Exhibit 10.2
 

 
Three (3) Year
$8,000,000.00
Revolving Loan Agreement
 
This Three (3) Year $8,000,000.00 Revolving Loan Agreement (the "Agreement"),
dated the 19th day of August, 2010 (the "Date Hereof"), by and between UDF IV
Acquisitions, L.P., a Delaware limited partnership (the "Borrower"), United
Development Funding III, LP, a Delaware limited partnership ("UDF III"), United
Development Funding IV, a real estate investment trust organized under the laws
of the State of Maryland ("UDF IV", UDF III and UDF IV are referred to herein
individually as a "Guarantor," and collectively as the "Guarantors"), and
Community Trust Bank of Texas (the "Bank").
 
WITNESSETH:
 
BACKGROUND.  Borrower is in the business of purchasing loans from financial
institutions evidenced by mortgage notes secured by first and prior liens on
single family residential lots or developed real property located within the
State of Texas (collectively called the "Mortgage Paper"). Borrower has
requested the Bank to extend a loan not to exceed Eight Million and No/l00
Dollars ($8,000,000.00), in aggregate, on a revolving loan basis (the "Loan")
from to fund all or part of the purchase price of the loans evidenced by the
Mortgage Paper.  Bank is willing to advance the Loan upon the terms and
conditions hereinafter set forth.
 
NOW, THEREFORE, in consideration of the promises herein contained, and each
intending to be legally bound hereby, the parties agree as follows:
 
Section I:  The Loan
 
1.01 Disbursement of the Loan. Subject to the terms hereof, Bank will credit the
proceeds of the revolving Loan advanced from time to time to the Borrower's
deposit account with the Bank or, at Bank's discretion, to other depository
accounts designated by Borrower.
 
1.02 General Terms. Subject to the terms hereof and the Note (defined below),
the Bank will lend the Borrower, from time to time during the period beginning
on the Date Hereof and ending on August 19, 2013, such sums as the Borrower may
request by draw ("Draw") request to the Bank, received by the Bank not less than
one (1) banking day before Bank is requested to fund such Draw and which shall
not exceed, in the aggregate principal amount at any one time outstanding, an
amount (the "Loan Commitment") equal to the lesser of $8,000,000.00 or the
Borrowing Base, defined in Section 1.06.  Borrower may borrow, repay without
penalty or premium and reborrow hereunder, from the Date Hereof until August 19,
2013, either the full amount of the Loan Commitment or any lesser sum. It is the
intention of the parties that the outstanding principal amount of the Loan shall
at no time exceed the amount of the then existing Borrowing Base, and if, at any
time, an excess shall for any reason exist, the full amount of such excess,
together with accrued and unpaid interest thereon as herein provided, shall be
immediately due and payable in full. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN
THE LOAN DOCUMENTS, BANK SHALL HAVE NO OBLIGATION TO MAKE ANY FURTHER ADVANCES
OF PRINCIPAL UNDER THE LOAN AFTER AUGUST19, 2013, ALTHOUGH BANK RESERVES THE
RIGHT TO DO SO, IF BANK DEEMS IT NECESSARY TO ADVANCE PRINCIPAL IN ORDER TO
PRESERVE COLLATERAL OR ENFORCE ITS RIGHTS UNDER THE LOAN DOCUMENTS.
 
 
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This Loan will be secured inter alia by Pledged Mortgage Paper (hereinafter
defined) which shall at all times during the term of the loan have an aggregate
outstanding principal balance equal to at least 200% of the outstanding
principal balance of the Loan.
 
1.03 Draws. Draws will be submitted not more frequently than monthly on forms
acceptable to Bank. Borrower will not submit Draws on or after August 19, 2013.
 
1.04 The Note. The Loan shall be evidenced by a Revolving Line of Credit
Promissory Note (the "Note"), having a stated maturity on August 19, 2013, with
a face amount of $8,000,000.00, executed by Borrower and payable to the order of
Bank.
 
1.05 The Origination and/or Commitment Fees. In exchange for Bank's agreement to
set aside funds to accommodate Borrower's rights to draw hereunder, Borrower
will pay Bank $80,000.00 upon execution of this Agreement by Borrower.
 
1.06 Borrowing Base. The Borrowing Base is an amount equal to the lesser of (i)
forty-five percent (45%) of the purchase price to be paid by Borrower for the
purchase of the Pledged Mortgage Paper, less any principal reductions on such
Pledged Mortgage Paper that may be made from time to time, or (ii) forty-five
percent (45%) of the appraised value of the Mortgage Property (hereinafter
defined) as determined by Lender in its reasonable discretion from time to time
(the "Appraised Value").  Borrower and Guarantors acknowledge and agree that the
portion of the Borrowing Base which was calculated based on the Appraised Value
may change from time to time as Bank may determine in its sole discretion due to
(i) changes in the appraised value of the Mortgage Property as set forth in any
appraisal obtained by Bank pursuant to its re-appraisal rights contained in
Section 4.01(JJ) of this Agreement, or (ii) as the lien of the Mortgage (as
defined in Section 3.10(B) of this Agreement) against the Mortgaged Property is
released or partially released from time to time.  Accordingly, if the lien of a
Mortgage is partially released from portions of the Mortgage Property, the
Borrowing Base may be adjusted by Bank based on the Appraised Value of the
remaining Mortgage Property which is still subject to the lien of the
Mortgage.  Or, if the value of the Mortgage Property fluctuates based on updated
appraisals, the Borrowing Base may be adjusted by Bank based on the current
Appraised Value.  Borrower and Guarantors further agree that any appraisals of
the Mortgage Property must be performed by appraisers that are acceptable to the
Bank and such appraisals must be satisfactory to the Bank in all respects.  Bank
agrees to give Borrower notice of Bank’s intent to conduct a new appraisal of
the Mortgaged Property, and such notice will give Borrower an opportunity to
submit to Bank information that is relevant to the value of the Mortgage
Property.  Borrower agrees that Bank is not obligated to consider the
information provided by Borrower related to the value of the Mortgaged
Property.  If, at any time, the recalculation of the Borrowing Base based upon
the Appraised Value results in the outstanding principal amount of the Loan
exceeding the then existing Borrowing Base, Borrower agrees to immediately pay
to Lender the full amount of such excess, together with accrued and unpaid
interest thereon as herein provided.
 
 
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For purposes hereof, the term "Pledged Mortgage Paper" shall mean Mortgage Paper
pledged to Bank by Borrower that is not more than sixty (60) days past due and
secured by a first and prior deed of trust lien encumbering single family
residential lots or developed real property located within the State of Texas
(the "Mortgage Property"), or fee simple titles to such residential properties,
but excluding any Mortgage Paper which (a) is more than sixty (60) days past
due, (b) is secured by townhomes, condos, or duplexes, (c) is secured by
property located outside of the State of Texas, (d) the outstanding principal
balance, payment terms, or collateral securing the Mortgage Paper is modified (a
"Material Modification"), (e) consists of an installment contract for deed, (f)
is secured by properties that have ad valorem taxes or other assessments due and
owing against the them that are delinquent, (g) the original loan to value ratio
of the Mortgage Paper exceeds one hundred percent (100%) of the purchase price
to be paid by Borrower for the purchase of such Mortgage Paper, or (h) any
Mortgage Paper that has been released by Lender or is otherwise no longer
enforceable by Lender.  Borrower will remove from the Mortgage Paper pledged to
the Bank and pay down the Loan to maintain compliance with the Borrowing Base,
at once and without demand (i) any Mortgage Paper that is more than sixty (60)
days past due, (ii) any Mortgage Paper that has been renewed, modified or
extended in any way that results in a Material Modification, or (iii) any
Mortgage Paper that is secured by properties that have ad valorem taxes or other
assessments due and owing against them that are not paid in full when due to the
appropriate taxing authorities. Borrower will submit a reconciliation of
collateral and debt on the first day of each month (the "Settlement Date") on
which will be reported the Borrowing Base for that month. Prior to August 19,
2013, if the reconciliation shows available borrowing, the Borrower may draw up
to the available amount for borrowing. If the reconciliation shows available
borrowing to be less than the amount outstanding, the Loan shall be immediately
paid down by the Borrower to the available amount, i.e. the Borrowing Base, at
that time. No Draw will be funded if any default by Borrower is threatened or
has occurred under any of Bank's Loan Documents in Bank's reasonable commercial
judgment.
 
1.07 Mortgage Paper Tracking. In order to induce Bank to enter into this
Agreement, Borrower has represented to Bank that Borrower will promptly furnish
Bank with all information needed/requested by Bank from time to time to track
each item of Mortgage Paper ("Item"), each first lien note and first lien
securing the payment of such first lien note pledged to Bank in order to
independently determine its currency, and to remain assured that no Item of
Pledged Mortgage Paper considered in the Borrowing Base is more than sixty (60)
days past due or does not otherwise comply with the Borrowing Base criteria as
set forth above.  In addition, Borrower will furnish any certification of
Mortgage Paper currency under oath that Bank may request from time to time
during the term of the Loan.
 
1.08 Interest Rate and Payments of Interest.
 
(A) Except as otherwise provided under § 1.08(B), interest on the principal
balance of the Loan from time to time outstanding will be payable in monthly
installments (as set forth in the Note) at the floating rate of one percentage
point (1%) above The Wall Street Journal Prime Rate per annum based on a 360 day
year and the actual number of days elapsed, subject to a floor interest rate of
five and one-half percent (5.5%) (the "Floating Rate"). All past due principal
and interest shall bear interest at a rate per annum which is equal to the
highest lawful rate from maturity until paid. Notwithstanding the foregoing
provisions concerning such varying rate, if at any time the Floating Rate
exceeds the highest lawful rate, the rate of interest to accrue on the Note
shall be limited to the highest lawful rate, but if thereafter the Floating Rate
is less than the highest lawful rate, the rate of interest to accrue on the Note
shall be the highest lawful rate until the total amount of interest accrued on
the Note equals the amount of interest which would have accrued if the Floating
Rate had at all times been in effect.
 
(B) It is the intention of the parties hereto to comply with the usury laws
applicable to the Loan; accordingly, it is agreed that notwithstanding any
provision to the contrary in Agreement or in any of the documents securing
payment of the Loan, no such provision shall require the payment or permit the
collection of interest in excess of the maximum permitted by law. If any excess
interest is provided for, contracted for, charged for or received, then the
provisions of this paragraph shall govern and control and neither the Borrower
hereof nor any other party liable for the payment thereof shall be obligated to
pay the amount of such excess interest. Any such excess interest which may have
been collected shall be, at the Bank's option, either applied as a credit
against the then unpaid amount hereof or refunded to Borrower. The effective
rate of interest shall be automatically subject to reduction to the maximum
lawful contract rate allowed under the usury laws as now or hereafter construed.
It is further agreed that without limitation of the foregoing, all calculations
of the rate of interest contracted for, charged for, or received under this
Agreement which are made for the purposes of determining whether such rate
exceeds the maximum lawful rate, shall be made, to the extent permitted by law,
by amortizing, prorating, allocating and spreading in equal parts during the
full stated term of the Loan, all interest contracted for, charged for or
received from the Borrower or otherwise by the Bank.
 
1.09 Payment to the Bank. All sums payable to the Bank hereunder shall be paid
directly to the Bank in immediately available funds. Additionally, upon the
occurrence of an Event of Default, the Bank may charge against any deposit
account of the Borrower all or any part of any amount due hereunder.
 
1.10 Audit of Mortgage Paper. The Borrower shall permit representatives of Bank,
including independent auditors, collateral verification agents, attorneys and
any other parties from time to time to audit and inspect Borrower's property,
including Borrower's books and records, make photocopies thereof, and record
information relating thereto, and Borrower shall reimburse Bank upon demand for
the fees, costs and expenses of such audits and inspections. As long as no Event
of Default has occurred, Bank agrees to audit and inspect Borrower's property no
more frequently than once in any twelve (12) month period. Upon the occurrence
of an Event of Default, Bank shall have the right to audit and inspect
Borrower's property more frequently than once in any twelve (12) month period.
 
 
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1.11 Servicing Rights. Borrower covenants that the servicing rights to the
Mortgage Paper pledged to Bank will not be sold or assigned and that the Bank
will have control of such rights, as more particularly set forth in Section 3.04
of this Agreement.
 
1.12 Guaranties. Guarantors shall guarantee the Obligations (as defined below)
of Borrower to Bank by executing and delivering to Bank the Guaranties (as
defined below). UDF III may request Bank to release UDF III of its obligations
under its respective Guaranty ("Release Request") upon UDF IV obtaining and
maintaining a Tangible Net Worth (as defined below) of $150,000,000.00.  Upon
Bank's receipt of UDF III's Release Request, Bank may, in its sole discretion,
release UDF III from its obligations under its Guaranty as long as (i) UDF IV
has obtained and maintained a Tangible Net Worth of $150,000,000.00 for six (6)
consecutive months, and (ii) no Event of Default has occurred. Borrower and
Guarantors agree and acknowledge that Bank shall have no obligation to release
UDF III from its obligations under its Guaranty upon Bank's receipt of a Release
Request.
 
Section II.  Conditions Precedent
 
In addition to the provisions set forth in 3.06 below, the obligation of the
Bank to make any advance on the Loan is subject to the following conditions
precedent:
 
2.01 Documents Required for the Closing. The Borrower shall have delivered to
the Bank, prior to the initial disbursement of any Loan amounts (the "Closing"),
the following:
 
(A) An opinion letter executed by Hallett & Perrin, P.C.;
 
(B) The duly executed Note (Exhibit "A"), having a stated maturity on the
August 19, 2013, with a face amount of $8,000,000.00, executed by Borrower and
payable to the order of Bank;
 
(C) The duly executed Guaranty Agreements (Exhibits "B" and "C") ("Guaranties"),
in form acceptable to Bank signed by Guarantors, together with each Guarantor’s
current financial statement as set forth in Section 2.01(E) below;
 
(D) Borrower's current financial statements (the "Borrower Financial
Statements") reviewed by its certified public accountant, which shall be
satisfactory in form/content to Bank;
 
(E) Guarantors' current financial statement (the "Guarantor Financial
Statements") reviewed by their certified public accountant, which shall be
satisfactory in form/content to Bank (Borrower Financial Statements and
Guarantor Financial Statements are collectively referred to herein as the
"Financial Statements");
 
(F) Collateral Assignment of Notes and Liens and Security Agreement (Exhibit
"D") ("Assignment"), duly executed by Borrower in favor of Bank, encumbering the
Mortgage Paper comprising the Pledged Mortgage Paper, acceptable to Bank,
including physical possession of the Notes endorsed to Bank and Financing
Statements mentioned in Section III;
 
 
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(G) UCC-l (Exhibit "E") Financing Statement, duly executed by Borrower,
evidencing the Bank's security interest in the Pledged Mortgage Paper;
 
(H) Foreclosure Arrangement Agreement (Exhibit "F") (“Foreclosure Agreement”)
duly executed by Borrower, Guarantors, Scheef & Stone, L.L.P., David R. Norman,
Patrick J. Schurr, Heather Legato-Kay, Leslie Sanderson, and Hallett & Perrin,
P.C.;

(I) Security Agreement (Exhibit "G") ("Security Agreement"), duly executed by
Borrower in favor of Bank, encumbering the assets of Borrower more particularly
described therein (the "Collateral");

(J) UCC-l (Exhibit "H") Financing Statement, duly executed by Borrower,
evidencing the Bank's security interest in the Collateral;
 
(K) Unanimous Written Consent of the Partners of Borrower (Exhibit "I"),
authorizing the execution, delivery, and performance of this Agreement, the
Note, and all other documents to be delivered pursuant hereto at such time;
 
(L) Unanimous Written Consent of the Members and Managers of UDF IV Acquisitions
Manager, LLC (Exhibit "J"), authorizing the execution, delivery, and performance
of this Agreement, the Note, and all other documents to be delivered pursuant
hereto at such time;
 
(M) Written Consent of the General Partner of United Development Funding III,
L.P. (Exhibit "K"), authorizing the execution, delivery, and performance of this
Agreement and all other documents to be delivered pursuant hereto at such time;
 
(N) Unanimous Written Consent of the Board of Directors of UMTH Land
Development, L.P. (Exhibit "L"), authorizing the execution, delivery, and
performance of this Agreement, the Note, and all other documents to be delivered
pursuant hereto at such time;
 
(O) Unanimous Written Consent of the Board of Directors of UMT Services, Inc.
(Exhibit "M"), authorizing the execution, delivery, and performance of this
Agreement, the Note, and all other documents to be delivered pursuant hereto at
such time;
 
(P) Unanimous Written Consent of the Board of Trustees of United Development
Funding IV (Exhibit "N"), authorizing the execution, delivery, and performance
of this Agreement, and all other documents to be delivered pursuant hereto at
such time;
 
               (Q) Statute of Frauds Notice (Exhibit "O") duly executed by Bank,
Borrower and Guarantors; and
 
 
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(R) Errors and Omissions Letter (Exhibit "P") duly executed by Bank, Borrower
and Guarantors.
 
The documents evidencing, securing or otherwise furnished by Bank in connection
with the Loan, including this Agreement and the documents set forth above,
collectively are called "Loan Documents".

 
Section III.  Security Agreement; Advances

 
3.01 Grant of Security Interest. As collateral security for the payment and
performance of the Note and any and all other liabilities of Borrower to Bank,
direct or contingent, of any nature whatsoever, including both purchase money
and non-purchase money transactions, and whether now existing or hereafter
arising under this Agreement or the other Loan Documents (collectively the
"Obligations"), Borrower hereby grants to Bank a continuing security interest in
the following as collateral security for the payment and performance of the
Obligations, wherever the following is located and whether the following is now
owned or existing or is owned, acquired, or arises hereafter, including, without
limitation, acquisition by contract or by operation of law (all terms used in
this Section 3.01 which are defined in the Uniform Commercial Code shall have
the meanings given to such terms in the Uniform Commercial Code as adopted in
the statutes of Texas):  (i) all right, title and interest of the Borrower in
and to the promissory notes constituting the Mortgage Paper; (ii) all right,
title and interest of the Borrower in and to each and every deed of trust,
installment contract for deed, mortgage, guarantee, loan document, title policy,
insurance policy, or any other right ancillary to or securing or relating to the
pledged promissory notes; (iii) all accounts and receivables of Borrower arising
out of or relating to the Mortgage Paper; (iv) all general intangibles of
Borrower relating to or arising out of the Mortgage Paper; (v) all of the rights
of Borrower to the payment of money, including, without limitation, tax refund
and insurance proceeds, relating to the Mortgage Paper or the real properties
securing same; (vi) all files, records, books, ledger cards (including without
limitation, computer programs, tapes and related electronic data processing
software) and writings of Borrower or in which it has an interest in any way
relating to the Mortgage Paper; (vii) all other personal property of Borrower of
any kind or type whatsoever relating to the Mortgage Paper; (viii) the
Collateral; and (ix) all additions, substitutions, replacements, proceeds and
products of each of the foregoing described in this Section 3.01.
 
3.02 Power of Attorney. Borrower hereby designates and/or appoints Bank and each
of its designees or agents as attorney-in-fact of Borrower, irrevocably and with
power of substitution, with authority to take any or all of the following
actions: (i) with respect to any Mortgage Paper, demand, collect, receive,
settle, compromise, adjust, foreclose and resell and/or give discharges and
releases, all as Bank may determine; (ii) commence and prosecute any actions in
any court for the purposes of collecting amounts owed on Mortgage Paper and
enforcing any other rights in respect thereof; (iii) defend, settle or
compromise any action brought and, in connection therewith, give such discharge
or release as Bank may deem appropriate; (iv) receive, open and dispose of mail
addressed to Borrower and endorse checks, notes, drafts, acceptances, money
orders, bills of lading, warehouse receipts or other instruments or documents
evidencing payment made on account of or funds paid relating to Mortgage Paper
on behalf of and in the name of Borrower; (v) sell, assign, transfer, make any
agreement in respect of, or otherwise deal with or exercise rights in respect
of, any Mortgage Paper as fully and completely as though Bank were the absolute
owner thereof for all purposes; (vi) adjust and settle claims under any
insurance policy related thereto; and (vii) execute financing statements or
amendments thereto or any other documents or writing deemed necessary by Bank to
evidence or perfect Bank's security interest in the Mortgage Paper and the
Collateral; provided that Bank agrees to furnish copy of any document executed
hereunder to Borrower, as applicable, upon request; and (viii) enter on the
premises of Borrower in order to exercise any of Bank's rights and
remedies.  The appointment of Bank as attorney-in-fact is coupled with an
interest and is irrevocable. Bank agrees not to exercise the rights granted in
this Section 3.02 until after the occurrence of an Event of Default.
 
 
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3.03 No Duty of Bank. Bank shall have no duty as to the collection or protection
of the Mortgage Paper nor as to the preservation of any rights pertaining
thereto. Borrower hereby releases Bank from any claims, causes of action and
demands at any time arising out of the Mortgage Paper and its use and/or any
actions taken by Bank with respect thereto, and Borrower hereby agrees to
indemnify Bank and to hold Bank harmless from any and all such claims, causes of
action and demands, except for such claims, causes of action and demands arising
from Bank's gross negligence or willful misconduct.
 
3.04 Collection of Mortgage Paper. Prior to the Bank exercising its right to
collect the Mortgage Paper pursuant to this Section 3.04, Borrower shall have a
revocable license to diligently collect all payments due under such Mortgage
Paper on behalf of Bank; provided, however, that upon the occurrence of an Event
of Default Borrower’s license to collect such payments shall immediately
terminate, and all such payment shall be delivered directly to
Bank.  Furthermore, upon termination of Borrower’s license to collect all
payments due under the Mortgage Paper pledged to the Bank, Borrower shall, at
the request of Bank, notify the account debtors of the Mortgage Paper as
provided for in this Agreement and direct such account debtors to make all such
payments directly to Bank. Bank itself may at any time after the termination of
Borrower’s license to collect payments due under any Mortgage Paper pledged to
Bank, so notify the account debtors and/or collect payments due under such
Mortgage Paper.
 
3.05 Perfection and Protection of Liens and Security Interest. Borrower will
from time to time deliver to Bank any financing statements, continuation
statements, extension agreements and other documents, properly completed and
executed (and acknowledged when required) by Borrower in form and substance
satisfactory to Bank for the purpose of perfecting, confirming, or protecting
Bank's security interest and other rights in the Mortgage Paper and the
Collateral.
 
3.06 Notice of Assignment. All Mortgage Paper pledged to Bank and all promissory
notes, instruments, documents and other agreements entered into by Borrower and
covering any of the use or proceeds of Mortgage Paper pledged to Bank shall
contain (by way of stamp or other means satisfactory to Bank) the following
language: "PAY TO THE ORDER OF COMMUNITY TRUST BANK OF TEXAS, WITH FULL
RECOURSE".
 
3.07 Rights in Property Held by the Bank. As further security for the prompt
satisfaction of all Obligations, the Borrower hereby assigns, transfers, and
sets over to the Bank all of its right, title, and interest in and to, and
grants the Bank a lien on and a security interest in, all amounts that may be
owing, from time to time, by the Bank to the Borrower in any capacity,
including, but without limitation, any deposit or other account with the Bank,
which lien and security interest shall be independent of, and in addition to,
any right of set-off that the Bank has hereunder or otherwise, excluding escrow
accounts.
 
 
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3.08 Priority of Liens. The foregoing liens and security interest in favor of
Bank shall be first and prior liens and security interests.
 
3.09 Financing Statements, Assignments and Deeds of Trust.
 
(A) The Borrower will:
 
(1) Join with the Bank in executing such financing statements (including
amendments thereto and continuation statements thereof), Assignments and any
other collateral documents in form satisfactory to the Bank as the Bank, from
time to time, may specify;
 
(2) Pay, or reimburse the Bank for paying, all costs and taxes of filing or
recording the same in such public offices as the Bank may designate; and
 
(3) Take such other steps as the Bank, from time to time, may direct to perfect,
to the satisfaction of the Bank, the Bank's interest in the Mortgage Paper and
the Collateral.
 
3.10 Mortgage Paper Draw Agreements. No Draw will be submitted, processed or
approved until all of the following special conditions relating to the Draw have
been satisfied:
 
(A) Bank has approved the form/content of any and all Mortgage Paper to be
pledged to the Bank;
 
(B) such Mortgage Paper has been assigned to Bank as follows:
 
(1) Borrower has executed a Collateral Assignment of Loan Documents (Exhibit
"Q") for each County in which the Mortgage Paper is located, assigning the
Mortgage Paper to Bank;
 
(2) the original promissory notes and the original installment contracts
evidencing the indebtedness have been delivered and endorsed by Borrower to Bank
with full recourse against Borrower with such endorsement being evidenced by an
Allonge (Exhibit "R") affixed to each promissory note, and executed by Borrower
in form/content acceptable to Bank; and

(3) the deeds of trust (collectively the "Mortgages") securing payment of such
Mortgage Paper have been transferred to Bank
 
(C) Borrower has executed and delivered a Request for Advance (Exhibit "S") and
a Borrowing Base Certificate (Exhibit "T") in form/content acceptable to Bank;
 
 
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(D) Borrower has executed and delivered an Estoppel Certificate and Agreement
(Exhibit "U") in form/content acceptable to Bank for each Mortgage Paper pledged
to Bank;
 
(E) Borrower has executed and delivered a Notice Letter (Exhibit "V") in
form/content acceptable to Bank for each Mortgage Paper to be held by Bank until
the license granted to Borrower in Section 3.04 of this Agreement is terminated;
 
(F) evidence that each of the Mortgages is an insured first lien has been
delivered to Bank (including the commitment for the mortgage title insurance
policies binders, the pro forma mortgage title insurance policies, or the
original mortgage title insurance policies together with such endorsements as
Bank may deem necessary showing Borrower as the fee simple owner of the
property, free and clear of liens) for each Mortgage Paper pledged to Bank;
 
(G) the Mortgage Property has been insured against loss by fire and other
casualty and general public liability in such amounts as Bank may require and
Bank is shown as a loss payee and additional insured in such policies, as its
interests may appear;
 
(H) appraisals relating to the Mortgage Property, and, if the Bank rejects any
such appraisals for any reason, in its sole discretion, Borrower shall obtain a
current appraisal of any such property, which is deemed satisfactory by the
Bank;
 
(I) Borrower has submitted to Bank a Phase I Environmental Report for the
Mortgage Property and such other evidence of the environmental safety and
soundness as Bank may request from time to time regarding any of the Mortgage
Property;
 
(J) evidence acceptable to Bank is provided establishing that no Mortgage Paper
comprising the Borrowing Base is past due, and that the outstanding principal
balance of the Loan does not exceed the Borrowing Base;
 
(K) No Event of Default has occurred hereunder;
 
(L) evidence acceptable to Bank that the Seller of the Mortgage Paper to
Borrower represented to Borrower that (i) such Seller was the current owner and
holder of the Mortgage Paper at the time such Mortgage Paper was sold to
Borrower, (ii) the Seller had the requisite authority to transfer and assign the
Mortgage Paper to Borrower, (iii) the Mortgage Paper was not in default, and
(iv) the current outstanding balance of the Mortgage Paper;
 
(M) flood certification of each of the real properties described in each of the
Mortgages, certifying that no portion of such real property lies within the
100-year flood plain;
 
(N) the survey of the real properties described in each of the Mortgages; and
 
(O) such additional documents, instruments and information as Bank may request.

 
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3.11 Reservation of Right Not to Make an Advance.  Notwithstanding anything
contained in the foregoing to the contrary, Bank reserves the right to refuse to
make an advance if Bank determines in its sole discretion, that the Mortgage
Paper pledged to Bank does not satisfy the requirements of this Article 3 or
does not otherwise conform to the Lender’s underwriting requirements for this
Loan.

3.12 Real Property Described in the Mortgage Paper. Bank does not make any
warranties or representations, expressed or implied with respect to the Mortgage
Paper pledged to Bank or the real property securing such Mortgage Paper or its
quality, marketability fitness, suitability, or condition; and, Borrower agrees
that, except for claims, losses, damages, liabilities and expenses of any kind
arising from Bank's gross negligence or willful misconduct, Bank is not
responsible for (and Borrower indemnifies Bank against) any claim, loss, damage,
liability or expense of any kind incurred by Bank arising directly or remotely
from such real property and/or Mortgage Paper or any sale, disposition, use,
inadequacy, defect or deficiency thereof.
 
Section IV.  Covenants, Representations and Warranties of Borrower and
Guarantors
 
4.01 Agreements. To induce the Bank to enter into this Agreement, the Borrower
and Guarantors jointly and severally represent and warrant to and covenant with
the Bank as follows:
 
(A) The Borrower is a limited partnership duly organized, validly existing, and
in good standing under the laws of the State of Delaware.
 
(B) Borrower is not directly or indirectly controlled by, or acting on behalf
of, any person which is an "Investment Company", within the meaning of the
Investment Company Act of 1940, as amended.
 
(C) Borrower and Guarantors are not in default with respect to any of their
existing indebtedness and the making and performance of this Agreement, the
Note, the Guaranties, and the other Loan Documents will not (immediately or with
the passage of time, the giving of notice, or both):
 
(1) Violate the documents of formation or constitution of the Borrower or
Guarantors, or violate any laws or result in a default under any contract,
agreement, or instrument to which the Borrower or the Guarantors are a party or
by which the Borrower, the Guarantors or their respective properties are bound;
or
 
(2) Result in the creation or imposition of any security interest in, or lien or
encumbrance upon, any of the assets of the Borrower except in favor of the Bank.
 
(D) The Borrower (and Guarantors, to the extent applicable to them) has the
power and authority to enter into and perform this Agreement, the Note, and the
other Loan Documents, and to incur the obligations herein and therein provided
for, and has taken all actions necessary to authorize the execution, delivery,
and performance thereof.

 
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(E) This Agreement, the Note, and the other Loan Documents are, or when
delivered will be, valid, binding and enforceable in accordance with their
respective terms.
 
(F) Except as otherwise shown herein, there is no pending order, notice, claim,
litigation, proceeding, or investigation against or affecting the Borrower or
Guarantors, whether or not covered by insurance, that would or could materially
or adversely affect the financial condition or business prospects of the
Borrower or Guarantors if adversely determined.
 
(G) As of the Date Hereof, except for any other indebtedness owed by Borrower to
Bank, the Borrower has no material indebtedness of any nature, including, but
without limitation, liabilities for taxes and any interest or penalties relating
thereto, except the extent disclosed in Borrower's financial statement or
disclosed in, or permitted by, this Agreement.
 
(H) Borrower understands that Borrower only may collect payments due under the
Mortgage Paper pledged to the Bank for so long as the license granted to
Borrower in Section 3.04 of this Agreement is not terminated.  All amounts, if
any, collected by Borrower represent trust funds which are assigned and belong
to Bank and which are to be immediately delivered to the Bank upon termination
of the license granted to Borrower in Section 3.04 of this Agreement, and any
retention of such funds by Borrower after the termination of such license shall
be deemed a conversion by Borrower of Bank's property, ipso
facto.  Notwithstanding anything in the foregoing to the contrary, Borrower
shall not accept any principal prepayments or payoffs of the Mortgage Paper
pledged to Bank without the Bank’s prior write consent.
 
(I) Borrower will take all actions and pay all costs to keep and maintain the
validity, enforceability, security, priority and collectability of the Mortgage
Paper and the Collateral, and will pay all other amounts which may be necessary
or desirable to preserve, maintain and protect Bank's interest in the Mortgage
Paper and the Collateral. Borrower will pay or reimburse Bank for all costs
incurred by Bank to document, protect and enforce the Loan including legal fees,
mortgage title insurance, etc.
 
(J) Bank shall have all rights, benefits and remedies provided in the Loan
Documents as well as those provided by law and may (but is not obligated to)
perform any act or pay any amount which Borrower is required and fails to pay or
perform, as the case may be, at the cost and for the account of the Borrower;
and, Borrower agrees to reimburse Bank upon demand for any and all such
expenditures, together with interest thereon at the highest lawful contract rate
together with all cost of collection.
 
(K) Borrower and Guarantors will take all necessary action to prevent the
occurrence of any default/dispute under any agreement or obligation between
Borrower or Guarantors and any other persons or entities in connection with any
matter including but not limited to the Mortgage Paper, the Collateral, or any
part thereof.

 
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(L) To the best of Borrower's knowledge, no hazardous substances or solid wastes
have been disposed of or otherwise released on or to any of the properties
described in the Mortgages securing the Mortgage Paper. The terms "hazardous
substance" and "release" shall have the meanings specified in the Comprehensive
Environmental Response Compensation and Liability Act of 1980, as amended,
("CERCLA"), and the terms "solid waste" and "disposal" (or "disposed") shall
have the meanings specified in the Resource Conservation and Recovery Act 6f
1976, as amended, ("RCRA"); provided, to the extent that the laws of the State
of Texas establish a meaning for hazardous substance," "release," "solid waste,"
or "disposal" which is broader than that specified in either CERCLA or RCRA,
such broader meaning shall apply.
 
(M) Borrower and Guarantors indemnify Bank against any loss to Bank, including
without limitation attorney's fees and costs of site investigation and cleanup,
incurred by or imposed on Bank as a result of any use, handling, storage,
transportation, or disposal of hazardous or toxic materials on or about any
property described in the liens or installment contracts for deed comprising the
Mortgage Paper pledged to Bank.  This indemnity at the election of Bank shall
survive repayment of the Loan and shall continue as long any risk of loss or
liability by Bank exists.
 
(N) As additional security for the punctual payment and performance of the Note,
and as part of the security therefor, Borrower hereby grants to Bank a security
interest, and a pledge and assignment of, any and all money, property, deposit
accounts, accounts, securities, documents, chattel paper, claims, demands,
instruments, items or deposits of the Borrower, now held or hereafter coming
within Bank's custody or control, including without limitation, all certificates
of deposit and other depository accounts whether such have matured or the
exercise of Bank's rights result in loss of interest or principal or other
penalty on such deposits, but excluding deposits subject to tax penalties if
assigned and excluding escrow accounts. Without prior notice or demand upon the
Borrower, Bank may exercise its rights granted above at any time when a default
has occurred. Bank's rights and remedies under this paragraph shall be in
addition to and cumulative of any other rights or remedies at law and equity
including, without limitation, any rights of set-off to which Bank may be
entitled.
 
(O) Borrower and Guarantors will give immediate written notice to the Bank of
(1) any default of Borrower or Guarantors hereunder; (2) any litigation or
proceeding in which it is a party if any adverse decision therein would require
it to pay more than $50,000.00 or deliver assets the value of which exceeds such
sum (whether or not the claim is considered to be covered by insurance); (3) the
institution of any other suit or proceeding involving it that might materially
and adversely affect its operation financial condition, property, or business
prospects; and (4) any contingent liabilities in accordance with generally
accepted accounting principles ("GAAP"). Notwithstanding anything in the
foregoing sentence to the contrary, Guarantors shall not be required to provide
the information set forth in this Section 4.01(O) to the Bank if such
information is considered nonpublic information under the regulations of the
Securities and Exchange Commission and the disclosure of such nonpublic
information would result in a violation of the regulations of the Securities and
Exchange Commission.
 
 
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(P) Borrower shall not incur any indebtedness, directly or indirectly, in excess
of $1,000,000.00, other than indebtedness owed by Borrower to Bank and trade
debt incurred and paid in the ordinary course of business, and Borrower shall
not assign, pledge, grant any security interests or liens in or otherwise
transfer or encumber any of the Mortgage Paper or the Collateral now owned and
held or subsequently acquired by Borrower; it being the intent of this provision
that although the Bank shall not have a direct lien or security interest in the
Mortgage Paper which is not or does not become Mortgage Paper pledged to Bank,
such unpledged Mortgage Paper shall constitute a secondary source of repayment
of the Loan, and the continued availability of such unpledged Mortgage Paper
constitutes a material inducement for the Bank to make and advance the Loan.
 
(Q) Borrower currently has and shall maintain at all times throughout the term
hereof, a minimum Tangible Net Worth of $l,000,000.00, as determined in
accordance with the audited financial statements of Borrower based upon GAAP.
The term "Tangible Net Worth" means net worth minus intangible assets.
 
(R) Once UDF IV has obtained a minimum Tangible Net Worth of not less than
$150,000,000.00 for six (6) consecutive months and if UDF III has been released
from its obligations under its Guaranty, UDF IV shall continue to maintain at
all times throughout the term hereof, a minimum Tangible Net Worth of not less
than $150,000,000.00, as determined in accordance with the audited financial
statements of UDF IV based upon generally accepted accounting principles.
 
(S) UDF III currently has and shall maintain at all times throughout the term
hereof, a minimum Tangible Net Worth of not less than $250,000,000.00, as
determined in accordance with the audited financial statements of UDF III based
upon generally accepted accounting principles.
 
(T) Borrower owns clear title to all Mortgage Paper free and clear of any liens
or security interests, except for the liens and security interests of Bank.  The
Mortgage Paper is payable to the order of Borrower prior to endorsement of same
to Bank.
 
(U) Borrower currently has and shall maintain at all times throughout the term
hereof, a minimum "Debt Service Coverage Ratio" of at least 1.25 to 1. "Debt
Service Coverage Ratio" means [net income plus all non-cash charges plus
interest expense less dividends and distributions] divided by [interest expense
and current maturities of all indebtedness of Borrower] (as those terms are
defined in GAAP). The Debt Service Coverage Ratio shall be tested on an annual
basis in conjunction with the delivery of Borrower's financial statements.
 
 
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(V) Borrower shall maintain a "Leverage Ratio" of at least 1 to 1. As used in
this Section 4.01(V) the term "Leverage Ratio" means [all indebtedness of
Borrower ] divided by [Tangible Net Worth]. The Leverage Ratio shall be tested
on a quarterly basis in conjunction with the delivery of Borrower's financial
statements.
 
(W) UDF IV shall maintain a "Leverage Ratio" of at least 3 to 1. As used in this
Section 4.01(W) the term "Leverage Ratio" means [all indebtedness of UDF IV]
divided by [Tangible Net Worth]. The Leverage Ratio shall be tested on an annual
basis in conjunction with the delivery of UDF IV's financial statements.
 
(X) UDF III shall maintain a "Leverage Ratio" of at least 3 to 1. As used in
this Section 4.01(X) the term "Leverage Ratio" means [all indebtedness of UDF
III] divided by [Tangible Net Worth]. The Leverage Ratio shall be tested on an
annual basis in conjunction with the delivery of UDF III's financial statements.
 
(Y) UDF III's net income minus distributions shall not be less than zero based
upon the twelve (12) month trailing operating information. This financial
covenant shall be tested on an annual basis in conjunction with the delivery of
UDF III's financial statements.
 
(Z) If UDF III has been released from its obligations under its Guaranty, UDF
IV's net income minus distributions shall not be less than zero based upon the
twelve (12) month trailing operating information. This financial covenant shall
be tested on an annual basis in conjunction with the delivery of UDF IV's
financial statements.
 
(AA) Upon the occurrence of an Event of Default Borrower will not will not
declare or pay any dividends, distributions, or make any other payment on
account of its partnership interests, or redeem, purchase or retire any of its
partnership interests, or grant or issue any new partnership interests or any
warrant, right or option pertaining to its partnership interests, without the
prior written consent of Bank.
 
(BB) Except as permitted in this Agreement, Borrower will not, directly or
indirectly, make any advance, loan, extension of credit, or capital contribution
to or investment in, or purchase, any stock, bonds, notes, debentures, or other
securities of, any third party, except in the ordinary course of its business.
 
(CC) Borrower shall not transfer, sell, lease, assign, or otherwise dispose of
any of its assets other than in the ordinary course of its business.

(DD) Borrower shall not (i) change its current management structure without the
prior written consent of Bank; (ii) allow, consent or permit any partner of
Borrower to sell, assign, transfer, convey, pledge, mortgage, encumber or grant
a security interest in any of the membership interests in Borrower, without the
prior written consent of Bank, or (iii) engage in any other business other than
the businesses in which Borrower is engaged in as of the Date Hereof.
 
 
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(EE) Borrower will obtain and maintain casualty and business interruption
insurance and such other insurance policies as may be specified by Bank, upon
and relating to Borrower's business, all in such amounts and with such insurance
carriers as may be specified by Bank from time to time.
 
(FF) Borrower will keep and maintain full and accurate accounts and records of
its operations according to general accounting principles consistently applied.
 
(GG) Borrower shall not grant a release or partial release of the lien of any
Mortgage that constitutes Mortgage Paper pledged to Bank without the Bank’s
prior written consent; and Borrower agrees not to grant a release or partial
release of the lien of such Mortgage without the Bank’s prior written
consent.  Borrower agrees that, prior to the occurrence of an Event of Default,
proceeds received for a release or partial release of lien of a Mortgage that
constitutes Mortgage Paper pledged to Bank (“Release Proceeds”) in an amount
equal to the greater of (i) the Draw advanced by Lender to purchase such
Mortgage Paper, or (ii) the amount needed to reduce the outstanding balance of
the Loan to bring it into compliance with the Borrowing Base, shall be delivered
to the Bank to be applied towards the payment of the Obligations.  Borrower
further agrees that upon the occurrence of an Event of Default one hundred
percent (100%) of the Release Proceeds shall be delivered to the Bank to be
applied towards the payment of the Obligations.
 
(HH) Borrower shall not modify, cancel, enforce, amend, or terminate any
Mortgage Paper pledged to Bank without the Bank’s prior written
consent.  Borrower agrees not to modify, cancel, enforce, amend, or terminate
any such Mortgage Paper without the Bank’s prior written consent.
 
(II) [intentionally omitted]
 
(JJ) Borrower and Guarantors agree that if at any time Lender reasonably
believes the value of the Mortgage Property has declined, or if for any reason
an updated appraisal is required to comply with any banking regulation or other
law, Lender may request that an updated appraisal be conducted upon the Mortgage
Property by a qualified appraisal company of Lender’s choosing.  The reasonable
cost of such appraisal shall be borne by Borrower.  Lender may in its sole
discretion and without any obligation whatsoever, advance funds under the Loan
to pay for the appraisal and such advances shall become part of the Obligations
and secured by the Mortgage Paper pledged to Bank and the other Loan Documents.
 
4.02 Survival. All of the covenants representations and warranties set forth in
Section 4.01 shall survive until all Obligations are satisfied in full and there
remain no outstanding Commitments hereunder; and, in the case of subparagraph
4.01(M), such indemnity will remain in effect for so long as the risk of loss to
be indemnified against exists.
 
Section V.  Default
 
5.01 Events of Default.  The occurrence of any one or more of the following
events shall constitute an "Event of Default" hereunder:
 
(A) The Borrower or Guarantors shall fail to pay when due any installment of
principal or interest or fee payable hereunder or under the Note, Guaranties, or
any of the other Loan Documents, and such failure to pay is not cured within
five (5) days after written notice of same is sent to Borrower; provided,
however, Bank shall not be required to furnish such notice more than two (2)
times in any calendar year;
 
 
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(B) The Borrower or Guarantors shall fail to observe or perform any other
obligation to be observed or performed by them hereunder or under any of the
Loan Documents (which does not otherwise include the payment of the monetary
obligations covered by Section 5.01(A) above), and such failure shall continue
for twenty (20) days after written notice of same is sent to Borrower;
 
(C) The Borrower shall fail to pay any indebtedness due any third persons, and
such failure shall continue beyond any applicable grace period, or the Borrower
shall suffer to exist any other event of default under any agreement binding the
Borrower;
 
(D) Any financial statement, representation, warranty, or certificate made or
furnished by or with respect to Guarantors or Borrower to the Bank in connection
with this Agreement, or as an inducement to the Bank to enter into this
Agreement, or in any separate statement or document delivered or to be delivered
to the Bank hereunder, shall be materially false, incorrect, or incomplete when
made;
 
(E) The dissolution of Borrower or Guarantors, or Borrower shall admit its
inability to pay its debts as they mature or shall make an assignment for the
benefit of itself or any of its creditors;
 
(F) Proceedings in bankruptcy, or for reorganization of the Borrower or
Guarantors, or for the readjustment of any of their respective debts under the
Bankruptcy Code, as amended, or any part thereof, or under any other laws,
whether state or federal, for the relief of debtors, now or hereafter existing,
shall be commenced against or by the Borrower or Guarantors and, except with
respect to any such proceedings instituted by the Borrower, shall not be
discharged within thirty (30) days of their commencement;
 
(G) The occurrence of a material adverse change in the financial condition of
either the Borrower or the Guarantors;
 
(H) The sale, transfer or assignment of any of the assets or properties of the
Borrower or the Guarantors except for sales, transfers or assignments of
individual assets or properties in the ordinary course of business and for
equivalent value received; and
 
(I) The Borrower or Guarantors fail to observe or perform any obligation to be
observed or performed by them under the terms of the Foreclosure Agreement.
 
5.02 Acceleration. Immediately, at the option of Bank and without notice, upon
the occurrence of an Event of Default all obligations, whether hereunder or
otherwise, including without limitation the entire outstanding principal balance
of the Note and all accrued but unpaid interest thereon, shall immediately
become due and payable without further action of any kind.
 
 
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5.03 Servicing Rights. Upon the occurrence of an Event of Default Bank will have
the ability to take over and control all servicing rights for the Mortgage Paper
pledged to Bank.
 
5.04 Remedies. After any acceleration, as provided for in § 5.02, the Bank shall
have, in addition to the rights and remedies given it by this Agreement and the
Loan Documents, all those allowed by all applicable laws, including, but without
limitation, the Uniform Commercial Code.
 
5.05 Notice Letter. Immediately, at the option of Bank and without notice, upon
the occurrence of an Event of Default Bank shall have the right to send the
Notice Letter attached hereto as Exhibit "U" to each account debtor of Mortgage
Paper. Bank agrees that it will not mail the executed Notice Letter for each
Mortgage Paper until the occurrence of an Event of Default.
 
Section VI. Partial Release's (Reassignment) Agreements
 
6.01 Partial Release. Bank may from time to time without obligation partially
release its liens and security interests against the Mortgage Paper, (i.e. Bank
will reassign without warranty or recourse the Mortgage Paper) under the
following agreements:
 
(i) no Event of Default is pending or threatened under the Loan Documents;
 
(ii) such partial release is documented, recorded and otherwise accomplished
without cost to Bank; and
 
(iii) such partial release does not (a) cause Borrower to be out of compliance
with the Borrowing Base or any financial covenant set forth in this Agreement,
or (b) otherwise cause an Event of Default to occur.
 
6.02 Release of Mortgage Paper. If the Loan is paid in full and Bank has no
further obligation to make advances hereunder Bank will release its liens and
security interests against the Mortgage Paper pledged to Bank (i.e. Bank will
reassign without warranty or recourse the Mortgage Paper).
 
6.03 Partial Release of Mortgages.  Borrower and Guarantors acknowledge and
agree that in order to obtain a partial release of the lien of the Mortgage from
Bank, the minimum release prices the maker of the Pledged Mortgage Paper must
pay to obtain a partial release of the lien of the Mortgage (the “Release
Price”) must be of sufficient amount so as to keep Borrower in compliance with
the Borrowing Base and that Bank must approve the Release Price as being of
sufficient amount so as to keep Borrower in compliance with the Borrowing
Base.  If the Release Price is not of sufficient amount so as to keep Borrower
in compliance with the Borrowing Base, as determined by Bank in its reasonable
discretion, Borrower agrees to cause the Pledged Mortgage Paper to be modified
to comply with the Release Price required by Bank, and such modification must be
in form and content acceptable to Bank.
 
 
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Section VII.  Miscellaneous
 
7.01 Construction.  The provisions of this Agreement shall be in addition to
those of any guaranty, security agreement, note, or other evidence of liability
now or hereafter held by the Bank, all of which shall be construed as
complementary to each other. Nothing herein contained shall prevent the Bank
from enforcing any or all other guaranty, pledge or security agreements, notes,
or other evidences of liability in accordance with their respective terms.
 
7.02 Further Assurance. From time to time, the Borrower and Guarantors will
execute and deliver to the Bank such additional documents and will provide such
additional information, including but not limited, to supplementary Financial
Statements information as the Bank may reasonably require to carry out the terms
of this Agreement and be informed of the status and affairs of the Borrower and
Guarantors (the "Additional Information"). The Additional Information provided
by Guarantors to Lender shall be limited to the information that is set forth in
all reports Guarantors file with the Securities and Exchange Commission.
 
In particular, Borrower and Guarantors will furnish to Bank Financial Statements
in form/content acceptable to Bank, as follows:

Borrower

Monthly Status Reports on Pledged Mortgage Paper;
Monthly Borrowing Base Certificates;
Audited Annual Financial Statement;
Quarterly Financial Statements prepared by Borrower;
Proof of Insurance on underlying real properties;
Annual Tax Return; and
Direct Verification of Outstanding Balance of Mortgage Paper pledged to Bank.

Guarantors

Annual Financial Statement;
Annual Tax Return; and
Annual 10-K Report.

The annual financial statements of Borrower will be furnished to Bank within one
hundred twenty (120) days after the end of each fiscal year of Borrower,
beginning with the fiscal year of Borrower most recently ended, and will be
audited by such party's certified public accountant. The quarterly financial
statements of Borrower will be furnished to Bank within forty-five (45) days
after January 1, April 1, July 1, and October 1 of each year, beginning October
1, 2010, and will be reviewed by such party's certified public accountant.  The
monthly status reports on Mortgage Paper pledged to Bank shall be furnished to
Bank within ten (10) days after the end of each calendar month and shall contain
the outstanding balance and payment history of each such Mortgage Paper. The
direct verification of outstanding balance of Mortgage Paper pledged to Bank
shall be furnished to Bank within ten (10) days after January 1 and June 1 of
each year, beginning January 1, 2011. The statements delivered to Bank pursuant
to this Agreement will be prepared in accordance with generally accepted
accounting principles and in form acceptable to Bank and will include, inter
alia complete contingent liability information, cash flow reports and income and
expense statements. In addition, Borrower and Guarantor will furnish Bank copies
of their current (filed) income tax returns and future returns within thirty
(30) days after filing the same with the Internal Revenue Service, during the
term of the Loan. Borrower will also furnish Bank a copy of its annual 10-K
Report within thirty (30) days after filing the same with the Securities and
Exchange Commission.
 
 
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7.03 Enforcement and Waiver by the Bank. The Bank shall have the right at all
times to enforce the provisions of this Agreement and the Loan Documents in
strict accordance with the terms hereof and thereof, notwithstanding any conduct
or custom on the part of the Bank in refraining from so doing at any time or
times. The failure of the Bank 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 in any way or manner modified or waived the same. All
rights and remedies of the Bank are cumulative and concurrent and the exercise
of one right or remedy shall not be deemed a waiver or release of any other
right or remedy. In the event and to the extent, if any, that Borrower is
indebted to Bank under any obligation arising prior to the execution of this
Loan Agreement ("Prior Indebtedness"), Borrower agrees that Borrower has no
off-sets, defense or counterclaims to payment of the Prior Indebtedness.
 
7.04 Future Advances Secured. The Mortgage Paper mentioned herein secures and
enforces the payment of the Obligations including but not limited to all sums
advanced by Bank to Borrower pursuant to the Note.
 
7.05 Expenses. The Borrower will, on demand, reimburse the Bank for all
expenses, including the reasonable fees and expenses of legal counsel for the
Bank, incurred by the Bank in connection with the preparation, administration,
amendment, modification, or enforcement of this Agreement and the Loan Documents
and the collection or attempted collection of the Note.  Furthermore, Borrower
shall be responsible for all fees and costs associated with the foreclosure of
its lien on any Mortgage Property (“Foreclosure Costs”).  Borrower agrees that
the Foreclosure Costs may be paid directly by Lender out of the proceeds of the
Loan.
 
7.06 Notices. Any notices or consents required or permitted by this Agreement
shall be in writing and shall be deemed delivered if delivered in person or if
sent by certified mail postage prepaid, return receipt requested to the parties
at their address shown by their names below, unless such address is changed by
written notice hereunder.
 
7.07 Waiver Release and Indemnity by the Guarantors and Borrower. To the maximum
extent permitted by applicable laws, each of the Guarantors and the Borrower:
 
 
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(A) Waives (1) protest of all commercial paper at any time held by the Bank on
which the Borrower is in any way liable; (2) except as the same may herein be
specifically granted, notice of acceleration and of intention to accelerate; and
(3) notice and opportunity to be heard, after acceleration before exercise by
the Bank of the remedies of self-help, set-off; or of other summary procedures
permitted by any applicable laws or by any agreement with the Guarantors or
Borrower, and, except where required hereby or by any applicable laws, notice of
any other action taken by the Bank;
 
(B) Releases the Bank and its officers, attorneys, agents, and employees from
all claims for loss or damage caused by any act or omission on the part of any
of them except for willful misconduct and gross negligence; and
 
(C) Indemnifies Bank against any loss, claim, cost, damage or liability incurred
by Bank in connection with or arising from any failure, breach or default of any
statement, warranty, agreement, obligation or agreement of Borrower or
Guarantors contained herein or made/delivered to Bank in connection herewith
without regard to any act or omission of Bank and waives trial by jury.
 
7.08 Applicable Law. This Agreement is entered into and performable in Dallas,
Dallas County, Texas and shall be subject to and construed and enforced in
accordance with the laws of the State of Texas.
 
7.09 Binding Effect. Assignment and Entire Agreement.  This Agreement shall
inure to the benefit of; and shall be binding upon, the respective successors
and permitted assigns of the parties hereto. The Borrower has no right to assign
any of its rights or obligations hereunder without the prior written consent of
the Bank.  This Agreement, including any Exhibits hereto, all of which are
hereby incorporated herein by reference, and the documents executed and
delivered pursuant hereto, constitute the entire agreement between the parties
and may be amended only by a writing signed on behalf of each party.
 
7.10 Severability.  If any provision of this Agreement shall be held invalid
under any applicable laws, such invalidity shall not affect any other provision
of this Agreement that can be given effect without the invalid provision, and to
this end, the provisions hereof are severable.
 
7.11 Counterparts.  This Agreement 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.
 
7.12 Controlling Interpretation.  The other Loan Documents delivered pursuant to
or in connection with this Agreement shall supplement and be in addition to the
terms and provisions of this Agreement. If an inconsistency of provisions should
exist between any of the Loan Documents, the interpretation of such provision
most favorable to Bank, as Bank shall determine in its sole discretion, shall
control.
 
7.13 RELIEF FROM AUTOMATIC STAY.  AS A MATERIAL INDUCEMENT AND AS FURTHER
CONSIDERATION TO INDUCE LENDER TO MAKE THE LOAN, BORROWER AND GUARANTORS HEREBY
STIPULATE, AGREE, CONSENT TO AND ACKNOWLEDGE THAT IN THE EVENT THAT A PROCEEDING
UNDER TITLE 11 OF THE U.S. CODE IS COMMENCED, EITHER VOLUNTARY OR INVOLUNTARY,
BY OR AGAINST BORROWER OR GUARANTORS, LENDER IS ENTITLED TO IMMEDIATE RELIEF
FROM ANY AUTOMATIC STAY IMPOSED UNDER SECTION 362 OF TITLE 11 OF THE U.S. CODE,
AS AMENDED, OR OTHERWISE, ON OR AGAINST THE EXERCISE OF THE RIGHTS AND REMEDIES
OTHERWISE AVAILABLE TO LENDER, WITHOUT REQUIRING LENDER TO FILE A MOTION FOR
RELIEF FROM THE AUTOMATIC STAY. IN ADDITION TO THE FOREGOING, BORROWER AND
GUARANTORS FURTHER STIPULATE, AGREE AND ACKNOWLEDGE THAT NEITHER BORROWER NOR
GUARANTORS SHALL OPPOSE OR OBJECT TO LENDER'S MOTION FOR RELIEF FROM ANY
AUTOMATIC STAY OR ANY VALUATION OF THE PROPERTY SUBJECT TO THE AUTOMATIC STAY
CONDUCTED BY LENDER.
 
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7.14 WAIVER OF JURY TRIAL. IN THE EVENT LITIGATION SHOULD ARISE OUT OF THE
TRANSACTIONS CONTEMPLATED BY ANY OF THE LOAN DOCUMENTS OR ANY OTHER MATTER
RELATED THERETO WHATSOEVER OR IN CONNECTION WITH ANY COURSE OF CONDUCT, COURSE
OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OR INACTIONS BY
LENDER, IT IS HEREBY STIPULATED AND AGREED BY BORROWER AND GUARANTORS THAT
BORROWER AND GUARANTORS SHALL WAIVE AND DO HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY WAIVE ALL RIGHTS TO DEMAND A TRIAL OF ANY SUCH MATTER BY OR BEFORE
A JURY. THIS PROVISION IS A MATERIAL INDUCEMENT TO LENDER TO COMMIT TO MAKE THE
LOAN.
 
THIS WRITTEN LOAN AGREEMENT (AND ALL RELATED DOCUMENTS MENTIONED HEREIN OR
PREPARED OR APPROVED IN WRITING BY BANK CONCURRENTLY HEREWITH, INCLUDING THE
NOTE) REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS
OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
 
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year first above written.
 
[End of text.  Signature pages to follow.]

 
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Address:                                                                BANK
8222 Douglas Avenue, Suite
1                                                                           Community
Trust Bank of Texas
Dallas, Texas 75225

By:           /s/ Martin J. Noto, Jr. 
Name:           Martin J. Noto,
Jr.                                                                
Title:           Senior Vice President 

Address:                                                                BORROWER
1301 Municipal Way, Suite
100                                                                           UDF
IV Acquisitions, L.P.
Grapevine, Texas
76051                                                                           a
Delaware limited partnership

By:           UDF IV Acquisitions Manager, LLC
a Delaware limited liability company,
its General Partner

By:           United Development Funding IV
a real estate investment trust organized under the laws of the State of
Maryland,
its Managing Member

By:           /s/ Hollis M. Greenlaw 
Hollis M. Greenlaw
Chief Executive Officer

GUARANTORS
United Development Funding IV
a real estate investment trust organized under the laws of the State of Maryland

By:           /s/ Hollis M. Greenlaw 
Hollis M. Greenlaw
Chief Executive Officer

United Development Funding III, LP
a Delaware limited partnership

By:           UMTH Land Development, L.P.
a Delaware limited partnership,
its sole General Partner

By:           UMT Services, Inc.
a Delaware corporation,
its sole General Partner

By:           /s/ Hollis M. Greenlaw 
Hollis M. Greenlaw
President

 
 

 
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