ex10-2.htm


    
      Exhibit
        10.2

    

    SECURITY
      AGREEMENT

    


    This
      Security Agreement (this
“Agreement”) dated as of the 12th
      day of November,
      2007 (the “Effective Date”), is made by United
      Development Funding X, L.P., a Delaware limited partnership
      (“Borrower” or the
“Debtor”), in favor of United
      Development Funding III,
      L.P., a Delaware limited partnership
      (“Lender”).

    


    R
      E C I T A L S:

    


    A.           Lender
      has committed to loan up to U.S. SEVENTY MILLION and NO/100 Dollars
      ($70,000,000.00) (the “Loan”) to Borrower pursuant to
      the terms and conditions of that certain Secured Line of Credit Promissory
      Note
      (the “Note”) executed by Borrower and payable to the
      order of Lender dated the Effective Date, the proceeds of which shall be used
      by
      Borrower for business purposes.

    


    B.           It
      is a condition precedent to Lender’s willingness to accept the Note and advance
      funds to Borrower thereunder that Debtor enter into this Agreement with Lender,
      pursuant to which Debtor grants Lender a security interest in and lien on all
      of
      its assets, and Debtor is willing to enter into this Agreement and agree to
      be
      bound by its terms and conditions.

    


    AGREEMENT:

    


    NOW,
      THEREFORE, in consideration of the
      foregoing premises and in order to induce Lender to accept the Note and advance
      funds to Borrower thereunder, and for other good and valuable consideration,
      the
      receipt and sufficiency of which are acknowledged, Debtor covenants and agrees
      with Lender as follows:

    


    1.           Definitions.  All
      capitalized terms used but not defined in this Agreement shall have the
      respective meanings given to such terms in the Note.  Notwithstanding
      the foregoing sentence, terms used in Article 9 of the Uniform Commercial Code
      (the “Code”) in the State of Texas, when used in this
      Agreement, have the definitions given to such terms as therein
      defined.

    


    2.           Grant
      of Security Interest.  Debtor hereby assigns, pledges and grants
      to Lender for its benefit, a continuing security interest in all of Debtor’s
      right, title and interest in and to all of its assets, whether now owned or
      hereafter acquired, and including, without limitation, all full and partial
      interests in the following (collectively, the
“Collateral”):

    


    (a)           all
      promissory notes payable to the order of Borrower issued by clients of Borrower
      (“Client Notes”) and all mortgages, deeds of trust to
      secure debt and deeds of trust on real or personal property, and contracts
      for
      deed and/or installment contracts, and all full or partial interests therein,
      and all related loan documents, guarantees, security agreements, leases, pledge
      agreements, assignments of interests, assignments of proceeds, assignments
      of
      securities, and all title policies, insurance policies, and security interests
      related to any of the foregoing and the rights to receive payment thereon and
      other agreements and property which secure or relate to any receivable or other
      asset (all such interests and documents evidencing such interests are referred
      to herein collectively as the “Client Loan
      Documents”);

    


    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

    (b)           all
      accounts receivable, receivables, rights to payment, promissory notes, and
      all
      guarantees, security agreements, insurance policies, and security interests
      and
      the rights to receive payment thereon, including, without limitation, all rights
      to payment under the Client Notes and the Client
      Loan  Documents;

    


    (c)           all
      cash on hand, including, without limitation, cash held in bank accounts,
      brokerage accounts, certificates of deposit, and other depositories, all
      accounts receivable owing by any person or entity, including all such amounts
      due thereunder, and all security for payment thereof, and in and to all the
      proceeds, monies, income, instruments, securities, accounts, benefit,
      collections, tax refunds, insurance proceeds, and products thereof and thereon
      and attributable or accruing thereto;

    


    (d)           all
      equipment, inventory, materials, computer software and records, goods, and
      other
      personal property, and all documents and receipts covering such property, and
      all licenses and permits used or held for use in connection with such
      property;

    


    (e)           all
      patents, trademarks, service marks, copyrights, licenses, and all other
      intellectual property (collectively, the “Intellectual
      Property”), and all agreements and contracts regarding the use and
      exploitation of any of the Intellectual Property and applications
      therefor;

    


    (f)           all
      contract rights and other general intangibles, including, without limitation,
      all contract and other rights to receive proceeds and reimbursements, and all
      license agreements;

    


    (g)           all
      interests in all subsidiaries, and all capital stock, equity interests,
      partnership interests, and membership interests and all warrants, options and
      other rights to purchase any such capital stock, equity interests, partnership
      interests, and membership interests, in any corporation, partnership, limited
      liability company or other entity;

    


    (h)           all
      books and records (including electronic records, computer disks, tapes,
      printouts and other storage media) relating to any of the foregoing;
      and

    


    (i)           any
      and all products and proceeds of the foregoing (including, but not limited
      to,
      any claim to any item referred to in this definition, and any claim against
      any
      third party for loss of, damage to or destruction of any or all of, the
      Collateral or for proceeds payable under, or unearned premiums with respect
      to,
      policies of insurance) in whatever form, including, but not limited to, cash,
      negotiable instruments and other instruments for the payment of money, chattel
      paper, security agreements and other documents.

    


    Debtor
      shall be deemed to have
      possession of any of the Collateral in transit to it or set apart for it or
      for
      any of its agents, affiliates or correspondents.

    


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    3.           Security
      for Obligations.  This Agreement and the security interest created
      and evidenced hereby secures the following obligations and liabilities (all
      such
      obligations and liabilities are referred to herein as the
“Obligations”):

    


    (a)           the
      prompt and complete payment, observance and performance of all duties,
      liabilities, obligations and indebtedness of Borrower arising under the Note
      and
      the other Loan Documents;

    


    (b)           all
      costs reasonably incurred by Lender to obtain, preserve, perfect and enforce
      the
      security interest evidenced hereby and by the other Loan Documents and to
      maintain, preserve and collect the Collateral, and all taxes, assessments,
      insurance premiums, repairs, reasonable attorneys’ fees and legal expenses,
      rent, storage charges, advertising costs, brokerage fees and expenses of sale;
      and

    


    (c)           and
      all modifications, extensions, renewals, replacements, and increases of each
      of
      the foregoing described in clauses (a) through (b), or any part
      thereof.

    


    4.           Debtor
      Remains Liable.  Notwithstanding anything to the contrary
      contained in this Agreement: (a) Debtor shall remain liable under the contracts
      and agreements included in the Collateral and obligated to perform all duties
      and obligations thereunder to the same extent as if this Agreement had not
      been
      executed, (b) the exercise by Lender of any of its rights hereunder shall not
      release Debtor from any duties or obligations under the contracts and agreements
      included in the Collateral, and (c) Lender shall have no obligation or liability
      under the contracts and agreements included in the Collateral by reason of
      this
      Agreement, nor shall Lender be obligated to perform any of the obligations
      or
      duties of either Debtor thereunder or to take any action to collect or enforce
      any claim for payment assigned hereunder.

    


    5.           Representations
      and Warranties.  Debtor represents and warrants as
      follows:

    


    (a)           Debtor
      owns the Collateral free and clear of any lien, security interest, charge or
      encumbrance of any kind whatsoever (collectively,
“Liens”) except for (i) the security interest created
      hereby in favor of Lender, (ii) Liens in favor of any person or entity that
      Lender has agreed in writing shall have priority over the Collateral (the
“Senior Liens”), (iii) Liens approved by Lender
      pursuant to a written consent or agreement executed by Lender, (iv) Liens
      explicitly permitted by the Loan Documents, and (v) Liens for taxes not yet
      due and payable (collectively, the Liens described in clauses (i) through (v)
      above are referred to herein as the “Permitted
      Liens”).  A schedule of the Senior Liens shall be
      attached hereto as Schedule 1.  No effective financing
      statement, continuation statement or amendment thereto promulgated under the
      Uniform Commercial Code of any state (collectively, “Financing
      Statements”) or other instrument similar in effect covering all or
      any part of the Collateral is on file in any recording office, except such
      as
      may have been filed in favor of Lender or in favor of the holder(s) of the
      Permitted Liens.  The validity of the Collateral in whole or in part,
      and Debtor’s title thereto is not currently being questioned in any litigation
      or regulatory proceeding to which either Debtor is a party, nor is any such
      litigation or proceeding threatened.


    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

    (b)           This
      Agreement creates and evidences a valid and perfected security interest in
      the
      Collateral, securing the payment of the Obligations, second in priority only
      to
      any Senior Liens, and all filings and other actions of either Debtor necessary
      or desirable to perfect and protect such security interest have been, or will
      be
      upon request, duly taken by Debtor.

    


    (c)           No
      authorization, approval or other action by, and no notice to or other filing
      with, any governmental authority or regulatory body is required, either (i)
      for
      the grant by Debtor of the security interest granted hereby or for the
      execution, delivery or performance of this Agreement by Debtor, or (ii) for
      the
      perfection of or the exercise by Lender of its rights and remedies hereunder
      (other than the filing of Financing Statements by Lender).

    


    (d)           Debtor’s
      principal place of business is at the address for Borrower set forth in
Section 1 of the Note (the “Principal Place of
      Business”).  All Collateral and books of account and
      records relating to the Collateral are located at Debtor’ Principal Place of
      Business.

    


    6.           Covenants
      and Further Assurances.

    


    (a)           Debtor
      agrees that from time to time, at its own expense, it will promptly execute
      and
      deliver all further instruments and documents, and take all further action,
      that
      may be reasonably necessary or desirable, or that Lender may reasonably request,
      in order to perfect and protect any security interest granted or purported
      to be
      granted hereby or to enable Lender to exercise and enforce rights and remedies
      hereunder with respect to any Collateral.  Without limiting the
      generality of the foregoing, Debtor will, subject to the priority rights, if
      any, of the holders of the Senior Liens:  (i) mark conspicuously
      each document included in the Collateral and each of its records pertaining
      to
      the Collateral, with a legend, in form and substance satisfactory to Lender,
      indicating that such document or Collateral is subject to the security interest
      granted hereby; (ii) transfer, register or otherwise put any of the Collateral
      in the name of Lender or its nominee; and (iii) execute and file such Financing
      Statements, and such other instruments or notices, as may be necessary or
      desirable, or as Lender may request, in order to perfect and preserve the
      security interest granted or purported to be granted hereby.

    


    (b)           Debtor
      hereby authorizes Lender to file one or more Financing Statements relative
      to
      all or any part of the Collateral without the signature of Debtor where
      permitted by law.  A carbon, photographic or other reproduction of
      this Agreement or any financing statement covering the Collateral or any part
      thereof shall be sufficient as a Financing Statement where permitted by
      law.  Debtor acknowledges and agrees that any Financing Statement
      filed by or on behalf of Lender against Debtor, whether such filing is or was
      made prior to or after the date of this Agreement, is hereby deemed to include
      the security interest granted by this Agreement, regardless of whether such
      Financing Statement is or was filed in connection with the Loan or some other
      indebtedness owed to Lender.


    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

    (c)           Debtor
      will take all actions and pay all costs to keep and maintain the validity,
      enforceability, security, priority and collectibility of the Client Notes and
      the Client Loan Documents and will pay all other amounts which may be necessary
      or desirable to preserve, maintain and protect Lender's interest in the Client
      Notes and the Client Loan Documents.

    


    (d)           Debtor
      shall at all times maintain the Collateral and its books of account and records
      relating to the Collateral at its Principal Place of Business, and shall not
      relocate such books of account and records and Collateral unless it delivers
      to
      Lender, prior written notice of such relocation and the new location thereof
      (which must be within the United States).  Debtor will furnish to
      Lender from time to time statements and schedules further identifying and
      describing the Collateral and such other reports in connection with the
      Collateral as Lender may reasonably request, all in reasonable
      detail.

    


    (e)           Promptly,
      but in any event, within three (3) business days following the closing of any
      Client Note, Borrower agrees to execute and deliver to Lender, for each such
      Client Note, (i) an allonge duly endorsing the Client Note to Lender, in the
      form attached to this Agreement as Exhibit “A”, together with the
      original Client Note, which shall be held by Lender for so long as the Note
      is
      outstanding or Lender has any obligation to Borrower thereunder, and (ii) a
      Collateral Assignment of Note and Liens, assigning the Client Notes and the
      related Client Loan Documents to Lender, in the form attached to this Agreement
      as Exhibit “B”.

    


    7.           Insurance.

    


    (a)           Debtor
      shall, at Debtor’s own expense, maintain insurance with respect to the
      Collateral in such amounts, against such risks, in such form and with such
      insurers, as shall be reasonably satisfactory to Lender from time to
      time.  Debtor shall ensure that the Collateral and the real properties
      securing the Client Notes and the Client Loan Documents are, and remain, insured
      against loss by fire and other casualty.  Each policy for property
      damage insurance shall provide for all losses to be paid to Lender as holder
      of
      the security interest created hereby, subject to the priority rights, if any,
      of
      the holders of the Senior Liens.  Each such policy shall in addition
      (i) contain the agreement (if available) by the insurer that any loss thereunder
      shall be payable to Lender notwithstanding any action, inaction or breach of
      representation or warranty by Debtor, subject to the priority rights, if any,
      of
      the holders of the Senior Liens, (ii) provide that there shall be no recourse
      against Lender for payment of premiums or other amounts with respect thereto,
      and (iii) provide that at least ten (10) days prior written notice of
      cancellation or of lapse shall be given to Lender by the
      insurer.  Debtor shall, if so requested by Lender, deliver to Lender
      original or duplicate policies of such insurance and, as often as Lender may
      reasonably request, a report of a reputable insurance broker selected by Debtor
      with respect to such insurance.  Further, Debtor shall, at the request
      of Lender, duly execute and deliver instruments of assignment of such insurance
      policies to comply with the foregoing requirements and cause the respective
      insurers to acknowledge notice of such assignment.


    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

    (b)           Reimbursement
      under any liability insurance maintained by Debtor may be paid directly to
      the
      person who shall have incurred liability covered by such
      insurance.  All insurance payments to Lender in respect of Collateral
      shall be applied by Lender to reduce the indebtedness evidenced by the
      Note.

    


    8.           Transfers
      and Other Liens.  Debtor shall not sell, assign (by operation of
      law or otherwise) or otherwise dispose of any of the Collateral, other than
      the
      sale or assignment of Client Notes and Client Loan Documents in the ordinary
      course of business if (i) Lender has provided its prior written consent to
      such
      sale or assignment, or (ii) the proceeds of the sale or assignment are used
      to
      pay down the Note.  Debtor shall not create or suffer to exist any
      Lien upon or with respect to any of the Collateral to secure debt of any person,
      except for Permitted Liens.

    


    9.           Lender
      Appointed Attorney-in-Fact.  Debtor hereby irrevocably appoints
      Lender as its attorney-in-fact, with full authority in the place and stead
      of
      Debtor, as applicable, and in the name of Debtor, as applicable, or otherwise,
      from time to time in Lender's discretion at any time after the occurrence of
      an
      Event of Default (as such term is defined in the Note), to take any action
      and
      to execute any instrument which Lender may deem necessary or advisable to
      accomplish the purposes of this Agreement, including, without
      limitation:

    


    (a)           to
      obtain insurance required to be maintained by Debtor and to settle and adjust
      claims under any insurance policy including, without limitation, any such policy
      related to a Client Note;

    


    (b)           to
      ask, demand, collect, sue for, recover, compound, receive and give acquittance
      and receipts for moneys due and to become due, under or in respect of any of
      the
      Collateral including, without limitation, moneys due and to become due under
      the
      Client Notes and the Client Loan  Documents or otherwise;

    


    (c)           to
      file any claims or take any action or institute any proceedings which Lender
      may
      deem necessary or desirable to enforce the rights of Lender with respect to
      any
      of the Collateral including, without limitation, the Client Notes and the Client
      Loan Documents;

    


    (d)           to
      commence and prosecute any actions in any court for the purposes of collecting
      amounts owed to Debtor under the Client Notes and Client Loan Documents, and
      otherwise, and enforcing any other rights in respect thereof, and to defend,
      settle or compromise any action brought and, in connection therewith, and to
      give such discharge or release as Lender may deem appropriate;

    


    (e)           to
      receive, open and dispose of mail addressed to Debtor 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
      on
      behalf of and in the name of Debtor including, without limitation, payment
      of
      Client Notes;


    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

    (f)           sell,
      assign, transfer, make any agreement in respect of, or otherwise deal with
      or
      exercise rights in respect of, any Collateral as fully and completely as though
      Lender were the absolute owner thereof for all purposes;

    


    (g)           to
      execute Financing Statements or any other documents or writing deemed necessary
      by Lender to evidence or perfect Lender's  security interest in the
      Collateral including, without limitation, the Client Notes and the Client Loan
      Documents; provided that Lender agrees to furnish copies of any document
      executed hereunder to Debtor;

    


    (h)           to
      enter on the premises of Debtor in order to exercise any of Lender's rights
      and
      remedies;

    


    (i)           to
      receive, endorse, and collect any drafts or other instruments, documents,
      assignments, and chattel paper; and

    


    (j)           to
      file any claims or take any action or institute any proceedings which Lender
      may
      deem necessary or desirable to enforce the rights of Lender with respect to
      any
      of the Collateral.

    


    The
      foregoing appointment of Lender as attorney-in-fact is coupled with an interest
      and is irrevocable.

    


    10.           Rights
      Prior to Event of Default; Termination.

    


    (a)           Rights
      Prior to Event of Default.  So long as no Event of Default shall
      have occurred and be continuing, Debtor shall be entitled to exercise any and
      all rights and powers relating or pertaining to the Collateral for any purpose
      not inconsistent with the terms of this Agreement.

    


    (b)           Termination
      of Rights. Debtor understands and agrees that during any period when an
      Event of Default shall have occurred and be continuing, and after Lender has
      given written notice to Debtor that Lender has exercised its rights hereunder,
      all rights of Debtor to exercise power with respect to the Collateral, which
      Debtor was previously entitled to exercise shall cease and all such rights
      shall
      become vested in Lender, which shall have the sole and exclusive right and
      authority to exercise such power immediately upon such written
      notice.  All amounts, if any, representing principal prepayment or
      payoffs and all amounts, if any, collected by Debtor after the occurrence of
      any
      Event of Default represents trust funds which are assigned and belong to Lender
      and which are to be immediately delivered to Lender, and any retention of such
      funds by Lender before and after the occurrence of an Event of Default shall
      be
      deemed to be a conversion of Lender's property,
ipsofacto.  Further, Lender shall have
      the right, during the continuance of any Event of Default, to notify and direct
      the obligors on the Client Notes to make all payments in respect thereof
      directly to Lender.  The obligor making any payment to Lender under
      this Agreement shall be fully protected in relying on the written statement
      of
      Lender that it then holds a security interest which entitles Lender to receive
      such payments.  Any and all money and other property paid over to or
      received by Lender pursuant to the provisions hereof shall be retained by Lender
      as additional Collateral under this Agreement.


    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

    11.           Lender
      May Perform.  If Debtor fails to perform any covenant or agreement
      contained in this Agreement, Lender may itself perform, or cause performance
      of,
      such covenant or agreement, and the expenses of Lender incurred in connection
      therewith shall be payable by Debtor and/or payable under the Note as a
      Discretionary Advance.

    


    12.           Events
      of Default.  Each of the following events constitutes an Event of
      Default (herein so called) under this Agreement:

    


    (a)           Borrower
      fails to timely pay any amount due and owing it under the Note when due and
      payable, whether at a date for the payment of a fixed installment or as a
      contingent or other payment becomes due and payable or as a result of
      acceleration or otherwise; or

    


    (b)           Any
      “Default”, “default”, “Event of Default” or “event of default” occurs under any
      Loan Document that defines any such term, and the same is not remedied within
      the applicable period of grace (if any) provided in such Loan Document;
      or

    


    (c)           the
      entry of a decree or order for relief by a court having jurisdiction in respect
      of Borrower 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 for any substantial part
      of
      Borrower’s property, or ordering the winding up or liquidation of such person's
      affairs; or

    


    (d)           the
      commencement by Borrower 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 for
      any
      substantial part of its property, or the making by Borrower of any assignment
      for the benefit of creditors, or the admission by Borrower in writing of
      Borrower’s inability to pay its debts generally as they become due;
      or

    


    (e)           the
      appointment of or taking possession by a receiver, liquidator, assignee,
      custodian, trustee, sequestrator or similar official of all or a substantial
      part of its assets or of any part of the Collateral in a proceeding brought
      against or initiated by Borrower.


    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

    

    Upon
      the occurrence of an Event of
      Default described in subsection (c), (d) or (e) of this Section 12, all
      of the Obligations 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.  During the continuance of any
      other Event of Default, Lender at any time and from time to time may, without
      notice to Borrower, declare any or all of the Obligations immediately due and
      payable, and all such Obligations 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.

    


    13.           Remedies.  If
      any Event of Default shall occur and be continuing, subject to the priority
      rights, if any, of the holders of the Senior Liens, Lender may protect and
      enforce its rights under this Agreement and the other Loan Documents by any
      appropriate proceedings, including proceedings for specific performance of
      any
      covenant or agreement contained in any Loan Document, and Lender may enforce
      the
      payment of any Obligations due it or enforce any other legal or equitable right
      which it may have.  All rights, remedies and powers conferred upon
      Lender under the Loan Documents shall be deemed cumulative and not exclusive
      of
      any other rights, remedies or powers available under the Loan Documents or
      at
      law or in equity.  Lender's authority and rights shall include,
      without limitation, the following:

    


    (a)           Lender
      may exercise in respect of the Collateral, in addition to other rights and
      remedies provided for herein or otherwise available to it, all the rights and
      remedies of a secured party on default under the Code (whether or not the Code
      applies to the affected Collateral) and also may (i) require  Debtor
      to, and Debtor hereby agrees that it will at its expense and upon request of
      Lender forthwith, assemble all or part of the Collateral as directed by Lender
      and make it available to Lender at a place to be designated by Lender which
      is
      reasonably convenient to it, and (ii) without notice except as specified below,
      sell the Collateral or any part thereof in one or more parcels at public or
      private sale, at any of Lender's offices or elsewhere, for cash, on credit
      or
      for future delivery, and upon such other terms as Lender may deem commercially
      reasonable.  Debtor agrees that, to the extent notice of sale shall be
      required by law, at least ten (10) business days' notice to Debtor of the time
      and place of any public sale or the time after which any private sale is to
      be
      made shall constitute reasonable notification.  Lender shall not be
      obligated to make any sale of Collateral regardless of notice of sale having
      been given.  Lender may adjourn any public or private sale from time
      to time by announcement at the time and place fixed therefor, and such sale
      may,
      without further notice, be made at the time and place to which it was so
      adjourned.

    


    (b)           All
      cash proceeds received by Lender in respect of any sale of, collection from,
      or
      other realization upon all or any part of the Collateral may, in the discretion
      of Lender, be held by Lender as Collateral for, and/or then or at any time
      thereafter applied in whole or in part by Lender against all or any part of
      the
      Obligations in such order as Lender shall elect, subject to any mandatory
      provisions of this Agreement or applicable law.  Any surplus of such
      cash or cash proceeds held by Lender and remaining after payment in full of
      all
      the Obligations shall be paid over to Debtor or to whomsoever may be lawfully
      entitled to receive such surplus.

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

    14.           Lender's
      Duties.  The powers conferred on Lender under this Agreement are
      solely to protect its interest in the Collateral and shall not impose any duty
      upon it to exercise any such powers.  Except for the safe custody of
      any Collateral in its possession and the accounting for moneys actually received
      by it hereunder, Lender shall have no duty as to any Collateral or as to the
      taking of any necessary steps to preserve rights against prior parties
      or  any other rights pertaining to any Collateral.

    


    15.           No
      Impairment.  The execution and delivery of this Agreement in no
      manner shall impair or affect any other security (by endorsement or otherwise)
      for the payment of the Obligations and no security taken hereafter as security
      for payment of the Obligations shall impair in any manner or affect this
      Agreement, all such present and further additional security to be considered
      as
      cumulative security.  Any of the Collateral for, or any obligor on,
      any of the Obligations may be released without altering, varying or diminishing
      in any way the force, effect, lien, security interest, or charge of this
      Agreement as to the Collateral not expressly released, and this Agreement shall
      continue as a security interest and charge on all of the Collateral not
      expressly released until all the Obligations secured hereby have been paid
      in
      full.  This Agreement shall not be construed as relieving Debtor from
      full recourse liability on the Obligations and any and all further and other
      indebtedness secured hereby and for any deficiency thereon.

    


    16.           Indemnity
      and Expenses.

    


    (a)           
      Debtor agrees to indemnify Lender from and against any and all claims, losses
      and liabilities growing out of or resulting from this Agreement (including,
      without limitation, enforcement of this Agreement), except claims, losses or
      liabilities resulting from Lender's gross negligence or willful
      misconduct.

    


    (b)           Debtor
      agrees that it will, upon demand, pay to Lender the amount of any and all
      reasonable expenses, including the reasonable fees and disbursements of Lender’s
      counsel and of any experts and agents, which Lender may incur in connection
      with
      (i) the administration of this Agreement, (ii) the custody, preservation, use
      or
      operation of, or the sale of, collection from, or other realization upon, any
      of
      the Collateral, (iii) the exercise or enforcement of any of the rights of Lender
      hereunder, or (iv) the failure by Debtor to perform or observe any of the
      provisions hereof.

    


    17.           Security
      Interest Absolute.  All rights of Lender and security interests
      hereunder, and all obligations of Debtor hereunder, shall be absolute and
      unconditional, irrespective of:

    


    (a)           any
      lack of validity or enforceability of the Note or any other Loan Document or
      instrument relating thereto;


    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

    (b)           any
      change in the time, manner or place of payment of, or in any other term of,
      all
      or any of the Obligations or any other amendment or waiver of or any consent
      to
      any departure from the Note or any other Loan Document;

    


    (c)           any
      exchange, release or non-perfection of any other collateral, or any release
      or
      amendment or waiver of or consent to departure from any guaranty, for all or
      any
      of the Obligations; or

    


    (d)           any
      other circumstance which might otherwise constitute a defense available to,
      or a
      discharge of, Debtor, or a third party holder of a security
      interest.

    


    18.           Notice.  Any
      notice, request, demand or other communication required or permitted hereunder,
      will be in writing and will be mailed by registered or certified mail, postage
      prepaid, sent by facsimile, delivered personally by hand, or delivered by
      nationally recognized overnight delivery service addressed at the addresses
      provided in the Note for purposes of notice or with respect to any party, to
      such other address or facsimile number as a party may have delivered to the
      other parties for purposes of notice pursuant to the provisions of the
      Note.  Each notice or other communication will be treated as effective
      and as having been given and received (a) if sent by mail, at the earlier of
      its
      receipt or three (3) business days after such notice or other communication
      has
      been deposited in a regularly maintained receptacle for deposit of United States
      mail, (b) if sent by facsimile, upon electronic or written confirmation of
      facsimile transfer, (c) if delivered personally by hand, upon electronic or
      written confirmation of delivery from the person delivering such notice or
      other
      communication, or (d) if sent by nationally recognized overnight delivery
      service, upon electronic or written confirmation of delivery from such
      service.

    


    19.           Continuing
      Security Interest.  This Agreement shall create a continuing
      security interest in the Collateral.  Upon the payment in full of the
      Obligations and termination of the Note as determined by Lender in its sole
      discretion, the security interest granted hereby shall
      terminate.  Upon any such termination, Lender will, at Debtor’s
      expense, execute and deliver to Debtor such documents as Debtor shall reasonably
      request to evidence such termination.

    


    20.           Further
      Assurances.  Debtor at Debtor’s expense will promptly execute and
      deliver to Lender on Lender’s request, all such other and further documents,
      agreements and instruments, and shall deliver all such supplementary
      information, including, without limitation, with respect to the Client Notes,
      the Client Loan Documents and the loans made pursuant thereto, and the
      Collateral, as Lender may request from time to time.

    


    21.           Cumulative
      Remedies.  Debtor hereby agrees that all rights and remedies that
      Lender is afforded by reason of the Loan Documents are separate and cumulative
      with respect to Debtor and otherwise and may be pursued separately,
      successively, or concurrently, as Lender deems advisable.  In
      addition, all such rights and remedies of Lender 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.

    


    22.           Enforcement
      and Waiver by Lender.  Lender shall have the right at all times to
      enforce the provisions of this Agreement 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. All rights and remedies of
      Lender 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.


    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

    23.    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 AGREEMENT 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 CONFLICTS OF LAWS
      PROVISIONS.  

    


    24.    JURISDICTION;
      VENUE.  DEBTOR IRREVOCABLY AGREES THAT ANY LEGAL PROCEEDING IN
      RESPECT OF THIS AGREEMENT 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”).  DEBTOR HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE
      JURISDICTION OF THE SPECIFIED COURTS.  EACH DEBTOR HEREBY IRREVOCABLY
      WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH DEBTOR
      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
      AND SUCH DEBTOR 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 EITHER DEBTOR
      IN ANY JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY APPLICABLE
      LAW.  

    


    25.           Counterparts.  This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed to be an original, but all of them together shall constitute one and
      the
      same agreement.

    


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

    


    27.           Amendments;
      Waivers.  No amendment or waiver of any provision of this
      Agreement nor consent to any departure herefrom, shall in any event be effective
      unless the same shall be in writing and signed by 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.  Debtor will not be released
      from its obligations hereunder, except pursuant to a written instrument executed
      by Lender.

    


    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    28.           Binding
      Effect; Assignment. This Agreement shall be binding on Debtor and its
      successors and assigns, including, without limitation, any receiver, trustee
      or
      debtor in possession of or for Debtor, and shall inure to the benefit of Lender
      and its successors and assigns.  Debtor shall not be entitled to
      transfer or assign this Agreement in whole or in part without the prior written
      consent of Lender. This Agreement is freely assignable and transferable by
      Lender without the consent of Debtor.  Should the status, composition,
      structure or name of either Debtor change, this Agreement shall continue and
      also cover Debtor under the new status composition, structure or name according
      to the terms of this Agreement.

    


    29.           Captions.  The
      captions in this Agreement are for the convenience of reference only and shall
      not limit or otherwise affect any of the terms or provisions
      hereof.

    


    30.           Number
      or Gender of Words.  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.

    


    31.           WAIVER
      OF JURY TRIAL, PUNITIVE DAMAGES, ETC.  DEBTOR HEREBY KNOWINGLY,
      VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT
      NOT PROHIBITED BY LAW, ANY RIGHT DEBTOR 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 AGREEMENT 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 SUCH DEBTOR
      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 ENTER INTO THE NOTE AND THE OTHER LOAN DOCUMENTS BY, AMONG OTHER THINGS,
      THE
      WAIVERS AND CERTIFICATIONS CONTAINED IN THIS SECTION. AS USED IN THIS SECTION,
      “SPECIAL DAMAGES” INCLUDES ALL SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE
      DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT INCLUDE ANY PAYMENTS OR FUNDS
      WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO ANY OTHER
      PARTY HERETO.

    


    32.           ACKNOWLEDGEMENT
      AND CONSENT TO PLEDGE.  THIS AGREEMENT IS SUBJECT TO A SECURITY
      INTEREST IN FAVOR OF, AND PLEDGED AS COLLATERAL TO, PREMIER BANK AND ITS ASSIGNS
      (“PREMIER”).  BY EXECUTION HEREOF, DEBTOR HEREBY CONSENTS TO SUCH
      SECURITY INTEREST AND PLEDGE OF THIS AGREEMENT TO PREMIER, AND CONSENTS TO
      THE
      ASSIGNMENT OF THIS AGREEMENT TO PREMIER IN ACCORDANCE
      THEREWITH.

    


    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    33.           ENTIRE
      AGREEMENT.  THIS
      AGREEMENT, THE 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 AGREEMENT AND THE OTHER LOAN DOCUMENTS.  THERE ARE NO
      UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES AND THIS AGREEMENT 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.]

    


    



    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, Debtor has caused
      this Agreement to be duly executed and delivered on the 12th day of November,
      2007, effective for all purposes as of the Effective Date.

    


    DEBTOR:

    


    UNITED
      DEVELOPMENT FUNDING X,
      L.P.

    a
      Delaware limited
      partnership

    


    


    By:         United
      Development Funding X, Inc.

    Its:         General
      Partner

    


    


    By:        /s/
      Hollis M. Greenlaw

    Name:   Hollis
      M. Greenlaw

    Its:        President
      and Chief Executive Officer

    


    


    


    


    


    


    


    



    
      
        
        

      

      
        Signature
          page to Security Agreement

        
          

        

      

      
        
        

      

    


    SCHEDULE
      1

    


    SENIOR
      LIENS

    


    


    


    


    


    NONE.

    


    


    


    


    


    


    


    


    


    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXHIBIT
      A

    


    ALLONGE

    


    (see
      attached)

    



    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    


    EXHIBIT
      B

    


    COLLATERAL
      ASSIGNMENT OF NOTE AND LIENS

    


    (see
      attached)