot Sale Contracts.  No Lot Sale Contract exists covering any of
the Mortgaged Property except for the Meritage Lot Sale Contract.

(v)           Lots.  Each of the Lots is a Finished Lot and is suitable for the
construction of a single family residence thereon.

9.           Covenants.  Borrower and each Borrower-Related Party covenants and
agrees as follows:

(a)           Payment; Performance.  Borrower shall promptly pay all amounts due
and owing to Lender under this Note.  Borrower and each Borrower-Related Party
shall timely perform and comply with each agreement and covenant made by them
under this Note and the other Loan Documents.

(b)           Use of Proceeds.  Borrower shall use the proceeds of this Note
solely for the refinancing of the Property and related closing costs and
expenses.  In no event shall the proceeds of this Note be used, directly or
indirectly, for personal, family, household or agricultural purposes or for the
purpose, whether immediate, incidental or ultimate, of purchasing, acquiring or
carrying any “margin stock” (as such term is defined in Regulation U promulgated
by the Board of Governors of the Federal Reserve System).

(c)           Indebtedness for Borrowed Money.  Except for Member Loans, UDF
Loans and Indebtedness secured by Liens permitted by the Loan Documents,
Borrower shall not incur any Indebtedness or guaranty or provide security for
any Indebtedness of another Person or enter into any agreement to do so without
the prior written consent of Lender, which may be withheld for any reason or no
reason.  As a condition of Lender granting such consent, Lender may require
Borrower and the other lender to enter into a subordination agreement in favor
of Lender, which shall be satisfactory to Lender in all
respects.  Notwithstanding the foregoing, Borrower may incur trade debt to
vendors, and suppliers and providers of services in the ordinary course of
business without violation of this Section 9(c).

(d)           Termination of Existence.  Borrower and each Borrower-Related
Party shall not cause or permit, or enter into any agreement to cause or permit,
the dissolution or termination of the existence of Borrower or any
Borrower-Related Party that is an entity.  Without Lender’s prior written
consent, Borrower shall not permit or enter into any agreement to cause or
permit, the merger, consolidation, or reorganization of Borrower or any
Borrower-Related party that is an entity with or into any other entity, whether
or not such party would be the surviving entity.

 
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(e)           Notice of Certain Events.  Borrower shall promptly notify Lender
in writing of (i) the occurrence of any event or series of events causing, or
that could be expected to cause or has caused, a material adverse effect on the
operations or financial condition of Borrower, any Borrower-Related Party or the
Collateral, (ii) the occurrence of any Event of Default, (iii) any default by
Borrower or the acceleration of the maturity of any Indebtedness owed by
Borrower or any Borrower-Related Party under any loan agreement, indenture,
mortgage, promissory note, contract or instrument to which Borrower or any
Borrower-Related Party is a party or by which any material asset or property of
Borrower or any Borrower-Related Party is bound, (iv) any litigation instituted
against Borrower or the Collateral, (v) notices of violation relating to and
adversely affecting the Collateral received from any Governmental Authority,
(vi) any audits of any federal or state tax returns of Borrower or any
Borrower-Related party and the results of any such audit, (vii) any condemnation
or similar proceedings with respect to the Mortgaged Property, and (viii) any
other matters which could reasonably be expected to adversely affect Borrower’s
ability to perform its obligations under this Note.  Borrower shall notify
Lender in writing at least thirty (30) days prior to the date that it or any
Borrower-Related Party changes its or his name, address, principal place of
business, or the place that it maintains its or his books and records.

(f)           Financial Statements; Tax Returns.  Borrower shall deliver or
cause to be delivered to Lender, the following:

(i)           within sixty (60) days after the end of each fiscal quarter, the
unaudited financial statements of Borrower, prepared in accordance with Good
Accounting Practice, and combined or consolidated as appropriate, including all
notes related thereto;

(ii)           within one hundred twenty (120) days after the end of each fiscal
year, the unaudited financial statements of Borrower, prepared in accordance
with Good Accounting Practice, and combined or consolidated as appropriate,
including all notes related thereto;

(iii)           copies of all federal and state tax returns prepared with
respect to Borrower within ten (10) days of such documents being filed with the
Internal Revenue Service or applicable state authority, along with an audit
thereof upon request of Lender; and

(iv)           such other information relating to the financial condition and
affairs of Borrower, and the Collateral as Lender may from time to time request.

All financial statements shall be accompanied by duly executed Financial
Statement Certifications.

(g)           Taxes.  Borrower shall pay or cause to be paid all federal, state
and local taxes levied against it and its assets and the Collateral as they
become due and payable and before the same become delinquent.  Borrower shall
furnish to Lender evidence that all such taxes are paid within ten (10) days
following the date of payment.  Notwithstanding the foregoing, Borrower shall
have the right to pay such tax under protest or to otherwise contest any such
tax or assessment, but only if (i) such contest has the effect of preventing the
collection of such taxes so contested and also of preventing the sale or
forfeiture of any property subject thereto, (ii) they have notified Lender of
the intent to contest such taxes, and (iii) adequate reserves for the liability
associated with such tax have been established in accordance with Good
Accounting Practice.

 
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(h)           Liens.  Borrower and each Borrower-Related Party shall not create,
incur, assume, permit or suffer to exist any Lien on or against the Collateral
including, without limitation, the Mortgaged Property, except for Liens securing
UDF Loans and as otherwise expressly permitted by the Loan Documents.

(i)           Operation of Business.  Borrower and each Borrower-Related Party
shall operate its business in compliance with all applicable federal, state and
local laws, rules, regulations, and ordinances.  Borrower and each
Borrower-Related Party shall maintain or engage sufficient qualified personnel
for the operations of its business.  Borrower and each Borrower-Related Party
shall maintain its existence and good standing in each state where it operates
or does any business, except in any jurisdictions where the failure to maintain
such existence and good standing would not have a material adverse effect
individually or in the aggregate, on its financial condition or
operations.  Borrower and each Borrower-Related Party shall obtain, maintain and
keep current, all consents, licenses, permits, authorizations, permissions and
certificates which may be required or imposed by any Governmental Authority or
which are required by applicable federal, state or local laws, regulations and
ordinances.

(j)           No Work Performed. No labor or services will be performed by on
behalf of Borrower or otherwise, and no materials will be furnished or delivered
by on or behalf of Borrower or otherwise to, the Property prior to the recording
the Deed of Trust, which could give rise to a Lien on the Property with priority
equal to or greater than the Liens and security interests of the Deed of Trust
or other Loan Documents.

(k)           Borrower and Mortgaged Property Documents.  In addition to the
information otherwise required to be provided to Lender pursuant to the Loan
Documents, Borrower shall, within five (5) days following Lender’s request,
furnish to Lender, the following documents:

(i)           all documents, certificates, agreements, contracts and other
materials provided for in the Advance Conditions, including, without limitation,
all amendments, modifications, and supplements thereto, and all new and
additional documents, certificates, and agreements, contracts and other
materials relating thereto;

(ii)           all capital expenditure and expense reports, invoices and
documentation of expenses and capital expenditures, bank account information and
records, and other material financial and operational information related to the
Collateral including, without limitation, the Mortgaged Property;

(iii)           minutes of the meetings and all written consents of the general
partner, managers, members, board or other governing authority of Borrower
relating in any respect to the Collateral including, without limitation, the
Mortgaged Property;

(iv)           promissory notes, loan documents, contracts and agreements
evidencing Indebtedness of Borrower and the Borrower-Related Parties and all
amendments, modifications and supplements thereto;

 
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(v)           any new documents or information, and any updates, supplements, or
replacements for any documents or information, required to be delivered to
Lender pursuant to the Loan Documents;

(vi)           each Lot Sale Contract and each amendment, modification and
supplement thereto (provided, that by this reference, Lender shall not be deemed
to have approved any such amendment, modification or supplement);

(vii)           contracts and agreements relating to the Mortgaged Property, its
maintenance, and administration; and

(viii)           all other information with respect to Borrower, each
Borrower-Related Party or the Collateral that Lender may reasonably request from
time to time.

(l)           Transactions with Affiliates.  Borrower shall not enter into or be
a party to any agreement or transaction with any Affiliate except in the
ordinary course of and pursuant to the reasonable requirements of Borrower’s
business and upon fair and reasonable terms that are no less favorable to
Borrower than it would obtain in a comparable arms-length transaction with a
Person not an Affiliate of Borrower, and on terms consistent with the business
relationship of Borrower and such Affiliate prior to the Effective Date, and
fully disclosed to Lender.

(m)           Audit.  Borrower and each Borrower-Related Party shall permit
Lender and its employees, representatives, auditors, collateral verification
agents, attorneys and accountants (collectively, the “Lender Representatives”),
at any time and from time to time, at Borrower’s expense, to (i) audit all books
and records related to Borrower, each Borrower-Related Party and the Collateral
including, without limitation, the Property, and (ii) visit and inspect the
offices of Borrower and each Borrower-Related party and to inspect and make
copies of all books and records, and to write down and record any information
the Lender Representatives obtain.  Borrower and each Borrower-Related Party
agrees to cooperate fully with Lender in connection with such audits and
inspections.

(n)           Agreements related to the Property.  Without the prior written
consent of Lender, neither Borrower nor any Borrower-Related Party shall enter
into, amend, modify or terminate any agreement related to the Collateral that
reasonably would be expected to hinder, delay or impair the timely payment of
the Debt or the performance by Borrower or any Borrower-Related party of any
obligations under the Loan Documents, or that could have a material adverse
effect on the value of the Collateral or Lender’s Liens against the Collateral.

(o)           General Liability Insurance.  Borrower shall at all times maintain
or cause to be maintained general liability insurance with coverage amounts that
are normal and customary for similarly-situated entities engaged in similar
businesses.  Each such policy shall provide that Lender be given at least thirty
(30) days written notice as a condition precedent to any cancellation thereof or
material change therein.  Borrower shall obtain an endorsement to each such
policy naming Lender as an additional insured to each such policy, and provide
Lender annually with the insurance certificate, evidencing such coverage, the
endorsement of each such policy to Lender, and evidence of payment of the
premium for each such policy.

(p)           Property Insurance.  Borrower shall, at all times maintain hazard
insurance on the Property with coverage amounts that are normal and customary
for similar properties.  Each such policy shall provide that Lender be given at
least thirty (30) days written notice as a condition precedent to any
cancellation thereof or material change therein.  Borrower shall obtain an
endorsement to each such policy naming Lender as an additional insured to each
such policy, and provide Lender annually with the insurance certificate,
evidencing such coverage, and evidence of payment of the premium for each such
policy.

 
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(q)           Communications.  Borrower and each Borrower-Related Party hereby
consents to and agrees that Lender and its representatives, employees, project
managers, and consultants may communicate with (verbally and in writing, in
person and via electronic communications), and exchange information among and
between, (i) all contractors, subcontractors, engineers, design professionals
and all others who provide work and/or services with respect the Property or any
portion thereof, together with their respective principals, employees and
agents, (ii) all Persons having an interest in the Collateral, and (iii) all
lenders and potential lenders that may or do provide financing to
Borrower.  Borrower and each Borrower-Related Party hereby releases and holds
harmless, and agrees to indemnify, Lender, its general partner and their
respective partners, officers, directors, shareholders, representatives,
employees, and agents (each, a “Released Party”), from and against any and all
damages, claims, liabilities and expenses related to, associated with or in
respect of any such communications or exchanges of information, whether or not
they shall be caused in whole or in part by the negligence of a Released Party,
excluding Lender’s intentional misconduct or gross negligence.

(r)           Reimbursement Contract.  Borrower shall obtain Lender’s written
consent prior to entering into or permitting any Affiliate to enter into any
Reimbursement Contract, or prior to becoming an assignee of, or otherwise
becoming entitled to receive proceeds under, any such Reimbursement
Contract.  As a condition to giving its prior written consent, Borrower agrees
that Lender may require, in its sole discretion, that (i) the Reimbursement
Contract and the proceeds therefrom or related thereto be assigned to Lender
pursuant to an Assignment of Contract Rights or other assignment form
satisfactory to Lender in form and substance and filed of record, and/or (ii)
the proceeds therefrom or related thereto be paid to Lender, which shall be
applied by Lender to reduce Borrower’s obligations owed to Lender under this
Note and the other Loan Documents, until all such obligations have been paid in
full.  Notwithstanding anything else to the contrary contained herein or in any
other Loan Document, in no event shall any Reimbursement Contract require or
result in a subordination of Lender’s Lien against the Mortgaged
Property.  Borrower agrees to, and agrees to cause its Affiliates to, execute,
enter into and deliver to Lender an Assignment of Contract Rights or any
additional agreements or assignments that Lender may request in order to
facilitate the obligations of Borrower under this Section, and in the event of a
Reimbursement Contract with the District, agrees to cause the District to
execute a District Consent.  If despite an assignment to Lender, Borrower
receives any reimbursement or other proceeds resulting from a Reimbursement
Contract, then Borrower agrees to immediately pay over to Lender the full amount
of such proceeds, which shall be applied by Lender to reduce Borrower’s
obligations owed to Lender under this Note and the other Loan Documents, until
all such obligations have been paid in full.  Borrower shall not amend or
modify, or permit to be amended or modified, any Reimbursement Contract without
Lender’s prior written consent.

(s)           Compliance with Lot Sale Contracts.  Borrower shall comply in all
respects with its obligations under each Lot Sale Contract and shall not take
any action or inaction that creates a Borrower default under any such Lot Sale
Contract.  Borrower shall not terminate any Lot Sale Contract except in
accordance with its terms upon default thereunder by the Builder, in which case,
Borrower shall obtain the prior written consent of Lender to terminate such Lot
Sale Contract.  Borrower shall obtain the prior written consent of Lender before
entering into any agreement that amends, modifies or supplements any Lot Sale
Contract.  Lender shall not unreasonably withhold or delay its consent to an
amendment, modification or supplement of any Lot Sale Contract if Borrower shall
have consented to such amendment, modification or supplement; provided, however,
that Lender may withhold its consent, as determined by Lender in its sole
discretion, to any amendment, modification or supplement to any Lot Sale
Contract which (i) decreases the purchase price payable for any Lots, (ii)
delays the acquisition of any Lot beyond the schedule or date(s) agreed in such
Lot Sale Contract, (iii) could reasonably be expected to delay or impair the
ability of Borrower to timely repay the Loan in accordance with the terms and
conditions or the Loan Documents, (iv) violates any of the Loan Documents, or
(v) in Lender’s opinion, materially and adversely affects Lender’s security for
the Loan or the rights and benefits of Borrower under such Lot Sale Contract.

 
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(t)           Additional Covenants for Lot Sale Contracts.  Borrower shall
obtain Lender’s prior written consent before entering into any Lot Sale
Contract.  Each Lot Purchaser must be either (i) an Approved Builder or (ii)
another Person approved by Lender in its sole discretion.  For each Lot Sale
Contract, the purchase price of the Lots, the timing of the take down schedule,
if any, the other terms and conditions of each Lot Sale Contract relating to the
purchase price and timing of payment for the Lots must be satisfactory to Lender
in its sole discretion.  Concurrently with entering into any Lot Sale Contract
and as a condition to Lender approving any Lot Sale Contract, Borrower shall
execute and deliver to Lender, and shall cause the Lot Purchaser under the Lot
Sale Contract, together with any title company or other escrow agent holding
earnest money (in the form of cash, a letter of credit or otherwise) to execute
and deliver to Lender, all of the following:  (i) an Assignment and
Subordination Agreement, (ii) a Lot Purchaser Consent, and (iii) and, if Earnest
Money is delivered or deposited in support of the Lot Sale Contract, an Earnest
Money Assignment.  Borrower further agrees to enter into such amendments,
modification or supplements to the Loan Documents in the form provided by Lender
and to make such representations, warranties, covenants, that Lender deems
necessary or desirable in connection with each such Lot Sale Contract.

(u)           Lot Sales Report.  Within ten (10) days after the end of each
month, Borrower shall deliver to Lender, a sales report setting forth the sales
status of each Lot.

(v)           Lease.  Borrower shall obtain Lender’s prior written consent
before entering into any lease for the Property or any portion thereof (the
“Lease”).  Borrower further agrees to amend, modify or supplement the Loan
Documents to incorporate such representations, warranties, covenants, agreements
and Events of Default and other terms and conditions that Lender deems
reasonably necessary in connection with such Lease.

(w)           Title Policy.  Borrower shall cause the title company to issue and
deliver to Lender, (i) the Title Policy for the Large Tract within forty-five
(45) days after the Effective Date, and (ii) the Title Policy for the Small
Tract within one hundred and five (105) days after the Effective Date.

(x)           Development Approval Matters.  Borrower will not execute any
contract or directly become a party to any arrangement for the furnishing of
labor, equipment, supplies or materials for any of the Mortgaged Property except
with Persons approved by the Lender and pursuant to contracts approved by
Lender’s prior written consent.  No work shall be commenced with respect to
construction of any improvements on the Mortgaged Property without Lender’s
prior written consent.  No plans and specifications shall be adopted by Borrower
for the construction of any improvements on the Mortgaged Property without
Lender’s prior written consent.  Lender may withhold its consent for any reason
or may condition its consent in any manner whatsoever, all as determined by
Lender in its sole discretion.

 
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(y)           Small Tract.  Borrower shall acquire the Small Tract, and as
further security for the Loan, Borrower shall grant Lender a first Lien on the
Small Tract.  In furtherance of this obligation, Borrower shall execute and
deliver to Lender, the Small Tract Deed of Trust within sixty (60) days
following the Effective Date.  Borrower and the Borrower-Related Parties
understand and agree that the Small Tract Deed of Trust and Lender’s Lien
thereon is being granted by Borrower as further security for the Loan, and that
no increase in the Commitment shall occur as a result of such additional Small
Tract Deed of Trust being granted to Lender.

10.           Assignment of Construction Contracts. As additional security for
the payment of the Debt and the payment and performance of the obligations,
covenants and agreements under the Loan Documents, Borrower and each
Borrower-Related Party hereby transfers and assigns to Lender for the benefit of
Lender all rights and interest, but not its obligations, in, under and to all
contracts, subcontracts and agreements, written or oral, between Borrower and
any other party, and between parties other than Borrower, in any way relating to
the development of the Property and/or the construction of improvements on the
Property, or the supplying of material (specially fabricated or otherwise),
labor, supplies, or other services therefor (collectively, the “Construction
Contracts”) upon the following terms and conditions:

(a)           Borrower and each Borrower-Related Party represents and warrants
to Lender that the copy of each Construction Contract that Borrower has
furnished or will furnish to Lender is or will be a true and complete copy
thereof, including all amendments thereto, if any, and that Borrower’s interest
therein is not subject to any claim, setoff or encumbrance;

(b)           Neither this assignment nor any action by Lender shall constitute
an assumption by Lender of any obligations under any Construction Contract, and
Borrower shall continue to be liable for all obligations of Borrower thereunder;
and Borrower hereby agrees to perform all of its obligations under each
Construction Contract.  Borrower and each Borrower-Related Party hereby agrees
to indemnify and hold Lender harmless against and from any loss, cost, liability
or expense (including, but not limited to, consultants’ fees and expenses and
attorneys’ fees and expenses) incurred in connection with Borrower’s failure to
perform any such Construction Contract or any action taken by Lender, except for
matters arising as a result of the gross negligence or willful misconduct by
Lender;

(c)           Upon the occurrence of an Event of Default, and during the
continuance thereof, Lender shall have the right at any time (but shall have no
obligation) to take in its name or in the name of Borrower such action as Lender
may at any time determine to be necessary or advisable to cure any default under
any Construction Contract or to protect the rights of Borrower or Lender
thereunder.  Lender shall incur no liability if any action so taken by it or on
its behalf shall prove to be inadequate or invalid, and Borrower and each
Borrower-Related Party agrees to indemnify and hold Lender harmless against and
from any loss, cost, liability or expense (including but not limited to
reasonable attorneys’ fees) incurred in connection with any such action, except
for matters arising as a result of the gross negligence or willful misconduct of
Lender;

(d)           Borrower hereby irrevocably constitutes and appoints Lender as
Borrower’s attorney-in-fact, in Borrower’ or Lender’s name, to enforce all
rights of such Borrower under each Construction Contract; provided, however,
that Lender agrees not to exercise such appointment until the occurrence of an
Event of Default, and during the continuance thereof. Such appointment is
coupled with an interest and is therefore irrevocable;

 
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(e)           Prior to the occurrence of an Event of Default, Borrower shall
have the right to exercise its rights as owner under each Construction Contract;
provided, that Borrower shall not cancel or amend any Construction Contract or
do or suffer to be done any act which would impair the security constituted by
this assignment without the prior written consent of Lender; and

(f)           This assignment shall inure to the benefit of Lender and its
successors and assigns, any purchaser upon foreclosure of the Liens against any
Property, any receiver in possession of any Property or any portion thereof and
any entity affiliated with Lender which assumes Lender’s rights and obligations
under this Note.

(g)           Without limitation, the foregoing indemnities contained in this
Section 10 shall apply to Lender with respect to matters which in whole or in
part are caused by or arise out of, or are claimed to be caused by or arise out
of, the negligence (whether sole, comparative or contributory) or strict
liability of Lender.  However, such indemnities shall not apply to Lender to the
extent that the subject of the indemnification is caused by or arises out of the
gross negligence or willful misconduct of Lender.

11.           Default.

(a)           For purposes of this Note, the following events shall constitute
an “Event of Default”:

(i)           except for Accrued Interest Payments due during any period when
Accrued Interest Payments are made by Lender pursuant to Section 4(b), the
failure of Borrower to make any payment required by this Note in full on or
before the date such payment is due (or declared due pursuant to the terms of
this Note), whether on or prior to the Maturity Date; or

(ii)           any financial statement, representation, warranty, or certificate
made or furnished by or with respect to Borrower or any Borrower-Related Party
contained in this Note or any other Loan Document or made in connection herewith
or therewith, shall be materially false, incorrect, or incomplete when made; or

(iii)           Borrower or any Borrower-Related Party shall fail to perform or
observe any covenant or agreement contained in this Note or any other Loan
Document that is not separately listed in this Section 11(a) as an Event of
Default, and the same remains unremedied for ten (10) days thereafter; or

(iv)           any “event of default” or “default” occurs under any Loan
Document other than this Note that is not separately listed in this Section
11(a), and the same remains unremedied for ten (10) days thereafter; or

(v)           the entry of a decree or order for relief by a court having
jurisdiction in respect of Borrower or any Borrower-Related Party in an
involuntary case under the federal bankruptcy laws, as now or hereafter
constituted, or any other applicable federal or state bankruptcy, insolvency or
other similar law, which is not vacated or dismissed within thirty (30) days, or
appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or other similar official) of Borrower or any Borrower-Related Party for any
substantial part of their respective properties or the Property, or ordering the
winding up or liquidation of such person’s affairs; or

 
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(vi)           the commencement by Borrower or any Borrower-Related Party of a
voluntary case under the federal bankruptcy laws, as now constituted or
hereafter amended, or any other applicable federal or state bankruptcy,
insolvency or other similar law, or the consent by it to the appointment to or
taking possession by a receiver, liquidator, assignee, trustee, custodian,
sequestrator (or other similar official) of Borrower or any Borrower-Related
Party for any substantial part of their respective properties or the Property,
or the making by Borrower or any Borrower-Related Party of any assignment for
the benefit of creditors, or the admission by Borrower or any Borrower-Related
Party in writing of its inability to pay its debts generally as they become due;
or

 
(vii)
the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of all or a substantial
part of the assets of Borrower or any Borrower-Related Party or the Collateral
in a proceeding brought against or initiated by Borrower or any Borrower-Related
Party or the Collateral;

(viii)           if Borrower or any Borrower-Related Party that is an entity is
liquidated or dissolved or winds up their affairs, or the sale or liquidation of
all or substantially all of the assets of Borrower or any Borrower-Related Party
that is an entity; or

(ix)           any Disposition of any Collateral occurs (except as expressly
permitted by the Loan Documents) without the prior written consent of Lender; or

(x)           any “default” or “event of default” not cured within the grace
period, if any, for such default or event of default (the terms “default” and
“event of default” have the meaning given to such terms in the agreements and
documents described below), shall occur under (A) any credit agreement, loan
agreement, promissory note or other document evidencing indebtedness for
borrowed money to which Borrower or any Borrower-Related Party is a party as a
borrower, debtor, guarantor or other obligor, or (B) any subordination
agreement, security agreement, pledge agreement, guaranty, deed of trust, or
other agreement providing guaranty of or security or collateral for
indebtedness, executed by Borrower or any Borrower-Related Party, or (C) any
joint venture agreement, revenue or profits sharing or participation agreement,
partnership agreement, shareholders agreement, securities purchase agreement or
any other agreement governing to which Borrower or any Borrower-Related Party is
a party, if Lender or any of its Affiliates are also a party to such agreement,
or

(xi)           the death or disability of the Principal Officer; or

(xii)           in Lender’s opinion, any material adverse change occurs in the
financial condition or business of Borrower or any Borrower-Related Party; or

(xiii)           any Loan Document ceases to be valid and binding for any reason
or Borrower or any Borrower-Related Party asserts so; or

 
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(xiv)           Borrower or any Borrower-Related Party suffers the entry against
it of a final judgment for the payment of money in excess of $50,000 which is
not covered by insurance which is not paid in full within ten (10) days
thereafter; or

(xv)           Borrower or any Borrower-Related Party suffers a writ or warrant
of attachment or any similar process to be issued by any tribunal against all or
any substantial part of its properties, assets or the Collateral including,
without limitation, the Mortgaged Property, and such writ or warrant of
attachment or any similar process is not stayed or released within thirty (30)
days after the entry or levy thereof or after any stay is vacated or set aside;
or

(xvi)           in Lender’s opinion, the prospect for payment or the prospect
for performance with respect to this Note or any other agreement that Borrower
or any Borrower-Related Party may have with Lender is impaired and Lender so
notifies Borrower in writing; or

(xvii)           Borrower or any Borrower-Related Party fails to comply with any
covenant or agreement in any of Sections 9(b), (c), (d), (h), (j), (m), (r),
(s), (t) or (v) in any respect.

(b)           Upon the occurrence of an Event of Default described in subsection
(a)(v), (vi) or (vii) above, all obligations under this Note and the other Loan
Documents shall thereupon be immediately due and payable, without demand,
presentment, notice of demand or of dishonor and nonpayment, protest, notice of
protest, notice of intention to accelerate, declaration or notice of
acceleration, or any other notice or declaration of any kind, all of which are
hereby expressly waived by Borrower and each Borrower-Related Party and any and
all sureties, guarantors and endorsers of this Note.  During the continuance of
any other Event of Default, then and in every such case Lender may do any or all
of the following: (i) declare the principal of this Note together with all
accrued and unpaid interest on the unpaid principal balance, and Loan Expenses
and other amounts due to Lender under this Note or the other Loan Documents, to
be due and payable immediately, and the same shall become and be due and
payable, without notices, demands for payment, presentations for payment,
notices of payment default, notices of intention to accelerate maturity, protest
and notice of protest, and any other notices of any kind, all of which are
expressly waived by Borrower and each Borrower-Related Party any and all
sureties, guarantors and endorsers of this Note, and/or (ii) exercise any or all
of its rights under all or any of the Loan Documents, and/or (iii) refuse to
advance any funds hereunder, including, without limitation, any Interest
Reserve, and/or (iv) exercise any or all other rights and remedies available to
Lender at law and at equity, including, without limitation, such rights existing
under the Uniform Commercial Code.  No delay on the part of Lender in exercising
any power under this Note shall operate as a waiver of such power or right nor
shall any single or partial exercise of any power or right preclude further
exercise of that power or right.

(c)           If this Note is placed in the hands of an attorney for collection
after an Event of Default or failure to pay under this Note, or if all or any
part of the Debt represented hereby is proved, established or collected in any
court or in any bankruptcy, receivership, debtor relief, probate or other court
proceedings, Borrower and each Borrower-Related Party and all endorsers,
sureties and guarantors of this Note, jointly and severally, agree to pay
reasonable attorneys' fees and collection costs to Lender in addition to the
principal and interest payable under this Note.

 
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12.           Usury Laws.  Notwithstanding anything to the contrary contained in
this Note or any other Loan Document:

(a)            It is expressly stipulated and agreed to be the intent of
Borrower and each Borrower-Related Party and Lender at all times to comply
strictly with the applicable Texas law governing the maximum rate or amount of
interest payable on the Debt, or applicable United States federal law to the
extent that such law permits Lender to contract for, charge, take, reserve or
receive a greater amount of interest than under Texas law.  If the applicable
law is ever judicially interpreted so as to render usurious any amount
contracted for, charged, taken, reserved or received in respect of the Debt,
including by reason of the acceleration of the maturity or the prepayment
thereof, then it is the express intent of Borrower and each Borrower-Related
Party and Lender that all amounts charged in excess of the Highest Lawful Rate
shall be automatically canceled, ab initio, and all amounts in excess of the
Highest Lawful Rate theretofore collected by Lender shall be credited on the
principal balance of the Debt (or, if the Debt has been or would thereby be paid
in full, refunded to Borrower), and the provisions of the Note and the other
Loan Documents shall immediately be deemed reformed and the amounts thereafter
collectible hereunder and thereunder reduced, without the necessity of the
execution of any new document, so as to comply with the applicable laws, but so
as to permit the recovery of the fullest amount otherwise called for hereunder
and thereunder; provided, however, if the Note has been paid in full before the
end of the stated term hereof, then Borrower and each Borrower-Related Party and
Lender agree that Lender shall, with reasonable promptness after Lender
discovers or is advised by Borrower that interest was received in an amount in
excess of the Highest Lawful Rate, either credit such excess interest against
the Debt then owing by Borrower to Lender and/or refund such excess interest to
Borrower.  Borrower and each Borrower-Related Party hereby agrees that as a
condition precedent to any claim seeking usury penalties against Lender,
Borrower will provide written notice to Lender, advising Lender in reasonable
detail of the nature and amount of the violation, and Lender shall have sixty
(60) days after receipt of such notice in which to correct such usury violation,
if any, by either refunding such excess interest to Borrower or crediting such
excess interest against the Debt then owing by Borrower to Lender. All sums
contracted for, charged, taken, reserved or received by Lender for the use,
forbearance or detention of the Debt shall, to the extent permitted by
applicable law, be amortized, prorated, allocated or spread, using the actuarial
method, throughout the stated term of the Note (including any and all renewal
and extension periods) until payment in full so that the rate or amount of
interest on account of the Debt does not exceed the Highest Lawful Rate from
time to time in effect and applicable to the Debt for so long as the Debt is
outstanding. In no event shall the provisions of Chapter 346 of the Texas
Finance Code (which regulates certain revolving credit loan accounts and
revolving triparty accounts) apply to this Note or any other part of the Debt.
Notwithstanding anything to the contrary contained herein or in any of the other
Loan Documents, it is not the intention of Lender to accelerate the maturity of
any interest that has not accrued at the time of such acceleration or to collect
unearned interest at the time of such acceleration.  The terms and provisions of
this paragraph shall control and supersede every other term, covenant or
provision contained herein, in any of the other Loan Documents or in any other
document or instrument pertaining to the Debt.

(b)           To the extent that Lender is relying on Chapter 303 of the Texas
Finance Code to determine the Highest Lawful Rate payable on the Note or any
other part of the Debt, Lender will utilize the weekly ceiling from time to time
in effect as provided in such Chapter 303, as amended. To the extent United
States federal law permits Lender to contract for, charge, take, receive or
reserve a greater amount of interest than under Texas law, Lender will rely on
United States federal law instead of such Chapter 303 for the purpose of
determining the Highest Lawful Rate. Additionally, to the extent permitted by
applicable law now or hereafter in effect, Lender may, at its option and from
time to time, utilize any other method of establishing the Highest Lawful Rate
under such Chapter 303 or under other applicable law by giving notice, if
required, to Borrower as provided by such applicable law now or hereafter in
effect.

 
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13.           Indemnity; Release.  Borrower and each Borrower-Related Party
jointly and severally agrees to indemnify Lender, upon demand, from and against
any and all liabilities, obligations, claims, losses, damages, penalties, fines,
actions, judgments, suits, settlements, costs, expenses or disbursements
(including reasonable, documented fees of attorneys, accountants, experts and
advisors) of any kind or nature whatsoever, now existing (in this section,
collectively called “Liabilities and Costs”) to the extent actually imposed on,
incurred by, or asserted against Lender in its capacity as lender hereunder
growing out of, resulting from or in any other way associated with (a) this Note
and the other Loan Documents or any of the transactions and events (including
the enforcement or defense thereof) at any time associated therewith or
contemplated therein, (b) any claim that the Loan evidenced hereby is
contractually usurious, and (c) any use, handling, storage, transportation, or
disposal of hazardous or toxic materials on or about the Property.

The foregoing indemnifications shall apply whether or not such Liabilities and
Costs are in any way or to any extent owned in whole or in part under any claim
or theory of strict liability, or are caused in whole or in part by any
negligent act or omission of any kind by Lender;

provided only that Lender shall not be entitled under this section to receive
indemnification for that portion, if any, of any Liabilities and Costs which is
proximately caused by its own individual gross negligence or willful misconduct,
as determined in a final judgment.  If any Person (including Borrower and each
Borrower-Related Party) ever alleges such gross negligence or willful misconduct
by Lender, the indemnification provided for in this section shall nonetheless be
paid upon demand, subject to later adjustment or reimbursement, until such time
as a court of competent jurisdiction enters a final judgment as to the extent
and effect of the alleged gross negligence or willful misconduct.  As used in
this section, the term “Lender” shall refer not only to the Person designated as
such in this Note but also to each partner, director, officer, attorney,
employee, representative and Affiliate of such Person.
 
For good and valuable consideration set forth herein, including the promises,
agreements, covenants, representations and obligations set forth in this Note
and the other Loan Documents, Borrower and each Borrower-Related Party hereby
releases and forever discharges, and covenants not to sue or file any charges or
claims against Lender for any and all existing or future claims, demands and
causes of action, in contract or in tort, at law or in equity, known or unknown,
pending or threatened, for all existing and future damages arising out of or in
any way associated with this Note and the other Loan Documents and the Loan made
pursuant hereto and thereto.
 

14.           No Presumption.  Borrower and each Borrower-Related Party
represents and warrants to Lender that they have read and fully understand the
terms and provisions hereof, have had an opportunity to review this Note and the
other Loan Documents with legal counsel and have executed this Note and the
other Loan Documents based on their own judgment.  If an ambiguity or question
of intent or interpretation arises, the Loan Documents will be construed as if
drafted jointly by Borrower and each Borrower-Related Party and Lender and no
presumption or burden of proof will arise favoring or disfavoring any party
because of authorship of any provision of the Loan Documents.

15.           Set-Off.  Borrower hereby gives and confirms to Lender a right of
set-off of all moneys, securities and other property of Borrower (whether
special, general or limited) and the proceeds thereof, now or hereafter
delivered to remain with or in transit in any manner to Lender, its
correspondents or its agents from or for Borrower, whether for safekeeping,
custody, pledge, transmission, collection or otherwise or coming into possession
of Lender in any way, and also, of all other liabilities and obligations now or
hereafter owed by Borrower to Lender, contracted with or acquired by Lender,
whether joint, several, absolute, contingent, secured, unsecured, matured or
unmatured, hereby authorizing Lender at any time after an Event of Default has
occurred and is continuing, without prior notice, to apply such balances,
credits of claims or any part thereof, to such liabilities in such amounts as it
may select, whether contingent, unmatured or otherwise, and whether any
collateral security therefor is deemed adequate or not.  The rights described
herein shall be in addition to any collateral security described in any separate
agreement executed by Borrower.

 
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16.           No Third Party Beneficiaries. The benefits of this Note and the
Loan Documents will not inure to any third party.  Notwithstanding anything
contained in the Loan Documents or any conduct or course of conduct by Borrower
or any Borrower-Related Party or Lender, before or after the date of this Note,
this Note will not be construed as creating any rights, claims, or causes of
action against Lender, or any of its officers, directors, agents or employees,
in favor of any contractor, subcontractor, supplier of labor or materials, or
any of their respective creditors, or any other person or entity other than
Borrower.  Without limiting the generality of the foregoing, Advances made to
any Person other than Borrower (including, without limitation, any contractor,
subcontractor or supplier of labor or materials) will not be deemed recognition
by Lender of any third-party beneficiary status claimed by any such person or
entity.

17.           Cumulative Remedies.  All rights and remedies that Lender is
afforded by reason of the Loan Documents are separate and cumulative with
respect to Borrower or any of them and otherwise and may be pursued separately,
successively, or concurrently, as Lender deems advisable.  In addition, all such
rights and remedies are non-exclusive and shall in no way limit or prejudice
Lender’s ability to pursue any other legal or equitable rights or remedies that
may be available to Lender.

18.           Notice.  Any notice, request or other communication required or
permitted to be given hereunder shall be given in writing by any of the
following methods:  (i) registered or certified mail, (ii) facsimile, (iii)
delivered personally by courier service, or (iv) delivered by nationally
recognized overnight delivery service; in each case, addressed to the respective
parties as follows:

If to Borrower:                                                      Pine Trace
Village, LLC
1221 North I-35 East, Suite 200
Carrollton, Texas 75006
Facsimile No. (469) 892-7201
Attention:  Mehrdad Moayedi
If to
Borrower-Related Party:                                           CTMGT Houston,
LLC
Mehrdad Moayedi
1221 E. I-35
Carrollton, Texas 75006
Facsimile No.(469) 892-7201
Attention:  Mehrdad Moayedi

If to Lender:                                           United Development
Funding IV
1301 Municipal Way, Suite 200
Grapevine, Texas 76051
Facsimile No. (817) 835-0383
Attention:  Ben Wissink, COO

 
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Each notice or other communication will be treated as effective and as having
been given and received (i) if sent by certified mail, or registered mail, three
(3) Business Days after deposit in a regularly maintained receptacle for deposit
of United States mail, (ii) if sent by facsimile, upon written or electronic
confirmation of facsimile transfer, (iii) if delivered by courier, upon written
or electronic confirmation of delivery from such service, or (iv) if sent by
nationally-recognized overnight delivery service, upon written or electronic
confirmation of delivery from such service.  Borrower’s or any Borrower Related
party’s address for notice may be changed at any time and from time to time, but
only after thirty (30) days’ advance written notice to Lender and shall be the
most recent such address furnished in writing by them to Lender.  Lender’s
address for notice may be changed at any time and from time to time, but only
after written notice to Borrower and shall be the most recent such address
furnished in writing by Lender to Borrower.  Actual notice, however and from
whomever given or received, shall always be effective when received.

19.           Enforcement and Waiver by Lender.  Lender shall have the right at
all times to enforce the provisions of this Note and the other Loan Documents in
strict accordance with their respective terms, notwithstanding any conduct or
custom on the part of Lender in refraining from so doing at any time or
times.  The failure of Lender at any time or times to enforce its rights under
such provisions, strictly in accordance with the same, shall not be construed as
having created a custom or in any way or manner modified or waived the same.

20.           Choice of Law.  Except to the extent that the validity or
perfection of security interests or remedies in respect of any particular
collateral is governed by the laws of a jurisdiction other than the state of
Texas, this Note and the other Loan Documents shall be construed in accordance
with and governed by the substantive laws of the state of Texas, without regard
to its conflict of laws provisions.

21.           Jurisdiction; Venue.  Borrower irrevocably agrees that any legal
proceeding in respect of this Note and the other Loan Documents shall be brought
in the district courts of Tarrant County, Texas or the United States District
Court for the Northern District of Texas, Fort Worth Division (the “Specified
Courts”).  Borrower hereby irrevocably submits to the nonexclusive jurisdiction
of the Specified Courts.  Borrower hereby irrevocably waives, to the fullest
extent permitted by law, any objection that it may now or hereafter have that
the laying of venue of any suit, action or proceeding brought in any such
Specified Court has been brought in an inconvenient forum.  Borrower hereby
irrevocably agrees to a transfer of all such proceedings to the Specified
Courts.  Nothing herein shall affect the right of Lender to commence legal
proceedings or otherwise proceed against Borrower in any jurisdiction or to
serve process in any manner permitted by applicable law.

22.           Counterparts.  This Note and each other Loan Document may be
executed in any number of counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute but one and the same
instrument.

23.           Severability.  If any provision of this Note or any other Loan
Document shall be held invalid under any applicable laws, then all other terms
and provisions of this Note and the Loan Documents shall nevertheless remain
effective and shall be enforced to the fullest extent permitted by applicable
law.

24.           Amendments; Waivers.  No amendment or waiver of any provision of
this Note nor consent to any departure herefrom, shall in any event be effective
unless the same shall be in writing and signed by Lender and the affected party,
and then such waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given.

 
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25.           Binding Effect; Assignment. This Note and the other Loan Documents
shall be binding on Borrower and its successors and assigns, including, without
limitation, any receiver, trustee or debtor in possession of or for Borrower,
and shall inure to the benefit of Lender and its successors and
assigns.  Borrower shall not be entitled to transfer or assign their obligations
under this Note and the other Loan Documents in whole or in part without the
prior written consent of Lender. This Note and the other Loan Documents are
freely assignable and transferable by Lender without the consent of
Borrower.  Should the status, composition, structure or name of Borrower change,
this Note and the other Loan Documents shall continue to be binding upon such
Person and also cover such Person under the new status composition, structure or
name according to the terms hereof and thereof.

26.           Time of the Essence.  Time is of the essence in this Note and the
Loan Documents.

27.           Captions; Number or Gender of Words.  The captions in this Note
are for the convenience of reference only and shall not limit or otherwise
affect any of the terms or provisions hereof.  Except where the context
indicates otherwise, words in the singular number will include the plural and
words in the masculine gender will include the feminine and neutral, and vice
versa, when they should so apply.

28.           Further Assurances; Cooperation.  Borrower and each
Borrower-Related Party will at any time and from time to time upon request of
the Lender take or cause to be taken any action, will execute, acknowledge,
deliver or record any further documents, opinions, mortgages, security
agreements, financing statements, amendments to the Loan Documents or other
instruments as Lender in its reasonable discretion deems necessary or
appropriate to carry out the purposes of the Loan Documents and to preserve,
protect and perfect the security interest intended to be created and preserved
in the Collateral.

29.           Joint and Several Liability.  “Borrower” shall mean each
co-borrower hereunder, or any of them, if more than one.  The obligations of
said Borrower hereunder if more than one, shall be joint and several.  Suit may
be brought against said Borrower, jointly and severally, and against any one or
more of them, or less than all, without impairing the rights of Lender against
the others of said Borrower; and Lender may compromise with any one of said
Borrower for such sums or sum as it may see fit and release such of said
Borrower from all further liability to Lender for such indebtedness without
impairing the right of Lender to demand and collect the balance of such
indebtedness from others of said Borrower not so released.

30.           Waiver of Jury Trial, Punitive Damages, etc.  Borrower and each
Borrower-Related Party hereby knowingly, voluntarily, intentionally and
irrevocably (a) waives, to the maximum extent not prohibited by law, any right
Borrower and each Borrower-Related Party may have to a trial by jury in respect
of any litigation based hereon, or directly or indirectly at any time arising
out of, under or in connection with this Note or the Loan Documents or any
transaction contemplated hereby or thereby or associated herewith or therewith,
(b) waives, to the maximum extent not prohibited by law, any right Borrower and
each Borrower-Related Party may have to claim or recover in any such litigation
any “Special Damages”, as defined below, (c) certifies that no party hereto nor
any representative of Lender or counsel for any party hereto has represented,
expressly or otherwise, or implied that such party would  not, in the event of
litigation, seek to enforce the foregoing waivers, and (d) acknowledges that
Lender has been induced to make the Loan to Borrower and to enter into the Loan
Documents with Borrower and each Borrower-Related Party by, among other things,
the waivers and certifications contained in this Section.  As used in this
Section, the term “Special Damages” means and includes special, consequential,
exemplary or punitive damages (regardless of how named).

 
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31.           Acknowledgement and Consent to Pledge.  Borrower and the
Borrower-Related Parties acknowledge that this Note is subject to a security
interest and lien in favor of, and is pledged as collateral to, Raley Holdings,
LLC, which is a lender to United Development Funding IV.  By execution hereof,
Borrower and the Borrower-Related Parties consent to such security interest,
lien and pledge.

32.           Entire Agreement.  This Note and the other Loan  Documents
together constitute the entire agreement among the parties concerning the
subject matter hereof, and all prior discussions, agreements and statements,
whether oral or written, are merged into this Note and the other Loan Documents.
There are no unwritten oral agreements among the parties and this Note and the
other Loan Documents may not be contradicted by evidence of prior,
contemporaneous or subsequent oral agreements of the parties.

[The remainder of this page is left blank intentionally.]

 
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This Note has been executed on this the _____ day of March, 2010 by the
undersigned Borrower, to be effective for all purposes as of the Effective Date.

BORROWER:

PINE TRACE VILLAGE, LLC,
a Texas limited liability company

By:           CTMGT Houston, LLC, a Texas limited liability company
Sole Member and Manager of Pine Trace Village, LLC

By:           Centamtar Terras, L.L.C., a Texas limited liability company
Member of CTMGT Houston, LLC

By:           CTMGT, LLC, a Texas limited liability company
Sole Member and Manager of Centamtar Terras, L.L.C.

By:             /s/ Mehrdad Moayedo
Name:         Mehrdad Moayedi
Title:           Sole Member and Manager of CTMGT, LLC.

By:           CTMGT, LLC, a Texas limited liability company
Member of CTMGT Houston, LLC

By:             /s/ Mehrdad Moayedi
Name:         Mehrdad Moayedi
Title:           Sole Member and Manager of CTMGT, LLC

 
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This Note has been executed on this the _____ day of March, 2010 by the
undersigned Borrower-Related Parties, to be effective for all purposes as of the
Effective Date.

BORROWER-RELATED PARTY:

CTMGT HOUSTON, LLC, a Texas limited liability company, hereby executes this Note
for the purpose of acknowledging and agreeing to the representations,
warranties, covenants and agreements as same relate to it, specifically in its
capacity as a Pledgor, a Guarantor and a Borrower-Related Party under this Note.

CTMGT HOUSTON LLC,
a Texas limited liability company

By:           Centamtar Terras, L.L.C., a Texas limited liability company
Member of CTMGT Houston, LLC

By:           CTMGT, LLC, a Texas limited liability company
Sole Member and Manager of Centamtar Terras, L.L.C.

By:             /s/ Mehrdad Moayedi
Name:         Mehrdad Moayedi
Title:           Sole Member and Manager of CTMGT, LLC.

By:           CTMGT, LLC, a Texas limited liability company
Member of CTMGT Houston, LLC

By:             /s/ Mehrdad Moayedi
Name:         Mehrdad Moayedi
Title:           Sole Member and Manager of CTMGT, LLC

 
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This Note has been executed on this the _____ day of March, 2010 by the
undersigned Lender, to be effective for all purposes as of the Effective Date.

The terms of this Note are hereby accepted by Lender.

LENDER:

UNITED DEVELOPMENT FUNDING IV
a Maryland real estate investment trust

By:         /s/ David
Hanson                                                                 
Name:     David Hanson                 
Its:          COO 

 
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EXHIBIT A

LARGE TRACT

Tract I:

LOTS ONE (1), FIVE (5), THIRTY (30), THIRTY-TWO (32), THIRTY-THREE (33),
THIRTY-FOUR (34), THIRTY-FIVE (35), THIRTY-SIX (36), THIRTY-SEVEN (37),
THIRTY-EIGHT (38), THIRTY-NINE (39), FORTY (40), FORTY-ONE (41) in BLOCK ONE (1)
; LOTS FIVE (5), SIX (6), SEVEN (7), EIGHT (8), NINE (9) in BLOCK TWO (2); LOTS
ONE (1), TWO (2), THREE (3), FOUR (4), SIX (6), SEVEN (7), in BLOCK THREE (3),
of PINE TRACE VILLAGE SECTION ONE (1), a subdivision in Harris County, Texas,
according to the map or plat thereof recorded under Film Code No. 603139 of the
Map Records of Harris County, Texas.

Tract II:

LOTS ONE (1), TWO, (2), THREE (3), FOUR (4), FIVE (5), SIX (6), SEVEN (7), EIGHT
(8), NINE (9), TEN (10), ELEVEN (11), TWELVE (12), THIRTEEN (13), FOURTEEN (14),
FIFTEEN (15), SIXTEEN (16), SEVENTEEN (17), EIGHTEEN (18), NINETEEN (19), TWENTY
(20), TWENTY-ONE (21), TWENTY-TWO (22), TWENTY-THREE (23), TWENTY-FOUR (24),
TWENTY-FIVE (25), TWENTY-SIX (26), TWENTY-SEVEN (27), TWENTY-EIGHT (28),
TWENTY-NINE (29), THIRTY (30), THIRTY-ONE (31) and THIRTY-TWO (32), in BLOCK ONE
(1); LOTS ONE (1), TWO (2), THREE (3), FOUR (4), FIVE (5), SIX (6), SEVEN (7),
EIGHT (8), NINE (9), TEN (10), ELEVEN (11), TWELVE (12), THIRTEEN (13), FOURTEEN
(14), FIFTEEN (15), SIXTEEN (16), SEVENTEEN (17), EIGHTEEN (18), NINETEEN (19),
TWENTY (20), TWENTY-ONE (21), TWENTY-TWO (22), TWENTY-THREE (23) TWENTY-FOUR
(24), TWENTY-FIVE (25), TWENTY-SIX (26), TWENTY-EIGHT (28), TWENTY-NINE (29),
THIRTY (30), THIRTY-ONE (31), THIRTY-TWO (32), THIRTY-THREE (33), THIRTY-FOUR
(34), THIRTY-FIVE (35), THIRTY-SIX (36), THIRTY-SEVEN (37), THIRTY-EIGHT (38),
THIRTY-NINE (39) in BLOCK TWO (2); LOTS ONE (1), TWO (2), THREE (3), FOUR (4),
FIVE (5), SIX (6), SEVEN (7), EIGHT (8), NINE (9), TEN (10), ELEVEN (11), TWELVE
(12), THIRTEEN (13), FOURTEEN (14), FIFTEEN (15), TWENTY-ONE (21), TWENTY-TWO
(22), TWENTY-THREE (23), TWENTY-FOUR (24), TWENTY-FIVE (25), TWENTY-SIX (26),
TWENTY-SEVEN (27) TWENTY-EIGHT (28), TWENTY-NINE (29) in BLOCK THREE (3), of
PINE TRACE VILLAGE SECTION TWO (2), a subdivision in Harris County, Texas
according to the map or plat thereof recorded under Film Code No. 603141 of the
Map Records of Harris County, Texas.

Tract III:

All that certain tract or parcel of land, containing 170.963 acres, more or
less, being out of the Jesse Pruitt Survey, Abstract No. 629, situated
in   County, Texas, being more particularly described by metes and bounds in
Exhibit "A" attached hereto.

Save and except the following two parcels of land:

PINE TRACE VILLAGE SECTION ONE (1), a subdivision in Harris County, Texas,
according to the map or plat thereof recorded under Film Code No. 603139 of the
Map Records of Harris County, Texas.

PINE TRACE VILLAGE SECTION TWO (2), a subdivision in Harris County, Texas
according to the map or plat thereof recorded under Film Code No. 603141 of the
Map Records of Harris County, Texas.

 
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EXHIBIT B

SMALL TRACT

Being a tract of land containing 19.842 acres, located in the James Coulter
Survey, Abstract 214, Harris County, Texas; said 19.842 acre tract being a
portion of a called 70.7708 acre tract of land recorded in the name of Ralph
Shirley, Trustee, in Harris County Clerk’s File Number (H.C.C.F. No.) H971952,
and being the remainder of a called 24.8708 acre tract recorded in the name of
Ralph Shirley, Trustee, in H.C.C.F. No. N220673; said 19.842 acre tract being
more particularly described by metes and bounds as follows (bearings are based
on the Texas State Plane Coordinate System, South Central Zone (NAD 83));
BEGINNING at a 5/8-inch iron rod found marking the northwest corner of a called
5.000 acre tract of land recorded in the name of George Rochester in H.C.C.F.
No. R936188, being on the east Right-of-Way (R.O.W.) line of Stuebner Airline
Road (60 feet wide per H.C.C.F. No. C104039 and Volume 1, Page 310 Road Records
of Harris County), and the west line of aforesaid 24.8708 acre tract;
THENCE, with the east R.O.W. line of aforesaid Stuebner Airline Road and the
west line of aforesaid 24.8708 acre tract, North 02 degrees 13 minutes 03
seconds West, a distance of 384.84 feet to a 5/8-inch iron rod found marking the
northwest corner of aforesaid 24.8708 acre tract, the southwest corner of a
called 5.0027 acre tract (called Tract “A”) recorded in the name of Patrick
Brady and Pamela Brady in H.C.C.F. No. X350141, and the northwest corner of the
herein described tract;
THENCE, with the line common to aforesaid 24.8708 acre tract and aforesaid
5.0027 acre tract, a called 5.0000 acre tract (called Tract “B”) recorded in the
name of Patrick Brady and Pamela Brady in H.C.C.F. No. X350141, a called 4.9942
acre tract (called Tract “C”) recorded in the name of Jean M. Widak in H.C.C.F.
No. S716758, and a called 5.0058 acre tract recorded in the name of James E.
Taylor and Linda A. Taylor in H.C.C.F. No. W325620, North 87 degrees 38 minutes
29 seconds East, a distance of 1249.70 feet (called 1250.00 feet) to a ½-inch
iron rod found marking the northeast corner of aforesaid 24.8708 acre tract, the
southeast corner of aforesaid 5.0058 acre tract, and the northwest corner of a
called 5.4103 acre tract recorded in the name of Kim L. Arnold and spouse Edward
E. Arnold in H.C.C.F. No. T112214;
THENCE, with the line common to aforesaid 24.8708 acre tract, and aforesaid
5.4103 acre, and a called 5.4416 acre tract of land recorded in the name of
David W. Pavlik in H.C.C.F. No. U314072, South 02 degrees 11 minutes 06 seconds
East, a distance of 866.01 feet (called 866.70 feet) to a 5/8-inch iron rod
found marking the southeast corner of aforesaid 24.8708 acre tract, the
southwest corner of aforesaid 5.4416 acre tract and the southeast corner of the
herein described tract, and being on the north line of a called 170.940 acre
tract of land recorded in the name of 170 Dowdell, Ltd., in H.C.C.F. No.
X444623;
THENCE, with the line common to aforesaid 24.8708 and 170.940 acre tracts, South
87 degrees 37 minutes 25 seconds West, a distance of 712.20 feet to a 5/8-inch
iron rod set for the southerly southwest corner of the herein described tract,
the southeast corner of aforesaid 5.0000 acre tract, and being on the southwest
line of a 75-foot wide Harris County Flood Control Ditch (H.C.F.C.D.); easement
recorded in H.C.C.F. No. S728540;
THENCE, with the east line of aforesaid 5.0000 acre tract and the southwest line
of aforesaid 75-foot wide H.C.F.C.D. easement, North 21 degrees 30 minutes 47
seconds West, a distance of 509.09 feet to a 5/8-inch iron rod set for angle
point and being the northeast corner of aforesaid 5.0000 acre tract;
THENCE, with the north line of aforesaid 5.0000 acre tract, South 87 degrees 43
minutes 00 seconds West, a distance of 368.78 feet to the POINT OF BEGINNING
containing 19.842 acres of land.

 
37104.8/319363v2
Secured Promissory Note – Pine Trace Village – Lot / Land Loan
 
39

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EXHIBIT C

APPROVED BUDGET

(See Attached)

 
37104.8/319363v2
Secured Promissory Note – Pine Trace Village – Lot / Land Loan
 
40

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EXHIBIT D

PRO FORMA

(See Attached)

 
37104.8/319363v2
Secured Promissory Note – Pine Trace Village – Lot / Land Loan
 
41

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EXHIBIT E

FORM OF ADVANCE REQUEST

(See Attached)

 
37104.8/319363v2
Secured Promissory Note – Pine Trace Village – Lot / Land Loan
 
42

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