Exhibit 10.7


 


PROMISSORY NOTE


	$35,000,000.00	July 2, 2014


 


FOR VALUE RECEIVED, UNITED
DEVELOPMENT FUNDING IV, a Maryland real estate investment trust (whether one or more, “Borrower”), having an
address at 1301 Municipal Way, Suite 200, Grapevine, Texas 76051, hereby promises to pay to the order of WATERFALL FINANCE 4, LLC
(together with its successors and assigns and any subsequent holders of this Promissory Note, the “Lender”),
as hereinafter provided, the principal sum of THIRTY-FIVE MILLION AND NO/100 DOLLARS ($35,000,000.00) or so much thereof as may
be advanced by Lender from time to time hereunder to or for the benefit or account of Borrower, together with interest thereon
at the Note Rate (as hereinafter defined), and otherwise in strict accordance with the terms and provisions hereof.


 


ARTICLE I.

DEFINITIONS


 


Section 1.1           DEFINITONS.
As used in this Promissory Note, the following terms shall have the following meanings:


 


Applicable Margin:
9.00%.


 


Applicable Rate:
LIBOR plus the Applicable Margin.


 


Borrower: As
identified in the introductory paragraph of this Note.


 


Business Day:
A weekday, Monday through Friday, except a legal holiday or a day on which banking institutions in New York, New York are authorized
or required by law to be closed. Unless otherwise provided, the term “days” when used herein shall mean calendar
days.


 


Change: Any
adoption of or change in any law, governmental or quasi-governmental rule, regulation, policy, guideline, interpretation, or directive
(whether or not having the force of law) after the date of this Note that affects capital adequacy or the amount of capital required
or expected to be maintained by Lender or any entity controlling Lender.


 


Charges: All
fees, charges and/or any other things of value, if any, contracted for, charged, taken, received or reserved by Lender in connection
with the transactions relating to this Note and the other Loan Documents, which are treated as interest under applicable law.


 


Debtor Relief Laws:
Title 11 of the United States Code, as now or hereafter in effect, or any other applicable law, domestic or foreign, as now or
hereafter in effect, relating to bankruptcy, insolvency, liquidation, receivership, reorganization, arrangement or composition,
extension or adjustment of debts, or similar laws affecting the rights of creditors.


 


Default Interest
Rate: A rate per annum equal to the lesser of (i) the Maximum Lawful Rate, or (ii) the sum of the Applicable Rate plus 2.50%.


 


Event of Default:
Any event or occurrence described under Section 3.1 hereof.


 




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Extended Maturity
Date: December 31, 2015, subject to the earlier maturity hereof whether by acceleration or otherwise in accordance with the
terms hereof.


 


Extension Term:
The period commencing on the Maturity Date and ending on the Extended Maturity Date.


 


Lender: As identified
in the introductory paragraph of this Note.


 


LIBOR: The greater
of (a) the LIBOR Floor and (b) the rate for one-month deposits in U.S. dollars, which rate is determined on a daily basis by the
Lender by reference to the ICE Benchmark Administration Limited (“IBA”) LIBOR Rates on Bloomberg (or such other
service or services as may be nominated by the IBA for the purpose of displaying London interbank offered rates for U.S. dollar
deposits) on such date (or, if such date is not a Business Day, on the immediately preceding Business Day) at or about 11 a.m.
New York City time; provided, however, that if no rate appears on Bloomberg on any date of determination, LIBOR shall
mean the rate for one-month deposits in U.S. Dollars which appears on the Telerate Page 3750 on any such date of determination;
provided further, that if no rate appears on either Bloomberg or such Telerate Page 3750, on any such date of determination
LIBOR shall be determined as follows:


 


LIBOR will be determined
at approximately 11:00 a.m., New York City time, on such day on the basis of (a) the arithmetic mean of the rates at which one-month
deposits in U.S. dollars are offered to prime banks in the London interbank market by four (4) major banks in the London interbank
market selected by the Lender and in a principal amount of not less than $35,000,000 that is representative for a single transaction
in such market at such time, if at least two (2) such quotations are provided, or (b) if fewer than two (2) quotations are provided
as described in the preceding clause (a), the arithmetic mean of the rates, as requested by the Lender, quoted by three (3) major
banks in New York City, selected by the Administrative Agent, at approximately 11:00 A.M., New York City time, on such day, one-month
deposits in United States dollars to leading European banks and in a principal amount of not less than $35,000,000 that is representative
for a single transaction in such market at such time.


 


LIBOR Floor:
The rate of one percent (1.00%) per annum.


 


Loan Agreement:
The Loan Agreement of even date herewith executed by Lender and Borrower.


 


Loan Documents:
As defined in the Loan Agreement.


 


Maturity Date:
July 2, 2015, subject to the earlier maturity hereof whether by acceleration or otherwise in accordance with the terms hereof.


 


Maximum Lawful Rate:
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 New York (or applicable United States federal law to the extent that such law permits Lender
to contract for, charge, take, receive or reserve a greater amount of interest than under New York law), taking into account all
Charges made in connection with the transaction evidenced by this Note and the other Loan Documents.


 


Note: This Promissory
Note.


 


Note Rate: The
rate equal to the lesser of (a) the Maximum Lawful Rate or (b) the greater of (i) the Minimum Rate or (ii) the Applicable Rate.


 


Payment Date:
The fifth (5th) day of each and every calendar month during the term of this Note, with the first being August 5, 2014.


 




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Related Indebtedness:
Any and all indebtedness paid or payable by Borrower to Lender pursuant to the Loan Documents or any other communication or writing
by or between Borrower and Lender related to the transaction or transactions that are the subject matter of the Loan Documents,
except such indebtedness which has been paid or is payable by Borrower to Lender under this Note.


 


ARTICLE
II.

PAYMENT TERMS


 


Section
2.1            PAYMENT OF PRINCIPAL AND INTEREST.


 


All accrued but unpaid
interest at the applicable Note Rate on the principal balance of this Note outstanding from time to time shall be due and payable
on each Payment Date. The then outstanding principal balance of this Note and all accrued but unpaid interest thereon at the applicable
Note Rate shall be due and payable on the Maturity Date; provided, that, if the Borrower is in compliance with the covenants set
forth in Article VIII of the Loan Agreement on the Maturity Date, the Borrower may, at its option, extend the term of this Note
and the Loan until the Extended Maturity Date. On each Payment Date during the Extension Term, the Borrower shall pay to Lender
an amount equal to the sum of (i) all accrued but unpaid interest on the outstanding principal balance of this Note at the applicable
Note Rate, and (ii) $5,833,333.33, and the outstanding principal balance of this Note, together with accrued but unpaid interest
thereon at the applicable Note Rate, shall be due and payable on the Extended Maturity Date.


 


Section 2.2           APPLICATION.
Except as expressly provided herein to the contrary, all payments on this Note shall be applied in the following order of priority:
(i) the payment or reimbursement of any expenses, costs or obligations (other than the outstanding principal balance hereof and
interest hereon) for which either Borrower shall be obligated or Lender shall be entitled pursuant to the provisions of this Note
or the other Loan Documents, (ii) the payment of accrued but unpaid interest hereon, and (iii) the payment of all or any portion
of the principal balance hereof then outstanding hereunder, in the direct order of maturity. If an Event of Default exists under
this Note or under any of the other Loan Documents, then Lender may, at the sole option of Lender, apply any such payments, at
any time and from time to time, to any of the items specified in clauses (i), (ii) or (iii) above without regard to the order of
priority otherwise specified in this Section 2.2 and any application to the outstanding principal balance hereof may be
made in either direct or inverse order of maturity.


 


Section 2.3            PAYMENTS.
All payments under this Note made to Lender shall be made in immediately available funds at 1140 Avenue of the Americas, 7th Floor,
New York, New York 10036, Attn: Patrick Lo (or at such other place as Lender, in Lender’s sole discretion, may have established
by delivery of written notice thereof to Borrower from time to time), without offset, in lawful money of the United States of America,
which shall at the time of payment be legal tender in payment of all debts and dues, public and private. Payments by check or draft
shall not constitute payment in immediately available funds until the required amount is actually received by Lender in full. Payments
in immediately available funds received by Lender in the place designated for payment on a Business Day prior to 11:00 a.m. New
York, New York time at said place of payment shall be credited prior to the close of business on the Business Day received, while
payments received by Lender on a day other than a Business Day or after 11:00 a.m. New York, New York time on a Business Day shall
not be credited until the next succeeding Business Day. If any payment of principal or interest on this Note shall become due and
payable on a day other than a Business Day, such payment shall be made on the next succeeding Business Day. Any such extension
of time for payment shall be included in computing interest which has accrued and shall be payable in connection with such payment.


 


Section 2.4           COMPUTATION
PERIOD. Interest on the indebtedness evidenced by this Note shall be computed on the basis of a three hundred sixty (360) day
year and shall accrue on the actual number of days elapsed for any whole or partial month in which interest is being calculated.
In computing the number of days during which interest accrues, the day on which funds are initially advanced shall be included
regardless of the time of day such advance is made, and the day on which funds are repaid shall be included unless repayment is
credited prior to the close of business on the Business Day received as provided in Section 2.3 hereof.


 




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Section 2.5           PREPAYMENT.
Borrower shall not have the right to prepay all or any portion of the outstanding principal balance of this Note
prior to the Maturity Date. Borrower may prepay all or any portion of the outstanding principal balance of this Note on any Business
Day during the Extension Period upon not less than three (3) Business Days prior written notice to Lender of such prepayment.


 


Section 2.6           UNCONDITIONAL
PAYMENT. Borrower is and shall be obligated to pay all principal, interest and any and all other amounts which become payable
under this Note or under any of the other Loan Documents absolutely and unconditionally and without any abatement, postponement,
diminution or deduction whatsoever and without any reduction for counterclaim or setoff whatsoever. If at any time any payment
received by Lender hereunder shall be deemed by a court of competent jurisdiction to have been a voidable preference or fraudulent
conveyance under any Debtor Relief Law, then the obligation to make such payment shall survive any cancellation or satisfaction
of this Note or return thereof to Borrower and shall not be discharged or satisfied with any prior payment thereof or cancellation
of this Note, but shall remain a valid and binding obligation enforceable in accordance with the terms and provisions hereof, and
such payment shall be immediately due and payable upon demand.


 


Section
2.7           PARTIAL OR INCOMPLETE PAYMENTS. Remittances in payment
of any part of this Note other than in the required amount in immediately available funds at the place where this Note is payable
shall not, regardless of any receipt or credit issued therefor, constitute payment until the required amount is actually received
by Lender in full in accordance herewith and shall be made and accepted subject to the condition
that any check or draft may be handled for collection in accordance with the practice of the collecting bank or banks. Acceptance
by Lender of any payment in an amount less than the full amount then due shall be deemed an acceptance on account only, and the
failure to pay the entire amount then due shall be and continue to be an Event of Default in the payment of this Note.


 


Section 2.8           DEFAULT
INTEREST RATE, ETC. For so long as any Event of Default exists under this Note or under any of the other Loan Documents, regardless
of whether or not there has been an acceleration of the indebtedness evidenced by this Note, and at all times after the maturity
of the indebtedness evidenced by this Note (whether by acceleration or otherwise), and in addition to all other rights and remedies
of Lender hereunder, interest shall accrue on the outstanding principal balance hereof at the Default Interest Rate, and such accrued
interest shall be immediately due and payable. Borrower acknowledges that it would be extremely difficult or impracticable to determine
Lender’s actual damages resulting from any late payment or Event of Default, and such late charges and accrued interest are
reasonable estimates of those damages and do not constitute a penalty. If Lender determines that the amount of capital required
or expected to be maintained by Lender or any entity controlling Lender, is increased as a result of a Change, then, within fifteen
(15) days of demand by Lender, Borrower shall pay to Lender the amount necessary to compensate for any shortfall in the rate of
return on the portion of such increased capital that Lender determines is attributable to this Note or the principal amount outstanding
hereunder (after taking into account Lender’s policies as to capital adequacy).


 


ARTICLE
III.

EVENT OF DEFAULT AND REMEDIES


 


Section
3.1           EVENT OF DEFAULT. The
occurrence or happening, at any time and from time to time, of any one or more of the Events of Default under the Loan Agreement
shall immediately constitute an “Event of Default” under this Note.


 




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Section
3.2           REMEDIES. Upon
the occurrence of an Event of Default, Lender shall have the immediate right, at the sole discretion of Lender and without notice,
demand, presentment, notice of nonpayment or nonperformance, protest, notice of protest, notice of intent to accelerate, notice
of acceleration, or any other notice or any other action (ALL OF WHICH BORROWER HEREBY EXPRESSLY WAIVES AND RELINQUISHES)
(i) to declare the entire unpaid balance of the indebtedness evidenced by this Note (including, without limitation, the outstanding
principal balance hereof, including all sums advanced or accrued hereunder or under any other Loan Document, and all accrued but
unpaid interest thereon) at once immediately due and payable (and upon such declaration, the same shall be at once immediately
due and payable) and may be collected forthwith, whether or not there has been a prior demand for payment and regardless of the
stipulated date of maturity, (ii) to foreclose any liens and security interests securing payment hereof or thereof (including,
without limitation, any liens and security interests, and (iii) to exercise any of Lender’s other rights, powers, recourses
and remedies under this Note, under any other Loan Document, or at law or in equity, and the same (w) shall be cumulative and concurrent,
(x) may be pursued separately, singly, successively, or concurrently against Borrower or others obligated for the repayment of
this Note or any part hereof, or against any one or more of them, at the sole discretion of Lender, (y) may be exercised as often
as occasion therefor shall arise, it being agreed by Borrower that the exercise, discontinuance of the exercise of or failure to
exercise any of the same shall in no event be construed as a waiver or release thereof or of any other right, remedy, or recourse,
and (z) are intended to be, and shall be, nonexclusive. All rights and remedies of Lender hereunder and under the other Loan Documents
shall extend to any period after the initiation of foreclosure proceedings, judicial or otherwise. Without limiting the provisions
of Section 4.18 hereof, if this Note, or any part hereof, is collected by or through an attorney-at-law, Borrower agrees
to pay all costs and expenses of collection, including, but not limited to, Lender’s attorneys’ fees, whether or not
any legal action shall be instituted to enforce this Note. This Note is also subject to acceleration as provided in the Loan Agreement.


 


ARTICLE IV.

GENERAL PROVISIONS


 


Section 4.1           NO
WAIVER; AMENDMENT. No failure to accelerate the indebtedness evidenced by this Note by reason of an Event of Default hereunder,
acceptance of a partial or past due payment, or indulgences granted from time to time shall be construed (i) as a novation of this
Note or as a reinstatement of the indebtedness evidenced by this Note or as a waiver of such right of acceleration or of the right
of Lender thereafter to insist upon strict compliance with the terms of this Note, or (ii) to prevent the exercise of such right
of acceleration or any other right granted under this Note, under any of the other Loan Documents or by any applicable laws. Borrower
hereby expressly waives and relinquishes the benefit of any statute or rule of law or equity now provided, or which may hereafter
be provided, which would produce a result contrary to or in conflict with the foregoing. The failure to exercise any remedy available
to Lender shall not be deemed to be a waiver of any rights or remedies of Lender under this Note or under any of the other Loan
Documents, or at law or in equity. No extension of the time for the payment of this Note or any installment due hereunder, made
by agreement with any person now or hereafter liable for the payment of this Note, shall operate to release, discharge, modify,
change or affect the original liability of Borrower under this Note, either in whole or in part, unless Lender specifically, unequivocally
and expressly agrees otherwise in writing. This Note may not be changed orally, but only by an agreement in writing signed by the
party against whom enforcement of any waiver, change, or modification is sought.


 


Section 4.2           WAIVERS.
EXCEPT AS SPECIFICALLY PROVIDED IN THE LOAN DOCUMENTS TO THE CONTRARY, BORROWER AND ANY ENDORSERS OR GUARANTORS HEREOF SEVERALLY
WAIVE AND RELINQUISH PRESENTMENT FOR PAYMENT, DEMAND, NOTICE OF NONPAYMENT OR NONPERFORMANCE, PROTEST, NOTICE OF PROTEST, NOTICE
OF INTENT TO ACCELERATE, NOTICE OF ACCELERATION OR ANY OTHER NOTICES OR ANY OTHER ACTION. BORROWER AND ANY ENDORSERS OR GUARANTORS
HEREOF SEVERALLY WAIVE AND RELINQUISH, TO THE FULLEST EXTENT PERMITTED BY LAW, ALL RIGHTS TO THE BENEFITS OF ANY MORATORIUM, REINSTATEMENT,
MARSHALING, FORBEARANCE, VALUATION, STAY, EXTENSION, REDEMPTION, APPRAISEMENT, EXEMPTION AND HOMESTEAD NOW OR HEREAFTER PROVIDED
BY THE CONSTITUTION AND LAWS OF THE UNITED STATES OF AMERICA AND OF EACH STATE THEREOF, BOTH AS TO ITSELF AND IN AND TO ALL OF
ITS PROPERTY, REAL AND PERSONAL, AGAINST THE ENFORCEMENT AND COLLECTION OF THE OBLIGATIONS EVIDENCED BY THIS NOTE OR BY THE OTHER
LOAN DOCUMENTS.


 




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Section 4.3           INTEREST
PROVISIONS. It is expressly stipulated and agreed to be the intent of Borrower and Lender at all times to comply strictly with
the applicable New York law governing the maximum rate or amount of interest payable on the indebtedness evidenced by this Note
and the Related Indebtedness (or applicable United States federal law to the extent that it permits Lender to contract for, charge,
take, reserve or receive a greater amount of interest than under New York law). If the applicable law is ever judicially interpreted
so as to render usurious any amount (i) contracted for, charged, taken, reserved or received pursuant to this Note, any of the
other Loan Documents or any other communication or writing by or between Borrower and Lender related to the transaction or transactions
that are the subject matter of the Loan Documents, (ii) contracted for, charged, taken, reserved or received by reason of Lender’s
exercise of the option to accelerate the maturity of this Note and/or the Related Indebtedness, or (iii) Borrower will have paid
or Lender will have received by reason of any voluntary prepayment by Borrower of this Note and/or the Related Indebtedness, then
it is Borrower’s and Lender’s express intent that all amounts charged in excess of the Maximum Lawful Rate shall be
automatically canceled, ab initio, and all amounts in excess of the Maximum Lawful Rate theretofore collected by Lender shall be
credited on the principal balance of this Note and/or the Related Indebtedness (or, if this Note and all Related Indebtedness have
been or would thereby be paid in full, refunded to Borrower), and the provisions of this Note and the other Loan Documents shall
immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of
the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount
otherwise called for hereunder and thereunder; provided, however, if this Note has been paid in full before the end of the stated
term of this Note, then Borrower and Lender agree that Lender shall, with reasonable promptness after Lender discovers or is advised
by Borrower that interest was received in an amount in excess of the Maximum Lawful Rate, either refund such excess interest to
Borrower and/or credit such excess interest against this Note and/or any Related Indebtedness then owing by Borrower to Lender.
Borrower hereby agrees that as a condition precedent to any claim seeking usury penalties against Lender, Borrower will provide
written notice to Lender, advising Lender in reasonable detail of the nature and amount of the violation, and Lender shall have
sixty (60) days after receipt of such notice in which to correct such usury violation, if any, by either refunding such excess
interest to Borrower or crediting such excess interest against this Note and/or the Related Indebtedness then owing by Borrower
to Lender. All sums contracted for, charged, taken, reserved or received by Lender for the use, forbearance or detention of any
debt evidenced by this Note and/or the Related Indebtedness shall, to the extent permitted by applicable law, be amortized or spread,
using the actuarial method, throughout the stated term of this Note and/or the Related Indebtedness (including any and all renewal
and extension periods) until payment in full so that the rate or amount of interest on account of this Note and/or the Related
Indebtedness does not exceed the Maximum Lawful Rate from time to time in effect and applicable to this Note and/or the Related
Indebtedness for so long as debt is outstanding. Notwithstanding anything to the contrary contained herein or in any of the other
Loan Documents, it is not the intention of Lender to accelerate the maturity of any interest that has not accrued at the time of
such acceleration or to collect unearned interest at the time of such acceleration.


 


Section 4.4           USE
OF FUNDS. Borrower hereby warrants, represents and covenants that (i) the loan evidenced by this Note is made to Borrower solely
for the Approved Purposes (as defined in the Loan Agreement).


 


Section 4.5           FURTHER
ASSURANCES AND CORRECTIONS. From time to time, at the request of Lender, Borrower will (i) promptly correct any defect, error
or omission which may be discovered in the contents of this Note or in any other Loan Document or in the execution or acknowledgment
thereof; (ii) execute, acknowledge, deliver, record and/or file (or cause to be executed, acknowledged, delivered, recorded and/or
filed) such further documents and instruments (including, without limitation, further deeds of trust, security agreements, financing
statements, continuation statements and assignments of rents) and perform such further acts and provide such further assurances
as may be necessary, desirable, or proper, in Lender’s opinion, (A) to carry out more effectively the purposes of this Note
and the Loan Documents and the transactions contemplated hereunder and thereunder, (B) to confirm the rights created under this
Note and the other Loan Documents, (C) to protect and further the validity, priority and enforceability of this Note and the other
Loan Documents and the liens and security interests created thereby, and (D) to subject to the Loan Documents any property of Borrower
intended by the terms of any one or more of the Loan Documents to be encumbered by the Loan Documents; and (iii) pay all costs
in connection with any of the foregoing.


 




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Section 4.6          WAIVER
OF JURY TRIAL. BORROWER, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, HEREBY KNOWINGLY, INTENTIONALLY, IRREVOCABLY, UNCONDITIONALLY
AND VOLUNTARILY, WITH AND UPON THE ADVICE OF COMPETENT COUNSEL, WAIVES, RELINQUISHES AND FOREVER FORGOES THE RIGHT TO A TRIAL BY
JURY IN ANY ACTION OR PROCEEDING BASED UPON, ARISING OUT OF, OR IN ANY WAY RELATING TO THIS NOTE OR ANY CONDUCT, ACT OR OMISSION
OF LENDER OR BORROWER, OR ANY OF THEIR DIRECTORS, OFFICERS, PARTNERS, MEMBERS, EMPLOYEES, AGENTS OR ATTORNEYS, OR ANY OTHER PERSONS
AFFILIATED WITH LENDER OR BORROWER, IN EACH OF THE FOREGOING CASES, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE.


 


Section 4.7           GOVERNING
LAW; SUBMISSION TO JURISDICTION. THIS NOTE AND ANY CLAIM, CONTROVERSY OR DISPUTE ARISING UNDER OR RELATED TO OR IN CONNECTION
WITH THIS NOTE AND/OR THE INTERPRETATION AND ENFORCEMENT HEREOF SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK (WITHOUT REFERENCE TO ITS CONFLICT OF LAWS PROVISIONS (OTHER THAN §5-1401 AND 5-1402 OF THE NEW YORK
GENERAL OBLIGATIONS LAW)). THE BORROWER HEREBY AGREES TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK, LOCATED IN THE
BOROUGH OF MANHATTAN AND THE FEDERAL COURTS LOCATED WITHIN THE STATE OF NEW YORK IN THE BOROUGH OF MANHATTAN. THE BORROWER HEREBY
WAIVES ANY OBJECTION BASED ON FORUM NON CONVENIENS, AND ANY OBJECTION TO VENUE OF ANY ACTION INSTITUTED HEREUNDER IN ANY OF THE
AFOREMENTIONED COURTS AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED APPROPRIATE BY SUCH COURT. Borrower
hereby agrees that service of process upon Borrower may be made by certified or registered mail, return receipt requested, at its
address specified herein. Nothing herein shall affect the right of Lender to serve process in any other manner permitted by law
or shall limit the right of Lender to bring any action or proceeding against Borrower or with respect to any of Borrower’s
property in courts in other jurisdictions. The scope of each of the foregoing waivers is intended to be all encompassing of any
and all disputes that may be filed in any court and that relate to the subject matter of this transaction, including, without limitation,
contract claims, tort claims, breach of duty claims, and all other common law and statutory claims. Borrower acknowledges that
these waivers are a material inducement to Lender’s agreement to enter into the agreements and obligations evidenced by the
Loan Documents, that Lender has already relied on these waivers and will continue to rely on each of these waivers in related future
dealings. The waivers in this Section 4.7 are irrevocable, meaning that they may not be modified either orally or in writing,
and these waivers apply to any future renewals, extensions, amendments, modifications, or replacements in respect of any and all
of the applicable Loan Documents. In connection with any litigation, this Note may be filed as a written consent to a trial by
the court.


 


Section 4.8           COUNTING
OF DAYS. If any time period referenced hereunder ends on a day other than a Business Day, such time period shall be deemed
to end on the next succeeding Business Day.


 


Section 4.9           RELATIONSHIP
OF THE PARTIES. Notwithstanding any prior business or personal relationship between Borrower and Lender, or any officer, director
or employee of Lender, that may exist or have existed, the relationship between Borrower and Lender is solely that of debtor and
creditor, Lender has no fiduciary or other special relationship with Borrower, Borrower and Lender are not partners or joint venturers,
and no term or condition of any of the Loan Documents shall be construed so as to deem the relationship between Borrower and Lender
to be other than that of debtor and creditor.


 


Section 4.10         SUCCESSORS
AND ASSIGNS. The terms and provisions hereof shall be binding upon and inure to the benefit of Borrower and Lender and their
respective heirs, executors, legal representatives, successors, successors-in-title and assigns, whether by voluntary action of
the parties, by operation of law or otherwise, and all other persons claiming by, through or under them. The terms “Borrower”
and “Lender” as used hereunder shall be deemed to include their respective heirs, executors, legal representatives,
successors, successors-in-title and assigns, whether by voluntary action of the parties, by operation of law or otherwise, and
all other persons claiming by, through or under them.


 


Section 4.11         JOINT
AND SEVERAL LIABILITY. If Borrower consists of more than one person or entity, each shall be jointly and severally liable to
perform the obligations of Borrower under this Note.


 




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Section 4.12         TIME
IS OF THE ESSENCE. Time is of the essence with respect to all provisions of this Note and the other Loan Documents.


 


Section 4.13         HEADINGS.
The Article, Section, and Subsection entitlements hereof are inserted for convenience of reference only and shall in no way alter,
modify, define, limit, amplify or be used in construing the text, scope or intent of such Articles, Sections, or Subsections or
any provisions hereof.


 


Section 4.14         CONTROLLING
AGREEMENT. In the event of any conflict between the provisions of this Note and the Loan Agreement, it is the intent of the
parties hereto that the provisions of the Loan Agreement shall control. In the event of any conflict between the provisions of
this Note and any of the other Loan Documents (other than the Loan Agreement), it is the intent of the parties hereto that the
provisions of this Note shall control. The parties hereto acknowledge that they were represented by competent counsel in connection
with the negotiation, drafting and execution of this Note and the other Loan Documents and that this Note and the other Loan Documents
shall not be subject to the principle of construing their meaning against the party which drafted same.


 


Section 4.15         NOTICES.
All notices or other communications required or permitted to be given pursuant to this Note shall be in writing and shall be considered
as properly given if (i) mailed by first class United States mail, postage prepaid, registered or certified with return receipt
requested, (ii) by delivering same in person to the intended addressee, (iii) by delivery to a reputable independent third party
commercial delivery service for same day or next day delivery and providing for evidence of receipt at the office of the intended
addressee, or (iv) by prepaid telegram, telex, telecopier or telefacsimile transmission to the addressee. Notice so mailed shall
be effective upon its deposit with the United States Postal Service or any successor thereto; notice sent by such a commercial
delivery service shall be effective upon delivery to such commercial delivery service; notice given by personal delivery shall
be effective only if and when received by the addressee; and notice given by other means shall be effective only if and when received
at the office or designated place or machine of the intended addressee. For purposes of notice, the addresses of the parties shall
be as set forth herein; provided, however, that either party shall have the right to change its address for notice hereunder to
any other location within the continental United States by the giving of thirty (30) days’ prior notice to the other party
in the manner set forth herein.


 


Section 4.16         SEVERABILITY.
If any provision of this Note or the application thereof to any person or circumstance shall, for any reason and to any extent,
be invalid or unenforceable, then neither the remainder of this Note nor the application of such provision to other persons or
circumstances nor the other instruments referred to herein shall be affected thereby, but rather shall be enforced to the greatest
extent permitted by applicable law.


 


Section 4.17         RIGHT
OF SETOFF. In addition to all liens upon and rights of setoff against the money, securities, or other property of Borrower
given to Lender that may exist under applicable law, Lender shall have and Borrower hereby grants to Lender a lien upon and a right
of setoff against all money, securities, and other property of Borrower, now or hereafter in possession of or on deposit with Lender,
whether held in a general or special account or deposit, for safe-keeping or otherwise, and every such lien and right of setoff
may be exercised without demand upon or notice to Borrower. No lien or right of setoff shall be deemed to have been waived by any
act or conduct on the part of Lender, or by any neglect to exercise such right of setoff or to enforce such lien, or by any delay
in so doing, and every right of setoff and lien shall continue in full force and effect until such right of setoff or lien is specifically
waived or released by an instrument in writing executed by Lender.


 


Section 4.18         COSTS
OF COLLECTION. If any holder of this Note retains an attorney-at-law in connection with any Event of Default or at maturity
or to collect, enforce, or defend this Note or any part hereof, or any other Loan Document in any lawsuit or in any probate, reorganization,
bankruptcy or other proceeding, or if Borrower sues any holder in connection with this Note or any other Loan Document and does
not prevail, then Borrower agrees to pay to each such holder, in addition to the principal balance hereof and all interest hereon,
all costs and expenses of collection or incurred by such holder or in any such suit or proceeding, including, but not limited to,
reasonable attorneys’ fees.


 




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Section 4.19         GENDER.
All personal pronouns used herein, whether used in the masculine, feminine or neuter gender, shall include all other genders; the
singular shall include the plural and vice versa.


 


Section 4.20         STATEMENT
OF UNPAID BALANCE. At any time and from time to time, Borrower will furnish promptly, upon the request of Lender, a written
statement or affidavit, in form satisfactory to Lender, stating the unpaid balance of the indebtedness evidenced by this Note and
the Related Indebtedness and that there are no offsets or defenses against full payment of the indebtedness evidenced by this Note
and the Related Indebtedness and the terms hereof, or if there are any such offsets or defenses, specifying them.


 


Section 4.21         ENTIRE
AGREEMENT. THIS NOTE AND THE OTHER LOAN DOCUMENTS CONTAIN THE FINAL, ENTIRE AGREEMENT BETWEEN THE PARTIES HERETO RELATING TO
THE SUBJECT MATTER HEREOF AND THEREOF AND ALL PRIOR AGREEMENTS, WHETHER WRITTEN OR ORAL, RELATIVE HERETO AND THERETO WHICH ARE
NOT CONTAINED HEREIN OR THEREIN ARE SUPERSEDED AND TERMINATED HEREBY, AND THIS NOTE AND THE OTHER LOAN DOCUMENTS MAY NOT BE CONTRADICTED
OR VARIED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO
UNWRITTEN ORAL AGREEMENTS AMONG THE PARTIES HERETO.


 


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IN WITNESS WHEREOF,
Borrower, intending to be legally bound hereby, has duly executed this Note as of the day and year first written above.


 


	 	BORROWER:
	 	 	 
	 	 	UNITED DEVELOPMENT FUNDING IV, a real estate investment trust organized under the laws of the State of Maryland
	 	 	 
	 	 	By:	/s/ Hollis M. Greenlaw
	 	 	 	Hollis M. Greenlaw, Chief Executive Officer


 


	Address of Lender for 	 
	purposes of notice hereunder:	 
	 	 
	WATERFALL FINANCE 4, LLC	 
	1140 Avenue of the Americas, 7th Floor	 
	New York, New York  10036	 
	Attn: Kenneth Nick	 


 




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