Document:

exv10w2

 

Exhibit 10.2

SECURED PROMISSORY NOTE

	 	 	 	 	 
	U.S. $962,563.00

	 	Dallas, Texas
	 	August 14, 2006

     FOR VALUE RECEIVED, MIDLOTHIAN LONGBRANCH, L.P., a Texas limited partnership (“Borrower”)
hereby makes and issues this Secured Promissory Note (this “Note”), and promises to pay to the
order of UNITED DEVELOPMENT FUNDING III, L.P., a Delaware limited partnership (together with its
successors and assigns, “Lender”) the principal sum of U.S. Nine Hundred Sixty-Two Thousand Five
Hundred Sixty-Three and NO/100 ($962,563.00) or, if greater or less, the aggregate amount of all
funds advanced to Borrower under this Note, together with accrued, unpaid interest thereon, and all
other amounts due to Lender hereunder. Pars Investments, Inc., a Texas corporation (the “General
Partner”) is executing this Note on behalf of Borrower in its capacity as the general partner of
Borrower, as well as on its own behalf for certain purposes described herein. Centurion
Acquisitions, L.P., a Texas limited partnership (“Centurion”) is executing this Note for certain
purposes described herein. Lender, Borrower, Centurion and the General Partner hereby agree to the
terms and conditions of this Note, as further set forth below.

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

     (a) “Accrued Interest Payments” shall mean 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.

     (b) “Base Rate” shall mean the lesser of (i) fifteen percent (15%) accrued and
compounded monthly, or (ii) the Highest Lawful Rate.

     (c) “Commitment” shall mean the aggregate amount of U.S. Seven Hundred Twenty-Five
Thousand and NO/100 Dollars ($725,000.00).

     (d) “Commitment Advance” shall mean full or partial advance of the Commitment to
Borrower pursuant to the terms hereof.

     (e) “Commitment Fee” shall mean a fee paid by Borrower to Lender or its assigns, in
consideration Lender’s commitment to make the loan pursuant to this Note in the amount set
forth in Section 2(c) of this Note.

     (f) “Deed of Trust” shall mean that certain Deed of Trust, Security Agreement, and
Fixture Filing (Financing Statement) with Borrower as the grantor and with Lender as the
grantee, covering the Borrower’s interests in the Property.

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

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     (h) “Effective Date” shall mean August 14, 2006.

     (i) “Event of Default” shall have the meaning given to such term in Section 10
of this Note.

     (j) “Highest Lawful Rate” shall mean 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.

     (k) “Indemnity Agreement” shall mean that certain Environmental Indemnity Agreement to
be executed by Borrower, Centurion, Pars and Mehrdad Moayedi in favor of Lender, dated as of
the Effective Date.

     (l) “Interest Reserve” shall mean an aggregate of up to $200,000.00 (subject to
increase pursuant to Section 3(a)) to be advanced by Lender hereunder and to be
applied against Accrued Interest Payments, subject to the provisions of Section 4(b)
of this Note.

     (m) “Interest Reserve Advance” means an advance under this Note in the amount of an
Accrued Interest Payment pursuant to Section 4(b) of this Note.

     (n) “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.

     (o) “Loan Administration Fee” shall mean a fee charged by Lender in consideration of
administrative costs and expenses incurred by Lender in connection with each Commitment
Advance hereunder.

     (p) “Loan Documents” shall mean this Note, the Pledge Agreement, the Deed of Trust, the
Indemnity Agreement, the error and omissions letter and all other documents, certificates,
instruments, and agreements executed, entered into or delivered by Borrower, Centurion, the
General Partner, or any of their respective affiliates in connection with the loan made
pursuant to this Note, as each such document may be amended from time to time.

     (q) “Loan Expenses” shall mean all fees and expenses incurred by Lender in connection
with the loan made pursuant to this Note and the preparation of this Note and the other Loan
Documents, including, without limitation, attorneys fees, accountants fees,

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closing costs, due diligence costs and expenses, recording fees, courier and delivery fees,
document preparation fees, wire transfer and bank fees, title company fees, and all other
fees and costs incurred by Lender.

     (r) “Maturity Date” means February 14, 2008.

     (s) “Partnership Agreement” means the Agreement of Limited Partnership of Midlothian
Longbranch, L.P., as it may be amended from time to time.

     (t) “Pledge Agreement” shall mean that certain Pledge Agreement executed by the
Pledgors in favor of Lender dated as of the Effective Date, pursuant to which (i) Centurion
and the General Partner pledge and grant to Lender, a security interest in their respective
partnership interests in Borrower, and (ii) Mehrdad Moayedi pledges and grants to Lender, a
security interest in all of the capital stock of the General Partner, as security for the
prompt payment and performance of Borrower’s obligations to Lender under this Note, as such
agreement may be amended from time to time.

     (u) “Pledgors” mean, collectively, Mehrdad Moayedi, Centurion and the General Partner.

     (v) “Property” shall mean that certain real property developed or to be developed into
residential single family lots located in the City of Midlothian, Ellis County, Texas,
commonly referred to “Meadows at Longbranch”, as further described on Exhibit “A” to
the Deed of Trust.

     (w) “Senior Indebtedness” shall mean the amount of indebtedness owed to the Senior
Lender that Lender has agreed in writing will have priority over the indebtedness evidenced
by this Note.

     (x) “Senior Lender” shall mean, collectively, (i) Affiliated Bank, F.S.B., with respect
to that certain Promissory Note executed by Borrower dated March 24, 2004 in the principal
amount of $1,050,000.00, (ii) TexasBank, with respect to that certain Promissory Note
executed by Borrower dated December 14, 2004 in the principal amount of $3,056,000.00, and
(iii) any other bank, financial institution or other lender having made a loan to Borrower
that has a senior position ahead of Lender with respect to the payment of Borrower
indebtedness and/or the priority of security interests and/or Liens on the Property and any
other collateral granted or pledged as security for the loan made pursuant to this Note;
provided, that Lender has agreed in writing to be subordinate thereto.

     (y) “Ventures” means Midlothian Ventures, G.P., a Texas general partnership, which owns
a 0.01% partnership interest in Borrower as of the Effective Date, which partnership
interest shall be redeemed by Borrower with proceeds of this Note.

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     2. Loan Expenses; Fees.

     (a) Loan Expenses. Upon Lender’s demand from time to time, Borrower shall pay
Lender, the full amount of all Loan Expenses incurred by Lender.

     (b) Loan Administration Fee. In consideration of administrative costs and
expenses incurred by Lender in connection with Commitment Advances, Borrower agrees to pay
Lender a Loan Administration Fee at the time of each Commitment Advance equal to one-quarter
percent (0.25%) of such Commitment Advance. The Loan Administration Fee with respect to
each Commitment Advance made hereunder is fully earned by Lender at the time such Commitment
Advance is funded and, if not otherwise paid, shall be funded by Lender at the time of the
Commitment Advance and upon disbursement shall automatically constitute principal
outstanding hereunder and cause a corresponding increase in the aggregate amount of
Borrower’s obligations hereunder (even if such disbursement causes the aggregate amount
outstanding hereunder to exceed the face amount of this Note).

     (c) Commitment Fee. In consideration of Lender’s commitment to make the loan
pursuant to this Note, Borrower agrees to pay Lender a Commitment Fee equal to three percent
(3.0%) of the sum of (i) Commitment, and (ii) the Interest Reserve (which Commitment Fee is
equal to $27,750.00), which shall be due at the first closing hereof. Pursuant to
Borrower’s request, the Commitment Fee shall be funded by Lender under this Note and upon
disbursement shall automatically constitute principal outstanding hereunder and cause a
corresponding increase in the aggregate outstanding amount of Borrower’s obligations
hereunder.

     (d) Usury Savings Clause Applies. Borrower, Centurion, the General Partner and
Lender agree that Lender has provided, and shall provide, separate and distinct
consideration for the fees and expenses described in Sections 2(a), (b) and
(c) above and/or that such fees and expenses represent bona fide fees and expenses
incurred by Lender. Borrower, the General Partner, Centurion 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 11 of this Note shall automatically apply to reduce the interest
charged hereunder so as not to exceed the Highest Lawful Rate.

     (e) Assignment. The Loan Administration Fee and all Loan Expenses are
assignable by the payee to any affiliate or third party.

     3. Closings; Commitment Advances; Borrowing Procedures; etc.

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     (a) Closings; Commitment Advances. Subject to the terms and conditions of this
Note, Lender agrees to make Commitment Advances to Borrower prior to the Maturity Date in an
aggregate amount not to exceed the Commitment. The loan made pursuant to this Note shall be
funded in two separate closings. At the first closing, which shall occur on or shortly
after the Effective Date of this Note, (i) $425,000.00 of the Commitment shall be advanced
to Borrower, to be applied towards the redemption by Borrower of the 0.01% partnership
interest in Borrower owned by Ventures, and (ii) this Note and the Loan Documents (other
than the Deed of Trust) shall be executed and delivered to Lender. At the second closing,
which is anticipated to occur within thirty (30) days after the Effective Date, (i) the
remaining $300,000.00 of the Commitment shall be advanced to Borrower, to be applied towards
the redemption by Borrower of the 0.01% partnership interest in Borrower owned by Ventures,
(ii) Borrower shall provide Lender with documentation and evidence satisfactory to Lender
that Ventures’ partnership interest in Borrower is then being redeemed, and (iii) Borrower
shall execute and deliver to Lender, the Deed of Trust and such other items as are then
required to be delivered by Section 7 of this Note. Lender shall have no obligation
to make any Commitment Advance hereunder to the extent such Commitment Advance would cause
the aggregate principal amount of all outstanding Commitment Advances to exceed the
Commitment. This Note is not a revolver and thus, the portion of the Commitment borrowed
may not be repaid to Lender and subsequently reborrowed under this Note.

     (b) Procedure for Borrowing. Each Commitment Advance shall be made by
Borrower’s delivery of a written request to Lender. Such notice must be received by Lender
no less than five (5) business days prior to the date that is the requested funding date,
and shall specify the amount of the Commitment Advance so requested, and the requested
funding date.

     (c) Making of Commitment Advances. Subject to the terms and conditions of this
Note, after receipt of a request for an Commitment Advance pursuant to Section 2(b),
Lender shall make the amount of the requested Commitment Advance available to Borrower on
the applicable funding date; provided, however, that Lender shall have no obligation to make
any Commitment Advance unless each of the conditions precedent in Section 7 have
been satisfied.

     (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). The making by Lender of any Discretionary Advance shall not cure any Event of
Default hereunder, unless Lender provides Borrower with a written waiver of such Event of
Default.

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     (e) Face Amount of Note. The $962,563.00 face amount of the Note consists of
the sum of (i) the Commitment ($725,000.00), plus (ii) the Interest Reserve
$200,000.00), plus (iii) the Commitment Fee, ($27,750.00), plus (iv) an
aggregate of $9,813.00 in anticipated Loan Expenses and Loan Administration Fees; provided,
that if the full $9,813.00 is not used for Loan Expenses and Loan Administration Fees, then
Lender shall increase the Interest Reserve by such unused amount.

     4. Interest; Payments.

     (a) Interest Rate. The outstanding principal amount of this Note shall bear
interest on each day outstanding at the Base Rate in effect on such day, accrued and
compounded monthly, unless the Default Rate shall apply. Upon the occurrence and during the
continuation of an Event of Default, the outstanding principal amount of this Note shall,
automatically and without the necessity of notice, bear interest from the date of such Event
of Default at the Default Rate, accrued and compounded monthly, until all such delinquent
amounts are paid or such breach or Event of Default is otherwise cured to the satisfaction
of Lender or waived by Lender in writing.

     (b) Interest Payments; Interest Reserve Advances. Accrued Interest Payments
shall be due and payable on the last day of each month for interest accrued during that
month. Notwithstanding the foregoing sentence and subject to the other provisions hereof,
on each date that an Accrued Interest Payment becomes due and payable hereunder, Lender
shall make an Interest Reserve Advance hereunder in the amount of such Accrued Interest
Payment, which shall be applied to the Accrued Interest Payment then due and payable, until
the Interest Reserve has been fully exhausted. Subject to the other provisions of this
Note, each time Lender funds an Interest Reserve Advance hereunder, (i) Borrower’s
requirement to make the Accrued Interest Payment for such month shall be satisfied, (ii) the
amount of remaining Interest Reserve shall be reduced by the amount of such Interest Reserve
Advance, and (iii) such Interest Reserve Advance funded by Lender hereunder shall
automatically become principal outstanding under this Note upon such funding. The Interest
Reserve Advances may be funded by Lender even if such funding causes the outstanding
principal balance of this Note to exceed its face amount. Notwithstanding anything else to
the contrary contained herein, (i) if at any time an Event of Default has occurred and is
continuing under this Note, Lender shall not be obligated to make any further Interest
Reserve Advances, and thereafter, shall do so only in its sole discretion, unless and until
the Event of Default is cured to Lender’s satisfaction as evidenced in writing, and (ii) in
no event shall Lender be obligated to make any Interest Reserve Advance that would cause the
aggregate amount of Interest Reserve Advances made hereunder to exceed the remaining
Interest Reserve.

     (c) Payments. Subject to the other provisions of this Note:

     (i) Accrued Interest Payments shall be due and payable as provided in
Section 4(b) of this Note;

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     (ii) concurrently with the sale and closing of the Property, Borrower shall pay
Lender the amount of full amount of such proceeds received by or due to Borrower
from such sale, after payment to the Senior Lender of any amount due to the Senior
Lender upon such sale under the terms of the loan documents evidencing the Senior
Indebtedness; and

     (iii) the outstanding principal balance of this Note, together with all
accrued, unpaid interest thereon, unpaid Loan Expenses and other unpaid amounts due
hereunder, shall be due and payable on the Maturity Date.

     5. Terms and Conditions of Payment.

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

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

     (c) Prepayment. Borrower may prepay this Note in whole or in part at any time
and from time to time without incurring any prepayment fee or penalty; provided, that
interest shall accrue on the portion of this Note so prepaid through the date of such
prepayment.

     6. Loan Deliveries. At or prior to the closing of the loan made pursuant to this
Note, Borrower shall deliver or cause to be delivered to Lender, the following items, each of which
shall be satisfactory in form and substance to Lender:

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     (a) this Note and each other Loan Document, duly executed by Borrower, the General
Partner, Centurion and Mehrdad Moayedi, as applicable;

     (b) the most recent financial statements of Borrower, Centurion and the General
Partner, in the form specified in Section 9(f), and accompanied by the certification
required by Section 9(f);

     (c) a certified copy of the formation documents and all amendments thereto for each of
Borrower, Centurion and the General Partner;

     (d) certificates of existence for Borrower and Centurion, and certificates of existence
and good standing for the General Partner, issued by the appropriate state authorities;

     (e) resolutions of the board of directors of the General Partner authorizing
Borrower’s, Centurion’s and the General Partner’s execution, delivery, and performance of
this Note and the other Loan Documents, and the transactions contemplated hereby and
thereby;

     (f) resolutions of the board of directors, managers, or other governing body which has
authority to act on behalf of each Pledgor that is an entity, authorizing the execution,
delivery and performance of the Pledge Agreement and the transactions contemplated thereby;

     (g) the written consent of the partners of Borrower authorizing the Pledge Agreement
and the transactions contemplated thereby, including Lender’s remedies thereunder;

     (h) a certificate of Borrower’s and the General Partner’s general liability policies,
and evidence of payment of the premium through at least one year;

     (i) a certificate (the “Officer’s Certificate”) executed by the Chief Executive Officer
or President of the General Partner certifying that (i) no Event of Default has occurred and
is continuing under this Note, (ii) all representations and warranties made by Borrower,
Centurion and the General Partner, respectively, in this Note and the other Loan Documents
are true and correct in all respects, and (iii) Borrower, Centurion and the General Partner
have 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;

     (j) the Partnership Agreement and all amendments thereto in effect as of the Effective
Date;

     (k) copies of the loan documents evidencing any Senior Indebtedness and all amendments
thereto;

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     (l) all written consents that are required with respect to the Note and the other Loan
Documents and the transactions contemplated thereby, including, without limitation, the
written consent of the Senior Lenders; and

     (m) such other and further documents, agreements and certificates as are reasonably
required by Lender.

     7. Conditions Precedent to Commitment Advances. Borrower, Centurion and the General
Partner agree that, notwithstanding anything to the contrary contained herein or in the other Loan
Documents, Lender’s obligation to fund each Commitment Advance shall be conditioned upon the
satisfaction of each of the following conditions, on and as of the funding date for the applicable
Commitment Advance:

     (a) Borrower and the General Partner shall have executed and delivered to Lender, an
Officer’s Certificate dated as of the funding date, and all matters certified in the
Officer’s Certificate shall be true and correct in all respects;

     (b) the requested Commitment Advance, if made, would not cause the aggregate amount of
all outstanding Commitment Advances to exceed the Commitment;

     (c) Borrower shall have obtained the consent of the Senior Lenders to Lender placing a
Lien on the Property pursuant to the Deed of Trust; and

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

     8. Representations and Warranties. Each of Borrower, Centurion and the General
Partner jointly and severally represents and warrants to Lender that:

     (a) Organization and Good Standing; Authorization. Each of Borrower, Centurion
and the General Partner (i) is duly organized, validly existing and in good standing under
the laws of its jurisdiction of organization, and (ii) has full power and authority to own
its properties, carry on its business and to perform the transactions contemplated by this
Note and the other Loan Documents. All necessary partnership, limited liability company,
partnership, member, partner and other actions required to be taken on behalf of the General
Partner, Centurion and Borrower to approve this Note and the other Loan Documents and the
transactions contemplated hereby and thereby, have been duly taken. Each of Borrower,
Centurion and the General Partner is in compliance in all material respects with all laws
applicable to it in each jurisdiction within and without outside the United States where it
owns or leases any properties or conducts any business, except for any such non-compliance
that would not have a material adverse effect, individually or in the aggregate, on their
respective financial condition or operations.

     (b) Authority; Validity. Each of Borrower, Centurion and the General Partner
has the power, authority and legal right to execute, deliver and perform its obligations

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under this Note and the other Loan Documents. The execution and delivery by Borrower,
Centurion and the General Partner of this Note and the other Loan Documents, and the
performance of their respective obligations thereunder, will not (i) violate the certificate
of formation of Borrower, Centurion or the General Partner, the partnership agreement of
Borrower or Centurion, or the General Partner’s bylaws, (ii) violate any law or result in a
default under any contract, agreement, or instrument to which Borrower, Centurion or the
General Partner is a party or by which Borrower, Centurion or the General Partner or any of
their respective assets and properties are bound, or (iii) result in the creation or
imposition of any Lien upon any of their respective assets. The Loan Documents constitute
the legal, valid and binding obligations of Borrower, Centurion and the General Partner and
are enforceable against Borrower, Centurion and the General Partner in accordance with their
terms, except as enforceability may be limited by bankruptcy, insolvency or similar laws
affecting the enforcement of creditors’ rights generally.

     (c) Litigation. There is no pending order, notice, claim, litigation,
proceeding or investigation against or affecting Borrower, Centurion or the General Partner
or any of their respective assets or properties, whether or not covered by insurance, that
could materially and adversely affect either the financial condition or business prospects
or Borrower, Centurion or the General Partner, if adversely determined.

     (d) Indebtedness. Neither Borrower nor Centurion nor the General Partner has
any material indebtedness of any nature, to the extent disclosed in the latest financial
statements delivered to Lender or otherwise disclosed in writing to Lender and approved by
Lender.

     (e) Environmental Liability. To the best of Borrower’s, Centurion’s and the
General Partner’s knowledge, no hazardous substances or solid wastes have been disposed of
or otherwise released on the Property, except as may have been otherwise disclosed to Lender
in a Phase I environmental report delivered to Lender. The terms “hazardous substance” and
release” shall have the meanings specified in the Comprehensive Environmental Response
Compensation and Liability Act of 1980, as amended, (“CERCLA”), and the terms “solid waste”
and “disposal” (or “disposed”) shall have the meanings specified in the Resource
Conservation and Recovery Act of 1976, as amended, (“RCRA”); provided, to the extent that
the laws of the State of Texas establish a meaning for “hazardous substance”, “release”,
“solid waste”, or “disposal” or “disposed”) that is broader than that specified in either
CERCLA or RCRA, such broader meaning shall apply.

     (f) Tax Liabilities. Each of Borrower, Centurion and the General Partner has
filed all federal, state, county, local, and foreign tax returns and reports required to
have been filed by them (or has obtained valid extensions with respect to such returns and
reports), including but not limited to such returns and reports with respect to income,
payroll, property, employee withholding, social security, unemployment, franchise, excise,
use and sales taxes. Each of Borrower, Centurion and the General Partner has paid in full
all taxes that have become due as reflected on all such returns and reports (including any
interest and penalties) and has established adequate reserves for all taxes

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payable but not yet due. No governmental claim for additional taxes, interest, or penalties
is pending or, to Borrower’s, Centurion’s and the General Partner’s knowledge, threatened
against the Property, or against Borrower, Centurion or the General Partner or any of their
respective properties or assets.

     9. Covenants. Each of Borrower, Centurion and the General Partner jointly and
severally covenants and agrees with Lender that it will comply with each of the following covenants
below:

     (a) Payment; Performance. Borrower shall promptly pay all amounts due and
owing to Lender under this Note. Borrower, Centurion and the General Partner shall timely
perform and comply with each agreement and covenant made under this Note and the other Loan
Documents.

     (b) Use of Proceeds. The proceeds of this Note shall be used solely to redeem
the 0.01% partnership interest in Borrower owned by Ventures, and such other business
purposes as are approved by Lender. In no event shall the proceeds of 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).

     (c) Other Loans. Except for Senior Indebtedness existing as of the Effective
Date, Borrower shall not enter into any promissory note, loan documents, or other agreement
for borrowed money without the prior written consent of Lender, including, without
limitation, any loan documents evidencing Senior Indebtedness. Unless otherwise agreed by
Lender in writing, all loan documents evidencing any Senior Indebtedness entered into after
the Effective Date shall provide that (i) the Senior Lender shall give Lender written notice
of any default or event of default occurring under the loan documents evidencing the Senior
Indebtedness, and (ii) upon any default by Borrower, Lender shall have the right, but not
the obligation, to cure Borrower’s default thereunder and to purchase the loan and the loan
documents evidencing the Senior Indebtedness from the Senior Lender.

     (d) Termination of Existence. Nether Borrower nor Centurion nor the General
Partner shall cause, or enter into any agreement to cause, the dissolution or termination of
the existence of Borrower, Centurion or the General Partner or the merger, consolidation, or
reorganization of Borrower, Centurion or the General Partner with or into any other entity,
whether or not such person would be the surviving entity.

     (e) Notice of Certain Events. Borrower, Centurion and the General Partner
shall promptly notify Lender in writing of the occurrence of any event or series of events
of which Borrower, Centurion or the General Partner have actual knowledge causing, or that
could be expected to cause or has caused (i) a material adverse effect on the operations or
financial condition of Borrower, Centurion or the General Partner, (ii) the occurrence of
any Event of Default (without giving effect to any cure period applicable

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thereto), or (iii) any default by Borrower, Centurion or the General Partner or the
acceleration of the maturity of any indebtedness owed by Borrower, Centurion or the General
Partner under the Senior Indebtedness or any indenture, mortgage, agreement, promissory
note, contract or other instrument to which Borrower, Centurion or the General Partner is a
party or by which any material asset or property of Borrower, Centurion or the General
Partner is bound. In addition, each of Borrower, Centurion and the General Partner agrees
to notify Lender in writing at least twenty (20) business days prior to the date that it
changes its name, address, the location of its chief executive office or principal place of
business, and the place where it keeps its books and records.

     (f) Financial Statements. Borrower, Centurion and the General Partner shall
deliver to Lender, the following financial statements: (i) within sixty (60) days after the
end of each fiscal quarter, the unaudited financial statements of Borrower, Centurion and
the General Partner, prepared in accordance with GAAP and combined or consolidated as
appropriate, including all notes related thereto; and (ii) within one hundred twenty (120)
days after the end of each fiscal year, the unaudited financial statements of Borrower,
Centurion and the General Partner, prepared in accordance with GAAP and combined or
consolidated as appropriate, including all notes related thereto. All financial statements
provided to Lender shall be certified as to accuracy and completeness by an officer of the
General Partner.

     (g) Taxes. Borrower, Centurion and the General Partner shall pay all federal,
state and local taxes levied against them and their respective properties and assets as they
become due and payable and before the same become delinquent. Borrower, Centurion and the
General Partner shall have the right to pay such tax under protest or to otherwise contest
any such tax or assessment, but only if (i) such contest has the effect of preventing the
collection of such taxes so contested and also of preventing the sale or forfeiture of any
property subject thereto, (ii) Borrower, Centurion and the General Partner have notified
Lender of their intent to contest such taxes, and (iii) adequate reserves for the liability
associated with such tax have been established in accordance with GAAP. Borrower, Centurion
and the General Partner shall furnish to Lender evidence that all such taxes are paid at
least five (5) days prior to the last date for payment of such taxes.

     (h) Certain Liens. Borrower shall not create, incur, assume, or suffer to
exist, directly or indirectly, any Lien on or with respect to any of its assets, of any
kind, whether now owned or hereafter acquired, or an income or profits therefrom, except for
(i) Liens in favor of Lender, (ii) Liens in favor of the Senior Lender that secure Senior
Indebtedness, (iii) Liens in favor of United Development Funding, L.P., a Nevada limited
partnership, and (iv) other Liens approved by Lender’s prior written consent.

     (i) Indebtedness. Borrower shall not incur any indebtedness for borrowed
money, other than Senior Indebtedness, the loan made pursuant to this Note or as otherwise
approved by Lender’s prior written consent.

12

 

     (j) Distributions. At any time when any amounts are due to Lender hereunder,
Borrower shall not declare, pay, make, or authorize any distributions, whether in cash or in
property, to its partners. Subject to Borrower’s timely fulfillment of its payment
obligations under Senior Indebtedness, all cash distributed to Centurion or the General
Partner from Borrower shall be applied to repayment of this Note, until it is repaid in
full.

     (k) Partnership Documents. Borrower, Centurion and the General Partner shall,
promptly upon receipt, furnish to Lender, all of the following documents:

     (i) all financial statements, pro formas, projections, budgets, capital
expenditure and expense reports, and other financial information, and all
information related to the operations of Borrower;

     (ii) minutes of the meetings of the General Partner acting in its capacity as
the general partner of Borrower, and all written consents of the General Partner
acting in its capacity as the general partner of Borrower;

     (iii) all loan documents evidencing indebtedness for borrowed money of
Borrower, and all amendments thereto;

     (iv) the title commitment for the Property, the title exception documents and,
upon issuance, the title policy for the Property;

     (v) all due diligence documents related to the Property, including, without
limitation, a Phase I Environmental Report, survey, plat, appraisal, and engineering
due diligence report, land use, zoning, subdivision, grading, municipal district,
environmental, and other governmental permits, approvals, authorizations and maps
necessary to develop the Property in compliance with applicable Governmental
Regulations;

     (vi) certificates of general liability and hazard insurance for Borrower and
builder’s liability insurance covering the Property;

     (vii) all project updates, development reports, sales reports, budgets, pro
formas, and similar information with respect to the Property.

     (l) Audit. Borrower, Centurion and the General Partner shall permit Lender and
its employees, representatives, auditors, collateral verification agents, attorneys and
accountants (collectively, the “Lender Representatives”), at any time and from time to time,
at their expense, to (i) audit all books and records related to Borrower, Centurion or the
General Partner and their respective properties and assets, and (ii) visit and inspect any
of their respective offices and assets and properties and to inspect and make copies of all
books and records, and to write down and record any information the Lender Representatives
obtain. Each of Borrower, Centurion and the General Partner agrees to cooperate fully in
connection with such audits and inspections.

13

 

     (m) Assignments. Neither Borrower nor Centurion nor the General Partner shall
assign, transfer or convey, any partnership interest, capital stock, or other equity
interest in any partnership, corporation, limited liability company, or other entity, the
equity interests of which are pledged under the Pledge Agreement.

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

     (o) Operation of Business. Each of Borrower, Centurion and the General Partner
shall operate their businesses in compliance with all applicable federal, state and local
laws, rules, regulations, and ordinances. Each of Borrower, Centurion and the General
Partner shall maintain their existence and good standing in each state where they operate or
do any business. Each of Borrower, Centurion and the General Partner shall obtain, maintain
and keep current, all consents, licenses, permits, authorizations, permissions and
certificates which may be required or imposed by any governmental or quasi-governmental
agency, authority or body which are required by applicable federal, state or local laws,
regulations and ordinances.

     (p) Alterations. Without the prior written consent of Lender, Borrower shall
not permit the following to occur: any material amendment to the loan documents evidencing
the Senior Indebtedness, any increase in the maximum amount of the Senior Indebtedness, or
any renewal or extension of the loan documents evidencing the Senior Indebtedness.

     10. Default.

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

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

     (ii) any financial statement, representation, warranty, or certificate made or
furnished by or with respect to Borrower, Centurion or the General

14

 

Partner contained in this Note or any other Loan Document or made in connection
herewith or therewith, shall be materially false, incorrect, or incomplete when
made; or

     (iii) Borrower, Centurion or the General Partner shall fail to perform or
observe any covenant or agreement contained in this Note or any other Loan Document
that is not separately listed in this Section 10(a) as an Event of Default,
and the same remains unremedied for ten (10) days after written notice of such
failure is given by Lender to Borrower; or

     (iv) any “event of default” or “default” occurs under any Loan Document other
than this Note and the same remains unremedied for ten (10) days after written
notice is given by Lender to Borrower; or

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

     (vi) the commencement by Borrower, Centurion or the General Partner 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, Centurion or the General Partner for any substantial part of
their respective properties, or the making by Borrower, Centurion or the General
Partner of any assignment for the benefit of creditors, or the admission by
Borrower, Centurion or the General Partner in writing of its inability to pay its
debts generally as they become due; or

     (vii) the appointment of or taking possession by a receiver, liquidator,
assignee, custodian, trustee, sequestrator or similar official of all or a
substantial part of Borrower, Centurion or the General Partner’s assets or of any
part of any property in a proceeding brought against or initiated by Borrower,
Centurion or the General Partner; or

     (viii) if Borrower, Centurion or the General Partner are liquidated or
dissolved or winds up their affairs, or the sale or liquidation of all or
substantially all of the assets of Borrower, Centurion or the General Partner; or

15

 

     (ix) except as otherwise permitted herein, Centurion or the General Partner
assigns transfers, or conveys any partnership interest, capital stock, or other
equity interest in any partnership, corporation, limited liability company, or other
entity, the equity interests of which are pledged under the Pledge Agreement without
the prior written consent of Lender; or

     (x) any “default” or “event of default” not cured within the grace period, if
any, for such default or event of default, shall occur under (A) the Senior
Indebtedness or any credit agreement, loan agreement, promissory note, or other
document evidencing indebtedness for borrowed money incurred by Borrower, Centurion
or the General Partner or (B) any subordination agreement, security agreement,
pledge agreement, guaranty, deed of trust, or other agreement providing security or
collateral for indebtedness, executed by Borrower, Centurion or the General Partner,
or (C) any joint venture agreement, revenue or profits sharing or participation
agreement, partnership agreement, shareholders agreement, securities purchase
agreement or any other agreement governing to which Borrower, Centurion or the
General Partner is a party, if Lender or any of its affiliates is also a party to
such agreement (the terms “default” and “event of default” having the meaning given
to such terms in any of the agreements described above).

     (b) Upon the occurrence of an Event of Default described in subsection (a)(v),
(vi) or (vii) above, all obligations under this Note and the other Loan
Documents shall thereupon be immediately due and payable, without demand, presentment,
notice of demand or of dishonor and nonpayment, protest, notice of protest, notice of
intention to accelerate, declaration or notice of acceleration, or any other notice or
declaration of any kind, all of which are hereby expressly waived by Borrower, Centurion and
the General Partner. 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, Centurion and the General Partner
and any and all sureties, guarantors and endorsers of this Note, (ii) exercise any its
rights under any of the Loan Documents, and/or (iii) exercise 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,

16

 

receivership, debtor relief, probate or other court proceedings, Borrower, Centurion
and the General Partner, 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.

     11. 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,
Centurion, the General Partner 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 Centurion nor the General Partner 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 11 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

17

 

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

THE FOREGOING INDEMNIFICATION SHALL APPLY WHETHER OR NOT SUCH LIABILITIES AND COSTS ARE IN ANY WAY
OR TO ANY EXTENT OWED IN WHOLE OR IN PART UNDER ANY CLAIM OR THEORY OF STRICT LIABILITY, OR ARE
CAUSED IN WHOLE OR IN PART, BY ANY NEGLIGENT ACT OR OMISSION OF ANY KIND BY LENDER;

provided only that Lender shall not be entitled under this section to receive indemnification for
that portion, if any, of any Liabilities and Costs which is proximately caused by its own
individual gross negligence or willful misconduct, as determined in a final judgment. If any
person (including Borrower, Centurion and the General Partner) ever alleges such gross negligence
or willful misconduct by Lender, the indemnification provided for in this section shall nonetheless
be paid upon demand, subject to later adjustment or reimbursement, until such time as a court of
competent jurisdiction enters a final judgment as to the extent and effect of the alleged gross
negligence or willful misconduct. As used in this section, the term “Lender” shall refer not only
to the person designated as such in this Note but also to each partner, director, officer,
attorney, employee, representative and affiliate of such person.

     13. Mutual Understanding. Each of Borrower, Centurion and the General Partner
represents and warrants to Lender that it and its principals have read and fully understands the
terms and provisions hereof, has had an opportunity to review this Note with legal counsel and

18

 

has executed this Note based on its own judgment and advice of counsel. If an ambiguity or
question of intent or interpretation arises, this Note will be construed as if drafted jointly by
Borrower, Centurion, the General Partner and Lender and no presumption or burden of proof will
arise favoring or disfavoring any party because of authorship of any provision of this Note.

     14. Further Assurances. Each of Borrower, Centurion and the General Partner, at
Borrower’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, in compliance with or accomplishment of the agreements of Borrower, Centurion and the
General Partner under this Note and the other Loan Documents.

     15. Cumulative Remedies. Each of Borrower, Centurion and the General Partner hereby
agree that all rights and remedies that Lender is afforded by reason of this Note are separate and
cumulative with respect to Borrower and the General Partner 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, Centurion and the General Partner at 3901 Airport Freeway, Suite 200, Bedford, Texas
76021, Facsimile No. Facsimile No. (817) 391-2501 or, with respect to Lender, to Lender at 1702 N.
Collins Boulevard, Suite 100, Richardson, Texas 75080, Facsimile No. (469) 916-0695 or with respect
to any party, to such other address as a party may have delivered to the other parties 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 confirmation of facsimile
transfer, (c) if delivered personally by hand, upon written confirmation of delivery from the
person delivering such notice or other communication, or (d) if sent by nationally recognized
overnight delivery service, upon written 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. 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.

     18. CHOICE OF LAW; JURISDICTION; VENUE. EXCEPT TO THE EXTENT THAT THE VALIDITY OR
PERFECTION OF SECURITY INTERESTS OR

19

 

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. JURISDICTION FOR ALL MATTERS ARISING OUT OF THIS NOTE AND THE OTHER LOAN
DOCUMENTS SHALL BE EXCLUSIVELY IN THE STATE AND FEDERAL COURTS SITTING IN DALLAS COUNTY, TEXAS, AND
EACH OF BORROWER, CENTURION AND THE GENERAL PARTNER HEREBY IRREVOCABLY SUBMITS ITSELF TO THE
JURISDICTION OF SUCH STATE AND FEDERAL COURTS AND AGREES AND CONSENTS NOT TO ASSERT IN ANY
PROCEEDING, THAT ANY SUCH PROCESS IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE THEREOF IS
IMPROPER, AND FURTHER AGREES TO A TRANSFER OF SUCH PROCEEDING TO THE COURTS SITTING IN DALLAS
COUNTY, TEXAS.

     19. 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.

     20. 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.

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

     22. Binding Effect; Assignment. This Note and the other Loan Documents shall be
binding on Borrower, Centurion and the General Partner and their respective administrators, other
legal representatives, successors, heirs and assigns, including, without limitation, any receiver,
trustee or debtor in possession of or for Borrower, Centurion or the General Partner, and shall
inure to the benefit of Lender and its successors and assigns. Neither Borrower nor Centurion nor
the General Partner shall 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,
Centurion, the General Partner or any of its affiliates. Should the status, composition, structure
or name of Borrower, Centurion or the General Partner change, this Note shall continue and also
cover Borrower, Centurion or the General Partner under the new status composition, structure or
name according to the terms of this Note.

     23. 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.

20

 

     24. Number of 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.

     25. WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. EACH OF BORROWER, CENTURION AND THE
GENERAL PARTNER HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY (A) WAIVES, TO THE
MAXIMUM EXTENT NOT PROHIBITED BY LAW, ANY RIGHT IT 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 IT 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 THIS NOTE AND THE OTHER
LOAN DOCUMENTS AND THE TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY 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.

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

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

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     This Note has been executed by Borrower, Centurion, the General
Partner and Lender on this the
18th day of August, 2006, effective for all purposes as of the Effective Date.

	 	 	 	 	 	 	 
	BORROWER:	 	MIDLOTHIAN LONGBRANCH, L.P.

a Texas limited partnership	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	By: Pars Investments, Inc.

Its: General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	By:  /s/ Mehrdad Moayedi                                        	 	 
	 

	 	 	 	Name: Mehrdad Moayedi

Its: President	 	 

GENERAL PARTNER:

Pars Investments, Inc., a Texas corporation acting in its own capacity, hereby (i) agrees with and
accepts all of the terms and conditions of this Note which are applicable to the General Partner
(as such term is defined in this Note), and (ii) makes the representations, warranties, covenants
and agreements in this Note which are, by their terms, applicable to General Partner.

	 	 	 	 	 
	 

	 	PARS INVESTMENTS, INC.

a Texas corporation
	 	 
	 
	 	 	 	 
	 

	 	By: /s/ Mehrdad Moayedi                                       	 	 
	 

	 	Name: Mehrdad Moayedi

Its: President	 	 

CENTURION:

Centurion Acquisitions, L.P., a Texas limited partnership acting in its own capacity, hereby (i)
agrees with and accepts all of the terms and conditions of this Note which are applicable to
Centurion (as such term is defined in this Note), and (ii) makes the representations, warranties,
covenants and agreements in this Note which are, by their terms, applicable to Centurion.

	 	 	 	 	 	 	 
	 	 	CENTURION ACQUISITIONS, L.P.

a Texas limited partnership	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	By: Pars Investments, Inc.

Its: General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	By: /s/ Mehrdad Moayedi                                       
	 	 
	 

	 	 	 	Name: Mehrdad Moayedi	 	 
	 

	 	 	 	Its: President	 	 

22

 

	 	 	 	 	 
	LENDER:

	 	UNITED DEVELOPMENT FUNDING III, L.P.,	 	 
	 

	 	a Delaware limited partnership	 	 
	 
	 	 	 	 
	 

	 	By: UMTH Land Development, L.P.

Its: General Partner	 	 
	 
	 	 	 	 
	 

	 	By: UMT Services Inc.	 	 
	 
	 	 	 	 
	 

	 	By: /s/ Ben Wissink                                   
    
	 	 
	 

	 	Name: Ben Wissink	 	 
	 

	 	Its: Vice President	 	 

23exv10w3

 

Exhibit 10.3

ENVIRONMENTAL INDEMNITY AGREEMENT

     THIS ENVIRONMENTAL INDEMNITY AGREEMENT (this “Agreement”), executed as of the 14th
day of August, 2006 (the “Effective Date”), is made by Midlothian Longbranch, L.P., a Texas limited
partnership (“Borrower”), Centurion Acquisitions, L.P., a Texas limited partnership (“Centurion”),
Pars Investments, Inc., a Texas corporation (the “General Partner”), and Mehrdad Moayedi
(“Moayedi”, and collectively with Borrower, Centurion and the General Partner, the “Affiliates”) in
favor of United Development Funding III, L.P., a Delaware limited partnership (“Lender”).

RECITALS:

     A. Lender has agreed to advance funds to Borrower under that certain Secured Promissory Note
dated as of the Effective Date in the principal amount of U.S. $962,563.00 (the “Note”), which
shall be secured in part by a Deed of Trust, Security Agreement and Financing Statement (Fixture
Filing) (the “Deed of Trust”) executed and delivered by Borrower to Todd Etter, trustee for the
benefit of Lender, covering that certain real property owned by Borrower located in the City of
Midlothian, County of Ellis, State of Texas and commonly referred to as “Meadows at Longbranch,” as
further described on Exhibit “A” attached to the Deed of Trust (the “Property”).

     B. It is a condition precedent to Lender’s agreement to advance funds to Borrower under the
Note that Borrower and the Affiliates enter into this Agreement, and Borrower and the Affiliates
are willing to enter into this Agreement in favor of Lender and hereby agree to be bound by its
terms and conditions.

AGREEMENT:

     NOW THEREFORE, in consideration of the premises and in order to induce Lender to advance funds
under the Note, and for other good and valuable consideration, the receipt and sufficiency of which
are acknowledged, Borrower and the Affiliates agree and covenant with Lender as follows:

     1. Definitions. Capitalized terms used herein and not otherwise defined shall have
the meaning set forth in the Note. In addition, as used in this Agreement, the following terms
have the following meanings:

     “Environmental Activity” means the existence, use, storage, Release, threatened
Release, generation, processing, abatement, removal, or disposal of any Hazardous Substance on, to,
or from the Property or the handling, transportation, treatment, or disposal of any Hazardous
Substance arranged by or on behalf of any Indemnitor.

     “Environmental Claims” means any and all governmental and third-party actions, suits,
demands, demand letters, claims, liens, notices of non-compliance or violation, investigations,
proceedings, consent orders, or consent agreements relating in any way to the presence or Use of
any Hazardous Substance on the Property or the Release or threatened Release of any Hazardous

1

 

Substance to or from the Property or the violation of any Environmental Requirement or any
Environmental Permit applicable to the Property or which otherwise relate to any Environmental
Activity (hereafter “Claims”), including without limitation (a) any and all Claims by
Governmental Authorities for enforcement, cleanup, removal, response, remedial, or other actions or
damages pursuant to any applicable Environmental Requirement, and (b) any and all Claims by any
third party seeking damages, contribution, indemnification, cost recovery, compensation, or
injunctive relief arising in connection with any Hazardous Substance or arising from alleged injury
or threat of injury to property, human health, or the environment resulting or allegedly resulting
from any Environmental Activity.

     “Environmental Damages” means all claims, judgments, damages, losses, penalties,
fines, liabilities (including strict liability), encumbrances, liens, costs, and expenses imposed
against any party in connection with any Environmental Activity, and all costs and expenses of
investigation and defense of any Environmental Claim, whether or not such Environmental Claim is
ultimately defeated, and in connection with any good faith settlement or agreed judgment,
including, without limitation, reasonable attorneys’ fees and disbursements and consultants’ fees,
which are reasonably necessary or required as a result of an Environmental Claim based on the
existence or alleged existence of any Hazardous Substance upon, about, or beneath the Property, or
the migration or threat of migration of any Hazardous Substance to or from the Property, or the
existence of a violation of any Environmental Requirement pertaining to any Indemnitor or the
Property, regardless of whether the existence or alleged existence of such Hazardous Substance or
the violation of Environmental Requirements arose prior to any Indemnitor’s ownership or operation
of the Property. “Environmental Damages” shall include, without limitation, (a) damages
for personal injury or injury to property or natural resources occurring upon or off of the
Property, (b) fees incurred for the services of attorneys, consultants, contractors, experts, and
laboratories, and all other costs incurred in connection with the investigation of the presence or
alleged presence of Hazardous Substances on, about, or under the Property, the removal or
remediation of any Hazardous Substances, or the violation of Environmental Requirements, including,
without limitation, costs and expenses for the preparation of any feasibility studies or reports or
the performance of any cleanup, remediation, removal, response, abatement, containment, closure,
restoration, or monitoring work required by any Governmental Authority or reasonably necessary in
defense of any Environmental Claim, and reasonable attorneys’ fees, costs, and expenses incurred in
enforcing this Agreement or collecting any sums due hereunder, and (c) liability to any third
person or Governmental Authority to indemnify such person or entity for costs expended in
connection with the items referenced in subparagraph (b) preceding, and (d) diminution in the value
of the Property.

     “Environmental Laws” means all statutes and ordinances of any Governmental Authority
having jurisdiction over any Indemnitor, the Property, or any user or occupant of the Property, and
relating to the protection of human health and the environment, now existing or hereafter adopted,
including without limitation, the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended (42 U.S.C. § 9601, et seq.), the Solid Waste Disposal Act, as amended (42
U.S.C. § 6901, et seq.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. § 1801,
et seq.), the Clean Air Act, as amended (42 U.S.C. § 7401, et seq.), the Federal Water Pollution
Control Act, as amended (33 U.S.C. § 1251, et seq.), the Toxic Substances Control Act, as amended
(15 U.S.C. § 2601, et seq.), the

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Safe Drinking Water Act, as amended (42 U.S.C. § 300f, et seq.), the Atomic Energy Act, as amended
(42 U.S.C. § 2014, et seq.), the Federal Insecticide, Fungicide and Rodenticide Act, as amended (7
U.S.C. § 136, et seq.), the Oil Pollution Act of 1990, as amended (33 U.S.C. § 2701, et seq.), the
Emergency Planning and Community Right-to-Know Act of 1986, as amended (42 U.S.C. § 11001, et
seq.), the Occupational Safety and Health Act, as amended (29 U.S.C. § 651, et seq.), the
Endangered Species Act, the Texas Water Code, as amended, and the Texas Health and Safety Code, as
amended, and the regulations adopted and publications promulgated pursuant thereto.

     “Environmental Permits” means all permits, approvals, identification numbers,
licenses, and other authorizations required under any applicable Environmental Requirement.

     “Environmental Requirements” means all applicable present and future Environmental
Laws and all rules, regulations, orders, decrees, permits, licenses, concessions, franchises, or
other restrictions or requirements of any Governmental Authority relating to the protection of
human health or the environment and all applicable judicial, regulatory, or administrative
decisions, decrees, judgments, or orders thereunder.

     “Governmental Authority” means any governmental authority, the United States of
America, any state of the United States of America, and any subdivision of any of the foregoing,
and any agency, department, commission, board, authority, instrumentality, bureau, or court having
jurisdiction over the Property, or over any Indemnitor or any occupant or user of the Property, or
any of their respective businesses, operations, assets, or properties.

     “Hazardous Substance” means any substance, material, or waste (a) the presence or
Release of which requires reporting, investigation, or remediation under any Environmental
Requirement, (b) which is defined or listed as a “hazardous waste,” “hazardous substance,”
“extremely hazardous waste,” “restricted hazardous waste,” “hazardous material,” “toxic substance,”
or other similar or related term under any Environmental Law, (c) which is toxic, radioactive, or
otherwise classified as hazardous or toxic and is or becomes regulated by any Governmental
Authority as a threat to human health or the environment, (d) the presence of which on the Property
causes or threatens to cause a nuisance upon the Property or to adjacent property, (e) the presence
of which on adjacent properties could constitute a trespass by any Indemnitor, (f) which is
asbestos, (g) which is polychlorinated biphenyls, or (h) which contains petroleum or any
petroleum-derived product.

     “Indemnitees” means Lender and its subsidiaries and affiliates, any assignee of Lender
with respect to all or any portion of the Loan, and their respective subsidiaries, affiliates,
shareholders, partners, members, directors, officers, agents, attorneys, and employees, and their
respective successors and assigns, and “Indemnitee” means any one of the Indemnitees.

     “Indemnitors” means, collectively, (i) Borrower and its successors and permitted
assigns and (ii) each Affiliate and their respective successors and permitted assigns.

     “Lien” means any encumbrance, lien, deed of trust, change, claim, or security interest
of any kind or nature.

3

 

     “Note” means the Secured Promissory Note dated of August 14, 2006, executed by
Borrower and payable to the order of Lender in the original principal amount of U.S. $962,563.00.

     “Permitted Substances” means common cleaning, maintenance, repair, painting materials,
and other commercial or retail products properly stored and handled in normal, commercially
reasonable quantities and consumed or used in the ordinary course of use and operation of the
Property.

     “Property” means the real and personal property covered by and described in
Exhibit “A” attached to the Deed of Trust and includes any soil, surface water, or
groundwater on or under any of the real property and all improvements located thereon.

     “Release” means any spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, dumping, or disposing into the environment (including
the abandonment or discarding of barrels, containers, or other closed receptacles containing any
Hazardous Substance).

     “Use” means use, ownership, development, construction, maintenance, management,
operation, or occupancy.

     2. Indemnity by Indemnitors.

     (a) Indemnitors shall indemnify, defend, save, and hold harmless each Indemnitee from and
against any and all Environmental Damages imposed or asserted against the Property or Indemnitees
(i) arising from the presence or alleged presence of Hazardous Substances upon, about, or beneath
the Property or arising from the migration of Hazardous Substances to or from the Property
regardless of the source of such release or when such release occurred or such presence is
discovered, (ii) arising in any manner whatsoever out of the violation of any Environmental
Requirement pertaining to any Indemnitor or the Property, or (iii) arising from the breach of any
covenant or the inaccuracy of any representation or warranty of Indemnitors contained in this
Agreement; unless, and to the extent, such Environmental Damages are finally determined to have
arisen solely and directly from the gross negligence or willful misconduct of Indemnitees. THIS
OBLIGATION SHALL INCLUDE ANY CLAIMS RESULTING FROM THE NEGLIGENCE OR ALLEGED NEGLIGENCE OF ANY
INDEMNITEE. This obligation shall include, but shall not be limited to, (A) the burden of
defending all claims, suits, and administrative proceedings (with counsel reasonably approved by
Indemnitees), even if such claims, suits, or proceedings are groundless, false, fraudulent, or
frivolous, and conducting all negotiations of any description, (B) paying and discharging, when and
as the same shall become due, any and all judgments, penalties, or other sums due against any
Indemnitee, (C) paying and discharging, when and as the same shall become due, all costs of removal
and/or remediation of any kind, and promptly disposing of such Hazardous Substances (whether or not
such Hazardous Substance may be legally allowed to remain upon, about, or beneath the Property if
removal or remediation is prudent), (D) paying and discharging, when and as the same shall become
due, all costs of determining whether the Property is in compliance and promptly causing the
Property to

4

 

be in compliance with all applicable Environmental Requirements, (E) paying and discharging, when
and as the same shall become due, all costs associated with claims for damages to persons,
property, or natural resources, and (F) paying and discharging, when and as the same shall become
due, Indemnitees’ reasonable attorneys’ fees, consultants’ fees, and court costs. Any Indemnitee
(or at Indemnitors’ expense if Indemnitors’ counsel or Indemnitee reasonably believes a conflict
exists in dual representation), at its expense, may employ additional counsel of its choice to
associate with counsel employed by Indemnitors; and any Indemnitee may in good faith settle any
Environmental Claim against it, whether or not subject to indemnification hereunder, without the
consent or joinder of Indemnitors or any other party.

     Indemnitors and their successors and assigns hereby waive, release, and agree not to make any
claim or bring any cost recovery action against Indemnitees under any Environmental Requirement now
existing or hereafter enacted. It is expressly understood and agreed that to the extent that
Indemnitees are strictly liable under any Environmental Requirements, Indemnitors’ obligations to
Indemnitees under this Agreement shall likewise be without regard to fault on the part of
Indemnitors with respect to the violation or condition which results in liability to Indemnitees.

     (b) Indemnitors shall indemnify, defend, and hold harmless each Indemnitee from and against
any and all loss, liability, obligation, damage, penalty, judgment, claim, deficiency, and expense
(including interest, penalties, attorneys’ fees, and amounts paid in settlement) to which
Indemnitees may become subject arising out of or relating to the Property, this Agreement and the
other Loan Documents, other than those which are finally determined to have arisen solely by reason
of the gross negligence or willful misconduct of Lender, BUT SPECIFICALLY INCLUDING ANY LOSS,
LIABILITY, OBLIGATION, DAMAGE, PENALTY, JUDGMENT, CLAIM, DEFICIENCY, OR EXPENSE ARISING OUT OF THE
SOLE OR CONCURRENT NEGLIGENCE OF ANY INDEMNITEE. The provisions of and undertakings and
indemnifications set forth in this Section 2(b) shall survive (i) the satisfaction and
payment of the and termination of the Note, and (ii) the release of any Liens held by Lender on
real property or the extinguishment of such Liens by foreclosure or action in lieu thereof.
INDEMNITORS HEREBY WAIVE ANY RIGHT OR CLAIM TO CONSEQUENTIAL OR PUNITIVE DAMAGES ARISING OUT OF OR
RELATED TO THE LOAN OR THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREIN OR THEREBY, OR
THE ACTIONS OF ANY INDEMNITEE IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT HEREOF OR THEREOF.

     (c) If the undertaking in the preceding paragraphs, or in any portion thereof, is at any time
determined to be unenforceable because it is violative of any law or public policy, Indemnitors
will contribute the maximum portion that they are permitted to pay and satisfy under applicable law
to the payment and satisfaction of all Environmental Damages incurred by Indemnitees as set forth
above.

     3. Costs and Expenses. Indemnitors shall pay to each Indemnitee all reasonable costs
and expenses (including the reasonable fees and disbursements of Indemnitee’s legal

5

 

counsel) incurred by that Indemnitee in connection with this Agreement or the enforcement of the
terms of this Agreement.

     4. Survival of Indemnity. Indemnitors’ obligations under Sections 2 and
3 of this Agreement (the “Indemnity Obligations”) shall survive the making and
repayment of the Loan and the termination of the Note and any transfer of Indemnitors’ right,
title, and interest in and to any or all of the Property (whether by sale, foreclosure, deed in
lieu of foreclosure, release, or otherwise) until such time as any claim described in Sections
2 and 3 hereof shall be barred by all of the applicable statutes of limitations, if
any. Indemnitors, without the prior written consent of Lender in each instance, may not assign,
transfer, or set over to another, in whole or in part, all or any part of its benefits, rights,
duties, or obligations hereunder.

     5. Representations and Warranties. Indemnitors represent and warrant that:

     (a) (i) the Property has not been used at any time during any Indemnitor’s management or
ownership to generate, manufacture, refine, transport, treat, store, handle, dispose of, transfer,
produce, process, or in any manner deal with Hazardous Substances; (ii) to Indemnitors’ knowledge
after reasonable inquiry, the Property has not been used at any time prior to any Indemnitor’s
management or ownership to generate, manufacture, refine, transport, treat, store, handle, dispose
of, transfer, produce, process, or in any manner deal with Hazardous Substances; (iii) at no time
during any Indemnitor’s management or ownership of the Property has there occurred a Release or
threatened Release of a Hazardous Substance; (iv) no Indemnitor has received any written notice or
advice from any Governmental Authority or quasi-Governmental Authority, any lessee of the Property,
or any other party alleging any claim based upon an Environmental Activity, alleging the presence,
Release, or threatened Release of a Hazardous Substance on, from, or affecting the Property, or
alleging any violation of any Environmental Requirement; and (v) to Indemnitors’ knowledge, no
prior owner of the Property or any lessee of the Property has received any written notice or advice
from any Governmental Authority or quasi-Governmental Authority or from any other party alleging
any claim based upon an Environmental Activity, alleging any Release of any Hazardous Substance on,
from, or affecting the Property, or alleging any violation of any Environmental Requirement;

     (b) all Environmental Permits necessary for the current use and operation of the Property, if
any are required, have been obtained and are in effect for the operations conducted at the
Property;

     (c) Indemnitors have operated the Property in material compliance with all applicable
Environmental Requirements;

     (d) there are no past, pending, or, to Indemnitors’ knowledge, threatened Environmental Claims
against Indemnitors or the Property;

     (e) Indemnitors have not transported or arranged for the transportation from the Property of
any Hazardous Substance to any location that is listed or proposed for listing on the National
Priorities List under CERCLA or on the CERCLIS or any analogous state list or, to Indemnitors’
knowledge, that is the subject of any Environmental Claim;

6

 

     (f) no asbestos-containing materials are located in any of the improvements constituting any
part of, or located on any part of, the Property;

     (g) there are not now and, to Indemnitors’ knowledge, never have been, any underground storage
tanks, as such term is defined in 42 U.S.C. § 6991, located on the Property or on any property
adjoining the Property.

     6. Affirmative and Negative Covenants. Until payment in full of the Secured
Indebtedness, unless Lender shall otherwise consent in writing:

     (a) Indemnitors shall keep the Property free of Hazardous Substances, except for Permitted
Substances and Indemnitors shall not allow any tenant, occupant, or other party to generate,
manufacture, refine, transport, treat, store, handle, dispose, transfer, produce, process, or in
any manner deal with Hazardous Substances on or at the Property, except for Permitted Substances.
Indemnitors shall not cause or permit, as a result of any intentional or unintentional act or
omission on the part of any Indemnitor, and Indemnitors shall at all times prior to the date
Indemnitors cease to own, operate, or control the Property, use (and shall cause all others to use)
their best efforts not to permit, as a result of any act or omission on the part of any tenant or
subtenant or occupant of the Property, a Release of any Hazardous Substance onto the Property or
onto any other property.

     (b) Indemnitors shall acquire and comply with all Environmental Permits necessary for the
ownership, operation, or use of the Property. Indemnitors shall comply with, and shall use their
best efforts to ensure compliance by all tenants, subtenants, and occupants of the Property with
all Environmental Requirements and shall keep the Property free and clear of any liens imposed
pursuant thereto. Indemnitors shall immediately pay or cause to be paid all costs and expenses
incurred to ensure such compliance. Indemnitors shall obtain and renew all Environmental Permits
required for the ownership, operation, or use of the Property. If Indemnitors receive any written
notice or advice from any Governmental Authority or from any tenant, subtenant, or occupant with
regard to any Environmental Claim or alleged Environmental Claim or of any Release or threatened
Release of any Hazardous Substance from or affecting the Property, then Indemnitors shall
immediately notify Lender in writing. Indemnitors shall conduct and complete all investigations,
studies, sampling, and testing which are reasonably necessary or required, and all remedial,
removal, and other actions necessary to investigate, clean up, and remove all Hazardous Substances
on or affecting the Property or originating from the Property in accordance with and to the full
extent required by Environmental Requirements and to the satisfaction of all applicable
Governmental Authorities. If Indemnitors do not proceed with any investigation, removal, remedial,
or other action in compliance with Environmental Requirements within thirty (30) days of receipt of
the initial written advice or notice with regard to the Property, then Lender, within thirty (30)
days after notice to Indemnitors by Lender, may elect, in its sole discretion and with no
obligation to do so, to undertake such action. Any monies expended by Lender in efforts to comply
with any Environmental Requirements (including the costs of hiring consultants, undertaking
sampling and testing, performing any removal or remedial action necessary or useful in the
compliance process, and reasonable attorneys’ fees and disbursements) will be reimbursed by
Indemnitors to Lender on demand, will constitute a portion

7

 

of the Secured Indebtedness, will bear interest from the date incurred until paid at the applicable
rate set forth in the Note, and will be secured by all collateral for the Loan.

     (c) Indemnitors shall provide Lender, within thirty (30) days after demand by Lender, with a
bond, letter of credit, or similar financial assurance evidencing to Lender’s satisfaction that
necessary funds are available to pay the cost of removing, treating, and disposing of such
hazardous substances and discharging any assessments which may be established on the Property as a
result thereof, if in Lender’s reasonable opinion, Indemnitors do not have sufficient funds to pay
for such costs for discharge of such assessments or if an Event of Default has occurred.

     7. Recourse Obligations. Indemnitors agree that notwithstanding any term or provision
contained in this Agreement or any other Loan Document apparently to the contrary, Indemnitors’
obligations as set forth in this Agreement shall be exceptions to any non-recourse or exculpatory
provision relating to the Loan, if any, and Indemnitors shall be unconditionally liable for the
obligations under this Agreement, and such liability shall not be limited to the original principal
amount of the Loan.

     8. Periodic Site Assessments. Lender (by its officers, employees, and agents) at any
time and from time-to-time, may contract for the services of persons (the “Site Reviewers”)
to perform environmental site assessments (“Site Assessments”) on the Property for the
purpose of determining whether there exists on the Property any environmental condition which could
reasonably be expected to result in any liability, costs, or expense to the owner, occupier, or
operator of the Property arising under any Environmental Requirement relating to Hazardous
Substances. The Site Assessments may be performed at any time or times, upon reasonable notice,
and under reasonable conditions established by Indemnitors which do not impede the performance of
the Site Assessments. The Site Reviewers are hereby authorized by Indemnitors to enter upon the
Property for such purposes and as provided hereinbelow. The Site Reviewers are further authorized
to perform both above and below the ground testing for environmental damage or the presence of
Hazardous Substances on the Property and such other tests on the Property as may be necessary to
conduct the Site Assessments in the reasonable opinion of the Site Reviewers. Indemnitors shall
supply to the Site Reviewers such historical and operational information regarding the Property as
may be reasonably requested by the Site Reviewers to facilitate the Site Assessments and will make
available for meetings with the Site Reviewers appropriate personnel having knowledge of such
matters. The cost of performing such Site Assessments shall be paid by Indemnitors upon demand of
Lender and any such obligations shall be added to and become a part of the Loan.

     9. Miscellaneous.

     (a) Notices. Notices to be made under this Agreement shall be given in accordance
with the Note.

     (b) Number and Gender. Whenever used herein, the singular number shall include the
plural and the singular, and the use of any gender shall be applicable to all genders.

8

 

     (c) Captions. The captions, headings, and arrangements used in this Agreement are for
convenience only and do not in any way affect, limit, amplify, or modify the terms and provisions
hereof.

     (d) Successors and Assigns. Whenever in this Agreement any of the parties hereto is
referred to, such reference shall be deemed to include the successors and assigns of such party as
Lender or Indemnitors; and all covenants, promises, and agreements by or on behalf of Indemnitors
that are contained in this Agreement shall bind and inure to the benefit of Indemnitees’ successors
and assigns; provided, however, that Indemnitors may not assign their obligations and duties
hereunder without the prior written consent of Lender, and any such attempted assignment shall not
have the effect of releasing Indemnitors from any of their obligations or duties hereunder.

     (e) CHOICE OF LAW; JURISDICTION; VENUE. 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. JURISDICTION FOR ALL MATTERS
ARISING OUT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE EXCLUSIVELY IN THE STATE AND
FEDERAL COURTS SITTING IN DALLAS COUNTY, TEXAS, AND EACH INDEMNITOR HEREBY IRREVOCABLY SUBMITS
ITSELF TO THE JURISDICTION OF SUCH STATE AND FEDERAL COURTS AND AGREES AND CONSENTS NOT TO ASSERT
IN ANY PROCEEDING, THAT ANY SUCH PROCESS IS BROUGHT IN AN INCONVENIENT FORUM OR THAT THE VENUE
THEREOF IS IMPROPER, AND FURTHER AGREES TO A TRANSFER OF SUCH PROCEEDING TO THE COURTS SITTING IN
DALLAS COUNTY, TEXAS.

     (f) Waivers. No failure or delay of any Indemnitee in exercising any power, right, or
benefit hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to enforce such a right or
power, preclude any other or further exercise thereof or the exercise of any other right or power.
The rights and remedies of Indemnitees hereunder are cumulative and not exclusive of any rights or
remedies which any of them would otherwise have. No waiver of any provision in this Agreement or
consent to any departure by Indemnitors therefrom shall in any event be effective unless signed in
writing by Lender, and then such waiver or consent shall be effective only in the specific instance
and for the purpose for which given.

     (g) Amendment. This Agreement may be amended only by an agreement in writing signed
by the party against whom enforcement thereof is sought.

     (h) WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. EACH INDEMNITOR HEREBY KNOWINGLY,
VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY (A) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY

9

 

LAW, ANY RIGHT IT 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, BEFORE OR AFTER MATURITY OF THE NOTE; (B) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED
BY LAW, ANY RIGHT IT 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 AND THE TRANSACTIONS
CONTEMPLATED THEREBY 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.

     (i) 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, THE NOTE AND THE OTHER LOAN DOCUMENTS. THERE ARE NO UNWRITTEN ORAL AGREEMENTS AMONG THE
PARTIES AND THIS AGREEMENT, THE NOTE AND THE OTHER LOAN DOCUMENTS MAY NOT BE CONTRADICTED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

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

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EXECUTED
on this the 18th day of August, 2006, effective for all purposes as of the Effective Date.

	 	 	 	 	 	 	 
	INDEMNITORS:	 	MIDLOTHIAN LONGBRANCH, L.P.,

a Texas limited partnership	 	 
	 
	 	 	 	 	 	 
	 	 	By: Pars Investments, Inc.

Its: General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	By:  /s/ Mehrdad Moayedi                                        
	 	 
	 

	 	 	 	       Name: Mehrdad Moayedi

       Its: President	 	 
	 
	 	 	 	 	 	 
	 	 	CENTURION ACQUISITIONS, L.P.,

a Texas limited partnership	 	 
	 
	 	 	 	 	 	 
	 	 	By: Pars Investments, Inc.

Its: General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	By:  /s/ Mehrdad Moayedi                                        
	 	 
	 

	 	 	 	       Name: Mehrdad Moayedi	 	 
	 

	 	 	 	       Its: President	 	 
	 
	 	 	 	 	 	 
	 	 	PARS INVESTMENTS, INC.,

a Texas corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	By:  /s/ Mehrdad Moayedi                                        
	 	 
	 

	 	 	 	       Name: Mehrdad Moayedi	 	 
	 

	 	 	 	       Its: President	 	 
	 
	 
	 	/s/ Mehrdad Moayedi	 	 
	 	 	 	 	 
	 	 	Mehrdad Moayedi, individually	 	 

11

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