ex10_2.htm


    Exhibit
10.2

    SECURED
LINE OF CREDIT PROMISSORY NOTE

    


    U.S.
$25,000,000.00 August 20, 2008

    


    FOR VALUE
RECEIVED, the undersigned, UNITED DEVELOPMENT FUNDING LAND OPPORTUNITY FUND,
L.P., a Delaware limited partnership (“Borrower”),
hereby makes this Secured Line of Credit Promissory Note (as it may be amended,
modified, renewed, extended, increased, superseded, or replaced from time to
time, this “Note”) and
promises to pay to the order of UNITED DEVELOPMENT FUNDING III, L.P., a Delaware
limited partnership or its assigns (“Lender”),
the sum of Twenty Five Million and NO/100 Dollars ($25,000,000.00), or, if
greater or less, the aggregate outstanding principal amount of this Note,
together with accrued, unpaid interest thereon, pursuant to the terms and
conditions set forth in this Note.  All amounts are payable to Lender
in lawful money of the United States of America at the address for Lender
provided in Section
1 of  this Note, or at such other address as from time to time
may be designated by Lender.

    


    1.           Definitions.  In
addition to the terms defined elsewhere in this Note, the following terms have
the meanings set forth below for purposes of this Note:

    


    


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

    


    “Advance
Request” shall mean Lender’s standard form of Advance Request for this
Note, as in effect from time to time, duly executed by an officer of Borrower
and including or accompanied by an Officer’s Certificate dated as of the date of
the Advance Request and as of the funding date.

    


    “Base Rate”
shall mean the lesser of (i) fifteen percent (15.0%), accrued monthly and
compounded annually, or (ii) the Highest Lawful Rate.

    


    “Collateral”
shall have the meaning given to such term in the Security
Agreement.

    


    “Commitment”
shall mean the aggregate amount of up to U.S. Twenty Five Million and NO/100
Dollars ($25,000,000.00).

    


    “Default
Rate” shall mean the lesser of (i) eighteen percent (18%), accrued
monthly and compounded annually, or (ii) the Highest Lawful Rate.

    


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

    


    “Effective
Date” shall mean August 20, 2008.

    


    
      
        
        

      

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

    


    “Investments”
shall mean loans to and/or investments in entities that acquire, entitle,
develop and/or sell land or lots for the construction of single-family
residential homes.

    


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

    


    “Loan”
shall mean the amount of principal outstanding under this Note from time to
time, together with unpaid accrued interest thereon.

    


    
      	
               
      

            	
              “Maturity
      Date” shall mean August 20,
2011.

            


    

    


    “Officer’s
Certificate” means a certificate duly executed by an authorized officer
on behalf of Borrower certifying that (i) no Event of Default has occurred and
is continuing under this Note, (ii) all representations and warranties made
by Borrower in this Note and the other Loan Documents are true and correct in
all respects, and (iii) Borrower has complied with and performed, in all
respects, all covenants, conditions and agreements which are then required by
this Note and the other Loan Documents to have been complied with or
performed.

    


    “Senior
Indebtedness” shall mean indebtedness owed to a Senior
Lender.

    


    “Senior
Lender” means any bank, financial institution or other lender having made
a loan to any client of Borrower that has a senior position with respect to the
payment of any indebtedness and/or the priority of any Liens.

    


    2.           Certain Loan
Terms.  In addition all other terms and conditions set forth
herein, certain terms and conditions of this Note are set forth
below:

    


    Borrower’s
Address                            1702
N. Collins Blvd., Suite 100

    For
Notice:                                   
         Richardson,
Texas  75080

    Attention:  Hollis M.
Greenlaw

    Facsimile No.
972-889-0162

    


    
      
        
        

      

      
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    Lender's
Address                                 1812
Cindy Lane, Suite 200

    For Notice and
Payment:                     Bedford,
Texas 76021

    Attention:  Ben
Wissink

    Facsimile No.
817-835-0380

    


    
      	
              Revolver:

            	
              This
      Note is a revolver and thus, Borrower may borrow, repay and then re-borrow
      the available amount of the Commitment; provided,  however, that
      notwithstanding anything else to the contrary contained herein, Lender has
      no obligation to make any advance of principal to Borrower under this Note
      unless each of the conditions precedent in Section 10 have
      been satisfied and/or fulfilled as determined by Lender in its sole
      discretion.

            


    

    


    
      	
              Use of
      Proceeds:

            	
              The
      purpose of the Loan is to finance Borrower’s origination, purchase,
      holding and selling of Investments.

            


    

    


    3.           Origination
Fee.  Borrower agrees to pay Lender an origination fee equal to
three percent (3%) of each advance or Commitment made under this Note pursuant
to that certain letter agreement dated as of the Effective Date (the “Origination Fee
Letter”), but in any event not to exceed $750,000.00 in the aggregate;
provided, that no further Origination Fee shall be due after total advances or
Commitment made under this Note exceed $25,000,000.00 in the aggregate and further provided, that
no origination fee shall be due on the portion of the Commitment repaid and
re-advanced under this Note.  The origination fee due with respect to
any advance shall be paid to Lender at or prior to the date of Lender’s funding
of such advance hereunder.

    


    4.           Security; Loan
Documents.  This Note is secured by, and entitled to the
benefits of, (i) a security agreement executed by Borrower in favor of Lender
dated as of the Effective Date (as it may be amended, modified, renewed,
extended, superseded, or replaced from time to time, the “Security
Agreement”) pursuant to which Borrower has granted to Lender, a security
interest in the Collateral, and (ii) for each Investment, an allonge, collateral
assignment, and/or such other documents, agreements, assignments and instruments
as Lender shall require in order to evidence, acknowledge or perfect its
security interest in the Collateral, as determined by Lender in its sole
discretion (collectively, as each may be amended, modified, renewed, extended,
superseded, or replaced from time to time, the “Collateral
Documents”).  This Note, the Security Agreement, the Collateral
Documents, the Origination Fee Letter, all UCC financing statements, amendments
thereto and continuation statements (collectively, “Financing
Statements”) filed by or in favor of Lender, all Advance Requests, all
Officer’s Certificates, and all other instruments, agreements, certificates,
assignments and other agreements and documents executed, entered into or
delivered by any party in connection with this Note, whether prior to, on or
after the Effective Date, are collectively referred to in this Note as the
“Loan
Documents”.

    


    5.           Loan
Expenses.

    


    
      
        
        

      

      
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    (a)           To
the extent not prohibited by applicable law, Borrower will pay all reasonable
costs and expenses and reimburse Lender for any and all expenditures of every
character incurred or expended from time to time, regardless of whether an Event
of Default shall have occurred, in connection with any of the following
(collectively, “Loan
Expenses”):

     

    (i)           the
preparation, negotiation, documentation, closing, renewal, revision,
modification, increase, review or restructuring of any loan or credit facility
represented by or secured by the Loan Documents, including legal, accounting,
auditing, architectural, engineering, due diligence, title company, and
inspection services and disbursements, or in connection with collecting or
attempting to enforce or collect pursuant to any Loan Document;

     

    (ii)           Lender’s
evaluating, monitoring, administering and protecting the Collateral or any other
collateral granted or pledged as security for the Loan or employing others to do
so or to perform due diligence for Lender with respect thereto; and

     

    (iii)           Lender’s
creating, perfecting and realizing upon Lender’s security interest in, and the
Liens on, the Collateral or any other collateral granted or pledged as security
for the Loan, and all costs and expenses relating to Lender’s exercising any of
its rights and remedies under any Loan Document or at law, including all
appraisal fees, consulting fees, filing fees, taxes, brokerage fees and
commissions, title review and abstract fees, litigation report fees, UCC search
fees, other fees and expenses incident to title searches, reports and security
interests, escrow fees, attorneys’ fees, legal expenses, court costs, other fees
and expenses incurred in connection with any complete or partial liquidation of
the Collateral or any other collateral granted or pledged as security for the
Loan, and all fees and expenses for any professional services or any operations
conducted in connection therewith.  Notwithstanding the foregoing, no
right or option granted by Borrower to Lender or otherwise arising pursuant to
any provision of any Loan Document shall be deemed to impose or admit a duty on
Lender to supervise, monitor or control any aspect of the character or condition
of the Collateral or any other collateral granted or pledged as security for the
Loan or any operations conducted in connection with it for the benefit of
Borrower or any other person other than Lender.

     

    (b)           Usury Savings Clause
Applies.  Borrower agrees that Lender has provided, and shall
provide, separate and distinct consideration for the fees and expenses described
in Section 5(a)
above and elsewhere in this Note and/or that such fees and expenses represent
bona fide fees and expenses incurred by Lender.  Borrower and Lender
further agree that such fees and expenses are not, are not intended to be, and
shall not be characterized as, interest or as compensation for the use,
forbearance or detention of money.  Despite the foregoing and
notwithstanding anything else in this Note and the other Loan Documents to the
contrary, if any fees or expenses charged or chargeable to Borrower hereunder
are determined to constitute interest and such fees or expenses, when added to
the interest charged hereunder, would cause the aggregate interest charged
hereunder to exceed the Highest Lawful  Rate, then Section 13 of this
Note shall automatically apply to reduce the interest charged hereunder so as
not to exceed the Highest Lawful Rate.

    


    
      
        
        

      

      
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    6.           Advance
Procedures.

    


    (a)           Advances.  Subject
to the other terms and conditions of this Note, including, without limitation,
Section 10,
Lender agrees to make advances to Borrower prior to the Maturity Date in an
aggregate amount not to exceed the available amount of the Commitment pursuant
to the procedures set forth in Section
6(b).  Notwithstanding anything else to the contrary contained
herein, Lender shall have no obligation to make any advance of Commitment to
Borrower under this Note unless each of the conditions precedent in Section 10 have been
satisfied and/or fulfilled as determined by Lender in its sole
discretion.  Any obligation of Lender to fund any amount of the
Commitment shall terminate upon the earlier of (i) Lender’s notification to
Borrower of such termination, (ii) the acceleration of this Note, or (iii) the
Maturity Date.

    


    (b)           Procedure for
Borrowing.  Each advance of Commitment (other than an advance
to be applied to accrued interest due and owing to Lender under this Note) shall
be made pursuant to Borrower’s delivery of an Advance Request and shall specify,
in addition to any information requested on Lender’s standard form of Advance
Request, (i) the amount of the advance of Commitment so requested, (ii) the
requested funding date, and (iii) the use of proceeds.  Each advance
of Commitment made for the purpose of funding an Investment shall be accompanied
by Borrower’s due diligence materials with respect to the Investment proposed to
be funded and other documentation supporting the advance of
Commitment.  Borrower agrees to provide, or cause to be provided, all
information, documents and agreements as may be requested by Lender in
connection with each such Investment and each such request for an advance of
Commitment.  Notwithstanding the foregoing sentences of this Section 6(b) and
provided that an Event of Default has not occurred and is continuing under this
Note, on each date that an payment of accrued interest becomes due and owing to
Lender hereunder, Borrower agrees that Lender shall make, and is hereby
authorized by Borrower to make, advance(s) from the Commitment equal to the
amount of the accrued interest then due and owing to Lender, which amount shall
be applied to the accrued interest then due and owing to Lender, without
delivery of an Advance Request to Lender in connection with such
advance.

    


    (c)           Making of
Advances upon
Approval of Advance Request.  Subject to the other terms and
conditions of this Note, after receipt of an Advance Request and upon approval
by Lender of such Advance Request, which approval may be withheld by Lender for
any reason or for no reason, Lender shall make available to Borrower, the amount
of the requested advance of Commitment (or such lesser amount than the requested
amount that Lender has approved to be funded); provided, however, that Lender
shall have no obligation to make any advance of Commitment unless each of the
conditions precedent in Section 10 have been
satisfied and/or fulfilled as determined by Lender in its sole
discretion.

    


    
      
        
        

      

      
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    (d)           Discretionary
Advances.  Lender is authorized to make advances hereunder that
Lender, in its sole discretion, deems necessary or desirable to pay any Loan
Expense or other amount chargeable to Borrower pursuant to the terms of this
Note or any other Loan Document (such advances made for the foregoing purposes
are referred to herein as the “Discretionary
Advances”).  Each Discretionary Advance shall, upon
disbursement, automatically constitute principal outstanding hereunder and cause
a corresponding increase in the aggregate amount of Borrower’s obligations
hereunder (even if such Discretionary Advance causes the aggregate amount
outstanding hereunder to exceed the face amount of this
Note).  Borrower agrees that each Discretionary Advance shall
automatically reduce the available amount of Commitment available
hereunder.  The making by Lender of any Discretionary Advance shall
not cure or waive any Event of Default hereunder (except only for an Event of
Default that has been cured to Lender’s satisfaction as confirmed by Lender’s
execution of a written agreement specifically acknowledging and describing the
Event of Default so cured, and for an Event of Default that has been waived by
Lender as confirmed by Lender’s execution of a written agreement specifically
acknowledging and describing the Event of Default so waived).

    


    (e)           Advance
Schedule.  Attached to this Note as Schedule 1 is a list
of the Advances made under this Note, any payments applied to reduce principal
outstanding under this Note, and the aggregate amount of principal outstanding
under this Note prepaid by Lender (the “Advance
Schedule”).  The Advance Schedule shall be revised by Lender
from time to time and, as so revised, shall be conclusive and binding upon
Borrower, absent manifest error.

    


    7.           Interest;
Payment.

    


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

    


    (b)           Payments.  Except
earlier upon any acceleration of this Note:

    


    (i)           Borrower
promises to pay to Lender monthly Accrued Interest Payments on the last day of
each month for interest accrued during that month; provided, however, that such
monthly interest payments may be advanced by Lender from the available amount of
the Commitment pursuant to the procedures set forth in Section 6(b) of this
Note.

    


    
      
        
        

      

      
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    (ii)           In
addition to the payments required by the provisions of clause (i) above, if
the outstanding principal amount of this Note ever exceeds $25,000,000.00,
Borrower promises to pay immediately to Lender, the amount of principal in
excess of $25,000,000.00, on the date that such excess exists.

    


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

    


    (c)           Application of
Payments.  Payments made on this Note will be applied first to
any unpaid collection costs, fees and other charges permitted under this Note,
next to unpaid, accrued interest, and last, to reduce the principal outstanding
under this Note, subject,
however,
to any adjustments required or permitted by this Note or applicable
law.

    


    (d)           General.  Borrower
will make each payment that it owes under this Note to Lender (interest, any
applicable fees and charges, and outstanding principal) in full and in lawful
money of the United States, without set-off, deduction or
counterclaim.  All payments shall be made by check or wire transfer of
immediately available funds.  Should any such payment become due and
payable on a day other than a business day, the date for such payment shall be
extended to the next succeeding business day, and, in the case of a payment of
principal or past-due interest, interest shall accrue and be payable on such
amount for the period of such extension.  Each such payment must be
received by Lender not later than 3:00 p.m., Dallas, Texas time on the date such
payment becomes due and payable.  Any payment received by Lender after
such time will be deemed to have been made on the next succeeding business
day.

    


    8.           Prepayment; Lender's
Rights.  Borrower may prepay this Note, or any portion of this
Note, at any time and from time to time, without the payment of any fee or
penalty.

    


    9.           Representations and
Warranties.  Borrower represents and warrants to Lender as
follows:

    


    (a)           Organization and Good
Standing.  Borrower is a limited partnership, duly organized,
validly existing and in good standing under the laws of its jurisdiction of
organization, having all limited partnership powers required to carry on its
business and to enter into and carry out the transactions contemplated by this
Note and the other Loan Documents.  Borrower has taken all appropriate
actions and complied in all material respects with all laws applicable to it in
each jurisdiction within and without outside the United States where Borrower
owns or leases any properties or conducts any business.

    


    (b)           Authorization;
Validity.  Borrower has the limited partnership power,
authority and legal right to execute, deliver and perform its obligations under,
this Note and the other Loan Documents.  The execution and delivery by
Borrower of the Loan Documents and the performance of its obligations under each
such Loan Document have been duly authorized by proper limited partnership
proceedings.  The Loan Documents to which Borrower is a party
constitute the legal, valid and binding obligations of Borrower enforceable
against Borrower in accordance with their terms, except as enforceability may be
limited by bankruptcy, insolvency or similar laws affecting the enforcement of
creditors' rights generally.

    


    
      
        
        

      

      
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    (c)           Usury.  Borrower
has been involved in the structure and negotiation of the Note and the other
Loan Documents.  It is the intention of Borrower that all aspects of
the Note and the other Loan Documents, and any related transaction, comply with
all laws, including, specifically, any applicable usury laws.  If for
any reason, it is determined by a governing authority that the loan made
pursuant to the Note and the other Loan Documents is usurious in any manner,
Borrower hereby represents that, as to Borrower, such result was unintentional
and the result of a bona fide mistake.

    


    10.           Conditions Precedent to
Advances of Commitment.  Borrower agrees that, notwithstanding
anything to the contrary contained herein or in the other Loan Documents,
Lender’s obligation to fund each advance of Commitment shall be conditioned upon
the satisfaction and/or fulfillment of each of the following conditions, on and
as of the funding date for the applicable advance of Commitment:

    


    (a)           the
representations and warranties made in this Note and the other Loan Documents by
Borrower and in all certificates and other documents delivered pursuant thereto,
shall be true and correct in all material respects on and as of the date of
funding, as determined by Lender in its sole discretion;

    


    (b)           all
of the covenants and agreements contained in this Note and the other Loan
Documents to be complied with and performed as of the date hereof by Borrower
have been duly complied with and performed on and as of the date of funding, as
determined by Lender in its sole discretion;

    


    (c)           no
event constituting an Event of Default (without giving effect to any grace or
cure periods for such Event of Default provided herein or in the other Loan
Documents), shall have occurred and be continuing, as determined by Lender in
its sole discretion;

    


    (d)           a
duly authorized officer on behalf of Borrower shall have duly executed and
delivered to Lender, an Advance Request (including or accompanied by an
Officer’s Certificate), and all matters certified in the Advance Request and
Officer’s Certificate shall be true and correct in all respects;

    


    (e)           on
and as of the date of funding, all statements contained in all Loan Documents
and all other certificates, statements and data furnished to Lender by or on
behalf of Borrower or in connection with the transactions contemplated by this
Note or any of the other Loan Documents (including all of the documents and
information delivered to Lender in connection with an Advance Request) shall be
true and complete in all material respects, and there are no facts or events
known to Borrower which, if disclosed to Lender, would make such statements,
certificates or date untrue in any material respect;

    


    
      
        
        

      

      
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    (f)            the
requested advance of Commitment, if made, would not cause the aggregate
outstanding principal amount of this Note to exceed the Commitment;

    


    (g)           as
of the date of any such advance of Commitment, all of the Loan Documents shall
have been executed and delivered (including, without limitation, all Collateral
Documents with respect to the Investment being funded by Lender with the
proceeds of the advance), and shall be valid, enforceable and in full force and
effect;

    


    (h)           Lender
shall have approved the Advance Request, as determined by Lender in its sole
discretion (which approval may be withheld by Lender for any reason or for no
reason); and

    


    (i)           Borrower
shall have complied with each other request of Lender made in connection with
the advance of Commitment.

    


    11.           Covenants.

    


    (a)           Deliveries.  Borrower
covenants and agrees with Lender that it will deliver each of the following, on
a quarterly basis, commencing with the quarter ending September 30, 2008, in
form and substance reasonably satisfactory to Lender:

    


    (i)           Summary of
Loans.  A summary of each Investment made by Borrower,
including the name and material of information with respect to the client of
Borrower to whom the Investment is made and a summary of concentration of credit
by client and geographical region.

    


    (ii)           Schedule of
Maturities.  A summary of scheduled maturities for each
Investment and payment status for all Investments.

    


    (iii)           Note
Proceeds.  A summary of all proceeds of this Note that are
allocated by Borrower to each Investment.

    


    (b)           Aggregate
Investment-to-Value.  Borrower agrees that at no time shall the
sum of (i) all Investments, plus (ii) any Senior Indebtedness exceed ninety
percent (90%) of the market value of the property securing the
Investments.

    


    (c)           Maximum Investment
Amount.  No single Investment may exceed twenty percent (20%)
of the Commitment (i.e., $5,000,000.00).  Investments with any single
client of Borrower or group of related clients may not exceed twenty percent
(20%) of the Commitment (i.e., $5,000,000.00).

    


    
      
        
        

      

      
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    (d)           Use of
Proceeds.  The proceeds of this Note shall be used solely to
acquire Investments approved by Lender and for business and commercial purposes
approved by Lender that are related to Investments.  In no event shall
any funds advanced under this Note be used, directly or indirectly, by any
person for personal, family, household or agricultural purposes or for the
purpose, whether immediate, incidental or ultimate, of purchasing, acquiring or
carrying any “margin stock” (as such term is defined in Regulation U promulgated
by the Board of Governors of the Federal Reserve System).

    


    12.           Default.

    


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

    


    (i)           the
default by Borrower in any payment required by this Note by the fifth (5th) day
following the date when due, whether on or prior to the Maturity Date;
or

    


    (ii)           Borrower
breaches any representation or warranty contained in this Note or any other Loan
Document, or fails to perform or observe any covenant or agreement that is set
forth in this Note or any other Loan Document, and such breach if capable of
being cured, is not cured within ten (10) days after written notice of such
breach is received from Lender; or

    


    (iii)           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

    


    (iv)           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

    


    
      	
               
      

            	
              (v)

            	
              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;
  or

            


    

    


    
      
        
        

      

      
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    (vi)           Borrower
is liquidated or winds up its affairs; or

    


    (vii)           any
Disposition of any Collateral occurs without the prior written consent of
Lender, unless the full amount of proceeds from such Disposition of Collateral
is paid by Borrower to Lender to reduce the indebtedness of Borrower owing to
Lender under this Note; or

    


    (viii)          any
Loan Document ceases to become valid, binding and enforceable for any reason
other than its release by Lender; or

    


    (ix)           the
sale or liquidation of all or substantially all of the assets of Borrower,
without the prior written consent of Lender or the payment in full of the
indebtedness of Borrower owing to Lender under this Note.

    


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

    


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

    


    
      
        
        

      

      
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    13.           Usury
Laws.

    


    (a)           Notwithstanding
anything to the contrary contained in this Note or any other Loan Document, (i)
this Note shall never bear interest in excess of the Highest Lawful Rate, and
(ii) if at any time the rate at which interest is payable on this Note is
limited by the Highest Lawful Rate by the foregoing clause (i) or by reference
to the Highest Lawful Rate in the definitions of Base Rate and Default Rate,
then this Note shall bear interest at the Highest Lawful Rate and shall continue
to bear interest at the Highest Lawful Rate until such time as the total amount
of interest accrued on this Note equals (but does not exceed) the total amount
of interest which would have accrued on this Note, had there been no Highest
Lawful Rate applicable to this Note.

    


    (b)           It
is the intention of the parties hereto that all aspects of this Note and the
other Loan Documents, and the transactions contemplated hereby and thereby,
comply with all laws, including, specifically, any applicable usury
laws.  In furtherance thereof, Borrower and Lender stipulate and agree
that none of the terms and provisions contained in this Note or the other Loan
Documents shall ever be construed to create a contract to pay for the use,
forbearance, or detention of money, or interest, in excess of the maximum amount
of interest permitted to be charged by applicable law in effect from time to
time.  Neither Borrower nor any present or future guarantors,
endorsers, or other persons or entities hereafter becoming liable for payment of
Borrower’s obligations hereunder and under the other Loan Documents shall ever
be liable for unearned interest thereon or shall ever be required to pay
interest thereon in excess of the maximum amount that may be lawfully charged
under applicable law from time to time in effect, and the provisions of this
Section 13
shall control over all other provisions of the Loan Documents that may be in
conflict or apparent conflict herewith.  Lender expressly disavows any
intention to charge or collect excessive unearned interest or finance charges in
the event the maturity of this Note is accelerated. If (i) the maturity of this
Note is accelerated for any reason, (ii) this Note is prepaid and as a result
any amounts held to constitute interest are determined to be in excess of the
legal maximum, or (iii) Lender or any other holder of this Note shall otherwise
collect moneys which are determined to constitute interest which would otherwise
increase the interest hereon to an amount in excess of that permitted to be
charged by applicable law, then all sums determined to constitute interest in
excess of such legal limit shall, without penalty, be promptly applied to reduce
the then outstanding principal of this Note or, at Lender's or such holder's
option, promptly returned to Borrower or the other payor thereof upon such
determination. In determining whether or not the interest paid or payable, under
any specific circumstance, exceeds the maximum amount permitted under applicable
law, Lender and Borrower (and any other payors of this Note) shall to the
greatest extent permitted under applicable law, (i) characterize any
non-principal payment as an expense, fee or premium rather than as interest,
(ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize,
prorate, allocate, and spread the total amount of interest throughout the entire
contemplated term of this Note in accordance with the amounts outstanding from
time to time hereunder and the maximum legal rate of interest from time to time
in effect under applicable law in order to lawfully charge the maximum amount of
interest permitted under applicable law.  In the event applicable law
provides for an interest ceiling under Chapter 303 of the Texas Finance Code
(the “Texas
Finance Code”) as amended, for that day, the ceiling shall be the “weekly
ceiling” as defined in the Texas Finance Code.  As used in this
section, the term “applicable
law” means the laws of the State of Texas or the laws of the United
States of America, whichever laws allow the greater interest, as such laws now
exist or may be changed or amended or come into effect in the
future.

    


    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

    14.           Further
Assurances.  Borrower will, at its expense, to promptly execute
and deliver to Lender, all such other and further documents, agreements and
instruments, and shall deliver all such supplementary information, including,
without limitation, information with respect to Investments, as Lender may
request from time to time.

    


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

    


    16.           Notice.  All
notices and other communications under this Note 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 to Borrower and Lender, respectively, at the
addresses set forth in Section 1 of this
Note, or, with respect to Borrower or Lender, to such other address as may have
delivered by one to the other for purposes of notice.  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 written or electronic confirmation of facsimile transfer, (c)
if delivered personally by hand, upon written or electronic confirmation of
delivery from the Person delivering such notice or other communication, or (d)
if sent by nationally recognized overnight delivery service, upon written or
electronic confirmation of delivery from such service.

    


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

    


    18.           CHOICE OF
LAW.  EXCEPT TO THE EXTENT THAT THE VALIDITY OR PERFECTION OF
SECURITY INTERESTS OR REMEDIES IN RESPECT OF ANY PARTICULAR COLLATERAL IS
GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF TEXAS, THIS NOTE
AND THE OTHER LOAN DOCUMENTS SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE SUBSTANTIVE LAWS OF THE STATE OF TEXAS, WITHOUT REGARD TO ITS CONFLICTS
OF LAWS PROVISIONS.

    


    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

    19.           JURISDICTION;
VENUE.  BORROWER IRREVOCABLY AGREES THAT ANY LEGAL PROCEEDING
IN RESPECT OF THIS NOTE AND THE OTHER LOAN DOCUMENTS SHALL BE BROUGHT IN THE
DISTRICT COURTS OF TARRANT COUNTY, TEXAS OR THE UNITED STATES DISTRICT COURT FOR
THE NORTHERN DISTRICT OF TEXAS, FORT WORTH DIVISION (THE “SPECIFIED
COURTS”).  BORROWER HEREBY IRREVOCABLY SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF THE SPECIFIED COURTS.  BORROWER HEREBY
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH
IT MAY NOW OR HEREAFTER HAVE THAT THE LAYING OF VENUE OF ANY SUIT, ACTION OR
PROCEEDING BROUGHT IN ANY SUCH SPECIFIED COURT HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM AND HEREBY IRREVOCABLY AGREES TO A TRANSFER OF ALL SUCH
PROCEEDINGS TO THE SPECIFIED COURTS.  NOTHING HEREIN SHALL AFFECT THE
RIGHT OF LENDER TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST
BORROWER IN ANY JURISDICTION OR TO SERVE PROCESS IN ANY MANNER PERMITTED BY
APPLICABLE LAW.

    


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

    


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

    


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

    


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

    


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

    


    
      
        
        

      

      
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    25.           Number of Gender or
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.

    


    26.           WAIVER OF JURY TRIAL,
PUNITIVE DAMAGES, ETC.  BORROWER HEREBY KNOWINGLY, VOLUNTARILY,
INTENTIONALLY, AND IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT BORROWER MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS NOTE OR THE LOAN DOCUMENTS OR ANY
TRANSACTION CONTEMPLATED HEREBY OR THEREBY OR ASSOCIATED HEREWITH OR THEREWITH,
BEFORE OR AFTER MATURITY OF THIS NOTE; (B) WAIVES, TO THE MAXIMUM EXTENT NOT
PROHIBITED BY LAW, ANY RIGHT BORROWER MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY “SPECIAL DAMAGES”, AS DEFINED BELOW, (C) CERTIFIES THAT NEITHER
LENDER NOR ANY REPRESENTATIVE OF LENDER OR COUNSEL FOR ANY PARTY HERETO HAS
REPRESENTED, EXPRESSLY OR OTHERWISE, OR IMPLIED THAT LENDER WOULD NOT, IN THE
EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND
(D) ACKNOWLEDGES THAT LENDER HAS BEEN INDUCED TO ENTER INTO THIS NOTE AND
THE OTHER LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY
BASED UPON, 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 BORROWER HAS EXPRESSLY
PROMISED TO PAY OR DELIVER TO LENDER HERETO.

    


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

    


    28.           ENTIRE
AGREEMENT.  THIS NOTE AND THE OTHER
LOAN DOCUMENTS TOGETHER CONSTITUTE THE ENTIRE AGREEMENT AMONG THE PARTIES
CONCERNING THE SUBJECT MATTER HEREOF, AND ALL PRIOR DISCUSSIONS, AGREEMENTS AND
STATEMENTS, WHETHER ORAL OR WRITTEN, ARE MERGED INTO THIS NOTE AND THE OTHER
LOAN DOCUMENTS.  THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES AND THIS NOTE AND THE OTHER LOAN DOCUMENTS MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE
PARTIES.

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    This Note has been executed by Borrower
on this the ___ day of ___________, 2008, effective for all purposes as of the
Effective Date.

    


    BORROWER:

    


    UNITED
DEVELOPMENT FUNDING LAND OPPORTUNITY FUND, L.P.

    


    By:           UDF
Land GenPar, L.P.

    Its:           General
Partner

    


    By:           UDF
Land GP, LLC

    Its:           General
Partner

    


    By:           UMTH
Land Development, L.P.

    Its:           Managing
Member

    


    By:           UMT
Services, Inc.

    Its:           General
Partner

    


    


    By:           /s/ Hollis
Greenlaw

    Name:     Hollis
M. Greenlaw

    Its:           President

    


    


                 
The terms of this Note are hereby accepted by Lender.

    


    LENDER:

    


    UNITED
DEVELOPMENT FUNDING III, L.P.

    


    By:           UMTH
Land Development, L.P.

    Its:           General
Partner

    


    By:           UMT
Services, Inc.

    Its:           General
Partner

    


    


    By:           /s/ Ben
Wissink

    Name:      Ben
Wissink

    Its:           Chief
Operating Officer

    


    


    


    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

    SCHEDULE
1

    


    ADVANCE
SCHEDULE

    


    


    
      	
               

               

              Date
      of

              Advance

            	
               

               

               

              Amount Advanced

            	
               

              Date
      of Principal
Repayment

            	
               

              Amount
      of

              Principal Repayment

            	
              Aggregate
      Principal Amount
      Outstanding