Document:

exv10w14

Exhibit 10.14

SECURED PROMISSORY NOTE

(Lago Vista at Bonds Ranch – Lot Loan)

			
	 	 	 
	U.S. $2,203,050.00
	 	April 19, 2010

     FOR VALUE RECEIVED, 165 HOWE, L.P., a Texas limited partnership (the “Borrower”), hereby makes
and issues this Secured Promissory Note (this “Note”) and promise to pay to the order of UNITED
DEVELOPMENT FUNDING IV, a real estate investment trust organized under the laws of the state of
Maryland (together with its successors and assigns, “Lender”), the principal sum of U.S. TWO
MILLION TWO HUNDRED THREE THOUSAND FIFTY AND NO/100 DOLLARS ($2,203,050.00) 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. This Note is subject to
the foregoing and the following terms:

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

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

     “Advance” shall mean an advance by Lender under this Note including, without
limitation, an Interest Reserve Advance, a Commitment Advance, or a Discretionary Advance.

     “Advance Conditions” has the meaning set forth in Section 7 of this Note.

     “Advance Request” shall mean Lender’s standard form of Advance Request in the form
attached hereto as Exhibit “D”, which includes means a certificate executed by the
Principal Officer certifying that (i) no Event of Default has occurred and is continuing
under this Note, (ii) all representations and warranties made by Borrower in this Note and
the other Loan Documents are true and correct in all respects, and (iii) Borrower has
complied with and performed, in all respects, all covenants, conditions and agreements which
are then required by this Note and the other Loan Documents to have been complied with or
performed.

     “Affiliate” shall mean an individual or legal entity that directly or indirectly,
through one or more intermediaries, controls or is controlled by, or is under common control
with, another Person. The term “Control” as utilized herein means the possession, directly
or indirectly, of the power to direct or cause direction of the management and policies of a
Person, whether through management, ownership, by contract, or otherwise; provided,
however, in no event shall any Lender be deemed an Affiliate of Borrower.

     “Approved Budget” means a budget approved by Lender for the management and development
of the Property reflecting all related costs and expenses, a copy of which is attached
hereto as Exhibit “B” and incorporated by reference.

     “Approved Builder” means Cheldan, Crescent and each other residential homebuilder
acquiring Lots from Borrower for the purpose of constructing single family residences
thereon which is approved by Lender, such approval not to be unreasonably withheld,
conditioned or delayed.

 

 

     “Assignment and Subordination Agreements” means, collectively, (i) that certain
Assignment and Subordination of Lot Sale and Purchase Contract with respect to the Cheldan
Lot Sale Contract, executed by Borrower in favor of Lender, (ii) that certain Assignment and
Subordination of Lot Sale and Purchase Contract with respect to the Crescent Lot Sale
Contract, executed by Borrower in favor of Lender, and (iii) each other Assignment and
Subordination of Lot Sale and Purchase Contract executed by Borrower in favor of Lender with
respect to any Lot Sale Contract entered into after the Effective Date, as each may be
amended, modified, renewed, superseded, or replaced from time to time. .

     “Assignment of Contract Rights” means each Assignment of Contract Rights executed by
Borrower in favor of Lender, assigning Lender all of the rights of Borrower under the
Reimbursement Contracts, if any.

     “Base Rate” means the lesser of (i) thirteen percent (13%) per annum, accrued monthly
and compounded annually, or (ii) the Highest Lawful Rate.

     “Borrower” means 165 Howe, L.P., a Texas limited partnership.

     “Borrower-Related Party” means, collectively, the General Partner, the Guarantor, and
any other Person who becomes a Guarantor or the general partner of Borrower after the
Effective Date.

     “Business Day” means any day other than a Saturday, Sunday, or other day on which
Lender is closed for business.

     “Cheldan” means Cheldan MM, LLC, a Texas limited liability company.

     “Cheldan Lot Sale Contract” means that certain Purchase and Sale Agreement dated
October 23, 2009, between Borrower as the seller thereunder, and Cheldan as the buyer
thereunder, as it may be amended, modified, renewed, superseded, or supplemented from time
to time.

     “Closing” means the execution and delivery of the Loan Documents by Lender, Borrower
and the Borrower-Related Parties.

     “Closing Deliveries” has the meaning given to such term in Section 6.

     “Closing Expense Advance” means an advance of the Commitment by Lender for the benefit
of Borrower in the aggregate amount of approximately $90,000.00, which shall fund the
following costs and expenses: the Origination Fee in the amount of $22,030.50, property
taxes due and owing for 2009 in the approximate amount of $50,000.00, the mortgagee title
policy in the approximate amount of $12,000.00, and endorsement costs, recording fees, and
other closing expenses shown on the settlement statement (all of which are subject to the
prior approval of Lender), plus outstanding Loan Expenses.

     “Collateral” means, collectively, all property, assets and rights in which a Lien, in
favor of Lender is or has been granted or arises or has arisen or may hereafter be granted
or arise, under or in connection with any Loan Document or otherwise, to secure payment or
performance of all or any part of the Debt. Without limitation of the foregoing, the term
“Collateral” includes, without limitation, (i) all “Mortgaged Property” as such term is
defined and used in the Deed of

2

 

Trust, (ii) each Lot Sale Contract, (iii) all Earnest Money,
if any and (iv) each Reimbursement Contract, if any.

     “Commitment” means the maximum dollar amount that Lender has committed to fund under
this Note, excluding Interest Reserve Advances, in the aggregate dollar amount of up to U.S.
One Million Nine Hundred Sixty-Eight Thousand Fifty and No/100 Dollars ($1,968,050.00),
which amount includes (and is not in addition to) the Initial Commitment Advance and the
Closing Expense Advance.

     “Commitment Advance” means any full or partial advance of the Commitment pursuant to
the terms hereof including, without limitation, the Initial Commitment Advance, future
Advances of Commitment, if any, and the Closing Expense Advance.

     “Company Certificate” means a certificate certifying the existence, good standing,
formation and organizational documents, and authorizing resolutions, of a Person that is an
entity.

     “Construction Contracts” has the meaning assigned to such term in Section 10
hereof.

     “Crescent” means Crescent Estates Custom Homes, L.P., a Texas limited partnership.

     “Crescent Lot Sale Contract” means that certain Purchase and Sale Agreement dated April
14, 2010 between Borrower as the seller thereunder, and Crescent as the buyer thereunder, as
it may be amended, modified, renewed, superseded, or supplemented from time to time.

     “Debt” means all Indebtedness (principal, interest or other) evidenced by this Note and
all Indebtedness (principal, interest or other) owing to Lender incurred under or evidenced
by the other Loan Documents. The Debt includes interest and other obligations accruing or
arising after (i) commencement of any case under any bankruptcy or similar laws by or
against Borrower or any Borrower-Related Party or (ii) the obligations of Borrower or
Borrower-Related Party shall cease to exist by operation of law or for any other reason.
The Debt also includes all reasonable attorneys’ fees and any other reasonable expenses
incurred by Lender in enforcing any of the Loan Documents.

     “Deed of Trust” shall mean that certain Deed of Trust, Assignment of Leases and Rents,
Security Agreement, and Fixture Filing recorded or to be recorded in the real property
records of Tarrant County, Texas at the Closing of the Loan, naming Borrower as the grantor
and Lender as the beneficiary thereunder, granting Lender a security interest in and a Lien
on the Mortgaged Property to secure the payment and performance of Borrower’s obligations
under this Note and the other Loan Documents, subject only to Permitted Exceptions and being
superior in priority over all Liens, as it may be amended, modified, renewed, extended,
supplemented, or replaced from time to time.

     “Default Rate” means the lesser of (i) eighteen percent (18.0%), accrued monthly and
compounded annually, or (ii) the Highest Lawful Rate.

     “Discretionary Advance” has the meaning given to such term in Section 3(c).

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

3

 

     “Distribution” means all proceeds, products, cash, securities, dividends, increases,
distributions and profits received or distributable to the partners of Borrower, including,
without limitation, distributions or payments in partial or complete liquidation or
redemption, or as a result of reclassifications, readjustments, reorganizations or changes
in the capital structure of the Borrower.

     “Earnest Money” means any form of earnest money supporting a Lot Sale Contract
including, without limitation, cash on deposit with a title company or released to Borrower,
and letters of credit.

     “Earnest Money Assignment” means, for each Lot Sale Contract supported by Earnest Money
an Assignment of Earnest Money Proceeds executed by Borrower in favor of Lender, providing
for a Lien and security interest on the Earnest Money supporting such Lot Sale Contract, in
the form approved by Lender in its sole discretion, if any.

     “Effective Date” means April 19, 2010.

     “Environmental Indemnity Agreement” shall mean that certain Environmental Indemnity
Agreement to be executed by Borrower and the Guarantor in favor of Lender, pursuant to which
Borrower and the Guarantor agree to indemnify Lender from environmental liabilities
associated with the Property, as it may be amended, modified, renewed, extended, increased,
superseded, or replaced from time to time.

     “Errors Agreement” means that certain errors and omissions agreement executed by
Borrower and the Borrower-Related Parties in favor of Lender dated as of the Effective Date.

     “Event of Default” has the meaning given to such term in Section 11(a).

     “Financial Statement Certifications” means those certain certifications of Borrower and
the Borrower-Related Parties attesting to the accuracy and completeness of the financial
statements in the form approved by Lender in its sole discretion.

     “Finished Lot” means a fully developed finished single-family residential lot owned by
Borrower which is deemed by Lender to be a “finished” single-family residential lot and has
been accepted by each of the city in which such Lot is located, and each municipal district,
municipality, water district, municipal utility district, public improvement district or
other Governmental Authority for the subdivision of Lago Vista at Bonds Ranch, Tarrant
County, Texas.

     “Funding Conditions” means, collectively, Borrower’s and the Borrower-Related Parties’
strict compliance with each of the requirements of the Closing Deliveries in Section
6 and each of the Advance Conditions in Section 7, as determined by Lender in
its sole discretion.

     “General Partner” means Centamtar Terras, L.L.C., a Texas limited liability company.

     “Good Accounting Practice” shall mean such accounting practice as, in the opinion of
independent certified public accountants satisfactory to Lender, conforms at the time to
generally accepted accounting principles or, with the express prior written consent of
Lender in any applicable case, cash basis of accounting or the federal income tax basis of
accounting, consistently applied. Each accounting term not defined in this Note shall have
the meaning given to it under Good Accounting Practice.

4

 

     “Governmental Authority” shall mean the United States, the State of Texas, the County
where the Property, in whole or in part, is located, the City, if any, where the Property,
in whole or in part, is located, the district where the Property, in whole or in part, is
located, the Texas Commission for Environmental Quality, the Texas Water Development Board,
the Texas Water Quality Board, the Department of Housing and Urban Development, the
Environmental Protection Agency, any political subdivision of any of the foregoing and any
agency, department, commission, board, bureau, court or instrumentality of any of them which
now or hereafter has jurisdiction over Lender, Borrower, any Borrower-Related Party, or any
part of the Property.

     “Guarantor” means CTMGT, LLC, a Texas limited liability company, and each other Person
who executes a Guaranty Agreement as a Guarantor thereunder.

     “Guaranty Agreement” means each Guaranty Agreement dated as of the Effective Date or
thereafter executed by a Guarantor in favor of Lender, as it may be amended, modified,
renewed, superseded, replaced or joined from time to time.

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

     “Indebtedness” shall mean and include (a) all items which in accordance with Good
Accounting Practice would be included on the liability side of a balance sheet on the date
as of which indebtedness is to be determined (excluding capital stock, surplus, surplus
reserves and deferred credits), (b) guaranties, endorsements and other contingent
obligations in respect of indebtedness of others, or any obligations to purchase or
otherwise acquire any such indebtedness of others, and (c) indebtedness secured by any
mortgage, pledge, security interest or lien existing on property owned subject to or
burdened by such mortgage, pledge, security interest or lien whether or not the indebtedness
secured thereby shall have been assumed.

     “Initial Commitment Advance” means the aggregate dollar amount of up to U.S. One
Million Eight Hundred Seventy-Eight Thousand Fifty and No/100 Dollars ($1,878,050.00), to be
advanced to or for the benefit of Borrower at the Closing.

     “Interest Reserve” means a fixed interest reserve in an amount of up to U.S. Two
Hundred Thirty-Five Thousand and No/100 Dollars ($235,000.00) that may be advanced by Lender
hereunder on the last day of each month for interest accrued during that month on the
outstanding principal balance of this Note (subject to the provisions of Sections
4(b) and 4(c)) and applied against Accrued Interest Payments on this Note.

     “Interest Reserve Advance” means an advance of Interest Reserve by Lender hereunder
applied against Accrued Interest Payments on this Note, subject to the terms and conditions
of Sections 4(b) and 4(c).

     “Land Development” means UMTH Land Development, L.P., a Delaware limited partnership.

5

 

     “Lease” has the meaning given to such term in Section 9(v).

     “Lender” means United Development Funding IV, a real estate investment trust organized
under the laws of the state of Maryland, and its successors and assigns.

     “Lender Representatives” has the meaning given to such term in Section 9(m).

     “Liabilities and Costs” has the meaning given to such term in Section 13.

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

     “Loan” means the full amount of loan made to Borrower pursuant to this Note including
all principal advanced and accrued interest thereon and all other amounts owing to Lender
under the Loan Documents.

     “Loan Documents” means, collectively, together with all exhibits and schedules thereto:
this Note, the Deed of Trust, the Environmental Indemnity Agreement, the Advance Requests,
the Guaranty Agreement, the Financial Statement Certifications, the Errors Agreement, the
IRS tax disclosure forms, the Company Certificates, the Assignment and Subordination
Agreements, the Lot Purchaser Consents, the Origination Fee Letter, the Earnest Money
Assignments (if any), the Assignment of Contract Rights (if any) and all other documents,
instruments, agreements, assignments and certificates relating thereto, including, without
limitation, any and all loan or credit agreements, promissory notes, deeds of trust,
mortgages, pledge agreements, financing statements, security agreements, assignments of
rents, assignments of leases, assignments of contracts, environmental indemnities,
guaranties, contractor’s consent agreements, lender’s title insurance policies, opinions of
counsel, evidences of authorization or incumbency, escrow instructions, and architect’s
and/or engineer’s consent agreements, letters of credit, each of which is to be executed
(and acknowledged where applicable) by the Borrower and/or Lender (as and where applicable)
in connection with Lender making the Loan to Borrower, as the same may be amended, modified,
renewed, supplemented or replaced from time to time.

     “Loan Expenses” has the meaning given to such term in Section 2(a).

     “Lot” shall mean each of the seventy-two (72) Finished Lots that are a part of the
Mortgaged Property, as referenced on Exhibit “A” attached hereto and incorporated by
reference.

     “Lot Purchaser” means (i) an Approved Builder or (ii) any other Person acquiring Lots
from Borrower, subject to approval by Lender in its sole discretion.

     “Lot Purchaser Consents” means, collectively, (i) that certain Consent to Assignment,
Subordination and Estoppel Certificate and Agreement executed by Cheldan for the benefit of
Lender, (ii) that certain Consent to Assignment, Subordination and Estoppel Certificate and
Agreement executed by Crescent for the benefit of Lender, and (iii) each other Consent to
Assignment, Subordination and Estoppel Certificate and Agreement executed by a Lot Purchaser
in favor of Lender with respect to any Lot Sale Contract entered into after the Effective
Date, as each may be amended, modified, renewed, superseded, or replaced from time to time.

6

 

     “Lot Sale Contract” means, collectively, each contract or agreement entered into by and
between Borrower and a Lot Purchaser relating to the acquisition from Borrower of Lots,
including, without limitation, (i) the Cheldan Lot Sale Contract, (ii) the Crescent Lot Sale
Contract and (iii) each other contract or agreement between Borrower, as the seller
thereunder, and a Lot Purchaser, as the buyer thereunder, providing for the acquisition of
Lot(s), in each case, as it may be amended, modified, renewed, superseded, or replaced from
time to time. .

     “Maturity Date” means April 19, 2012.

     “Member Loans” means, collectively, loans from partners, members or managers or
affiliates of Borrower made in accordance with the terms of the Organizational Agreement of
Borrower, which are subordinate both in payment and priority of Liens to the Loan and the
Loan Documents pursuant to a subordination agreement executed by such Person in favor of
Lender, which is binding upon such Person.

     “Mortgaged Property” has the meaning given to such term in the Deed of Trust. The
Mortgaged Property includes the Lots.

     “Note” means this Secured Promissory Note as defined in the introductory paragraph
hereof, together with all exhibits and schedules hereto, as it may be amended, modified,
renewed, extended, increased, supplemented or replaced from time to time.

     “Organizational Agreement” shall mean (a) in respect of a corporation, the Articles of
Incorporation certified to a current date by the Secretary of State in which such
corporation is incorporated and the Bylaws of a corporation certified to a current date as
true and correct by the secretary or assistant secretary of a corporation; (b) in respect of
a general partnership, a partnership agreement; (c) in respect of a joint venture, a joint
venture agreement; (d) in respect of a limited partnership, a partnership agreement and the
certificate of limited partnership certified to a current date by an appropriate
Governmental Authority of the state in which the limited partnership is organized; (e) in
respect of a trust, a trust agreement; and (f) in respect of a limited liability company,
the certificate of organization certified to a current date by the Secretary of State in
which such limited liability company is organized and the regulations of a limited liability
company certified to a current date as true and correct by the manager of a limited
liability company; and any and all future modifications thereof which are consented to by
Lender.

     “Origination Fee” shall mean a fee payable to Lender, charged in consideration of the
origination of the Loan and payable as provided in the Origination Fee Letter.

     “Origination Fee Letter” shall mean that certain letter agreement between Borrower and
Lender, pursuant to which Borrower agrees to pay Land Development the Origination Fee as
provided in the Origination Fee Letter.

     “Partial Release Price” shall mean, for each closing of a Lot or Lots under a Lot Sale
Contract and Borrower’s request for Lender’s release of its Lien against such Lot or Lots,
the sales price for such Lot set forth in such Lot Sale Contract, less the following
reductions: (x) any credit to the Purchase Price resulting from the application of Earnest
Money, if any, to the Purchase Price pursuant to the applicable Lot Sale Contract, and (y)
any other closing expense shown on the settlement statement that is approved by Lender’s
prior written consent to be deducted from the release price that would otherwise be due to
Lender.

7

 

     “Permitted Exceptions” has the meaning given to such term in the Deed of Trust.

     “Person” means a corporation, limited liability company, general partnership, limited
partnership, trust, or other entity, or any individual.

     “Principal Officer” means Mehrdad Moayedi.

     “Pro Forma” means Borrower’s schedule for the sale of the Lots and the projected
proceeds from the sale of the Lots prepared by Borrower in good faith and in accordance with
industry standards, a copy of which is attached hereto as Exhibit “C” and
incorporated by reference.

     “Property” means the Lots located in Lago Vista at Bonds Ranch, a residential
subdivision, an addition to Tarrant County, Texas, all of which is more particularly
described on Exhibit “A” attached hereto and incorporated herein by reference.

     “Released Party” has the meaning given to such term in Section 8(q).

     “Reimbursement Contract” means, collectively, any contract or agreement with any city,
county, water district, municipal utility district, public improvement district, or other
Governmental Authority providing for the sharing, payment and/or reimbursement of the costs
of planning, development and/or construction with respect to the Mortgaged Property such as,
but not limited to, a municipal utility district or public improvement district
reimbursement agreement.

     “Title Policy” shall mean one or more policies of mortgagee title insurance and all
endorsements thereto requested by Lender, issued in favor of Lender and naming Lender and
its assigns as insured mortgagee by a title company acceptable to Lender and insuring that
title to the Property covered by the Deed of Trust is vested in Borrower, free and clear of
any Lien, objection, exception or requirement other than the Permitted Exceptions, and that
Lender has a first and prior Lien against the Property, in such amount and containing such
endorsements as Lender may require.

     “UDF Loans” means, collectively, loans from United Development Funding, L.P., a
Delaware limited partnership, United Development Funding III, LP, a Delaware limited
partnership United Development Funding Land Opportunity Fund, L.P., a Delaware limited
partnership, or any of their Affiliates.

2. Loan Expenses; Fees.

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

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

8

 

     (ii) Lender’s evaluating, monitoring, administering and protecting the
Mortgaged Property, or any other Collateral or employing others to do so or to
perform due diligence for Lender with respect thereto; and

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

     (b) Origination Fee. Borrower agrees to pay Land Development an Origination
Fee in the amount of $22,030.50, as further provided in the Origination Fee Letter.
Borrower has requested, and Lender has agreed, to fund the Origination Fee from the Closing
Expense Advance proceeds.

     (c) Usury Savings Clause Applies. Borrower agrees that Lender has provided,
and shall provide, separate and distinct consideration for the Origination Fee and the fees
and expenses described in Section 2(a) above and elsewhere in the Loan Documents and
that the Origination Fee and such fees and expenses represent bona fide fees and expenses
incurred by Borrower or Lender. Borrower further agrees 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
12 of this Note shall automatically apply to reduce the interest charged hereunder so as
not to exceed the Highest Lawful Rate.

     3. Closing; Commitment; Discretionary Advances.

     (a) Closing; Commitment. Subject to the Funding Conditions, Lender agrees to
fund the Initial Commitment Advance to Borrower at the Closing and to fund the Closing
Expense Advance at Closing; provided, however, that all Commitment Advances shall be made
subject to, and in accordance with, the terms and conditions of Section 3(b).
Notwithstanding anything else to the contrary contained herein, Lender shall have no
obligation to make any Advance unless each of the Funding Conditions has been satisfied.
This Note is not a revolver and thus, the portion of the Commitment borrowed may not be
repaid to Lender and subsequently borrowed again under this Note. The Interest Reserve is
not included in the Commitment.

9

 

     (b) Procedure for Borrowing. Each Commitment Advance shall be made pursuant to
Borrower’s delivery of an Advance Request to Lender, accompanied by documentation supporting
the Commitment Advance. Borrower agrees to provide, all information, documents and
agreements as may be requested by Lender in connection with each such Advance Request.
Notwithstanding anything else to the contrary contained herein, Lender shall have no
obligation to make any Advance unless each of the Funding Conditions has been satisfied.

     (c) Discretionary Advances. Lender is hereby authorized from time to time to
make Advances to or for the benefit of Borrower hereunder that Lender, in its sole
discretion, deems necessary or desirable upon the occurrence of any of the following (such
Advances made upon the occurrence of the following events are referred to herein as the
“Discretionary Advances”): (i) Lender determines, in its sole discretion, that an Advance is
be necessary or desirable for the purpose of paying any Loan Expense, cost, expense, fee or
other amount to or for the benefit of Borrower or chargeable to Borrower under the Loan
Documents, (ii) any Event of Default occurs, or (iii) upon request by Borrower for an
Advance that (A) if a Commitment Advance, would cause the aggregate amount of all Commitment
Advances made hereunder to exceed the Commitment amount, or (B) if an Interest Reserve
Advance, would cause the aggregate amount of all Interest Reserve Advances made hereunder to
exceed the amount of the Interest Reserve. Each Discretionary Advance shall, upon
disbursement, automatically constitute principal outstanding hereunder and cause a
corresponding increase in the aggregate amount of the Debt (even if such Discretionary
Advance causes the aggregate amount outstanding hereunder to exceed the face amount of this
Note). Borrower agrees that each Discretionary Advance shall automatically reduce the
amount of Commitment available hereunder. The making by Lender of any Discretionary Advance
shall not cure or waive any Event of Default hereunder (except only for an Event of Default
that has been cured to Lender’s satisfaction as confirmed by Lender’s execution of a written
agreement specifically acknowledging and describing the Event of Default so cured, and for
an Event of Default that has been waived by Lender as confirmed by Lender’s execution of a
written agreement specifically acknowledging and describing the Event of Default so waived).

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

     (b) Interest Payments; Interest Reserve Advances. Borrower agrees to make
Accrued Interest Payments to Lender on the last day of each month while the Loan is
outstanding, in an amount equal to the interest accrued on the outstanding principal balance
of this Note during each such month. Notwithstanding the foregoing sentence, on each date
that an Accrued Interest Payment becomes due and payable hereunder, provided that the
Advance Conditions are then satisfied and that a sufficient amount of Interest Reserve is
available for the funding of an Interest Reserve Advance, 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

10

 

and payable. Lender may, but is not
obligated to, make Interest Reserve Advances hereunder whether or not the Advance Conditions
have been met, provided, however, that if the Advance Conditions are not then met, any such
Interest Reserve Advances shall be made at Lender’s option and in its sole discretion.
Provided that Borrower met all of the Advance Conditions for an Interest Reserve Advance,
upon Lender funding such Interest Reserve Advance hereunder, the corresponding Accrued
Interest Payment for such month shall be deemed to be satisfied. Upon each Interest Reserve
Advance, irrespective of whether the Advance Conditions were met, (i) the amount of
remaining Interest Reserve (if any) shall be reduced by the amount of such Interest Reserve
Advance and (ii) such Interest Reserve Advance funded by Lender hereunder shall
automatically become principal outstanding under this Note upon such funding. Borrower
agrees that the Interest Reserve Advances may be funded by Lender in Lender’s sole
discretion even if such funding causes the outstanding principal balance of this Note to
exceed its face amount, and that any such Interest Reserve Advances funded in excess of the
face amount of this Note shall be repaid to Lender in accordance with the provisions of this
Note. 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 has been cured to Lender’s
satisfaction as confirmed by Lender’s execution of a written agreement specifically
acknowledging and describing the Event of Default so cured, or waived by Lender as confirmed
by Lender’s execution of a written agreement specifically acknowledging and describing the
Event of Default so waived, 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) Interest and Principal Payments. Except earlier upon any acceleration of
this Note:

     (i) Borrower promises to pay to Lender monthly Accrued Interest Payments on the
last day of each month for interest accrued during that month, unless Lender applies
the Interest Reserve to such Accrued Interest Payment as provided in Section
4(b) of this Note;

     (ii) in addition to the payments required by the provisions of clause (i)
above, concurrently with each Disposition of the Lots pursuant to a Lot Sale
Contract, Borrower promises to pay or cause to be paid to Lender, the Partial
Release Price for each Lot released from Lender’s Lien thereon;

     (iii) in addition to the payments required by the provisions of clauses (i) and
(ii) above, concurrently with any Disposition of the Mortgaged Property or any part
or parcel thereof or other than pursuant to a Lot Sale Contract, Borrower promises
to pay to Lender the full amount of the proceeds received by or due to Borrower from
such Disposition (such Disposition being subject to Lender’s prior written consent
which may be given or withheld in its sole discretion, unless the Disposition
results in the Debt being paid in full); and

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

11

 

     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 (being
applied first to any portion of principal attributable to Interest Reserve Advances).
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 shall 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., Grapevine, 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, by giving Lender no
less than ten (10) days prior written notice of such termination; 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, 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 (the “Closing Deliveries”):

     (a) originals duly executed by Borrower other party (other than Lender) who is a
signatory thereto, of this Note and each other Loan Document including, without limitation,
the Deed of Trust, the Environmental Indemnity Agreement, the initial Advance Request, the
Guaranty Agreement, the Financial Statement Certifications, the Errors Agreement, the IRS
tax disclosure forms, the Company Certificates, the Assignment and Subordination Agreement
for the Cheldan Lot Sale Contract, the Lot Purchaser Consent for the Cheldan Lot Sale
Contract, the Assignment and Subordination Agreement for the Crescent Lot Sale Contract,
the Lot Purchaser Consent for the Crescent Lot Sale Contract, and the Origination Fee
Letter;

     (b) a certified copy of the Organizational Agreements of Borrower and each
Borrower-Related Party that is an entity;

     (c) certificates of existence and good standing for Borrower and each Borrower-Related
Party that is an entity issued by the appropriate state authorities;

12

 

     (d) resolutions of the general partner, manager or other governing body (as evidenced
by the Organizational Agreements) of Borrower and each Borrower-Related Party, authorizing
the execution, delivery, and performance of this Note and the other Loan Documents, and the
transactions contemplated hereby and thereby;

     (e) copies of the liability insurance and casualty insurance policies covering Borrower
and the Mortgaged Property, evidence of payment of the premiums therefor through at least
one year and endorsements of such policies to Lender (in accordance with and meeting the
requirements of Sections 9(o) and (p) hereof);

     (f) all written consents that are required with respect to or necessitated by this Note
and the other Loan Documents and the transactions contemplated hereby and thereby;

     (g) all written consents that are required with respect to or necessitated by this Note
and the other Loan Documents and the transactions contemplated hereby and thereby;

     (h) the following documents and materials: (i) a current appraisal assessing the fair
market value of the Mortgaged Property, subject to Lender’s review and acceptance, completed
by an appraiser acceptable to Lender (ii) all environmental site assessments and reports
with respect to the Mortgaged Property, including, but not limited to, a wetlands
assessment; (iii) all engineering reports and studies, soil analysis, construction,
structural and mechanical feasibility reports; all surveys, survey maps, plats and proposed
plats; all development plans, construction plans, and other plans and specifications; all
topographic, drainage and contour maps and all other reports, maps, studies and surveys of
engineers, architects and others; (iv) the fully executed Cheldan Lot Sale Contract, and the
fully executed Crescent Lot Sale Contract, (v) all sales and marketing plans for the
Mortgaged Property, (vi) all contracts and agreements with developers, engineers,
contractors, subcontractors, consultants and others relating to supervision and maintenance
of, and other professional services relating to the Mortgaged Property; (vii) copies of all
easements and encumbrances affecting the Mortgaged Property, including land use, water use,
mineral rights, surface rights, zoning, subdivision, grading, environmental restrictions,
and neighborhood association rights and restrictions, (viii) the commitment for the issuance
of the Title Policy for the Large Tract, and the title exception documents, and (ix) all
permits, approvals, and authorizations necessary to develop the Mortgaged Property in
compliance with applicable governmental laws, rules, and regulations; and

     (i) such other and further information, documents, agreements and certificates as are
reasonably requested by Lender.

	 	 	No waiver by Lender of the timely delivery of any Closing Delivery will constitute a waiver
of any condition precedent to any obligation of Lender to make any Advance or to require
delivery of any Closing Delivery prior to the funding of any Advance.

     7. Conditions Precedent to Advances. Borrower agrees that, notwithstanding anything
to the contrary contained herein or in the other Loan Documents, Lender’s obligation to fund any
Advance shall be conditioned upon the satisfaction by Borrower of each of the following conditions,
on and as of the funding date for the Advance (the “Advance Conditions”):

     (a) no event constituting an Event of Default shall have occurred and be continuing;

13

 

     (b) the Principal Officer shall have executed and delivered to Lender an Advance
Request dated the funding date, and all matters certified in the Advance Request shall be
true and correct in all respects;

     (c) all statements contained in all Loan Documents and all other certificates,
statements and data furnished to Lender by or on behalf of Borrower or in connection with
the transactions contemplated by this Note or any of the other Loan Documents (including all
of the documents and information required to be delivered to Lender by Section 6)
shall be true and complete in all material respects, and there are no facts or events
actually known to Borrower that, if disclosed to Lender, would make such statements,
certificates or date untrue in any material respect (and Borrower agrees to inform Lender,
prior to Lender making any such Advance, of any such facts or events actually known to
Borrower);

     (d) all of the Loan Documents shall be valid and subsisting, enforceable and in full
force and effect and in the priority Lien position stated therein;

     (e) the Origination Fee and all fees and expenses owed to Lender under any of the Loan
Documents shall have been paid in full;

     (f) the title agent shall have delivered to Lender the title company’s unconditional
commitment to issue the Title Policy for the Deed of Trust to the Lender pursuant to a
commitment, in form and content satisfactory to Lender, wherein the title company agrees to
provide the Title Policy to Lender, and all endorsements thereto required by Lender,
obtained at Borrower’s expense; and

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

No Advance will constitute a waiver of any condition precedent to any obligation of Lender to make
any further Advances.

     8. Representations and Warranties. Borrower and each Borrower-Related Party
represents and warrants to Lender as follows:

     (a) Due Organization, Existence and Authority. Borrower and each
Borrower-Related Party that is an entity (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 as presently conducted and as
proposed to be conducted, and to enter into and perform its obligations under this Note and
the other Loan Documents to which it is a party.

     (b) Loan Documents Authorized. The execution and delivery by Borrower and each
Borrower-Related Party of this Note and the other Loan Documents and the full and timely
performance of all obligations thereunder have been duly authorized by all necessary action
under the Organizational Agreement of Borrower and each Borrower-Related Party and
otherwise.

     (c) Loan Documents Valid, Binding and Enforceable. This Note and the other
Loan Documents have been duly and validly executed, issued and delivered by Borrower and
each Borrower-Related Party, and constitutes the valid and legally binding obligations of
Borrower and each Borrower-Related Party enforceable in accordance with their respective
terms, except as

14

 

limited by bankruptcy, insolvency, reorganization or other similar laws
relating to or affecting enforcement of creditor’s rights.

     (d) No Violation. The execution, delivery and performance by Borrower and each
Borrower-Related Party of the Loan Documents does not and will not (i) contravene the
Organizational Agreement of Borrower and each Borrower-Related Party, (ii) contravene any
law, rule or regulation, or any order, writ, judgment, injunction or decree or any
contractual restriction binding on or affecting Borrower or any Borrower-Related Party or
the Collateral, (iii) require any approval or consent of any general partner, board,
manager, member, lender or any other Person, other than approvals or consents that have been
previously obtained and disclosed in writing to the Lender, (iv) result in a breach of or
constitute a default under any indenture or loan or credit agreement or any other agreement,
lease or instrument to which Borrower or any Borrower-Related Party is a party or by which
Borrower or any Borrower-Related Party or the Collateral may be bound or affected, or (v)
result in, or require the creation or imposition of, any Lien (other than the Liens
contemplated by the Loan Documents) with respect to the Collateral.

     (e) Governmental Consents. No authorization or approval or other action by,
and no notice to or filing with, any Governmental Authority is required for the due
execution, delivery and performance by Borrower of the Loan Documents, other than approvals
or consents that have been previously obtained and disclosed in writing to the Lender.

     (f) Government Regulations. Neither Borrower nor any Borrower-Related Party is
subject to regulation under the Investment Company Act of 1940, the Federal Power Act or the
Public Utility Holding Company Act of 1935, the Interstate Commerce Act, as the same may be
amended from time to time, or any federal or state statute or regulation limiting its
ability to incur Indebtedness

     (g) Securities Activities Neither Borrower nor any Borrower-Related Party is
engaged principally, or as one of its important activities, in the business of extending
credit for the purpose of purchasing or carrying any margin stock (as defined in Regulation
U of the Board of Governors of the Federal Reserve System in effect from time to time) and
not more than twenty five (25%) of the value of the assets of said entities consists of such
margin stock.

     (h) Suits. There are no actions, suits or proceedings pending, or to the
knowledge of Borrower, threatened, against or affecting Borrower, any Borrower-Related Party
or the Collateral, or involving the validity or enforceability of the Loan Documents or the
priority of the Liens created or evidenced thereby, at law or in equity, or before or by any
Governmental Authority.

     (i) Financial Statements Complete and Accurate. All information supplied and
statements made to Lender by or on behalf of Borrower or any Borrower-Related Party is in
any financial statement furnished or application for credit made prior to, contemporaneously
with or subsequent to the execution of this Note are and shall be true, correct, complete,
valid and genuine; such financial statements and applications for credit have been prepared
in accordance with Good Accounting Practice and fully and accurately present the financial
condition of the subject thereof as of the date thereof and no material adverse change has
occurred in the financial condition reflected therein since the respective dates thereof;
and no additional borrowings have been made by Borrower or any Borrower-Related Party since
the respective dates thereof other than (i) the borrowing contemplated hereby and (ii) other
borrowings approved by Lender’s prior written consent.

15

 

     (j) Environmental Liability. To the knowledge of Borrower, no hazardous
substances or solid wastes have been disposed of or otherwise released on the Property in
violation of Environmental Laws, nor is the Property including its soil, ground, water, air
and other elements, contaminated by hazardous substances or solid wastes in violation of
Environmental Laws. The terms “hazardous substance” and release” shall have the meanings
specified in the Comprehensive Environmental Response Compensation and Liability Act of
1980, as amended (42 U.S.C. Section 9601 et. seq.) (“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 (42 U.S.C. Section 6901 et. seq.)
(“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.

     (k) Tax Liabilities. Borrower has filed all tax returns required to be filed,
or has obtained an extension which is currently valid and in effect, for all federal, state,
county, local, and foreign tax returns and reports required to be filed, including, without
limitation, taxes on the Collateral and all applicable income, payroll, personal property,
real property, employee withholding, social security, unemployment, franchise, excise, use
and sales taxes. Borrower has paid in full all taxes that have become due as reflected on
all such returns and reports including any interest and penalties, expect for taxes being
contested in good faith and for which such taxpayer has set aside adequate reserves for the
payment thereof. Borrower has established adequate reserves for all taxes payable but not
yet due. No governmental claim for additional taxes, interest, or penalties is pending or,
to the knowledge of Borrower, threatened against Borrower or the Collateral.

     (l) Compliance With Legal Requirements. Borrower and each Borrower-Related
Party is in compliance with all legal requirements in respect of the conduct of its business
and the ownership of its assets. Borrower and each Borrower-Related Party owns or has the
continuing right to use all permits, licenses, patents, patent rights or licenses,
trademarks, trademark rights, trade names, trade name rights and copyrights which are
required to conduct its business.

     (m) Full Disclosure. None of the representations, warranties, covenants,
agreements or statements contained in any Loan Document or any schedule, exhibit, report,
statement or certificate furnished to Lender by or on behalf of Borrower or any
Borrower-Related Party in connection with the Loan contains or will contain any untrue
statement of a material fact, or omits or will omit any material fact required to be stated
therein or necessary to make the statements made therein, in light of the circumstances
under which they are made, not misleading.

     (n) No Known Material Adverse Fact. Neither Borrower nor any Borrower-Related
Party knows of any fact which materially and adversely affects the Collateral, or the
business, operations, prospects or condition, financial or otherwise, of Borrower.

     (o) Survival of Representations and Warranties. All representations and
warranties made by or on behalf of Borrower or any Borrower-Related Party herein or in any
other Loan Document shall survive the delivery of this Note and the making of the Loan and
any investigation at any time made by or on behalf of Lender shall not diminish its rights
to rely thereon.

     (p) No Usury. Without limiting the generality of any other representation or
warranty set forth herein or in any other Loan Document, the Loan is a commercial loan and
not usurious under the laws of the State of Texas.

16

 

     (q) Advisement by Lender. Prior to entering into this Note and the other Loan
Documents, Borrower and each Borrower-Related Party has been advised by Lender to seek the
advice of an attorney and an accountant in connection with the Loan. Borrower and each
Borrower-Related Party has had the opportunity to seek the advice of an attorney and
accountant of its choice in connection with the Loan.

     (r) Adequate Consideration. Prior to entering into this Note and the other
Loan Documents, Borrower and each Borrower-Related Party has reviewed the benefits to be
provided to it as a result of the Lender making the Loan and have concluded that the
benefits are reasonably equivalent in value to the Collateral to be pledged to secure the
Loan and the obligations assumed and to be assumed by it pursuant to the Loan Documents.

     (s) No Partnership, Joint Venture or Agency Intended. Nothing in this Note or
the other Loan Documents is intended or shall in any way be construed so as to create any
form of partnership, joint venture or agency relationship between the Borrower and each
Borrower-Related Party, on the one hand, and the Lender on the other hand, the parties
hereto having expressly disclaimed any intention of any kind to create any partnership or
agency relationship between them resulting from or arising out of the Loan Documents.

     (t) No Reimbursement Contract. No Reimbursement Contract exists or has ever
existed with respect to the Mortgaged Property.

     (u) Lot Sale Contracts. No Lot Sale Contract exists covering any of the
Mortgaged Property except for the Cheldan Lot Sale Contract and the Crescent Lot Sale
Contract.

     (v) Lots. Each of the Lots is a Finished Lot and is suitable for the
construction of a single family residence thereon.

     9. Covenants. Borrower and each Borrower-Related Party covenants and agrees as
follows:

     (a) Payment; Performance. Borrower shall promptly pay all amounts due and
owing to Lender under this Note. Borrower and each Borrower-Related Party shall timely
perform and comply with each agreement and covenant made by them under this Note and the
other Loan Documents.

     (b) Use of Proceeds. Borrower shall use the proceeds of this Note solely for
the refinancing of the Property and related closing costs and expenses. In no event shall
the proceeds of this Note be used, directly or indirectly, 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) Indebtedness for Borrowed Money. Except for Member Loans, UDF Loans and
Indebtedness secured by Liens permitted by the Loan Documents, Borrower shall not incur any
Indebtedness or guaranty or provide security for any Indebtedness of another Person or enter
into any agreement to do so without the prior written consent of Lender, which may be
withheld for any reason or no reason. As a condition of Lender granting such consent,
Lender may require Borrower and the other lender to enter into a subordination agreement in
favor of Lender, which shall be satisfactory to Lender in all respects. Notwithstanding the
foregoing, Borrower may

17

 

incur trade debt to vendors, and suppliers and providers of services
in the ordinary course of business without violation of this Section 9(c).

     (d) Termination of Existence. Borrower and each Borrower-Related Party shall
not cause or permit, or enter into any agreement to cause or permit, the dissolution or
termination of the existence of Borrower or any Borrower-Related Party that is an entity.
Without Lender’s prior written consent, Borrower shall not permit or enter into any
agreement to cause or permit, the merger, consolidation, or reorganization of Borrower or
any Borrower-Related party that is an entity with or into any other entity, whether or not
such party would be the surviving entity.

     (e) Notice of Certain Events. Borrower shall promptly notify Lender in writing
of (i) the occurrence of any event or series of events causing, or that could be expected to
cause or has caused, a material adverse effect on the operations or financial condition of
Borrower, any Borrower-Related Party or the Collateral, (ii) the occurrence of any Event of
Default, (iii) any default by Borrower or the acceleration of the maturity of any
Indebtedness owed by Borrower or any Borrower-Related Party under any loan agreement,
indenture, mortgage, promissory note, contract or instrument to which Borrower or any
Borrower-Related Party is a party or by which any material asset or property of Borrower or
any Borrower-Related Party is bound, (iv) any litigation instituted against Borrower or the
Collateral, (v) notices of violation relating to and adversely affecting the Collateral
received from any Governmental Authority, (vi) any audits of any federal or state tax
returns of Borrower or any Borrower-Related party and the results of any such audit, (vii)
any condemnation or similar proceedings with respect to the Mortgaged Property, and (viii)
any other matters which could reasonably be expected to adversely affect Borrower’s ability
to perform its obligations under this Note. Borrower shall notify Lender in writing at
least thirty (30) days prior to the date that it or any Borrower-Related Party changes its
or his name, address, principal place of business, or the place that it maintains its or his
books and records.

     (f) Financial Statements; Tax Returns. Borrower shall deliver or cause to be
delivered to Lender, the following:

     (i) within sixty (60) days after the end of each fiscal quarter, the unaudited
financial statements of Borrower, prepared in accordance with Good Accounting
Practice, and combined or consolidated as appropriate, including all notes related
thereto;

     (ii) within one hundred twenty (120) days after the end of each fiscal year,
the unaudited financial statements of Borrower, prepared in accordance with Good
Accounting Practice, and combined or consolidated as appropriate, including all
notes related thereto;

     (iii) copies of all federal and state tax returns prepared with respect to
Borrower within ten (10) days of such documents being filed with the Internal
Revenue Service or applicable state authority, along with an audit thereof upon
request of Lender; and

     (iv) such other information relating to the financial condition and affairs of
Borrower, and the Collateral as Lender may from time to time request.

	 	 	All financial statements shall be accompanied by duly executed Financial Statement
Certifications.

18

 

     (g) Taxes. Borrower shall pay or cause to be paid all federal, state and local
taxes levied against it and its assets and the Collateral as they become due and payable and
before the same become delinquent. Borrower shall furnish to Lender evidence that all such
taxes are paid within ten (10) days following the date of payment. Notwithstanding the
foregoing, Borrower 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) they have notified Lender of the intent to
contest such taxes, and (iii) adequate reserves for the liability associated with such tax
have been established in accordance with Good Accounting Practice.

     (h) Liens. Borrower and each Borrower-Related Party shall not create, incur,
assume, permit or suffer to exist any Lien on or against the Collateral including, without
limitation, the Mortgaged Property, except for Liens securing UDF Loans and as otherwise
expressly permitted by the Loan Documents.

     (i) Operation of Business. Borrower and each Borrower-Related Party shall
operate its business in compliance with all applicable federal, state and local laws, rules,
regulations, and ordinances. Borrower and each Borrower-Related Party shall maintain or
engage sufficient qualified personnel for the operations of its business. Borrower and each
Borrower-Related Party shall maintain its existence and good standing in each state where it
operates or does any business, except in any jurisdictions where the failure to maintain
such existence and good standing would not have a material adverse effect individually or in
the aggregate, on its financial condition or operations. Borrower and each Borrower-Related
Party shall obtain, maintain and keep current, all consents, licenses, permits,
authorizations, permissions and certificates which may be required or imposed by any
Governmental Authority or which are required by applicable federal, state or local laws,
regulations and ordinances.

     (j) No Work Performed. No labor or services will be performed by on behalf of
Borrower or otherwise, and no materials will be furnished or delivered by on or behalf of
Borrower or otherwise to, the Property prior to the recording the Deed of Trust, which could
give rise to a Lien on the Property with priority equal to or greater than the Liens and
security interests of the Deed of Trust or other Loan Documents.

     (k) Borrower and Mortgaged Property Documents. In addition to the information
otherwise required to be provided to Lender pursuant to the Loan Documents, Borrower shall,
within five (5) days following Lender’s request, furnish to Lender, the following documents:

     (i) all documents, certificates, agreements, contracts and other materials
provided for in the Advance Conditions, including, without limitation, all
amendments, modifications, and supplements thereto, and all new and additional
documents, certificates, and agreements, contracts and other materials relating
thereto;

     (ii) all capital expenditure and expense reports, invoices and documentation of
expenses and capital expenditures, bank account information and records, and other
material financial and operational information related to the Collateral including,
without limitation, the Mortgaged Property;

     (iii) minutes of the meetings and all written consents of the general partner,
managers, members, board or other governing authority of Borrower relating in any
respect to the Collateral including, without limitation, the Mortgaged Property;

19

 

     (iv) promissory notes, loan documents, contracts and agreements evidencing
Indebtedness of Borrower and the Borrower-Related Parties and all amendments,
modifications and supplements thereto;

     (v) any new documents or information, and any updates, supplements, or
replacements for any documents or information, required to be delivered to Lender
pursuant to the Loan Documents;

     (vi) each Lot Sale Contract and each amendment, modification and supplement
thereto (provided, that by this reference, Lender shall not be deemed to have
approved any such amendment, modification or supplement);

     (vii) contracts and agreements relating to the Mortgaged Property, its
maintenance, and administration; and

     (viii) all other information with respect to Borrower, each Borrower-Related
Party or the Collateral that Lender may reasonably request from time to time.

     (l) Transactions with Affiliates. Borrower shall not enter into or be a party
to any agreement or transaction with any Affiliate except in the ordinary course of and
pursuant to the reasonable requirements of Borrower’s business and upon fair and reasonable
terms that are no less favorable to Borrower than it would obtain in a comparable
arms-length transaction with a Person not an Affiliate of Borrower, and on terms consistent
with the business relationship of Borrower and such Affiliate prior to the Effective Date,
and fully disclosed to Lender.

     (m) Audit. Borrower and each Borrower-Related Party 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 Borrower’s expense, to (i) audit all books and records related to Borrower, each
Borrower-Related Party and the Collateral including, without limitation, the Property, and
(ii) visit and inspect the offices of Borrower and each Borrower-Related party and to
inspect and make copies of all books and records, and to write down and record any
information the Lender Representatives obtain. Borrower and each Borrower-Related Party
agrees to cooperate fully with Lender in connection with such audits and inspections.

     (n) Agreements related to the Property. Without the prior written consent of
Lender, neither Borrower nor any Borrower-Related Party shall enter into, amend, modify or
terminate any agreement related to the Collateral that reasonably would be expected to
hinder, delay or impair the timely payment of the Debt or the performance by Borrower or any
Borrower-Related party of any obligations under the Loan Documents, or that could have a
material adverse effect on the value of the Collateral or Lender’s Liens against the
Collateral.

     (o) General Liability Insurance. Borrower shall at all times maintain or cause
to be maintained general liability insurance with coverage amounts that are normal and
customary for similarly-situated entities engaged in similar businesses. Each such 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 shall obtain 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.

20

 

     (p) Property Insurance. Borrower shall, at all times maintain hazard insurance
on the Property with coverage amounts that are normal and customary for similar properties.
Each such 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
shall obtain 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, and evidence of payment of the premium for each such policy.

     (q) Communications. Borrower and each Borrower-Related Party hereby consents
to and agrees that Lender and its representatives, employees, project managers, and
consultants may communicate with (verbally and in writing, in person and via electronic
communications), and exchange information among and between, (i) all contractors,
subcontractors, engineers, design professionals and all others who provide work and/or
services with respect the Property or any portion thereof, together with their respective
principals, employees and agents, (ii) all Persons having an interest in the Collateral, and
(iii) all lenders and potential lenders that may or do provide financing to Borrower.
Borrower and each Borrower-Related Party hereby releases and holds harmless, and agrees to
indemnify, Lender, its general partner and their respective partners, officers, directors,
shareholders, representatives, employees, and agents (each, a “Released Party”), from and
against any and all damages, claims, liabilities and expenses related to, associated with or
in respect of any such communications or exchanges of information, whether or not they shall
be caused in whole or in part by the negligence of a Released Party, excluding Lender’s
intentional misconduct or gross negligence.

     (r) Reimbursement Contract. Borrower shall obtain Lender’s written consent
prior to entering into or permitting any Affiliate to enter into any Reimbursement Contract,
or prior to becoming an assignee of, or otherwise becoming entitled to receive proceeds
under, any such Reimbursement Contract. As a condition to giving its prior written consent,
Borrower agrees that Lender may require, in its sole discretion, that (i) the Reimbursement
Contract and the proceeds therefrom or related thereto be assigned to Lender pursuant to an
Assignment of Contract Rights or other assignment form satisfactory to Lender in form and
substance and filed of record, and/or (ii) the proceeds therefrom or related thereto be paid
to Lender, which shall be applied by Lender to reduce Borrower’s obligations owed to Lender
under this Note and the other Loan Documents, until all such obligations have been paid in
full. Notwithstanding anything else to the contrary contained herein or in any other Loan
Document, in no event shall any Reimbursement Contract require or result in a subordination
of Lender’s Lien against the Mortgaged Property. Borrower agrees to, and agrees to cause
its Affiliates to, execute, enter into and deliver to Lender an Assignment of Contract
Rights or any additional agreements or assignments that Lender may request in order to
facilitate the obligations of Borrower under this Section. If despite an assignment to
Lender, Borrower receives any reimbursement or other proceeds resulting from a Reimbursement
Contract, then Borrower agrees to immediately pay over to Lender the full amount of such
proceeds, which shall be applied by Lender to reduce Borrower’s obligations owed to Lender
under this Note and the other Loan Documents, until all such obligations have been paid in
full. Borrower shall not amend or modify, or permit to be amended or modified, any
Reimbursement Contract without Lender’s prior written consent.

     (s) Compliance with Lot Sale Contracts. Borrower shall comply in all respects
with its obligations under each Lot Sale Contract and shall not take any action or inaction
that creates a Borrower default under any such Lot Sale Contract. Borrower shall not
terminate any Lot Sale Contract except in accordance with its terms upon default thereunder
by the Builder, in which case, Borrower shall obtain the prior written consent of Lender to
terminate such Lot Sale Contract. Borrower shall obtain the prior written consent of Lender
before entering into any

21

 

agreement that amends, modifies or supplements any Lot Sale
Contract. Lender shall not unreasonably withhold or delay its consent to an amendment,
modification or supplement of any Lot Sale Contract if Borrower shall have consented to such
amendment, modification or supplement; provided, however, that Lender may withhold its
consent, as determined by Lender in its sole discretion, to any amendment, modification or
supplement to any Lot Sale Contract which (i) decreases the purchase price payable for any
Lots, (ii) delays the acquisition of any Lot beyond the schedule or date(s) agreed in such
Lot Sale Contract, (iii) could reasonably be expected to delay or impair the ability of
Borrower to timely repay the Loan in accordance with the terms and conditions or the Loan
Documents, (iv) violates any of the Loan Documents, or (v) in Lender’s opinion, materially
and adversely affects Lender’s security for the Loan or the rights and benefits of Borrower
under such Lot Sale Contract.

     (t) Additional Covenants for Lot Sale Contracts. Borrower shall obtain
Lender’s prior written consent before entering into any Lot Sale Contract. Each Lot
Purchaser must be either (i) an Approved Builder or (ii) another Person approved by Lender
in its sole discretion. For each Lot Sale Contract, the purchase price of the Lots, the
timing of the take down schedule, if any, the other terms and conditions of each Lot Sale
Contract relating to the purchase price and timing of payment for the Lots must be
satisfactory to Lender in its sole discretion. Concurrently with entering into any Lot Sale
Contract and as a condition to Lender approving any Lot Sale Contract, Borrower shall
execute and deliver to Lender, and shall cause the Lot Purchaser under the Lot Sale
Contract, together with any title company or other escrow agent holding earnest money (in
the form of cash, a letter of credit or otherwise) to execute and deliver to Lender, all of
the following: (i) an Assignment and Subordination Agreement, (ii) a Lot Purchaser Consent,
and (iii) and, if Earnest Money is delivered or deposited in support of the Lot Sale
Contract, an Earnest Money Assignment. Borrower further agrees to enter into such
amendments, modification or supplements to the Loan Documents in the form provided by Lender
and to make such representations, warranties, covenants, that Lender deems necessary or
desirable in connection with each such Lot Sale Contract.

     (u) Approved Budget; Pro Forma; Lot Sales Report.

     (i) Approved Budget. Borrower and the Borrower-Related Parties shall
not consent to, approve, adopt or vote in favor of any modification, amendment,
supplement, or other change to the Approved Budget (except for changes in line items
that do not increase the overall Budget amount) without Lender’s prior written
consent. Borrower and the Borrower-Related Parties shall manage the Property in
strict accordance with the Approved Budget.

     (ii) Pro Forma. Borrower and the Borrower-Related Parties shall not
consent to, approve, adopt or vote in favor of any modification, amendment,
supplement, or other change to the Pro Forma without Lender’s prior written consent.
Borrower shall cause aggregate Lot sales to occur at least by the dates forth for
Lot sales in the Pro Forma (for example, 4 Lots must be sold by June 30, 2010, 8
Lots must be sold by September 30, 2010, etc.).

     (iii) Lot Sales Report. Within ten (10) days after the end of each
month, Borrower shall deliver to Lender, a sales report setting forth the current
sales status of all Lots, including pending and anticipated Lots sales, and naming
the Approved Builder.

     (v) Lease. Borrower shall obtain Lender’s prior written consent before
entering into any lease for the Property or any portion thereof (the “Lease”). Borrower
further agrees to

22

 

amend, modify or supplement the Loan Documents to incorporate such
representations, warranties, covenants, agreements and Events of Default and other terms and
conditions that Lender deems reasonably necessary in connection with such Lease.

     (w) Title Policy. Borrower shall cause the title company to issue and deliver
the Title Policy to Lender within forty-five (45) days after the Effective Date.

     10. Assignment of Construction Contracts. As additional security for the payment of
the Debt and the payment and performance of the obligations, covenants and agreements under the
Loan Documents, Borrower and each Borrower-Related Party hereby transfers and assigns to Lender for
the benefit of Lender all rights and interest, but not its obligations, in, under and to all
contracts, subcontracts and agreements, written or oral, between Borrower and any other party, and
between parties other than Borrower, in any way relating to the development of the Property and/or
the construction of improvements on the Property, or the supplying of material (specially
fabricated or otherwise), labor, supplies, or other services therefor (collectively, the
“Construction Contracts”) upon the following terms and conditions:

     (a) Borrower and each Borrower-Related Party represents and warrants to Lender that the
copy of each Construction Contract that Borrower has furnished or will furnish to Lender is
or will be a true and complete copy thereof, including all amendments thereto, if any, and
that Borrower’s interest therein is not subject to any claim, setoff or encumbrance;

     (b) Neither this assignment nor any action by Lender shall constitute an assumption by
Lender of any obligations under any Construction Contract, and Borrower shall continue to be
liable for all obligations of Borrower thereunder; and Borrower hereby agrees to perform all
of its obligations under each Construction Contract. Borrower and each Borrower-Related
Party hereby agrees to indemnify and hold Lender harmless against and from any loss, cost,
liability or expense (including, but not limited to, consultants’ fees and expenses and
attorneys’ fees and expenses) incurred in connection with Borrower’s failure to perform any
such Construction Contract or any action taken by Lender, except for matters arising as a
result of the gross negligence or willful misconduct by Lender;

     (c) Upon the occurrence of an Event of Default, and during the continuance thereof,
Lender shall have the right at any time (but shall have no obligation) to take in its name
or in the name of Borrower such action as Lender may at any time determine to be necessary
or advisable to cure any default under any Construction Contract or to protect the rights of
Borrower or Lender thereunder. Lender shall incur no liability if any action so taken by it
or on its behalf shall prove to be inadequate or invalid, and Borrower and each
Borrower-Related Party agrees to indemnify and hold Lender harmless against and from any
loss, cost, liability or expense (including but not limited to reasonable attorneys’ fees)
incurred in connection with any such action, except for matters arising as a result of the
gross negligence or willful misconduct of Lender;

     (d) Borrower hereby irrevocably constitutes and appoints Lender as Borrower’s
attorney-in-fact, in Borrower’ or Lender’s name, to enforce all rights of such Borrower
under each Construction Contract; provided, however, that Lender agrees not to exercise such
appointment until the occurrence of an Event of Default, and during the continuance thereof.
Such appointment is coupled with an interest and is therefore irrevocable;

     (e) Prior to the occurrence of an Event of Default, Borrower shall have the right to
exercise its rights as owner under each Construction Contract; provided, that Borrower shall
not

23

 

cancel or amend any Construction Contract or do or suffer to be done any act which would
impair the security constituted by this assignment without the prior written consent of
Lender; and

     (f) This assignment shall inure to the benefit of Lender and its successors and
assigns, any purchaser upon foreclosure of the Liens against any Property, any receiver in
possession of any Property or any portion thereof and any entity affiliated with Lender
which assumes Lender’s rights and obligations under this Note.

     (g) Without limitation, the foregoing indemnities contained in this Section 10
shall apply to Lender with respect to matters which in whole or in part are caused by or
arise out of, or are claimed to be caused by or arise out of, the negligence (whether sole,
comparative or contributory) or strict liability of Lender. However, such indemnities shall
not apply to Lender to the extent that the subject of the indemnification is caused by or
arises out of the gross negligence or willful misconduct of Lender.

     11. 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 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 or any Borrower-Related Party 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 or any Borrower-Related Party 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 11(a) as an Event of Default, and the
same remains unremedied for ten (10) days thereafter; or

     (iv) any “event of default” or “default” occurs under any Loan Document other
than this Note that is not separately listed in this Section 11(a), and the
same remains unremedied for ten (10) days thereafter; or

     (v) the entry of a decree or order for relief by a court having jurisdiction in
respect of Borrower or any Borrower-Related Party 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
or any Borrower-Related Party for any substantial part of their respective
properties or the Property, or ordering the winding up or liquidation of such
person’s affairs; or

     (vi) the commencement by Borrower or any Borrower-Related Party of a voluntary
case under the federal bankruptcy laws, as now constituted or hereafter

24

 

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 or any Borrower-Related Party for any substantial part of their
respective properties or the Property, or the making by Borrower or any
Borrower-Related Party of any assignment for the benefit of creditors, or the
admission by Borrower or any Borrower-Related Party 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 the assets of Borrower or any Borrower-Related Party or the
Collateral in a proceeding brought against or initiated by Borrower or any
Borrower-Related Party or the Collateral;

     (viii) if Borrower or any Borrower-Related Party that is an entity is
liquidated or dissolved or winds up their affairs, or the sale or liquidation of all
or substantially all of the assets of Borrower or any Borrower-Related Party that is
an entity; or

     (ix) any Disposition of any Collateral occurs (except as expressly permitted by
the Loan Documents) 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 (the terms “default” and “event of
default” have the meaning given to such terms in the agreements and documents
described below), shall occur under (A) any credit agreement, loan agreement,
promissory note or other document evidencing indebtedness for borrowed money to
which Borrower or any Borrower-Related Party is a party as a borrower, debtor,
guarantor or other obligor, or (B) any subordination agreement, security agreement,
pledge agreement, guaranty, deed of trust, or other agreement providing guaranty of
or security or collateral for indebtedness, executed by Borrower or any
Borrower-Related Party, 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 or
any Borrower-Related Party is a party, if Lender or any of its Affiliates are also a
party to such agreement, or

     (xi) the death or disability of the Principal Officer; or

     (xii) in Lender’s opinion, any material adverse change occurs in the financial
condition or business of Borrower or any Borrower-Related Party; or

     (xiii) any Loan Document ceases to be valid and binding for any reason or
Borrower or any Borrower-Related Party asserts so; or

     (xiv) Borrower or any Borrower-Related Party suffers the entry against it of a
final judgment for the payment of money in excess of $50,000 which is not covered by
insurance which is not paid in full within ten (10) days thereafter; or

     (xv) Borrower or any Borrower-Related Party suffers a writ or warrant of
attachment or any similar process to be issued by any tribunal against all or any
substantial part of its properties, assets or the Collateral including, without
limitation, the Mortgaged Property, and such writ or warrant of attachment or any
similar process is not

25

 

stayed or released within thirty (30) days after the entry or
levy thereof or after any stay is vacated or set aside; or

     (xvi) in Lender’s opinion, the prospect for payment or the prospect for
performance with respect to this Note or any other agreement that Borrower or any
Borrower-Related Party may have with Lender is impaired and Lender so notifies
Borrower in writing; or

     (xvii) Borrower or any Borrower-Related Party fails to comply with any covenant
or agreement in any of Sections 9(b), (c), (d), (h),
(j), (m), (r), (s), (t) or (v) in
any respect; or

     (xviii) Borrower fails to cause aggregate Lot sales to occur at least by the
dates forth for Lot sales in the Pro Forma (for example, four (4) Lots must be sold
by June 30, 2010, eight (8) Lots must be sold by September 30, 2010, etc.);
provided, however, that such failure shall not, in and of itself, constitute an
Event of Default until after Lender has given Borrower written notice of such
failure, and ninety (90) days to cure by causing aggregate Lot sales to meet or
exceed the dates set forth in the Pro Forma.

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

     (c) If this Note is placed in the hands of an attorney for collection after an Event of
Default or failure to pay under this Note, or if all or any part of the Debt represented
hereby is proved, established or collected in any court or in any bankruptcy, receivership,
debtor relief, probate or other court proceedings, Borrower and each Borrower-Related Party
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.

     12. Usury Laws. Notwithstanding anything to the contrary contained in this
Note or any other Loan Document:

26

 

     (a) It is expressly stipulated and agreed to be the intent of Borrower and each
Borrower-Related Party and Lender at all times to comply strictly with the applicable Texas
law governing the maximum rate or amount of interest payable on the Debt, or applicable
United States federal law to the extent that such law permits Lender to contract for,
charge, take, reserve or receive a greater amount of interest than under Texas law. If the
applicable law is ever judicially interpreted so as to render usurious any amount contracted
for, charged, taken, reserved or received in respect of the Debt, including by reason of the
acceleration of the maturity or the prepayment thereof, then it is the express intent of
Borrower and each Borrower-Related Party and Lender that all amounts charged in excess of
the Highest Lawful Rate shall be automatically canceled, ab initio, and all amounts in
excess of the Highest Lawful Rate theretofore collected by Lender shall be credited on the
principal balance of the Debt (or, if the Debt has been or would thereby be paid in full,
refunded to Borrower), and the provisions of the Note and the other Loan Documents shall
immediately be deemed reformed and the amounts thereafter collectible hereunder and
thereunder reduced, without the necessity of the execution of any new document, so as to
comply with the applicable laws, but so as to permit the recovery of the fullest amount
otherwise called for hereunder and thereunder; provided, however, if the Note has been paid
in full before the end of the stated term hereof, then Borrower and each Borrower-Related
Party and Lender agree that Lender shall, with reasonable promptness after Lender discovers
or is advised by Borrower that interest was received in an amount in excess of the Highest
Lawful Rate, either credit such excess interest against the Debt then owing by Borrower to
Lender and/or refund such excess interest to Borrower. Borrower and each Borrower-Related
Party hereby agrees that as a condition precedent to any claim seeking usury penalties
against Lender, Borrower will provide written notice to Lender, advising Lender in
reasonable detail of the nature and amount of the violation, and Lender shall have sixty
(60) days after receipt of such notice in which to correct such usury violation, if any, by
either refunding such excess interest to Borrower or crediting such excess interest against
the Debt then owing by Borrower to Lender. All sums contracted for, charged, taken, reserved
or received by Lender for the use, forbearance or detention of the Debt shall, to the extent
permitted by applicable law, be amortized, prorated, allocated or spread, using the
actuarial method, throughout the stated term of the Note (including any and all renewal and
extension periods) until payment in full so that the rate or amount of interest on account
of the Debt does not exceed the Highest Lawful Rate from time to time in effect and
applicable to the Debt for so long as the Debt is outstanding. In no event shall the
provisions of Chapter 346 of the Texas Finance Code (which regulates certain revolving
credit loan accounts and revolving triparty accounts) apply to this Note or any other part
of the Debt. Notwithstanding anything to the contrary contained herein or in any of the
other Loan Documents, it is not the intention of Lender to accelerate the maturity of any
interest that has not accrued at the time of such acceleration or to collect unearned
interest at the time of such acceleration. The terms and provisions of this paragraph shall
control and supersede every other term, covenant or provision contained herein, in any of
the other Loan Documents or in any other document or instrument pertaining to the Debt.

     (b) To the extent that Lender is relying on Chapter 303 of the Texas Finance Code to
determine the Highest Lawful Rate payable on the Note or any other part of the Debt, Lender
will utilize the weekly ceiling from time to time in effect as provided in such Chapter 303,
as amended. To the extent United States federal law permits Lender to contract for, charge,
take, receive or reserve a greater amount of interest than under Texas law, Lender will rely
on United States federal law instead of such Chapter 303 for the purpose of determining the
Highest Lawful Rate. Additionally, to the extent permitted by applicable law now or
hereafter in effect, Lender may, at its option and from time to time, utilize any other
method of establishing the Highest Lawful Rate under such Chapter 303 or under other
applicable law by giving notice, if required, to Borrower as provided by such applicable law
now or hereafter in effect.

27

 

     13. Indemnity; Release. Borrower and each Borrower-Related Party 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 the
Property.

The foregoing indemnifications shall apply whether or not such Liabilities and Costs are in any way
or to any extent owned 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 and each Borrower-Related Party) 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.

For good and valuable consideration set forth herein, including the promises, agreements,
covenants, representations and obligations set forth in this Note and the other Loan Documents,
Borrower and each Borrower-Related Party hereby releases and forever discharges, and covenants not
to sue or file any charges or claims against Lender for any and all existing or future claims,
demands and causes of action, in contract or in tort, at law or in equity, known or unknown,
pending or threatened, for all existing and future damages arising out of or in any way associated
with this Note and the other Loan Documents and the Loan made pursuant hereto and thereto.

     14. No Presumption. Borrower and each Borrower-Related Party represents and warrants
to Lender that they have read and fully understand the terms and provisions hereof, have had an
opportunity to review this Note and the other Loan Documents with legal counsel and have executed
this Note and the other Loan Documents based on their own judgment. If an ambiguity or question of
intent or interpretation arises, the Loan Documents will be construed as if drafted jointly by
Borrower and each Borrower-Related Party and Lender and no presumption or burden of proof will
arise favoring or disfavoring any party because of authorship of any provision of the Loan
Documents.

     15. Set-Off. Borrower hereby gives and confirms to Lender a right of set-off of all
moneys, securities and other property of Borrower (whether special, general or limited) and the
proceeds thereof, now or hereafter delivered to remain with or in transit in any manner to Lender,
its correspondents or its agents from or for Borrower, whether for safekeeping, custody, pledge,
transmission, collection or otherwise or coming into possession of Lender in any way, and also, of
all other liabilities and obligations now or hereafter owed by Borrower to Lender, contracted with
or acquired by Lender, whether joint, several, absolute, contingent, secured, unsecured, matured or
unmatured, hereby authorizing Lender at any time after an Event of Default has occurred and is
continuing, without prior notice, to apply such

28

 

balances, credits of claims or any part thereof, to
such liabilities in such amounts as it may select, whether contingent, unmatured or otherwise, and
whether any collateral security therefor is deemed adequate or not. The rights described herein
shall be in addition to any collateral security described in any separate agreement executed by
Borrower.

     16. No Third Party Beneficiaries. The benefits of this Note and the Loan Documents
will not inure to any third party. Notwithstanding anything contained in the Loan Documents or any
conduct or course of conduct by Borrower or any Borrower-Related Party or Lender, before or after
the date of this Note, this Note will not be construed as creating any rights, claims, or causes of
action against Lender, or any of its officers, directors, agents or employees, in favor of any
contractor, subcontractor, supplier of labor or materials, or any of their respective creditors, or
any other person or entity other than Borrower. Without limiting the generality of the foregoing,
Advances made to any Person other than Borrower (including, without limitation, any contractor,
subcontractor or supplier of labor or materials) will not be deemed recognition by Lender of any
third-party beneficiary status claimed by any such person or entity.

     17. Cumulative Remedies. All rights and remedies that Lender is afforded by reason of
the Loan Documents are separate and cumulative with respect to Borrower or any of them 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.

     18. Notice. Any notice, request or other communication required or permitted to be
given hereunder shall be given in writing by any of the following methods: (i) registered or
certified mail, (ii) facsimile, (iii) delivered personally by courier service, or (iv) delivered by
nationally recognized overnight delivery service; in each case, addressed to the respective parties
as follows:

	 	 	 

	If to Borrower:

	 	165 Howe, L.P.
	 

	 	1221 North I-35 East, Suite 200
	 

	 	Carrollton, Texas 75006
	 

	 	Facsimile No. (469) 892-7201
	 

	 	Attention: Mehrdad Moayedi
	 
	 	 
	If to a
Borrower-Related Party:

	 	CTMGT, LLC
	 

	 	Centamtar Terras, L.L.C.
	 

	 	Mehrdad Moayedi
	 

	 	1221 E. I-35
	 

	 	Carrollton, Texas 75006
	 

	 	Facsimile No.(469) 892-7201
	 

	 	Attention: Mehrdad Moayedi
	 
	 	 
	If to Lender:

	 	United Development Funding IV
	 

	 	1301 Municipal Way, Suite 200
	 

	 	Grapevine, Texas 76051
	 

	 	Facsimile No. (817) 835-0383
	 

	 	Attention: Ben Wissink

Each notice or other communication will be treated as effective and as having been given and
received (i) if sent by certified mail, or registered mail, three (3) Business Days after deposit
in a regularly maintained receptacle for deposit of United States mail, (ii) if sent by facsimile,
upon written or electronic confirmation of facsimile transfer, (iii) if delivered by courier, upon

29

 

written or electronic confirmation of delivery from such service, or (iv) if sent by
nationally-recognized overnight delivery service, upon written or electronic confirmation of
delivery from such service. Borrower’s or any Borrower Related party’s address for notice may be
changed at any time and from time to time, but only after thirty (30) days’ advance written notice
to Lender and shall be the most recent such address furnished in writing by them to Lender.
Lender’s address for notice may be changed at any time and from time to time, but only after
written notice to Borrower and shall be the most recent such address furnished in writing by Lender
to Borrower. Actual notice, however and from whomever given or received, shall always be effective
when received.

     19. 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.

     20. Choice of Law. Except to the extent that the validity or perfection of security
interests or remedies in respect of any particular collateral is governed by the laws of a
jurisdiction other than the state of Texas, this Note and the other Loan Documents shall be
construed in accordance with and governed by the substantive laws of the state of Texas, without
regard to its conflict of laws provisions.

     21. Jurisdiction; Venue. Borrower irrevocably agrees that any legal proceeding in
respect of this Note and the other Loan Documents shall be brought in the district courts of
Tarrant County, Texas or the United States District Court for the Northern District of Texas, Fort
Worth Division (the “Specified Courts”). Borrower hereby irrevocably submits to the nonexclusive
jurisdiction of the Specified Courts. Borrower hereby irrevocably waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have that the laying of venue of any
suit, action or proceeding brought in any such Specified Court has been brought in an inconvenient
forum. Borrower hereby irrevocably agrees to a transfer of all such proceedings to the Specified
Courts. Nothing herein shall affect the right of Lender to commence legal proceedings or otherwise
proceed against Borrower in any jurisdiction or to serve process in any manner permitted by
applicable law.

     22. 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.

     23. 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.

     24. 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 party, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which given.

     25. Binding Effect; Assignment. This Note and the other Loan Documents shall be
binding on Borrower and its successors and assigns, including, without limitation, any receiver,
trustee or debtor in possession of or for Borrower, and shall inure to the benefit of Lender and
its successors and assigns. Borrower shall not be entitled to transfer or assign their obligations
under 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

30

 

Documents are freely assignable and transferable by Lender
without the consent of Borrower. Should the status, composition, structure or name of Borrower
change, this Note and the other Loan Documents shall continue to be binding upon such Person and
also cover such Person under the new status composition, structure or name according to the terms
hereof and thereof.

     26. Time of the Essence. Time is of the essence in this Note and the Loan Documents.

     27. Captions; Number or Gender of Words. 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. 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.

     28. Further Assurances; Cooperation. Borrower and each Borrower-Related Party will at
any time and from time to time upon request of the Lender take or cause to be taken any action,
will execute, acknowledge, deliver or record any further documents, opinions, mortgages, security
agreements, financing statements, amendments to the Loan Documents or other instruments as Lender
in its reasonable discretion deems necessary or appropriate to carry out the purposes of the Loan
Documents and to preserve, protect and perfect the security interest intended to be created and
preserved in the Collateral.

     29. Joint and Several Liability. “Borrower” shall mean each co-borrower hereunder, or
any of them, if more than one. The obligations of said Borrower hereunder if more than one, shall
be joint and several. Suit may be brought against said Borrower, jointly and severally, and
against any one or more of them, or less than all, without impairing the rights of Lender against
the others of said Borrower; and Lender may compromise with any one of said Borrower for such sums
or sum as it may see fit and release such of said Borrower from all further liability to Lender for
such indebtedness without impairing the right of Lender to demand and collect the balance of such
indebtedness from others of said Borrower not so released.

     30. Waiver of Jury Trial, Punitive Damages, etc. Borrower and each Borrower-Related
Party hereby knowingly, voluntarily, intentionally and irrevocably (a) waives, to the maximum
extent not prohibited by law, any right Borrower and each Borrower-Related Party 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, (b) waives, to the maximum
extent not prohibited by law, any right Borrower and each Borrower-Related Party 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 make the Loan
to Borrower and to enter into the Loan Documents with Borrower and each Borrower-Related Party by,
among other things, the waivers and certifications contained in this Section. As used in this
Section, the term “Special Damages” means and includes special, consequential, exemplary or
punitive damages (regardless of how named).

     31. Acknowledgement and Consent to Pledge. Borrower and the Borrower-Related Parties
acknowledge that this Note is subject to a security interest and lien in favor of, and is pledged
as collateral to, Raley Holdings, LLC, which is a lender to United Development Funding IV. By
execution hereof, Borrower and the Borrower-Related Parties consent to such security interest, lien
and pledge.

31

 

     32. 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.]

32

 

     This Note has been executed on this the 19th day of April, 2010 by the undersigned Borrower,
to be effective for all purposes as of the Effective Date.

BORROWER:

165 HOWE, L.P.,

a Texas limited partnership

	 	 	 	 	 	 	 	 	 	 	 

	 	 	By:	 	Centamtar Terras, L.L.C., a Texas limited liability company	 	 
	 	 	Its:	 	General Partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	CTMGT, LLC, a Texas limited liability company	 	 
	 

	 	 	 	 	 	Sole Member and Manager of Centamtar Terras, L.L.C.	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Mehrdad Moayedi
 

	 	 
	 

	 	 	 	 	 	Name:
	 	Mehrdad Moayedi	 	 
	 

	 	 	 	 	 	Title:
	 	Sole Member and Manager of CTMGT, LLC	 	 

33

 

     This Note has been executed on this the 19th day of April, 2010 by the undersigned
Borrower-Related Parties, to be effective for all purposes as of the Effective Date.

BORROWER-RELATED PARTY:

CTMGT, LLC, a Texas limited liability company, hereby executes this Note for the purpose of
acknowledging and agreeing to the representations, warranties, covenants and agreements as same
relate to it, specifically in its capacity as a Guarantor and a Borrower-Related Party under this
Note.

CTMGT, LLC,

a Texas limited liability company

	 	 	 	 	 	 	 

	 

	 	By:
	 	/s/ Mehrdad Moayedi
	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Mehrdad Moayedi	 	 
	 

	 	Title:
	 	Sole Member and Manager of CTMGT, LLC	 	 

CENTAMTAR TERRAS, L.L.C., a Texas limited liability company, hereby executes this Note for the
purpose of acknowledging and agreeing to the representations, warranties, covenants and agreements
as same relate to it, specifically in its capacity as the General Partner of Borrower and a
Borrower-Related Party under this Note.

CENTAMTAR TERRAS, L.L.C.,

a Texas limited liability company

	 	 	 	 	 	 	 

	 

	 	By:
	 	CTMGT, LLC, a Texas limited liability company	 	 
	 

	 	 	 	Sole Member and Manager of Centamtar Terras, L.L.C.
	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Mehrdad Moayedi	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:
	 	Mehrdad Moayedi	 	 
	 

	 	Title:
	 	Sole Member and Manager of CTMGT, LLC	 	 

34

 

     This Note has been executed on this the 19th day of April, 2010 by the undersigned Lender, to
be effective for all purposes as of the Effective Date.

The terms of this Note are hereby accepted by Lender.

LENDER:

UNITED DEVELOPMENT FUNDING IV

a Maryland real estate investment trust

	 	 	 	 	 

	By:

	 	/s/ David Hanson
	 	 
	 

	 	 	 	 
	Name:

	 	David Hanson	 	 
	Its:

	 	Chief Operating Officer	 	 

35exv10w15

Exhibit 10.15

CONSTRUCTION LOAN AGREEMENT

     This Construction Loan Agreement is made and entered into effective as of this the
26th day of April, 2010 (the “Effective Date”) by and between UDF IV HOME FINANCE, L.P.,
a Delaware limited partnership (together with its successors and assigns, “Lender”), and CHELDAN
MM, L.L.C., a Texas limited liability company (“Borrower”).

RECITALS:

     A. Borrower has requested that Lender extend credit to Borrower as described in this
Agreement. Lender is willing to make such credit available to Borrower upon and subject to the
provisions, terms and conditions hereinafter set forth.

     B. Subject to and upon the terms and conditions of this Agreement, Lender has agreed to lend
to Borrower the amounts herein described for the purposes set forth below.

AGREEMENT:

     NOW, THEREFORE, in consideration of the premises, the covenants, representations, warranties
and agreements contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto hereby covenant and agree as
follows:

ARTICLE I

DEFINITIONS

     1.1 Certain Definitions. Certain capitalized terms which are defined in the text of
this Agreement shall have the respective meanings given to such terms herein. The following
initially capitalized or fully capitalized terms shall have the following meanings:

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

     “Advance” shall mean an advance by Lender under a Loan to or for the benefit of
Borrower including, without limitation, a Loan Advance or a Discretionary Advance.

     “Advance Conditions” has the meaning given to such term in Section 7.1.

     “Advance Request” means a request for Advance duly executed by a Principal Officer on
behalf of Borrower, appropriately completed and in the form of Exhibit “E” attached
hereto.

     “Affidavit of Commencement” has the meaning given to such term in Section 9.27.

     “Affidavit of Completion” has the meaning given to such term in Section 9.28.

     “Affiliate” shall mean an individual or legal entity that directly or indirectly,
through one or more intermediaries, controls or is controlled by, or is under common control
with, another Person. The term “Control” as utilized herein means the possession, directly
or indirectly, of the power to direct or cause direction of the management and policies of a
Person, whether through

 

 

management, ownership, by contract, or otherwise; provided, however, in
no event shall any Lender be deemed an Affiliate of Borrower.

     “Agreement” means this Construction Loan Agreement together with all exhibits and
schedules hereto, as it may be amended, modified, renewed, extended, increased, superseded,
or replaced from time to time.

     “Appraisal” means an appraisal of a Home prepared by a third party appraiser reasonably
approved by Lender, which is reasonably acceptable to Lender in form and substance, and
which includes all possible construction upgrades that Borrower intends to make available
for the Home.

     “Approved Budget” means a budget that has been agreed to and accepted by Lender for the
acquisition of the Lot and the construction, marketing, administration, carrying and sale of
the Home on such Lot. Each Approved Budget must be in form and content acceptable to Lender
in Lender’s sole and absolute discretion and can only be amended with the written consent of
Lender.

     “Approved Purposes” means the use by Borrower of a Loan to acquire Lots that are
located in Approved Subdivisions and the construction, marketing, administration, carrying
and sale of Homes thereon for the purpose of ultimate resale to third parties. Borrower may
not acquire a Loan for the purpose of buying a Lot for inventory.

     “Approved Sales Contract” means a bona fide, legally binding, enforceable contract for
the sale of a Project, between Borrower, as seller, and a third party unrelated to Borrower,
as buyer, with respect to which an earnest money deposit has been delivered to Borrower, the
Title Company or a reputable title company reasonably acceptable to Lender in the amount of
the lesser of (a) three percent (3%) of the sales price of the Home, and (b) Five Hundred
and No/100 Dollars ($500.00), and with respect to which a Homeowner Financing Approval
Letter has been issued.

     “Approved Subdivision” means a residential subdivision located in Texas in which
Borrower is actively engaged in the construction of single-family residences and which is
otherwise acceptable to Lender in all respects, as determined by Lender in its sole
discretion.

     “Assignment of Distributions” means that certain assignment of the Distributions of
Borrower, being executed and delivered to Lender by the Members of Borrower pursuant to the
requirements hereof, which Assignment of Distributions is effective automatically upon an
Event of Default.

     “Available Liquidity” means, collectively, (i) cash, currency, and credit balances in
Deposit Accounts, and (ii) Temporary Certificates of Deposit.

     “Base Rate” means the lesser of (a) thirteen percent (13.0%) per annum, accrued monthly
and compounded annually, or (b) the Highest Lawful Rate.

     “Borrower” means Cheldan MM, L.L.C., a Texas limited liability company.

     “Borrower-Related Parties” means, collectively, the Guarantors, the Managing Member,
the Members, and any other Person who becomes a guarantor of the Loans, a member of Borrower
or the managing member of Borrower.

2

 

     “CTMGT” means CTMGT, LLC, a Texas limited liability company.

     “CTMGT Event of Default” means any event of default occurring under the loan documents
evidencing a CTMGT Loan (after giving effect to any applicable notice and cure periods in
such loan documents).

     “CTMGT Loan” means a loan from a member of the UDF Group as the lender to CTMGT, and/or
any subsidiary or Affiliate of CTMGT, as the borrower(s).

     “Business Day” means any day other than a Saturday, Sunday, or other day on which
Lender is closed for business.

     “Claims” shall have the meaning given to such term in Section 12.2.

     “Closing Deliveries” has the meaning given to such term in Section 6.1.

     “Collateral” means, collectively, all property, assets and rights in which a lien,
security interest, assignment, pledge or other encumbrance in favor of Lender is or has been
granted or arises or has arisen or may hereafter be granted or arise, under or in connection
with any Loan Document or otherwise, to secure payment of all or any part of the Debt or
performance of the Obligations. Without limitation of the foregoing, the term “Collateral”
includes, without limitation, the Projects and all “Mortgaged Property” as such term is
defined and used in the Deeds of Trust.

     “Commitment” means the obligation of Lender, subject to the terms and conditions of
this Agreement and the Loan Documents, to make the Loans to Borrower in an amount not to
exceed at any one time, in the aggregate, the Maximum Commitment.

     “Company Certificate” means a certificate certifying the existence, good standing,
formation and organizational documents, and authorizing resolutions, of a Person that is an
entity.

     “Completion Survey” means a survey of the Project dated after the completion of the
Home showing that the Home and other improvements on the Lot do not encroach on, across, or
into any property line, easement, building setback line, septic tank field, or other
restricted area, in form and content reasonably acceptable to Lender.

     “Compliance Certificate” means Lender’s form of compliance certificate duly completed
and executed by an officer of Borrower acting in such capacity, relating to the covenants
contained in Section 9.39, in the form of Exhibit “F” attached hereto.

     “Construction Contracts” has the meaning given to such term in Section 10.1.

     “Covenant Breach” has the meaning given to such term in Section 11.1(c).

     “Debt” means all debt (principal, interest or other) evidenced by the Notes and all
debt (principal, interest or other) to Lender incurred under or evidenced by the other Loan
Documents. The Debt includes interest and other obligations accruing or arising after (a)
commencement of any case under any bankruptcy or similar laws by or against Borrower or any
Borrower-Related Party or (b) the obligations of Borrower or any Borrower-Related Party
shall cease to exist by operation of law or for any other reason. The Debt also includes
all reasonable attorneys’ fees and any other reasonable expenses incurred by Lender in
enforcing any of the Loan Documents.

3

 

     “Deed of Trust” shall mean each Master Deed of Trust, Assignment of Leases and Rents,
Security Agreement, and Fixture Filing and each Short Form Deed of Trust recorded or to be
recorded in the real property records of the appropriate county of the state of Texas,
naming Borrower as the grantor and Lender as the grantee and beneficiary thereunder,
granting Lender a security interest in and creating a Lien on and against all or any of the
Property or any part or parcel thereof, or any one or more Lot(s) included in all or any of
the Property, subject only to Permitted Exceptions and being superior in priority and in
payment over all other Liens, as each may be amended, modified, renewed, extended,
increased, superseded, or replaced from time to time.

     “Default Rate” means the lesser of (a) eighteen percent (18.0%) per annum, accrued
monthly and compounded annually, or (b) the Highest Lawful Rate.

     “Deposit Account” means a demand, time, savings, and passbook or like account with a
United States depository institution insured by the Federal Deposit Insurance Corporation.

     “Discretionary Advance” has the meaning given to such term in Section 3.9.

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

     “Distribution” means all proceeds, products, cash, securities, dividends, increases,
distributions and profits received from or on the partnership interests in Borrower or
distributable to the partners of Borrowers, including distributions or payments in partial
or complete liquidation or redemption, or as a result of reclassifications, readjustments,
reorganizations or changes in the capital structure of Borrower.

     “Effective Date” means the 26th day of April, 2010.

     “Environmental Indemnity Agreement” shall mean that certain Environmental Indemnity
Agreement to be executed by Borrower and Guarantor in favor of Lender, pursuant to which,
among other things, Borrower and Guarantor agree to indemnify Lender from environmental
liabilities associated with the Property, as it may be amended, modified, renewed, extended,
increased, superseded, or replaced from time to time.

     “Environmental Laws” means all statutes and ordinances of any Governmental Authority
having jurisdiction over all or any of the Property, in whole or in part, or any user or
occupant of all or any of the Property, in whole or in part, 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 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

4

 

Water Code, as
amended, and the Texas Health and Safety Code, as amended, and the regulations adopted and
publications promulgated pursuant thereto.

     “Equity Interests” shall mean, collectively, all management rights, membership
interests, capital stock, equity interests, options, warrants, convertible securities, and
all other similar rights thereto, and shall include any and all rights to receive dividends,
distributions, capital accounts, cash flow, profits, surplus, liquidation distributions or
proceeds, sums due or owing as distributions of cash or property, whether or not such
distributions are in the nature of profits, reimbursements, repayments, return of capital,
return on capital, or fees.

     “Event of Default” has the meaning given to such term in Section 11.1.

     “Extension” shall have the meaning given to such term in Section 3.12(a).

     “Financial Statement Certifications” means those certain certifications duly executed
and properly completed by the Borrower and the Guarantor attesting to the accuracy and
completeness of their financial statements, in the form of Exhibit “G” attached
hereto. .

     “Finished Lot” shall mean an unimproved (but fully developed) single-family residential
lot located in an Approved Subdivision having all necessary improvements, being eligible for
a housing building permit, and as to which the development work has been completed.

     “Foundation Survey” means prior to the foundation of a Home being poured, Borrower will
obtain a form set survey or other evidence reasonably acceptable to Lender, showing (i) the
location of the foundation form boards on the Lot, (ii) that the foundation form boards are
entirely within the property lines of the Lot, (iii) that the foundation form boards do not
encroach on, across, or into any easement, building setback line, septic tank field, or
other restricted area, (iv) that the foundation form boards are located in accordance with
the Plans and Specifications and the plot plan, (v) that the foundation form boards do not
violate any Legal Requirements, and (vi) no state of facts reasonably objectionable to
Lender.

     “Good Accounting Practice” shall mean such accounting practice as, in the opinion of
independent certified public accountants satisfactory to Lender, conforms at the time to
generally accepted accounting principles or, with the express prior written consent of
Lender in any applicable case, cash basis of accounting or the federal income tax basis of
accounting, consistently applied. Each accounting term not defined in this Agreement shall
have the meaning given to it under Good Accounting Practice.

     “Governmental Authority” shall mean the United States, the State of Texas, the counties
where any or all of the Property, in whole or in part, is located, the city, if any, where
any or all of the Property, in whole or in part, is located, the district where any or all
of the Property, in whole or in part, is located, the Texas Commission for Environmental
Quality, the Texas Water Development Board, the Texas Water Quality Board, the Department of
Housing and Urban Development, the Environmental Protection Agency, any political
subdivision of any of the foregoing and any agency, department, commission, board, bureau,
court or instrumentality of any of them which now or hereafter has jurisdiction over Lender,
Borrower, any Borrower-Related Party, or any part of the Property.

     “Guarantor” means Mehrdad Moayedi, an individual.

5

 

     “Guaranty” means, that certain Guaranty Agreement dated as of the Effective Date
executed by Guarantor in favor of Lender, as it may be amended, modified, renewed,
superseded, or replaced from time to time.

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

     “Home” means a single family residence constructed or to be constructed by Borrower
upon a Lot; provided however, no more than one residence may be constructed on each Lot. As
the context requires, the term “Home” includes the Lot upon which it is located.

     “Homeowner Financing Approval Letter” means an approval letter from a reliable third
party lender that is reasonably acceptable to Lender and which provides that the buyer under
the Approved Sales Contract is approved (subject only to reasonable, ordinary and customary
exceptions and conditions that are reasonably acceptable to Lender) for a mortgage loan to
acquire the Home upon completion of the Home in accordance with the Approved Sales Contract.

     “Indebtedness” shall mean and include (a) all items which in accordance with Good
Accounting Practice would be included on the liability side of a balance sheet on the date
as of which indebtedness is to be determined (excluding capital stock, surplus, surplus
reserves and deferred credits), (b) guaranties, endorsements and other contingent
obligations in respect of indebtedness of others, or any obligations to purchase or
otherwise acquire any such indebtedness of others, and (c) indebtedness secured by any
mortgage, pledge, security interest or lien existing on property owned subject to or
burdened by such mortgage, pledge, security interest or lien whether or not the indebtedness
secured thereby shall have been assumed; provided, however, that such term shall not mean or
include any indebtedness for which monies sufficient to fully pay and discharge such
indebtedness (either on its stated final maturity date or on such earlier date as such
indebtedness may be duly called for redemption and payment) are on deposit with a
depositary, agency or trustee in trust for the payment of such indebtedness.

     “Initial Loan Closing” means the first Loan Closing occurring on or after the Effective
Date.

     “Inventory Reports” has the meaning given to such term in Section 9.36.

     “Legal Requirements” means any law, ordinance, order, rule or regulation of a
Governmental Authority and any requirements, terms or conditions contained in any
restrictions or restrictive covenants affecting a Lot.

     “Lender” has the meaning given to such term in the introductory paragraph of this
Agreement.

     “Lender Representatives” has the meaning given to such term in Section 9.13.

     “Lender’s Inspector” means an inspector selected by Lender, in Lender’s sole
discretion.

6

 

     “Liabilities and Costs” has the meaning given to such term in Section 12.2.

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

     “Loan” and “Loans” have the meanings given to such terms in Section 3.1.

     “Loan Administration Fee” shall mean a $250 fee charged by the Loan Servicer in
consideration of administrative costs and expenses incurred by it in connection with each
Loan Closing.

     “Loan Advance” means any full or partial advance of a Loan made by Lender to or for the
benefit of Borrower.

     “Loan Closing” means the closing of a Loan.

     “Loan Conditions” has the meaning given to such term in Section 3.5.

     “Loan Documents” means, collectively, together with all exhibits and schedules thereto:
this Agreement, the Notes, the Guaranty, the Deeds of Trust, the Environmental Indemnity
Agreement, the Assignment of Distributions, all Officer’s Certificates, all Loan Requests,
all Advance Requests, the error and omissions agreement, all IRS tax disclosure forms, the
Company Certificates and all other documents, instruments, agreements, assignments and
certificates relating thereto, including, without limitation, any and all loan or credit
agreements, promissory note, deeds of trust, mortgages, pledge agreements, financing
statements, security agreements, assignments of rents, assignments of leases, assignments of
contracts, environmental indemnities, guaranties, contractor’s consent agreements, lender’s
title insurance policies, opinions of counsel, evidences of authorization or incumbency,
escrow instructions, and architect’s and/or engineer’s consent agreements, letters of
credit, each of which is to be executed (and acknowledged where applicable) by Borrower, the
Borrower-Related Parties and/or Lender (as and where applicable) in connection with Lender
making the Loan to Borrower, as the same may be amended, modified, renewed, superseded, or
replaced from time to time.

     “Loan Expenses” has the meaning given to such term in Section 2.1.

     “Loan Maturity Date” means, for each Loan, the date that is nine (9) months after the
date that the Loan closes; provided, however, that if an Extension is granted by Lender with
respect to such Loan, the Loan Maturity Date for such Loan shall be the ninetieth
(90th) day following the original Loan Maturity Date for such Loan. The Lender’s
records of the date of Loan Closing for each Loan and the Loan Maturity Date for such Loan
shall be conclusive evidence of the date of such Loan Closing and the Loan Maturity Date for
such Loan, absent manifest error.

     “Loan Quarter” means each quarterly period during the Term (prorated for partial
quarters) ending September 30, December 31, March 31, or June 30.

     “Loan Request” means a request for a Loan duly executed by a Principal Officer on
behalf of Borrower, appropriately completed and in the form of Exhibit “D” attached
hereto.

7

 

     “Loan Servicer” means UMTH Land Development, L.P., a Delaware limited partnership.

     “Lot” means a Finished Lot in an Approved Subdivision to be used by Borrower for
Approved Purposes and that is otherwise eligible for funding under a Loan as provided in
this Agreement.

     “Management Fee” shall mean an annual fee paid by Borrower to the Managing Member,
which is equal to three percent (3.0%) of the gross revenues generated from the sale of each
Home, (i) $2,000.00 of which is payable to the Managing Member at the closing of the Loan
for such Home, and (ii) the unpaid remaining balance of which is payable to the Managing
Member after the payment to Lender of all Loan principal advanced for such Home, together
with accrued interest thereon; provided, that no Management Fee shall be payable upon the
occurrence and during the continuance of an Event of Default.

     “Managing Member” means Cheldan Enterprises, L.P., a Texas limited partnership, and
any permitted successor managing member(s) of Borrower.

     “Maximum Commitment” means the aggregate amount of up to U.S. Six Million and NO/100
Dollars ($6,000,000.00).

     “Member” means, collectively, 2M Holdings, L.P., a Delaware limited partnership and
Cheldan Enterprises, L.P., a Texas limited partnership.

     “Member Loans” means, collectively, loans from members or the managing member of
Borrower, or their Affiliates, made in accordance with the terms of the Organizational
Agreement of Borrower, which are subordinate both in payment and priority of Liens to the
Loan and the Loan Documents pursuant to a subordination agreement in favor of Lender binding
upon such Person.

     “Model Home” means a single family residence built or to be built by Borrower in an
Approved Subdivision for the purpose of marketing Borrower’s home inventory to prospective
purchasers and not for immediate sale, whether or not the construction thereof is financed
by Lender. For Model Homes financed by Lender hereunder, the term “Model Home” includes the
Lot upon which such Home is located.

     “New Lender” has the meaning given to such term in Section 9.4.

     “New Loan Documents” has the meaning given to such term in Section 9.4.

     “Note” means each Secured Promissory Note executed by Borrower to evidence a Loan, as
it may be amended, modified, renewed, extended, increased, superseded, or replaced from time
to time. The form of each Note shall be in the form attached hereto as Exhibit “A”.

     “Obligations” means any and all of the covenants, conditions, warranties,
representations and other obligations (other than to repay the Debt) made or undertaken by
Borrower or any Borrower-Related Party to Lender as set forth in the Loan Documents.

     “Officer’s Certificate” means a certificate executed by a Principal Officer certifying,
among other things, that (a) no Event of Default has occurred and is continuing under this
Agreement, (b) all representations and warranties made by Borrower and the Borrower-Related

8

 

Parties, respectively, in this Agreement and the other Loan Documents are true and correct
in all respects, and (c) Borrower and the Borrower-Related Parties have complied with and
performed, in all material respects, all covenants, conditions and agreements which are then
required by this Agreement and the other Loan Documents to have been complied with or
performed.

     “Operating Expenses” means the Borrower’s monthly recurring operating costs and
expenses (whether expensed or capitalized) including, without limitation, salaries, rent,
leased equipment, and other fixed costs which cannot be terminated by Borrower within sixty
(60) days. Two months of Operating Expenses have been determined by Borrower to be
$125,000.

     “Organizational Agreement” shall mean (a) in respect of a corporation, the Articles of
Incorporation certified to a current date by the Secretary of State in which such
corporation is incorporated and the Bylaws of a corporation certified to a current date as
true and correct by the secretary or assistant secretary of a corporation; (b) in respect of
a general partnership, a partnership agreement; (c) in respect of a joint venture, a joint
venture agreement; (d) in respect of a limited partnership, a partnership agreement and the
certificate of limited partnership certified to a current date by an appropriate
Governmental Authority of the state in which the limited partnership is organized; (e) in
respect of a trust, a trust agreement; and (f) in respect of a limited liability company,
the certificate of organization certified to a current date by the Secretary of State in
which such limited liability company is organized and the regulations of a limited liability
company certified to a current date as true and correct by the manager of a limited
liability company; and any and all future modifications thereof which are consented to by
Lender.

     “Origination Fee” means, for each Loan funded by Lender hereunder, a fee in an amount
equal to one-half of one percent (0.5%) of the Loan amount, to be paid to the Loan Servicer
at the Loan Closing for such Loan.

     “Other Contracts” has the meaning given to such term in Section 10.3.

     “Other Homes” has the meaning given to such term in Section 9.36.

     “Partial Release Amount” means the amount that must be paid to Lender for the release
of Lender’s Liens against a Lot as stated in the Deed of Trust for such Lot.

“

     “Permitted Exceptions” has the meaning given to such term in each Deed of Trust.

     “Person” means a corporation, limited liability company, general partnership, limited
partnership, trust, or other entity, or any individual.

     “Plans and Specifications” means the plans and specifications for each Home prepared by
Borrower or Borrower’s architect that have been approved by Lender and all applicable
Governmental Authorities and all amendments and modifications to the Plans and
Specifications that are subsequently approved in writing by Lender and applicable
Governmental Authorities.

     “Pre-Sold Home” means a Home which is the subject of an Approved Sales Contract.

     “Principal Officer” means Mehrdad Moayedi and Richard Nunnally.

     “Project” means Borrower’s acquisition of a Lot and construction of a Home thereon,
financed in part by a Loan.

9

 

     “Projected Cost Shortfall” means the amount of equity, if any, required to be funded by
Borrower towards the cost of a Project to fully complete the Project based on the Budget,
after taking into consideration the amount that Lender will fund towards the Project
calculated in accordance with Section 3.3 subject to the terms and conditions of
this Agreement.

     “Property” means all “Mortgaged Property” as such term is defined and used in the Deeds
of Trust.

     “Purchase Contracts” means all of Borrower’s right, title, and interest in, to, and
under (a) all contracts for the purchase and sale of any portion of a Lot or Home secured by
the Loans (including without limitation, Approved Sales Contracts), whether such Purchase
Contracts are now or at any time hereafter existing, (b) all amendments, renewals, and
extensions of the Purchase Contracts, (c) all payments, earnings, income, and profits
arising from the sale of any part of a Lot or Home or from the Purchase Contracts and all
other sums due or to become due pursuant to the Purchase Contracts, and (d) all earnest
money, security, letters of credit, or other deposits under any of the Purchase Contracts.

     “Reimbursement Contract” has the meaning given to such term in Section 9.23.

     “Released Party” has the meaning given to such term in Section 9.18.

     “Renewal” has the meaning given to such term in Section 3.13(a).

     “Required Documents” means all documents described on Exhibit “C”, all of which
must be satisfactory to Lender in form and substance (however, to the extent that a Required
Document has been previously submitted to Lender in connection with a prior Loan or Advance
and such Required Document has not been subsequently modified, supplemented, or replaced,
then re-submittal of such Required Document is not required absent Lender’s specific request
therefor).

     “Retainage” means an amount equal to the aggregate of all amounts, if any, retained or
withheld by Borrower from its contractors pursuant to mechanic’s and materialman’s liens
laws or any similar laws of Texas.

     “Revolving Principal Balance” means the aggregate unpaid principal balance of the
outstanding Notes at the time in question.

     “Short Form Deed of Trust” means, for each Loan financed by Lender hereunder, a Short
Form Deed of Trust executed by Borrower, as the grantor thereunder for the benefit of
Lender, as the beneficiary thereunder, incorporating the terms and conditions of the
Lender’s Master Deed of Trust, Assignment of Leases and Rents, Security Agreement, and
Fixture Filing, which Short Form Deed of Trust is to be recorded in the Official Public
Records of the county in which the Lot is located at the closing of the related Loan. The
form of each Short Form Deed of Trust shall be in substantially the form attached hereto as
Exhibit “B”.

     “Spec Home” means a single family residence constructed or to be constructed in an
Approved Subdivision which is not the subject of an Approved Sales Contract, whether or not
the construction thereof is funded by Lender, including a Model Home. With respect to Spec
Homes financed hereunder, the term “Spec Home” includes the Lot upon which such Home is
located.

10

 

     “Special Damages” has the meaning given to such term in Section 12.18.

     “Subdivision” shall mean all phases of a subdivision or addition in which a Project is
located.

     “Tangible Net Worth” means (x) the gross book value of Borrower’s assets determined in
accordance with Good Accounting Practice less (y) total liabilities determined in
accordance with Good Accounting Practice and including, without limitation, accrued and
deferred income taxes, and any reserves against assets.

     “Temporary Certificates of Deposit” shall mean certificates of deposit that (a) are
issued by a United States depository institution insured by the Federal Deposit Insurance
Corporation and (b) mature within sixty (60) days from the date of issuance thereof.

     “Term” means the period of time from the Effective Date through and including the one
(1) year anniversary of the Effective Date.

     “Termination Date” means April 26, 2011.

     “Title Binder” shall mean each Mortgagee Title Policy Binder on Interim Construction
Loan and all endorsements thereto requested by Lender, in the total amount of the applicable
Loan, issued in favor of Lender and naming Lender and its assigns as the proposed insured
mortgagee by the Title Company and committing to insure that title to the Property described
in the applicable Deed of Trust is vested in Borrower, free and clear of any Lien,
objection, exception or requirement other than the Permitted Exceptions, and that such Deed
of Trust creates a first lien on the Property, subject only to Permitted Exceptions and
committing to issue such endorsements as Lender may require, along with all extensions
required to keep such Title Binder in full force and effect, and if Lender believes at any
time there is or will be a dispute concerning the validity or priority of Lender’s Lien on
any Lot or Home, a mortgagee title insurance policy reasonably required by Lender.

     “Title Commitment” means a commitment binding upon the Title Company to issue a Title
Binder to Lender meeting Lender’s requirements with respect thereto.

     “Title Company” means Sendera Title Company or any other title company acceptable to
Lender in its sole discretion.

     “UDF Group” means, collectively, Lender, United Development Funding, L.P., a Delaware
limited partnership, United Development Funding III, L.P., a Delaware limited partnership,
United Development Funding Land Opportunity Fund, L.P., a Delaware limited partnerships,
United Mortgage Trust, Lender, and their respective current and future Affiliates.

ARTICLE II

LOAN EXPENSES, FEES

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

11

 

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

     (b) Lender’s evaluating, monitoring, administering and protecting the Collateral or
employing others to do so or to perform due diligence for Lender with respect thereto; and

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

     2.2 Origination Fee. For each Loan funded by Lender hereunder, Borrower agrees to pay
the Origination Fee for such Loan to the Loan Servicer at on or prior to the Loan Closing for such
Loan. The Origination Fee for each Loan is fully earned and nonrefundable at the Loan Closing for
such Loan.

     2.3 Loan Administration Fee. Borrower agrees to pay a Loan Administration Fee to the
Loan Servicer at the Closing of each Loan. The Loan Administration Fee for each Loan is fully
earned at the Loan Closing. Upon Borrower’s request, the Loan Administration Fee for the
applicable Loan may be funded by Lender under the Loan at the Loan Closing and upon disbursement,
such amount shall automatically constitute principal outstanding under the Note evidencing such
Loan.

     2.4 Usury Savings Clause Applies. Borrower and the Borrower-Related Parties agree
that Lender has provided, and shall provide, separate and distinct consideration to Borrower for
the Loan Expenses, and any other fees, expenses or charges provided for in this Agreement or any
Loan Document and that the Loan Expenses and the Loan Administration Fee represent bona fide, third
party fees and expenses. Borrower, the Borrower-Related Parties and Lender further agree that the
Loan Expenses, the Loan Administration Fee and all other fees, expenses and charges provided for in
this Agreement or any Loan Document 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 Agreement and the other Loan Documents to the
contrary, if any Loan Expenses, Loan Administration Fees or other fees, expenses or charges
provided for in this Agreement or any Loan Document or charged or chargeable to Borrower are
determined to constitute interest that, when added to the interest charged under the Notes, would
cause the aggregate interest charged under the Notes to exceed the Highest Lawful Rate, then
Section 12.1 of this Agreement shall automatically apply to reduce the interest charged
under the Notes so as not to exceed the Highest Lawful Rate.

12

 

     2.5 Advance of Fees, Expenses and Charges. Loan Expenses, Loan Administration Fees
and other fees, expenses or charges may be advanced under a Loan if requested by Borrower and
approved by Lender, as determined by Lender in its sole discretion.

ARTICLE III

LOANS

     3.1 Loans. Subject to and upon the terms, covenants, and conditions of this
Agreement, Lender agrees to make loans (hereinafter called, individually, a “Loan” and,
collectively, the “Loans”) to Borrower prior to the Termination Date for Approved Purposes in
connection with one or more Projects in an aggregate principal amount at any one time outstanding
up to but not exceeding the Maximum Commitment. Within the limit of the Maximum Commitment,
Borrower may borrow, repay, and reborrow at any time and from time to time from the Effective Date
to the earlier of (a) the Termination Date or (b) the termination of Lender’s Commitment hereunder.
NOTWITHSTANDING ANY PROVISION TO THE CONTRARY IN THE LOAN DOCUMENTS, ALL LOANS SHALL BE MADE ONLY
AT THE SOLE DISCRETION OF LENDER AND LENDER SHALL NOT BE OBLIGATED TO PROVIDE ANY PARTICULAR LOAN
AND/OR ACCOMMODATE ANY RENEWAL AND EXTENSION REQUEST RELATING TO ANY LOAN.

     3.2 Notes. Each Loan shall be evidenced by, and be repayable in accordance with, a
separate Note executed and delivered by Borrower to Lender at the Loan Closing for such Loan. Each
Note shall be issued and dated on a date on or after the Effective Date but before the Termination
Date and shall mature on or before nine (9) months from the date of such Note; provided, however,
that if an Extension is granted by Lender with respect to such Note, the Loan Maturity Date for
such Note shall be the ninetieth (90th) day following the original Loan Maturity Date for such
Note. Notwithstanding the termination of this Agreement, subject to the terms and provisions of
this Agreement, Lender will fund Advances under the Notes that do not mature until after the
Termination Date.

     3.3 Amount of Loan; Appraisals; Approved Subdivisions.

     (a) If Lender approves a Loan Request, Lender shall advance to Borrower, or for
Borrower’s benefit, the lesser of (i) eighty-five percent (85%) of the value of the
completed Projects described in the Loan Request, as determined by Lender in its sole
discretion, which value may be equal to or less than, but shall not exceed, the appraised
value of such completed Projects, in which event Borrower shall pay the Projected Cost
Shortfall, if any, towards the cost of the Projects at or prior to the first Loan Advance
after the Loan Closing, (ii) eighty-five percent (85%) of the sales price of the Projects as
defined in the Approved Sales Contract relating to such Projects, in which event Borrower
shall pay the Projected Cost Shortfall, if any, towards the cost of the Projects at or prior
to the first Loan Advance at the Loan Closing, or (iii) one hundred percent (100%) of the
cost of the Project set forth in the Approved Budget; provided, however, that the Revolving
Principal Balance shall not exceed the Maximum Commitment at any time. For example only and
not necessarily the numbers to be used in real transactions consummated hereunder: if a Home
appraises for $100,000 and Lender determines the value of the completed Project to be
$100,000, the sales price of the Project as defined in the Approved Sales Contract is
$100,000, and the cost of the Project as set forth in the Approved Budget is $90,000, then
(i) the maximum amount that Lender will fund towards the Project is $85,000, and (ii) the
Projected Cost Shortfall required to be funded by Borrower is $5,0000.

     (b) In each Approved Subdivision funded by Lender, Borrower shall obtain an Appraisal
for the Homes to be built in the Approved Subdivision based on the Plans and

13

 

Specifications of the Homes to be build in the Approved Subdivision that itemizes the
various components of upgrades to the Homes. An Appraisal of a particular Home to be
constructed in an Approved Subdivision shall be used as the Appraisal for other Homes in the
same Approved Subdivision that are to be built based on the same Plans and Specifications
used to construct the Home that was appraised; provided, however, such Appraisal shall be no
more than twelve (12) months old at the time a Loan is made to Borrower, otherwise a new
Appraisal shall be made for the type of Home in question. Notwithstanding the foregoing, a
new Appraisal for a Project may be required sooner than twelve (12) months in Lender’s sole
discretion. Such new Appraisal shall be at Borrower’s cost pursuant to Section
2.1(c).

     (c) Borrower may submit a residential subdivision to Lender for pre-approval as an
Approved Subdivision.

     3.4 Approval of Loans. Borrower shall provide to Lender a Loan Request for each
proposed Loan. Lender will not consider Loan Requests for principal amounts less than $75,000. In
connection with each such Loan Request, Borrower shall provide Lender with the Required Documents,
all of which must be satisfactory in form and content to Lender. The Loan Request will not be
considered by Lender unless and until the Loan Request and all Required Documents are submitted to
Lender. Loan Requests will be considered no more often than once per month. Each Loan Request and
all Required Documents must be received by Lender in order for the proposed Loan to be considered
for approval. Lender shall have ten (10) days (or the next Business Day following the tenth day,
if such date is not a Business Day) following the date that the fully completed Loan Request and
all Required Documents are delivered to Lender to determine whether Lender will approve or
disapprove the proposed Loan. Each proposed Loan may be approved or disapproved by Lender in its
sole discretion, for any reason or for no reason. Lender will notify Borrower as to whether the
proposed Loan is approved or disapproved.

     3.5 Conditions for Each Loan. No Loan shall be approved by Lender unless each of the
following conditions (“Loan Conditions”) is satisfied:

     (a) the representations and warranties made in this Agreement and the other Loan
Documents by Borrower and the Borrower-Related Parties and in all certificates and other
documents delivered pursuant thereto are true and correct at and as of the time the Loan is
to be made;

     (b) on the date of, and upon receipt of, the Loan, no Event of Default, and no event
which, with the lapse of time or notice or both, could become an Event of Default, shall
have occurred and be continuing;

     (c) the Loan will not contravene any applicable Governmental Requirement;

     (d) Lender has received a Loan Request for the Loan, as well as all Required Documents
in such form as Lender may reasonably request, and Lender has approved the Loan Request in
Lender’s sole discretion;

     (e) The Revolving Principal Balance prior to such Loan plus the amount of the requested
Loan will not exceed the Maximum Commitment in effect on the date of the requested Loan;

     (f) Lender has received evidence satisfactory to Lender that the Liens created by the
Loan Documents are, collectively, first and prior as to all of the Collateral;

14

 

     (g) Lender has received evidence satisfactory to Lender that Borrower’s equity
contribution to the Project as required by the Lender has been made or will be made
simultaneous with the subject Loan;

     (h) All proceeds of previous Loans shall have been spent or used only for Approved
Purposes;

     (i) The proceeds of the Loan shall not be used to build Spec Homes or Model Homes that
would violate the limitation on number of Spec Homes and Model Homes in Section 3.6;
and

     (j) Borrower has paid Lender all Loan Expenses and other fees, charges and expenses
required to be paid by Borrower under the Loan Documents.

     3.6 Limitations on Number of Spec Homes and Model Homes. Notwithstanding whether Loan
proceeds are used to acquire or construct a Spec Home, the number of Spec Homes that are not Model
Homes (whether or not the construction thereof is financed by Lender) owned by Borrower in a
particular section, division, phase or other portion of an Approved Subdivision (as determined by
Lender) shall not exceed five (5). In addition, notwithstanding whether Loan proceeds are used to
acquire or construct a Model Home, the number of Model Homes (whether or not the construction
thereof is financed by Lender) owned by Borrower in a particular section, division, phase or other
portion of an Approved Subdivision (as determined by Lender) shall not exceed two (2). Borrower
further agrees that if a Spec Home is financed by Lender hereunder and purchased pursuant to an
Approved Sales Contract, then upon delivery to Lender of the Approved Sales Contract and such other
supporting documents and evidence satisfactory to Lender in its sole discretion, such Home shall no
longer be designated as a Spec Home and shall instead be designated as a standard Home. Borrower
further agrees that if any Approved Sales Contract with respect to a Project is terminated for any
reason or otherwise ceases to be a valid and binding obligation of the parties thereto for any
reason, then Borrower shall immediately inform Lender of such fact in writing and such Project
shall be deemed to be a Spec Home unless and until such Project becomes subject to a subsequent
Approved Sales Contract and Borrower has delivered to Lender the Approved Sales Contract and such
other supporting documents and evidence reasonably required by Lender.

     3.7 Advances. After a Loan is approved, Borrower shall apply for an Advance under
such Loan by providing Lender with an Advance Request under such Loan. Advance Requests will be
considered no more often than once per month. Each Advance Request and all required attachments
must be received by Lender by the fifteenth (15th) day of the month in order for the
proposed Advance to be considered for funding in that month. Provided that Borrower has fully
complied with all Advance Conditions required by Section 7.1 of this Agreement to Lender’s
satisfaction, Lender will fund the applicable Advance Request by the last day of the month in which
the Advance was requested or as soon thereafter as is reasonably practical; provided, however, that
if the Advance Request and all required attachments were not timely delivered to Lender on or
before the 15th of the month, then Lender may, in its sole discretion, fund the Advance
in the following month. At Lender’s option, all or any Advances shall be made by and through the
Title Company.

     3.8 No Obligation. Lender has no obligation to make a Loan Advance to Borrower under a
Loan until such time as such Loan is approved by Lender, in its sole and absolute discretion,
pursuant to the terms of this Agreement. Notwithstanding any provision to the contrary in any Loan
Document, once a Loan has been approved, Lender shall have no obligation to make any Advance under
any Loan, unless and until Borrower has fully complied with all Advance Conditions required by
Section 7.1 of this Agreement to Lender’s satisfaction.

15

 

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

     3.10 Maximum Commitment. Should the unpaid Revolving Principal Balance at any time
exceed the Maximum Commitment, Lender’s obligation to fund any Advances shall immediately cease.
After Lender notifies Borrower in writing of the deficiency, Borrower shall, within ten (10)
Business Days from and after the giving of such notice, prepay the Debt in an amount sufficient to
reduce the Revolving Principal Balance to an amount equal to or less than the Maximum Commitment.

     3.11 Termination Date. No Loan Requests will be considered by Lender after the
Termination Date.

     3.12. Extension of Notes.

     (a) Extension Request. Provided that no Event of Default has occurred (except
only for an Event of Default that has been cured to Lender’s satisfaction as confirmed by
Lender’s execution of a written agreement specifically acknowledging and describing the
Event of Default so cured, or for an Event of Default that has been waived by Lender as
confirmed by Lender’s execution of a written agreement specifically acknowledging and
describing the Event of Default so waived), upon satisfaction of the conditions precedent
set forth in Section 3.12(b) below, with respect to each Note issued by Borrower
under this Agreement, Lender agrees to a one-time extension of the Loan Maturity Date for
such Note for a period of ninety (90) days (the “Extension”) so that, if the Extension is
granted with respect to a Note, the Loan Maturity Date for such Note would be extended to,
and such Note shall become due and payable in full on, the ninetieth (90th) day following
the original Loan Maturity Date for such Note.

     (b) Conditions Precedent to Extension. Borrower shall not be entitled to an
Extension of the Loan Maturity Date for any Note unless Borrower and the Borrower-Related
Parties have complied in all respects with each of the following to Lender’s satisfaction
with respect to the Note for which the Extension is requested:

     (i) Borrower shall have executed and delivered to Lender a written request for
an Extension of such Note describing the reason for the request, the status of the
construction of the Home and the status of any sales contract for the Home;

     (ii) Borrower shall have paid an extension fee to Lender in an amount equal to
one quarter of one percent (0.25%) of the principal amount of such Note;

16

 

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

     (iv) on and as of the date of the Extension, the Principal Officer shall have
executed and delivered to Lender an Officer’s Certificate dated the Extension date,
certifying all matters in the Officer’s Certificate to be true and correct in all
respects;

     (v) on and as of the date of the Extension, all of the Loan Documents shall be
valid, enforceable and in full force and effect;

     (vi) on and as of the date of any such Extension, all Loan Expenses and any
other fees, charges and expenses owed under any of the Loan Documents shall have
been paid in full;

     (vii) on and as of the date of the Extension, Lender’s security interests in
all Collateral must be duly perfected and in the Lien position stated therein; and

     (viii) Borrower and the Borrower-Related Parties shall have complied with each
other reasonable request of Lender made in connection with the Extension.

     3.13. Renewal.

     (a) Renewal Request. Provided that no Event of Default has occurred (except
only for an Event of Default that has been cured to Lender’s satisfaction as confirmed by
Lender’s execution of a written agreement specifically acknowledging and describing the
Event of Default so cured, or for an Event of Default that has been waived by Lender as
confirmed by Lender’s execution of a written agreement specifically acknowledging and
describing the Event of Default so waived), upon satisfaction of the conditions precedent
set forth in Section 3.13(b) below, Lender agrees to a one-time, twelve (12) month
renewal and extension of the Termination Date (the “Renewal”) so that, if the Renewal is
granted, the Termination Date would be extended to, the second (2nd) anniversary
of the Effective Date.

     (b) Conditions Precedent to Renewal. Borrower shall not be entitled to a
Renewal of the Termination Date unless Borrower and the Borrower-Related Parties have
complied in all respects with each of the following to Lender’s satisfaction:

     (i) Borrower shall have executed and delivered to Lender a written request for
the Renewal;

     (ii) RESERVED;

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

17

 

     (iv) on and as of the date of the Renewal, the Principal Officer shall have
executed and delivered to Lender an Officer’s Certificate dated the Extension date,
certifying all matters in the Officer’s Certificate to be true and correct in all
respects;

     (v) on and as of the date of the Renewal, all of the Loan Documents shall be
valid, enforceable and in full force and effect;

     (vi) on and as of the date of any such Renewal, all Loan Expenses and any other
fees, charges and expenses owed under any of the Loan Documents shall have been paid
in full;

     (vii) on and as of the date of the Renewal, Lender’s security interests in all
Collateral must be duly perfected and in the Lien position stated therein; and

     (viii) Borrower and the Borrower-Related Parties shall have complied with each other
reasonable request of Lender made in connection with the Renewal.

ARTICLE IV

INTEREST; LOAN PAYMENTS

     4.1 Interest Rate. Unless the Default Rate shall apply, interest shall accrue on the
principal balance from day to day outstanding under each Loan at a rate equal to the Base Rate.
Interest on the outstanding principal amount of each Loan shall be computed on the basis of a three
hundred sixty-five (365) day year and shall accrue on the actual number of days elapsed for any
whole or partial month in which interest is being calculated. Upon the occurrence and during the
continuation of an Event of Default, the outstanding principal amount of each Loan shall, at
Lender’s option, automatically and without the necessity of notice to Borrower, bear interest from
the date of such Event of Default at the Default Rate, unless and until all delinquent amounts are
paid and all Events of Default have been cured to Lender’s satisfaction as confirmed by Lender’s
execution of a written agreement specifically acknowledging and describing the Event of Default so
cured, and/or waived by Lender as confirmed by Lender’s execution of a written agreement
specifically acknowledging and describing the Event of Default so waived.

     4.2 Interest and Principal Payments. Except earlier upon any acceleration of the
Notes, the Loans shall be due and payable as follows:

     (a) on a monthly basis, Borrower promises to pay to Lender, Accrued Interest Payments
calculated on the outstanding principal balance of each Loan, which are due and payable
beginning on the last day of the month of the Loan Closing for such Loan, and continuing
monthly thereafter on the last day of each month for so long as such Loan is outstanding;

     (b) in addition to the payments required by the provisions of clause (a) above,
concurrently with each Disposition of one or more Project(s), Borrower promises to pay
Lender, the Partial Release Amount for the Project(s) released from Lender’s Lien thereon,
which is due and payable prior to Lender providing to Borrower (or releasing from escrow
with the Title Company) its partial release of Lien on such Project(s);

     (c) in addition to the payments required by the provisions of clauses (a) and (b)
above, for each Loan funded by Lender hereunder, Borrower promises to pay to Lender, the
full outstanding principal amount of such Loan and all accrued but unpaid interest thereon
on or prior

18

 

to the earlier of (i) the Loan Maturity Date for such Loan, or (ii) if an Event of Default
occurs (after the running of any required notice and cure periods, but only if applicable to
the Event of Default in question), the date such Loan is declared by Lender to be
immediately due and payable.

     4.3 Order of Application. Except as otherwise provided in the Loan Documents, all
payments and prepayments of the Debt shall be applied to the Debt in the following order, any
instructions from Borrower to the contrary notwithstanding: (a) to Loan Expenses for which Lender
shall not have been reimbursed under the Loan Documents, (b) to all indemnified amounts due under
the Loan Documents; (c) to fees and charges (other than Loan Expenses) then owed Lender under the
Loan Documents, including, without limitation, including, without limitation, Loan Administration
Fees; (d) to accrued interest on the portion of the Indebtedness being paid or prepaid; (e) to the
portion of the principal being paid or prepaid; (f) to the remaining accrued interest on the Debt;
and (g) to the remaining principal of the Debt. Notwithstanding the foregoing sentence, if any
Event of Default occurs and is continuing, Lender shall have the right to apply payments as Lender
determines in its sole discretion.

     4.4 Payments. All amounts are payable to Lender in lawful money of the United States
of America at the address for Lender provided in or pursuant to Section 12.7 of this
Agreement. Payments shall be made in lawful money of the United States, without set-off, deduction
or counterclaim. Under no circumstance may Borrower offset any amount owing by Borrower to Lender
with an amount owed by Lender to Borrower under any arrangement. All payments shall be made in
cash or cash equivalents in 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 interest shall accrue and be payable for the period of such extension.
Each such payment must be received by Lender not later than 3:00 p.m., Bedford, 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 and interest shall accrue and be
payable for the interim period. Any payment, whether a regularly scheduled installment, a
prepayment or otherwise, shall be applied in the order of payment set forth in Section 4.3
of this Agreement. Borrower hereby agrees to accept Lender’s calculation of principal and interest
payable under the Notes absent mathematical error.

     4.5 Prepayment. Subject to the order of payment provisions of Section 4.3,
Borrower may prepay the Notes 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 outstanding
principal balance of any principal prepayment through the date of such prepayment.

ARTICLE V

LIENS; PARTIAL RELEASES

     5.1 Liens. In order to secure payment of the Debt and performance of the Obligations,
Borrower shall, at each Loan Closing, grant to Lender a Lien on each Project that is included in
the Loan Request for the applicable Loan by executing and delivering to Lender a Deed of Trust for
each such Project. Borrower further agrees to execute and deliver to Lender from time to time such
other Deeds of Trust and assignments and other similar documents covering the Collateral or any
part thereof to secure the payment of the Debt and the performance of the Obligations as Lender may
reasonably require. Borrower agrees to take all action and execute all documents necessary in
order for the Lien of Lender to be properly created and perfected for each Project. Each Project
shall secure all Debt and Obligations then existing and thereafter arising. Borrower hereby
authorizes the filing of any financing statement and all amendments thereto in favor of Lender to
secure the Loans.

19

 

     5.2 Partial Release Amount. Borrower shall be entitled to obtain a partial release
from Lender’s Lien on one or more Project(s) covered by a Deed of Trust for the payment in cash to
Lender of the Partial Release Amount for such Project. Upon receipt by Lender of Borrower’s
request for a release under this Section 5.2, and upon Lender’s receipt of the Partial
Release Amount for the particular Project and Lien to be released, Lender, at Borrower’s expense,
will release its Lien against such Lot subject to, and in accordance with, the provisions of
Section 8.9 of the applicable Deed of Trust.

ARTICLE VI

CLOSING DELIVERIES

     6.1 Closing Deliveries. At or prior to the Initial Loan Closing, Borrower shall
deliver or cause to be delivered to Lender, all of the following items (collectively, the “Closing
Deliveries”), each of which shall be satisfactory in form and substance to Lender:

     (a) originals duly executed by Borrower and each Borrower-Related Party who is a
signatory thereto, of this Agreement, the Environmental Indemnity Agreement, the Assignment
of Distributions, the Guaranty, the error and omissions agreement, the Company Certificates
for Borrower, and each Borrower-Related Party that is an entity, and IRS tax disclosure
forms for Borrower and Guarantor;

     (b) the most recent financial statements of Borrower and Borrower-Related Party, in the
form specified in Section 9.7, and accompanied by the certification required by
Section 9.7;

     (c) a certified copy of the Organizational Agreements of Borrower and each
Borrower-Related Party that is an entity;

     (d) certificates of existence and good standing for Borrower and each Borrower-Related
Party that is an entity, issued by the appropriate state authorities;

     (e) resolutions of the board of directors, managers or other governing authority of
Borrower and each Borrower-Related Party that is an entity authorizing the execution,
delivery, and performance of this Agreement and the other Loan Documents, and the
transactions contemplated hereby and thereby, which resolutions shall include the
authorization of any one of the Principal Officers to request Loans and Advances under a
Loan on behalf of Borrower during the term of this Agreement;

     (f) copies of the liability insurance and casualty insurance policies covering
Borrower, evidence of payment of the premiums therefor through at least one year and
endorsements of such policies to Lender (in accordance with and meeting the requirements of
Section 9.15(a) hereof);

     (g) a duly executed Officer’s Certificate, dated as of the date of the Initial Loan
Closing;

     (h) all written consents that are required with respect to or necessitated by this
Agreement and the other Loan Documents and the transactions contemplated hereby and thereby;

     (i) an opinion of counsel for Borrower and Borrower-Related Party and satisfactory in
all respects to Lender and its counsel containing customary opinions as to the validity and
enforceability of the Loan Documents, the authority of Borrower and the Borrower-Related

20

 

Parties to enter into the Loan Documents, and an opinion that the Loan Documents do not
violate the usury laws of the State of Texas; and

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

     6.2 No Waiver. No waiver by Lender of the timely delay of any Closing Delivery will
constitute a waiver of any condition precedent to any obligation of Lender to make any Advance on
any Loan or to require delivery of any Closing Delivery prior to the funding of any Advance.

ARTICLE VII

ADVANCE CONDITIONS

     7.1 Conditions Precedent to Advances. Borrower agrees that, notwithstanding anything
to the contrary contained herein or in the other Loan Documents, Lender’s obligation to fund each
Advance shall be conditioned upon the satisfaction by Borrower of each of the following conditions,
on and as of the funding date for the applicable Advance (the “Advance Conditions”):

     (a) no event constituting a CTMGT Event of Default under a CTMGT Loan shall have
occurred and be continuing;

     (b) Lender (or the Title Company, acting at Lender’s direction) shall have received the
original Deed of Trust covering the Projects being funded by the Loan, duly executed by
Borrower for the benefit of Lender and Lender shall have received the original Note for the
Loan, duly executed by Borrower;

     (c) Lender shall have received all Required Documents relating to the Loan and all
Closing Deliveries required to be delivered to Lender as further described in Section
6.1;

     (d) Lender shall have received an Advance Request properly completed and duly executed
by a Principal Officer, accompanied by all required attachments, and all matters certified
in the Advance Request shall be true and correct in all respects;

     (e) the representations and warranties made in this Agreement and the other Loan
Documents by Borrower and the Borrower-Related Parties and in all certificates and other
documents delivered pursuant thereto, shall be true and correct in all material respects on
and as of the date of funding;

     (f) all of the covenants and agreements contained in this Agreement and the other Loan
Documents to be complied with and performed as of the date hereof by Borrower and the
Borrower-Related Parties have been duly complied with and performed on and as of the date of
funding;

     (g) no event constituting an Event of Default, shall have occurred and be continuing,
as determined by Lender pursuant to Section 11.1;

     (h) on and as of the date of funding, all statements contained in all Loan Documents
and all other certificates, statements and data furnished to Lender by or on behalf of
Borrower or in connection with the transactions contemplated by this Agreement or any of the
other Loan Documents (including all of the documents and information required to be
delivered to Lender by

21

 

Section 6.1 and Section 7.1) shall be true and complete in all material
respects, and there are no facts or events actually known to Borrower that, if disclosed to
Lender, would make such statements, certificates or date untrue in any material respect;

     (i) the amount of the requested Advance, when added to the outstanding principal amount
of all Loans then outstanding, would not exceed the Maximum Commitment;

     (j) as of the date of any such Advance, all of the Loan Documents shall have been
executed and delivered, and shall be valid, enforceable and in full force and effect;

     (k) as of the date of any such Advance, all Loan Expenses and other fees, charges and
expenses owed under any of the Loan Documents as of the date of the requested Advance shall
have been paid in full (or Lender shall have agreed to fund such Loan Expenses, fees,
charges and expenses out of the proceeds of such Advance);

     (l) as of the date of any such Advance, Lender’s security interests in all Collateral
shall be duly perfected and in the Lien position stated therein;

     (m) the title agent shall have delivered to Lender the Title Company’s Title Binder to
the Lender pursuant to a Title Commitment, in form and content satisfactory to Lender,
wherein the Title Company agrees to provide a Title Policy covering the Lots being funded by
such Advance to Lender, obtained at Borrower’ expense;

     (n) Borrower and the Borrower-Related Parties shall have complied with each other
reasonable request of Lender made in connection with the then-requested Advance that Lender
determines is reasonably related to such Advance;

     (o) the Project has not been destroyed or materially damaged by fire or other casualty;

     (p) the Project is not the subject of a condemnation proceeding or litigation;

     (q) the building pad site for the Home is not located in flood zone A or V unless
Lender gives its advance written consent thereto, which may be withheld for any reason in
Lender’s sole and absolute discretion;

     (r) if requested by Lender, Borrower will also do the following: (i) deliver copies of
recorded Affidavits of Commencement to Lender and the Title Company; (ii) deliver updated
Title Binder to Lender showing title to the Lot or Home to be vested in Borrower and no
stated facts objectionable to Lender, including without limitation, mechanic’s liens filings
for unpaid bills for labor or materials; (iii) furnish Lender and Title Company with a list
of the names and addresses of all contractors, subcontractors, laborers, and suppliers who
have furnished labor or materials for any Home; (iv) furnish Lender and Title Company with
copies of the contracts, bills of sale, receipted vouchers, and agreements under which
Borrower claims title to the materials, articles, fixtures, and other personal property used
or to be used in the construction or operation of any Home; and/or (v) furnish Lender and
Title Company with lien waivers or lien subordination agreements from all contractors,
subcontractors, laborers, or suppliers, who have furnished labor, services or material for
any Home certifying that they have been fully paid for all labor, services and material
furnished by them through the date of the immediately prior Advance Request;

22

 

     (s) Lender and Title Company have received a report from Lender’s Inspector indicating
(i) whether the Approved Budget is sufficient to complete the Project in substantial
accordance with the Plans and Specifications and if not, specifying the amount in excess of
the Approved Budget which is necessary to complete the Project in substantial accordance
with the Plans and Specifications, which amount Borrower shall, at Lender’s request, place
in escrow with Title Company to be released to Borrower upon Lender’s unilateral request
therefor; provided, that upon Borrower’s request to Lender for release of such funds, if no
Event of Default has occurred and is continuing, Lender will request the Title Company to
release the funds to Borrower upon completion of the Project; and further provided, that
Borrower agrees that the released funds will be used solely for the purpose of paying
Project costs unless all Project costs have been paid in full, (ii) the progress of the work
on such Home, (iii) the conformity of the work with the Plans and Specifications, (iv) the
sufficiency of the Loan proceeds to fund the work remaining to be completed on such Home,
(v) whether the work can be completed in a timely manner, (vi) the Plans and Specifications
are in compliance in all material respects with all applicable legal Requirements for the
full completion of the Project, and (vii) any other matters that Lender reasonably requests
to be reviewed by Lender’s Inspector;

     (t) Lender shall have received sales and marketing reports reasonably requested by
Lender;

     (u) Lender and Title Company shall have received a Foundation Survey upon completion of
the foundation of each Home to be reviewed and approved prior to subsequent Advances for
work performed after completion of the foundation, and a Completion Survey upon the
completion of the Home to be reviewed and approved prior to the final Advance in connection
with such Home;

     (v) the use of proceeds of such Advance will comply in all respects with Section
7.4;

     (w) if the Advance is a first Loan Advance after the related Loan Closing and a
Projected Cash Shortfall exists, Borrower shall pay the Projected Cash Shortfall at the time
of the Loan Advance or provide Lender evidence that the Projected Cash Shortfall has been
paid prior to the Loan Advance; and

     (x) Borrower shall have obtained all necessary permits to construct the Home on the Lot
(including, without limitation, the building permit, if any) and shall have paid all taxes
and fees to applicable Governmental Authorities (including, without limitation, all
permitting and impact fees, if any) and to any homeowner association that are due prior to
the date of the Advance.

     7.2 Advance Not A Waiver. No Advance will constitute a waiver of any condition
precedent to any obligation of Lender to make any further Advances or preclude Lender from
thereafter declaring the failure of Borrower to satisfy the condition precedent to be an Event of
Default.

     7.3 Conditions for Benefit of Lender. All conditions precedent to the obligation of
Lender to make any Advance are imposed solely for the benefit of Lender and may be waived in by
Lender in writing only as to one or more Advances in Lender’s sole and absolute discretion without
waiving them as to others, and no other party may require satisfaction of any condition precedent
or be entitled to assume that Lender will refuse to make any Advance in the absence of strict
compliance with these conditions precedent. All requirements of this Agreement may be waived by
Lender in writing only, in whole or in part, at any time. Borrower shall have no right to rely on
any investigations, inspections, or reviews preformed by Lender pursuant to the terms of this
Agreement or any other procedures employed

23

 

by Lender under the terms of this Agreement. All such investigations, inspections, or reviews
preformed by Lender pursuant to the terms of this Agreement or any other procedures employed by
Lender under the terms of this Agreement are solely for the Lender’s own protection. Borrower
acknowledges and agrees that Borrower has sole responsibility for constructing the Homes and paying
for work done and materials furnished in their construction and that Borrower has solely, on
Borrower’s own behalf, selected or approved each contractor, each subcontractor, each materialman,
and each supplier and that Lender has no responsibility for any such persons or entities or for the
quality of their materials or workmanship.

     7.4 Limitations on Advances. Lender will only make Advances for the acquisition of
Lots and other costs and expenses specified in the Approved Budget, and then only (i) in the case
of soft costs payable to Affiliates of Borrower, for those soft costs that are specifically
approved by Lender, (ii) in the case of soft costs payable to Persons other than Affiliates of
Borrower, for work performed, services rendered or materials furnished, and (iii) in the case of
hard costs, for work performed, services rendered or materials furnished. Advances for payment of
construction costs will only be made after actual commencement of construction of the Home and may
not exceed the aggregate of (a) the costs of labor, materials and services incorporated into the
Project in a manner acceptable to Lender not to exceed the Approved Budget, plus (b) if approved by
Lender, the purchase price of uninstalled materials to be used in the construction of the Home that
are stored on the Lot or in the Home not to exceed the Approved Budget, or elsewhere with the
written consent of and in a manner acceptable to Lender, and less (c) any Retainage, if applicable,
and less (d) all prior Advances for payment of costs of labor, materials and services for the
construction of the Home. Lender shall have no obligation: (i) to make any Advance for a line item
in excess of the sums for such line item in the Approved Budget, (ii) to consider an Advance
Request unless and until Borrower has complied with this Agreement, and (iii) to make any Advance
which would cause the aggregate of all Advances to be greater than the amount of the Maximum
Commitment. If the aggregate amount of Advances for any Home is insufficient to pay for all labor
and materials necessary to complete the construction of the Home, Borrower shall pay all excess
costs immediately with funds from sources other than the Loan.

     7.5 Direct Payment to Contractors and Others. After the occurrence of an Event of
Default, Lender shall have the right, but not the obligation, to pay any amount of any Advance
directly to any contractor, Title Company, any design professional or other Person instead of
advancing that money to Borrower, and will notify Borrower in advance and in writing when it has
exercised that election on each occasion it does. Any Advance by Lender for such purpose shall be
part of the Loan and shall be secured by the Loan Documents. Borrower hereby authorizes Lender to
hold, use, disburse, and apply each Loan for payment of costs of construction of the improvements
after an Event of Default, expenses incident to such Loan and the Lot or Home, and the payment or
performance of any obligation of Borrower hereunder, including, without limitation, interest on the
Loans, any reasonable Loan fees owing to Lender, reasonable legal fees of Lender’s attorneys which
are payable by Borrower, and such other reasonable sums as may be owing from time to time by
Borrower to Lender with respect to the Loan. No further direction or authorization from Borrower
shall be necessary to warrant such direct Advances and all such Advances shall satisfy pro
tanto the obligations of Lender hereunder and shall be secured by the Loan Documents as
fully as if made directly to Borrower. Notwithstanding the other provisions of this paragraph,
nothing in this Agreement is intended to be for the benefit of, nor may be enforced by, nor should
be relied upon by, any Person other than Borrower.

     7.6 Retainage. If Borrower withholds Retainage with regard to any contractor engaged
in work on a Home, Lender shall not be obligated to advance the amount reserved as Retainage by
Borrower unless Lender shall have received evidence that either (i) Borrower is releasing the
Retainage to the contractor or (ii) all work with respect to such Project is complete.

24

 

     7.7 Off-site Materials. Lender shall not be obligated to approve, and Lender shall
not be obligated to fund, any Advance covering in whole or in part any equipment or materials not
stored at the Project without the prior approval of Lender, which approval shall be in Lender’s
sole discretion.

ARTICLE VIII

REPRESENTATIONS AND WARRANTIES

     To induce Lender to enter into this Agreement and make each Loan and Advance, Borrower and
each Borrower-Related Party (where applicable below) represents and warrants to Lender, as of the
date of this Agreement and as of the date of each Loan Closing and Advance, that:

     8.1 Due Organization, Existence and Authority. Borrower and each Borrower-Related
Party that is an entity (a) is duly organized, validly existing and in good standing under the laws
of its jurisdiction of organization, and (b) has full power and authority to own its properties,
carry on its business as presently conducted and as proposed to be conducted, and to enter into and
perform its Obligations under this Agreement and the other Loan Documents to which it is a party.

     8.2 Loan Documents Authorized. The execution and delivery by Borrower and the
Borrower-Related Parties of this Agreement and the other Loan Documents to which they are parties,
and the full and timely payment of the Debt and the performance of all Obligations under the Loan
Documents, have been duly authorized by all necessary action under the Organizational Agreement of
Borrower, the Organizational Agreement of each Borrower-Related Party, and otherwise.

     8.3 Loan Documents Valid, Binding and Enforceable. This Agreement and the other Loan
Documents have been duly and validly executed, issued and delivered by Borrower and the
Borrower-Related Parties and constitute the valid and legally binding obligations of Borrower and
the Borrower-Related Parties, enforceable in accordance with their respective terms, except as
limited by bankruptcy, insolvency, reorganization or other similar laws relating to or affecting
enforcement of creditor’s rights.

     8.4 Other Agreements Not Violated. Compliance by Borrower and the Borrower-Related
Parties with this Agreement and the Loan Documents will not violate any law, the Organizational
Agreement of Borrower, the Organizational Agreement of any Borrower-Related Party or any other
instrument or agreement binding upon Borrower or any Borrower-Related Party.

     8.5 Suits. Except as set forth on Schedule 8.5, there are no actions, suits
or proceedings pending, or to the knowledge of Borrower or any Borrower-Related Party, threatened,
against or affecting Borrower or any Borrower-Related Party, any Collateral, or any of the Property
or involving the validity or enforceability of the Loan Documents or the priority of the Liens
created or evidenced thereby at law or in equity, or before or by any Governmental Authority. With
respect to litigation matters disclosed on Schedule 8.5, Borrower agrees to (i) provide
Lender with such documents and information relevant to such litigation matters as Lender may
reasonably request from time to time, including, without limitation, copies of all pleadings filed
in such litigation matters, and (ii) promptly provide Lender with updates on all material
developments in such litigation matters upon the occurrence thereof.

     8.6 Financial Statements, Loan Requests and Advance Requests Complete and Accurate.
All information supplied and statements made to Lender by or on behalf of Borrower or any
Borrower-Related Party in any financial statement, Loan Request, or Advance Request furnished or
application for credit made prior to, contemporaneously with or subsequent to the execution of this
Agreement are and shall be true, correct, complete, valid and genuine; such financial statements,
Loan Requests, Advance Requests and applications for credit have been prepared in accordance with
Good Accounting Practice

25

 

and fully and accurately present the financial condition of the subject thereof as of the date
thereof and no material adverse change has occurred in the financial condition reflected therein
since the respective dates thereof; and no additional borrowings have been made by Borrower or any
Borrower-Related Party since the respective dates thereof other than (a) the Debt, (b) with respect
to Borrower-Related Parties, borrowings disclosed to Lender to the extent required pursuant to the
Loan Documents, (c) other borrowings from Lender, (d) RESERVED or (e) other borrowings approved by
Lender’s prior written consent.

     8.7 Environmental Liability. To the current, actual knowledge of Borrower and the
Borrower-Related Parties, no hazardous substances or solid wastes have been disposed of or
otherwise released on the Property in violation of Environmental Laws, nor to the current, actual
knowledge of Borrower, is the Property including the Property’s soil, ground, water, air and other
elements, contaminated by hazardous substances or solid wastes in violation of Environmental Laws
except as set forth in a Phase 1 Environmental Report dated on or before the Effective Date and
certified to Lender (provided, that such certification may be obtained and provided to Lender
within sixty (60) days following the Effective Date). The terms “hazardous substance” and release”
shall have the meanings specified in the Comprehensive Environmental Response Compensation and
Liability Act of 1980, as amended (42 U.S.C. Section 9601 et. seq.) (“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 (42 U.S.C. Section 6901 et. seq.) (“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.

     8.8 Tax Liabilities. Borrower and each Borrower-Related Party has filed all tax
returns required to be filed, or has obtained an extension which is currently valid and in effect,
for all federal, state, county, local, and foreign tax returns and reports required to be filed,
including, without limitation, taxes on the Collateral and all applicable income, payroll, personal
property, real property, employee withholding, social security, unemployment, franchise, excise,
use and sales taxes. Borrower and each Borrower-Related Party have paid in full all taxes that
have become due as reflected on all such returns and reports including any interest and penalties,
expect for taxes being contested in good faith and for which such taxpayer has set aside adequate
reserves for the payment thereof. Borrower and each Borrower-Related Party have established
adequate reserves for all taxes payable but not yet due. No governmental claim for additional
taxes, interest, or penalties is pending or, to Borrower’s or any Borrower-Related Party’s
knowledge, threatened against Borrower or any Borrower-Related Party.

     8.9 Compliance With Legal Requirements. Borrower is in substantial compliance with
all Legal Requirements in respect of the conduct of its business and the ownership of its assets.
Borrower owns or will obtain the continuing right to use all permits, licenses, patents, patent
rights or licenses, trademarks, trademark rights, trade names, trade name rights and copyrights
which are required to conduct its business.

     8.10 Full Disclosure. None of the representations, warranties, covenants, agreements
or statements contained in any Loan Document or any exhibit, report, statement or certificate
furnished to Lender by or on behalf of Borrower or any Borrower-Related Party in connection with
the Loan contains or will contain any untrue statement of a material fact, or omits or will omit
any material fact required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they are made, not misleading.

26

 

     8.11 No Known Material Adverse Fact. Borrower and the Borrower-Related Parties know
of no fact which materially and adversely affects the business, operations, prospects or condition,
financial or otherwise, of Borrower or any Borrower-Related Party.

     8.12 Survival of Representations and Warranties. All representations and warranties
made by or on behalf of Borrower or any Borrower-Related Party herein or in any other Loan Document
shall survive the delivery of this Agreement and the making of the Loan and any investigation at
any time made by or on behalf of Lender shall not diminish its rights to rely thereon.

     8.13 Statements Are Representations. All statements contained in a Loan Document by
or on behalf of Borrower, any Borrower-Related Party or any of their representatives or officers
under or pursuant to this Agreement and the other Loan Documents in connection with the
transactions contemplated hereby shall constitute representations and warranties.

     8.14 Property and Lots. Borrower will have good and indefeasible fee simple title to
the Property and each Lot, free and clear of any Liens except the Permitted Exceptions.

     8.15 No Work Performed. No labor or services will be performed on, and no materials
will be furnished or delivered to, any Lot by or on behalf of Borrower prior to recording the Deed
of Trust covering that Lot, which could give rise to a Lien on the Lot with priority equal to or
greater than the Liens and security interests of the Deed of Trust or other Loan Documents. No
contracts (or memorandum or affidavit thereof) for the supplying of labor, materials, or services
for the construction of improvements on a Lot shall have been recorded in the mechanic’s lien or
other appropriate records in the county where the Lot is located.

     8.16 No Partnership, Joint Venture or Agency Intended. Nothing in this Agreement or
the other Loan Documents is intended or shall in any way be construed so as to create any form of
partnership, joint venture or agency relationship between the Borrower and the Borrower-Related
Parties, on the one hand, and the Lender, on the other hand, the parties hereto having expressly
disclaimed any intention of any kind to create any partnership or agency relationship between them
resulting from or arising out of the Loan Documents.

     8.17 Plans and Specifications. All Plans and Specifications are, and will be, prepared
in-house by employees of Borrower. To the actual knowledge of Borrower, the Plans and
Specifications comply with all Governmental Requirements. To the extent required by applicable law
or applicable restrictive covenants pertaining to the Lot, the Plans and Specifications have been
approved by the applicable Governmental Authorities and the architectural control committee or
other persons empowered to do so by any restrictive covenants.

     8.18 Utility Services. To the actual knowledge of Borrower, all applicable utility
services (including without limitation, potable water storm and sanitary sewer facilities, gas,
electric, and telephone facilities) necessary for the construction of a Home and its operation as a
single family residence are, or will be prior to completion of the Home, available at the
boundaries of each Lot in adequate sizes and capacities and that Borrower has the right to connect
each Home to such utility services.

     8.19 Access. To the actual knowledge of Borrower, all roads necessary for the full
utilization of the Lot for its intended purposes have been, or will be before completion of the
Home, completed and have been, or will be before completion of the Home, accepted by the
appropriate Governmental Authority.

27

 

     8.20 Disclaimer of Permanent Financing. Lender has not made any representations,
warranties, guarantees, commitments, or other agreements of any kind whatsoever, either express or
implied, that Lender, any subsidiary of Lender, or any other party affiliated with Lender will
extend the term of any Loan past its stated maturity date or provide permanent financing for
Borrower or any person purchasing any Home from Borrower.

     8.21 Interstate Land Sales Act. Borrower’s development of the Lot and the sale of
each Home by Borrower are exempt from registration under and any requirements of the Interstate
Land Sales Full Disclosure Act and the regulations promulgated pursuant to it.

ARTICLE IX

COVENANTS AND AGREEMENTS

     So long as Lender is committed to make Loans hereunder, and thereafter until payment and
performance in full of the Indebtedness and Obligations, Borrower covenants and agrees that:

     9.1 Payment; Performance. Borrower shall promptly pay all Debt when due or declared
due pursuant to this Agreement and the Loan Documents. Borrower shall perform and comply with all
of its Obligations under this Agreement and the other Loan Documents.

     9.2 Use of Proceeds. Borrower shall use the proceeds of this Agreement solely for the
benefit of Borrower. In no event shall the proceeds of this Agreement be used, directly or
indirectly, 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). Borrower agrees that the purpose of the Loans is, and that the proceeds of the Loans will
only be used, for Approved Purposes.

     9.3 Indebtedness to be Paid. Borrower will pay punctually and discharge when due, or
renew or extend, any Indebtedness incurred by it and will discharge, perform and observe the
covenants, provisions and conditions to be performed, discharged and observed on the part of
Borrower in connection therewith, or in connection with any agreement or other instrument relating
thereto or in connection with any Lien existing at any time upon any of the property or assets of
Borrower; provided, however, that nothing contained in this Section shall require Borrower to pay,
discharge, renew or extend any such Indebtedness or to discharge, perform or observe any such
covenants, provisions and conditions so long as such Person in good faith shall be actively
contesting any claims which may be asserted against it with respect to any such Indebtedness or any
such covenants, provisions and conditions and shall set aside on its books reserves with respect
thereto deemed adequate by Lender.

     9.4 Limitation of Indebtedness. Excluding the Debt, Member Loans and Indebtedness for
borrowed money described on Schedule 9.4, Borrower shall not incur any borrowed money
obligation, guaranty or provide security for any Indebtedness of another Person or enter into or
issue any agreement providing for Borrower to incur or guaranty Indebtedness for borrowed money
without the prior written consent of Lender, which may be withheld for any reason or no reason.
Notwithstanding the foregoing, Borrower may incur ordinary trade debt to vendors, and suppliers and
providers of services without violation of this Section 9.4. Borrower shall give Lender
prior written notice of any proposed Indebtedness for borrowed money and Lender shall inform
Borrower in writing of whether it approves or disapproves such proposed Indebtedness for borrowed
money within ten (10) days after receipt of Borrower’s written notice. If Lender consents to
Borrower incurring or guaranteeing any Indebtedness for borrowed money, as a condition of Lender
granting such consent, Borrower and the other lender (“New Lender”) shall, unless otherwise agreed
by Lender in writing, enter into a written agreement with

28

 

Lender, which shall be satisfactory to Lender in all respects, providing that (a) the priority of
the payment of the Debt always shall be superior to the priority of the payment of such other
Indebtedness for borrowed money, (b) no Liens securing such Indebtedness for borrowed money shall
be placed on the assets of Borrower or the Property or on the economic or legal interests in
Borrower without Lender’s express prior written consent, which may be withheld for any reason or
for no reason, (c) the priority of Lender’s Liens and security interest against the Property and
the assets of Borrower always shall be superior to the priority of any Liens or security interests,
if any, in favor of the New Lender, (d) Lender shall be given written notice by the New Lender of
any material default or event of default occurring under the loan documents evidencing Indebtedness
owed to the New Lender (“New Loan Documents”), (e) upon any Event of Default under this Agreement
or upon any default or event of default under the New Loan Documents, Lender shall have the right,
but not the obligation, to cure the default thereunder prior to acceleration and/or, at Lender’s
alternative, to purchase the New Loan Documents and the Indebtedness evidenced thereby upon terms
satisfactory to Lender, and (f) the terms of the New Loan Documents providing for the principal
amount of the Indebtedness evidenced by such New Loan Documents, the interest rate and charges, and
the payment terms (including payment dates, payment amounts, and the maturity date for payment of
principal and interest, the amount of proceeds to be paid for release or partial release of any
Lien) and all other provisions of such New Loan Documents shall be acceptable to Lender and shall
not be materially modified without Lender’s prior written consent. Borrower agrees that it shall
not enter into any agreement, or permit Borrower-Related Party to enter into any agreement, that is
inconsistent with or would cause Borrower to violate the provisions of this Section 9.4.
Notwithstanding the foregoing, Lender acknowledges and agrees that its execution of an
intercreditor agreement with a New Lender shall be deemed to be Lender’s written consent to any
variance contained in such intercreditor agreement from the requirements of this Section
9.4.

     9.5 Termination of Existence; Organizational Agreements. Until Lender’s obligations
hereunder have terminated and the Debt is paid in full, Borrower shall not cause or permit, or
enter into any agreement to cause or permit, the dissolution or termination of the existence of
Borrower. Until Lender’s obligations hereunder have terminated and the Debt is paid in full,
without Lender’s prior written consent, Borrower shall not permit or enter into any agreement to
cause or permit, the merger, consolidation, or reorganization of Borrower with or into any other
entity, whether or not such party would be the surviving entity. Until the Loan is repaid in full
and all of the obligations of Lender and Borrower hereunder have fully and finally terminated, the
Organizational Agreements of Borrower shall not be modified, amended, restated or supplemented.

     9.6 Notice of Certain Events. Borrower shall promptly notify Lender in writing of the
occurrence of any event or series of events causing, or that could be expected to cause or has
caused, (a) a material adverse effect on the operations or financial condition of Borrower, the
Property or the Collateral, (b) the occurrence of any Event of Default under this Agreement or any
“event of default” or “default” under any other Loan Document, (c) RESERVED or (d) any material
default by Borrower or a Borrower-Related Party or the acceleration of the maturity of any
indebtedness owed by Borrower or a Borrower-Related Party under any loan agreement, indenture,
mortgage, promissory note, contract or instrument to which Borrower or any Borrower-Related Party
is a party or by which any material asset or property of Borrower or any Borrower-Related Party is
bound. In addition, Borrower agrees to notify Lender in writing at least twenty (20) Business Days
prior to the date that Borrower or any Borrower-Related Party changes its name or address, the
location of its chief executive office or principal place of business, and the place where it keeps
its books and records.

     9.7 Financial Statements; Tax Returns. Borrower shall deliver or cause to be
delivered to Lender, the following (all financial statements provided to Lender shall be certified
as to accuracy and completeness by the senior financial officer of Borrower):

29

 

     (a) within thirty (30) days after the end of each month, the unaudited financial
statements of Borrower for such month, prepared in accordance with Good Accounting Practice,
and combined or consolidated as appropriate, including all notes related thereto,
accompanied by a duly executed Financial Statement Certification and a duly completed and
executed Compliance Certificate;

     (b) within sixty (60) days after the end of each fiscal quarter, the unaudited
financial statements of Borrower for such fiscal quarter, prepared in accordance with Good
Accounting Practice, and combined or consolidated as appropriate, including all notes
related thereto, accompanied by a duly executed Financial Statement Certification;

     (c) within one hundred twenty (120) days after the end of each fiscal year, the
reviewed financial statements of Borrower for such fiscal year, prepared in accordance with
Good Accounting Practice, and combined or consolidated as appropriate, including all notes
related thereto, accompanied by a duly executed Financial Statement Certification;

     (d) copies of all federal and state tax returns prepared with respect to Borrower
within ten (10) days of such documents being filed with the Internal Revenue Service or
applicable state authority; and

     (e) such other information relating to the financial condition and affairs of Borrower,
the Property or the Collateral, as Lender may from time to time reasonably request or as may
be required by the Loan Documents.

     9.8 Taxes. Borrower shall pay or cause to be paid all federal, state and local taxes
levied against them and their respective properties and assets, including the Property, as they
become due and payable and before the same become delinquent. Borrower shall furnish to Lender
evidence that all such taxes are paid within ten (10) days following the date of payment (prior to
such payment being late). Borrower shall have the right to pay such tax under protest or to
otherwise contest any such tax or assessment, but only if (a) 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, (b) Borrower has notified Lender of its intent to contest such
taxes, and (c) adequate reserves for the liability associated with such tax have been established
in accordance with Good Accounting Practice.

     9.9 Liens. Borrower shall not create, incur, assume, or suffer to exist, or permit
Borrower-Related Party to create, incur, assume or suffer to exist, directly or indirectly, any
Lien on, against or with respect to the Collateral, except as expressly permitted by the Loan
Documents.

     9.10 Efficient and Lawful Management. Borrower shall maintain sufficient qualified
personnel for the operations of their businesses, and shall conduct its business in an efficient
manner and in accordance with all applicable Legal Requirements.

     9.11 Prohibition on Distributions; Other Payments. Borrower shall not declare, pay,
make, or authorize any Distributions of any kind to its Members, other than tax distributions made
to the members of Borrower in accordance with the terms of Borrower’s Organizational Agreement;
provided, however, that upon an Event of Default, Borrower shall not make any such tax
distributions.

     9.12 Borrower and Property Documents. In addition to the information otherwise
required to be provided to Lender pursuant to this Agreement, Borrower shall, within five (5) days
after Lender’s request, furnish to Lender, all of the following documents, to the extent in the
possession and control of

30

 

Borrower (and if such documents are not in the possession or control of Borrower, then Borrower
shall notify Lender of such fact within such five (5) day period):

     (a) all documents, certificates, agreements, contracts and other materials required to
be delivered to Lender by Section 6.1 and Section 7.1 of this Agreement
including those coming into effect or existence after the Effective Date, and all
amendments, modifications, and supplements thereto;

     (b) all capital expenditure and expense reports, invoices and documentation of expenses
and capital expenditures, bank account information and records, and other material financial
and operational information related to Borrower, the Collateral, and the Property;

     (c) minutes of the meetings of Borrower’s Managing Member and Members,

     (d) all promissory notes, loan documents, contracts and agreements evidencing
Indebtedness for borrowed money of Borrower, and all amendments, modifications and
supplements thereto;

     (e) all financial statements, progress reports, and notices delivered by Borrower to
their respective partners or relating to the Property;

     (f) all notices delivered to Borrower from any other lenders to Borrower;

     (g) any new documents or information, and any updates, supplements, or replacements for
any documents or information, required to be delivered to Lender pursuant to this Agreement
and the other Loan Documents; and

     (h) all other information with respect to the Property, the Collateral and/or Borrower
that Lender may reasonably request from time to time.

     9.13 Audit. Borrower 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 Borrower’s expense, to (a) audit all books
and records related to Borrower, and all Collateral granted or pledged as security for the Loan,
and (b) visit and inspect the offices of Borrower, to inspect and make copies of all books and
records, and to write down and record any information Lender Representatives obtain. Borrower
agrees to cooperate fully with Lender in connection with such audits and inspections.

     9.14 Approved Sales Contracts. Borrower shall deliver to Lender each Approved Sales
Contract entered into by Borrower for sale of a Home promptly upon execution, but in any event,
within thirty (30) days following execution. If an Approved Sales Contract is entered into by
Borrower for the sale of one or more Homes, Borrower (a) shall comply in all respects with its
obligations under such Approved Sales Contract, (b) shall not create a default under such Approved
Sales Contract, and (c) shall not terminate any such Approved Sales Contract except for default by
the proposed purchaser without first obtaining Lender’s prior written consent.

     9.15 Operation of Business. Borrower shall operate its business in compliance with
all applicable federal, state and local laws, rules, regulations, and ordinances. Borrower shall
maintain its existence and good standing in each state where it operates or does any business,
except in any jurisdictions where the failure to maintain such existence and good standing would
not have a material adverse effect individually or in the aggregate, on its financial condition or
operations. Borrower shall

31

 

obtain, maintain and keep current, all consents, licenses, permits, authorizations, permissions and
certificates which may be required or imposed by any Governmental Authority or which are required
by applicable federal, state or local laws, regulations and ordinances. Borrower shall obtain home
warranties for the benefit of the purchasers of the Homes.

     9.16 Limitation on Loan Modifications. Without the prior written consent of Lender,
Borrower shall not consent to or approve, or enter into any extension, increase, or material
modification of RESERVED or any New Loan Documents.

     9.17 New Entities. Borrower owns no equity interests in any partnership, limited
liability company, corporations or other entity. Until Lender’s obligations hereunder have
terminated and the Debt is paid in full, Borrower agrees that it shall not create, organize or
acquire any interest in any limited partnership, limited liability company, corporation or other
entity (collectively, a “New Entity”) without complying with each of the following requirements:

     (a) Borrower shall give Lender prior written notice of its intent to create, organize
or acquire a New Entity;

     (b) if the New Entity will receive or benefit from any Advance hereunder, such new
Entity shall become a new co-borrower under this Agreement and in connection therewith,
shall execute all agreements, counterparts and joinders to the Loan Documents required by
Lender in connection therewith promptly upon the formation of the New Entity, but in any
event, no later than the earlier of (i) thirty (30) days after formation or acquisition, or
(ii) the closing of the first Advance to the New Entity; and

     (c) Borrower shall provide Lender with all information and documents required to be
delivered to Lender by Section 6.1 and Section 7.1 of this Agreement or
otherwise requested by Lender in relation to the New Entity and its assets, any real
property owned or to be acquired by the New Entity, and the owners of the New Entity.

     9.18 Communications. Borrower hereby consents to and agrees that Lender and its
representatives, employees, project managers, and consultants may communicate with (verbally and in
writing, in person and via electronic communications), and exchange information among and between,
(a) all contractors, subcontractors, engineers, design professionals and all others who have
performed or have contracted to provide work and/or services for the Property or any portion
thereof, together with their respective principals, employees and agents, and (b) RESERVED, any New
Lenders, any other holders of Indebtedness owed by Borrower, and their respective partners,
managers, members, stockholders, officers, directors, shareholders, representatives, employees, and
agents. Borrower hereby releases and holds harmless, and agrees to indemnify, Lender, its general
partner and their respective partners, managers, members, stockholders, officers, directors,
shareholders, representatives, employees, and agents (each, a “Released Party”), from and against
any and all damages, claims, liabilities and expenses related to, associated with or in respect of
any such communications or exchanges of information, WHETHER OR NOT THEY SHALL BE CAUSED IN WHOLE
OR IN PART BY THE NEGLIGENCE OF A RELEASED PARTY, EXCLUDING LENDER’S INTENTIONAL MISCONDUCT OR
GROSS NEGLIGENCE.

     9.19 Change in Management. Until Lender’s obligations hereunder have terminated and
the Debt is paid in full, Borrower will not allow any individual other than the Principal Officers
to have day-to-day management and control of the Managing Member. Furthermore, until Lender’s
obligations hereunder have terminated and the Debt is paid in full, Borrower and the
Borrower-Related Parties will not permit any Person, other than the Managing Member to serve as the
Managing Member of Borrower

32

 

or otherwise manage or control Borrower (provided that 2M Holdings, L.P., a Delaware limited
partnership, may be appointed to serve as the Managing Member if Borrower obtains Lender’s prior
written consent, and Lender shall not unreasonably withhold, condition or delay its approval of
same); (ii) Borrower to issue or agree to issue (conditionally or otherwise) any Equity Interests
or rights thereto to any Person other than the Members, or (iii) the Members or Managing Member to
pledge or grant a security interest in the Equity Interests of Borrower to any Person.

     9.20 Budget; Sales Report.

     (a) Approved Budget. Borrower shall not modify the Approved Budget for any
Project (except for changes in line items that do not increase the overall amount of the
Approved Budget) without Lender’s prior written consent.

     (b) Sales Report. Within ten (10) days after the end of each month, Borrower
shall deliver to Lender, a sales report which will include the sales status of each Lot, and
which is otherwise in compliance with the requirements of Section 9.36.

     9.21 Consultants. Borrower agrees that Lender may engage one or more consultants and
whenever consent or approval by Lender is required under this Agreement, the consent or approval
may be conditioned upon consent or approval by such consultants. All reasonable costs of the
consultants shall be borne by Borrower. Borrower shall cooperate with the consultants and will use
commercially reasonable efforts to cause the design professionals, engineers, developers,
contractors, project engineers and the employees of each of them to cooperate with the consultants
and, upon request, will furnish the consultants whatever they may consider reasonably necessary or
useful in connection with the performance of their duties. Borrower acknowledge and agree that the
duties of the consultants run solely to Lender and that the consultants shall have no obligations
or responsibilities whatsoever to Borrower or to any other Person.

     9.22 Direct Payment to Contractors and Others. Borrower agrees that Lender shall have
the right, but not the obligation, to pay any amount of any Advance directly to any contractor,
title company, project engineer, developer, engineer, design professional or other Person instead
of advancing that money to Borrower. No further direction or authorization from Borrower shall be
necessary to warrant such direct advances and all such advances shall satisfy pro
tanto the obligations of Lender hereunder and shall be secured by the Loan Documents as
fully as if made directly to Borrower. Notwithstanding the other provisions of this paragraph,
nothing in this Agreement is intended to be for the benefit of, nor may be enforced by, nor should
be relied upon by, any Person other than Borrower.

     9.23 Reimbursement Contract. Borrower shall obtain Lender’s written consent not to be
unreasonably withheld, conditioned or delayed prior to entering into, consenting to, approving or
voting in favor of any contract or agreement with any Governmental Authority providing for the
sharing, payment and/or reimbursement of the costs of planning and/or construction with respect to
the Property such as, but not limited to, a municipal utility district or public improvement
district reimbursement agreement (each, a “Reimbursement Contract”) or prior to becoming an
assignee of, or otherwise becoming entitled to receive proceeds under, any such Reimbursement
Contract. Notwithstanding anything else to the contrary contained herein or in any other Loan
Document, in no event shall any Reimbursement Contract require or result in a subordination of any
of Lender’s Liens against the Collateral. Borrower shall not enter into, consent to, approve, or
vote in favor of any material amendment or modification of any Reimbursement Contract without
Lender’s prior written consent not to be unreasonably withheld, conditioned or delayed; provided,
however, that any such amendment shall be deemed to be material if such amendment could reasonably
be expected to delay, hinder or impede

33

 

Borrower’s payment of the Debt or any portion thereof or performance of any of its Obligations
under the Loan Documents.

     9.24 Agreements related to the Property. Borrower shall not enter into, amend, modify
or terminate any agreement related to the Property or the Collateral that reasonably would be
expected to hinder, delay or impair the payment of the Debt or any portion thereof or performance
by Borrower of any of its Obligations under the Loan Documents, without the prior written consent
of Lender.

     9.25 Notice of Event of Default, Suits. Upon discovery, Borrower will promptly notify
Lender of any breach of any of the covenants contained in Article Six and Article
Seven of this Agreement and of the occurrence of any Event of Default hereunder, or of the
filing of any claim, action, suit or proceeding before any Governmental Authority against Borrower
and advise Lender from time to time of the status thereof. Borrower shall promptly notify Lender if
any Project will not be completed in accordance the Approved Budget.

     9.26 Commencement and Completion. Borrower shall commence construction of each Home
within thirty (30) days after the applicable Deed of Trust is recorded in the appropriate records
of the county where such Home is located and diligently pursue its completion without cessation
until the Home is fully completed except due to acts of God.

     9.27 Affidavit of Commencement. If requested by Lender in connection with any Home,
Borrower will record an affidavit of commencement (“Affidavit of Commencement”) in the appropriate
records of the county where the Home is located, in a form reasonably acceptable to Lender. The
Affidavit of Commencement must not state a commencement date or be recorded before the applicable
Deed of Trust is recorded.

     9.28 Affidavit of Completion. If requested by Lender in connection with any Home,
Borrower will record an affidavit of completion (“Affidavit of Completion”) stating the date
construction was completed in the appropriate records of the county where the Lot is located, and
otherwise in a form reasonably acceptable to Lender.

     9.29 Building Permits; Construction According to Plans and Specifications. Borrower
shall obtain the building permit, if one is required, for the construction of the Home within
thirty (30) days after the Loan for such Home is initially closed. For each Home funded by Lender
hereunder, Borrower shall deliver the following items to Lender promptly upon receipt: (i) if
applicable, the application for the building permit, (ii) the issued building permit, if one is
required, (iii) all other applications for permits and issued permits, if any, required with
respect to the construction of the Home, and (iv) evidence that all fees have been paid in
connection with the applications and permits referenced in clauses (i), (ii) and (iii) above.
Borrower will construct each Home in a good and workmanlike manner and in accordance with its Plans
and Specifications approved by Lender for such Home and all Governmental Requirements in all
material respects. Furthermore, Borrower will not materially amend, alter, or change the Plans and
Specifications unless the changes have been approved in writing by Lender in advance and, if
necessary, by all applicable Governmental Authorities and any architectural control committee or
other party empowered to do so by any restrictive covenants. Borrower will not contract with or
engage any architect (including through any Affiliate) to prepare Plans and Specifications without
obtaining Lender’s prior written consent. As a condition to granting such consent, Lender may
require Borrower to obtain a written consent of the architect to the assignment by Borrower of all
Plans and Specifications to Lender, which shall be satisfactory to Lender in form and substance.

     9.30 Correction of Defects. Borrower will correct (a) any defect in the construction
of the Homes and any material departure from the Plans and Specifications not approved in writing
by Lender

34

 

and (b) all violations of any Governmental Requirements or restrictive covenants. An Advance will
not constitute a waiver of Lender’s right to require compliance with this covenant with respect to
any such defects or violations not previously discovered by Lender, or otherwise.

     9.31 Reports and Notices. Borrower shall furnish promptly to Lender such information
as Lender may reasonably require concerning costs, progress of construction, marketing, and such
other factors as Lender may reasonably require. Borrower shall notify Lender promptly of (i) any
litigation instituted or threatened against Borrower or any Lot, (ii) any deficiencies asserted or
liens filed by the Internal Revenue Service against Borrower or any Lot, (iii) any audits of any
federal or state tax returns of Borrower and the results of any such audit, (iv) any condemnation
or similar proceedings with respect to any Lot, (v) any proceeding seeking to enjoin the intended
use of any Lot, (vi) any changes of legal Requirements, utility availability, or anticipated costs
of completion of a Home that would cause the Project to exceed the Approved Budget, and (vii) any
other matters which could reasonably be expected to adversely affect Borrower’s ability to perform
its obligations under this Agreement.

     9.32 Identify Property. Borrower shall display the Borrower’s name and the street
address of each Lot in a prominent place on the Lot that is visible from the street.

     9.33 Personalty and Fixtures. Borrower will deliver to Lender, on demand, any
contracts, bills of sale, statements, receipted vouchers, or agreements under which Borrower claims
title to any materials, fixtures, or other personal property incorporated into or located within
any of the Homes located on any of the Lots.

     9.34 Insurance.

     (a) General Requirements. Borrower will, at Borrower’s own expense, obtain and
maintain in full force and effect insurance upon and relating to the Lot or Home with such
insurers, in such amounts, and covering such risks as are requested by and satisfactory to
Lender, from time to time, including but not limited to: (i) the broadest available form of
builder’s risk insurance (utilizing the then prevailing “ISO causes of loss-special forms”
and “reporting forms” of builder’s risk insurance form or equivalent forms acceptable to
Lender) covering all Homes during their construction for their full replacement cost; (ii)
the broadest available form of “all risks” or “special form” property insurance (utilizing
the then prevailing “ISO Special Form” property insurance form or an equivalent form
reasonably acceptable to Lender), covering all Homes within the Lot or Home after their
construction is complete for their full replacement cost, with no exclusions permitted for
vandalism or malicious mischief; (iii) worker’s compensation insurance to the statutory
limit; (iv) a commercial general liability insurance policy providing coverage against
(among other things) bodily injury and disease, including death resulting therefrom,
personal injury and property damage, written on an “occurrence” basis in connection with the
business or other activities conducted on or from the Lot or Home; (v) flood insurance
covering all Homes located within Flood Zone A or V, both during construction and after
construction is complete for their full replacement cost or the maximum amount available
under the federal flood insurance program, whichever is the most; and (vi) such other
insurance with other coverages or increased coverages, if any, as Lender may require from
time to time. No umbrella liability insurance policy will be required unless the costs of
such policy is reasonable as reasonably determined by Borrower in its good faith business
judgment. Each insurance policy issued pursuant to this Section must be issued by good and
solvent insurance companies satisfactory to Lender and all such policies must provide, by
way of endorsements, riders, or as otherwise applicable, that: (1) the builder’s risk and
property insurance policies must contain a standard “Mortgagee clause” and must be payable
to Lender as a mortgagee and not as a co-insured, and with respect to all policies and
insurance carried by Borrower for the benefit of

35

 

Lender, such insurance must be payable to Lender as Lender’s interest may appear; (2)
with respect to the commercial general liability policy and all other liability insurance,
such insurance must name Lender as an “Additional Insured” (using the applicable ISO form,
or an equivalent form reasonably acceptable to Lender, without modification, and which
policy must contain standard commercial general liability “other insurance” wording,
unmodified in any way that would make it excess over or contributory with the additional
insured’s own commercial general liability coverage); (3) Lender’s coverage under the
policies must not be terminated, reduced, or affected in any manner regardless of any breach
or violation by Borrower of any warranties, declarations, or conditions in the policies; (4)
no policies will be canceled, endorsed, altered, or reissued to effect a change in coverage
for any reason and to any extent whatsoever unless the insurer has first given Lender no
less than thirty (30) days’ prior written notice; and (5) Lender must be permitted, but not
be obligated, to make premium payments to prevent any cancellation, endorsement, alteration,
or reissuance of the policies, and such payments must be accepted by the insurer to prevent
same. Lender must be furnished with the original of each such initial policy when this
Agreement is executed and the original of each renewal policy not less than thirty (30) days
before the expiration of the initial policy or each immediately preceding renewal policy,
and Lender must additionally be concurrently furnished with receipts or other evidence that
the premiums on all the policies have been paid for at least one (1) year. Borrower shall
furnish to Lender, on or before thirty (30) days after the close of each of Borrower’s
fiscal years while this Deed of Trust is in force and effect, a statement certified by
Borrower or a duly authorized officer of Borrower of the amounts of insurance maintained in
compliance with this Section, of the risks covered by such insurance, and of the insurance
companies which carry the insurance. For purposes of this Section, the term “ISO” shall mean
Insurance Services Office.

     (b) Texas Collateral Protection Insurance Notice. According to Section 307.052
of the Texas Finance Code the following notice is given to Borrower by Lender:

          (i) Borrower is required to (A) keep the Lot or Home insured against damage in the
amount the Lender specifies; (B) purchase the insurance from an insurer that is authorized
to do business in Texas or an eligible surplus lines insurer; and (C) name Lender as the
person to be paid under the policy in the event of a loss;

          (ii) Borrower must, if required by Lender, deliver Lender a copy of the policy and
proof of the payment of premiums; and

          (iii) If Borrower fails to meet any requirement listed in paragraph (b)(i) or
(b)(ii) above, Lender may obtain collateral protection insurance on behalf of Lender at
Borrower’s expense.

     9.35 Storage of Materials and Equipment. Borrower will cause all equipment, supplies
and materials acquired or furnished in connection with the construction of each Home but not
affixed to or incorporated into the Project to be stored on the Lot or at other locations
reasonably approved by Lender in writing, in each case under adequate safeguard to minimize the
possibility of loss, theft, damage or commingling with other property. Upon request of Lender,
Borrower will furnish an inventory of all such equipment, supplies and materials stored off-site,
specifying the location thereof. Borrower agrees that it will take all reasonable steps required
by Lender in order to perfect a security interest in such equipment, supplies and materials.

     9.36 Inventory and Sales Reports. Borrower agrees to deliver inventory reports (the
“Inventory Reports”) to Lender on or before the tenth (10th ) day of each month during
the term of the Loans covering all sales of homes, and (if applicable) cancelled sales, occurring
in the immediately

36

 

preceding month. All Inventory Reports must be in form and content satisfactory to Lender, in
Lender’s sole and absolute discretion, and must specify the following: (i) the number and location
(subdivision and street address with city) of homes (“Other Homes”) that Borrower has under
construction that are not the subject of a Loan categorizing them as vacant lots, Spec Homes,
Pre-Sold Homes, or Model Homes, (ii) the number and location (subdivision and street address with
city) of Homes that Borrower has under construction that are the subject of the Loans approved
hereunder categorizing them as Pre-Sold Homes, Spec Homes or Model Homes, (iii) the number and
location (subdivision and street address with city) of Homes that have been fully completed
(subject to minor customer selection items) and a description of which completed Homes are Pre-Sold
Homes, Spec Homes or Model Homes, (iv) sales reports showing whether such Home or Other Home is
under contract or sold, including the contract closing date or the date of the sale if already
sold, and (v) sales prices of all Pre-Sold Homes.

     9.37 Approved Sales Contracts; Homeowner Financing Approval Letter. Borrower agrees
that if any Approved Sales Contract with respect to a Project is terminated for any reason or
otherwise ceases to be a valid and binding obligation of the parties thereto for any reason or if
any party thereto is in default thereunder, or if a Homeowner Financing Approval Letter for a
Project is withdrawn or terminated for any reason. then Borrower shall immediately inform Lender of
such fact in writing.

     9.38 Transactions with Affiliates. Borrower shall not enter into or be a party to any
agreement or transaction with any Affiliate except in the ordinary course of and pursuant to the
reasonable requirements of Borrower’s business and upon fair and reasonable terms that are no less
favorable to Borrower than it would obtain in a comparable arms length transaction with a Person
not an Affiliate of such Borrower, and on terms consistent with the business relationship of such
Borrower and such Affiliate prior to the Effective Date, and fully disclosed to Lender.

     9.39 Financial Covenants. Borrower shall maintain and comply with the following
financial covenants during the term of the Loan:

     (a) Minimum Available Liquidity. Borrower shall maintain a minimum Available
Liquidity equal to at least $300,000, based on the quarterly financial statements of
Borrower for such month delivered to Lender in accordance with Section 9.7(a) and
accompanied by a duly executed Financial Statement Certification and a duly completed and
executed Compliance Certificate. The amount of minimum Available Liquidity will be reviewed
by the Borrower and Lender on a periodic basis, not more frequently than quarterly and
adjusted as necessary to reflect changes in Borrower’s Operating Expenses, operations and
liquidity needs as mutually determined by Borrower and Lender acting in good faith. Any
such adjustments to the minimum Available Liquidity shall be documented in a written
agreement executed by Borrower and Lender.

     (b) Minimum Tangible Net Worth. Borrower will maintain a minimum Tangible Net
Worth that is equal to or greater than $2,100,000, calculated based on the quarterly
financial statements of Borrower for such month delivered to Lender in accordance with
Section 9.7(a) and accompanied by a duly executed Financial Statement Certification
and a duly completed and executed Compliance Certificate.

     9.40 Subordination. Notwithstanding anything to the contrary contained in the Loan
Documents, the Organizational Agreements of Borrower, or otherwise, each Borrower-Related Party
agrees that if, for any reason whatsoever, Borrower now or hereafter becomes liable, obligated or
indebted to such Borrower-Related Party, all such liabilities, obligations and Indebtedness,
together with all interest thereon and fees and other charges in connection therewith, and all
liens, security interests, charges and other security devices, shall at all times, be second,
subordinate and inferior in right of

37

 

payment, in lien priority and in all other respects to the Debt and all liens, collateral
assignments, security interests and other security devices securing the Debt.

     9.41 Management Fee. While any Event of Default has occurred and is continuing,
Borrower shall not make any payments or distribute any Loan proceeds to Affiliates (such as for
soft costs, general contractor services, administration, overhead, and similar services) even if
such payments are included in the Approved Budget, including, without limitation, the Management
Fee any fees payable under the Management Services Agreement, Borrower’s Organizational Agreements,
or any other agreement or understanding. Notwithstanding anything to the contrary contained in the
Loan Documents, the Organizational Agreements of Borrower, or otherwise, Borrower and the
Borrower-Related Parties shall not pay the Managing Member or any Affiliate thereof any amount in
excess of the Management Fee and Borrower shall not make any supplemental or additional payments to
the Managing Member under the Management Services Agreement, the Organizational Agreements of
Borrower any other agreement or understanding. Any payment of, or on account of, the Management
Fee or any other obligation which shall be received by the Managing Member, any Affiliate or any
other party, at a time when such payment is not permitted to be made or retained under the terms of
this Agreement, shall not constitute property of the Managing Member or such recipient, but shall
be received and held in trust by such recipient for the benefit of Lender and promptly paid over to
Lender.

ARTICLE X

CONSTRUCTION AND OTHER CONTRACTS

     10.1 Assignment of Construction Contracts. As additional security for the payment of
the Debt and the performance of Borrower’s Obligations, Borrower hereby transfers and assigns to
Lender for the benefit of Lender, all of Borrower’s rights and interest, but not its obligations,
in, under and to all contracts, subcontracts and agreements, written or oral, between Borrower and
any other party, and between parties other than Borrower, in any way relating to the development of
the Property and/or the construction of improvements on the Property, or the supplying of material
(specially fabricated or otherwise), labor, supplies, or other services therefor (collectively, the
“Construction Contracts”) upon the following terms and conditions:

     (a) Borrower represents and warrants to Lender that the copy of each Construction
Contract that Borrower has furnished or will furnish to Lender is or will be a true and
complete copy thereof, including all amendments thereto, if any, and that Borrower’s
interest therein is not subject to any claim, setoff or encumbrance;

     (b) neither this assignment nor any action by Lender shall constitute an assumption by
Lender of any obligations under any Construction Contract, and Borrower shall continue to be
liable for all obligations of Borrower thereunder; and Borrower hereby agrees to perform all
of its obligations under each Construction Contract. Borrower hereby agrees to indemnify
and hold Lender harmless against and from any loss, cost, liability or expense (including,
but not limited to, consultants’ fees and expenses and attorneys’ fees and expenses)
incurred in connection with Borrower’s failure to perform any such Construction Contract or
any action taken by Lender, except for matters arising as a result of the gross negligence
or willful misconduct by Lender;

     (c) upon the occurrence of an Event of Default, and during the continuance thereof,
Lender shall have the right at any time (but shall have no obligation) to take in its name
or in the name of Borrower such action as Lender may at any time determine to be necessary
or advisable to cure any default under any Construction Contract or to protect the rights of
Borrower or Lender thereunder. Lender shall incur no liability if any action so taken by it
or in its behalf shall prove

38

 

to be inadequate or invalid, and Borrower agrees to indemnify and hold Lender harmless
against and from any loss, cost, liability or expense (including but not limited to
reasonable attorneys’ fees) incurred in connection with any such action, except for matters
arising as a result of the gross negligence or willful misconduct of Lender;

     (d) Borrower hereby irrevocably constitutes and appoints Lender as Borrower’s
attorney-in-fact, in Borrower’s or Lender’s name, to enforce all rights of Borrower under
each Construction Contract; provided, however, that Lender agrees not to exercise such
appointment until the occurrence of an Event of Default, and during the continuance thereof.
Such appointment is coupled with an interest and is therefore irrevocable;

     (e) prior to the occurrence of an Event of Default, Borrower shall have the right to
exercise its rights as owner under each Construction Contract, provided that Borrower shall
not cancel or amend any Construction Contract or do or suffer to be done any act which would
impair the security constituted by this assignment without the prior written consent of
Lender;

     (f) this assignment shall inure to the benefit of Lender and its successors and
assigns, any purchaser upon foreclosure of the Liens against the Property, any receiver in
possession of the Property or any portion thereof and any entity affiliated with Lender
which assumes Lender’s rights and obligations under this Agreement; and

     (g) Borrower, in its capacity as general contractor for the Projects, hereby consent to
the foregoing assignment and the terms of this Section 10.1.

     10.2 Assignment of Plans and Specifications. As additional security for the payment
of the Loans and Borrower’s other Obligations under the Loan Documents, and the performance of the
covenants and agreements under the Loan Documents, Borrower hereby transfers and assigns to Lender
for the benefit of Lender all of Borrower’s right, title and interest in and to the Plans and
Specifications for each Project, and hereby represents and warrants to and agrees with Lender as
follows:

     (a) each schedule of the Plans and Specifications delivered or to be delivered to
Lender for a Project is and shall be a complete and accurate description of the Plans and
Specifications for such Project;

     (b) the Plans and Specifications for each Project are and shall be complete and
adequate for the construction of the Project and there have been no modifications thereof
except as described in such schedule. The Plans and Specifications shall not be materially
modified without the prior written consent of Lender, which shall not be unreasonably
withheld or delayed;

     (c) Lender may use the Plans and Specifications for any purpose relating to the
Project, including but not limited to inspections of construction and the completion of the
Project;

     (d) Lender’s acceptance of this assignment shall not constitute approval of the Plans
and Specifications by Lender. Lender has no liability or obligation in connection with the
Plans and Specifications and no responsibility for the adequacy thereof or for the
construction of the Project contemplated by the Plans and Specifications. Lender has no duty
to inspect the Improvements, and if Lender should inspect the Improvements, Lender shall
have no liability or obligation to Borrower, Lender or any other party arising out of such
inspection. No such inspection nor any failure by Lender to make objections after any such
inspection shall constitute a representation by Lender that the Improvements are in
accordance with the Plans and Specifications or any other requirement or constitute a waiver
of Lender’s right thereafter to insist

39

 

that the Project be constructed in accordance with the Plans and Specifications or any
other requirement; and

     (e) this assignment shall inure to the benefit of Lender and its successors and
assigns, any purchaser upon foreclosure of any Deed of Trust, any receiver in possession of
the Property or any part thereof and any entity affiliated with Lender which assumes
Lender’s rights and obligations under this Agreement.

     10.3 Assignment of Purchase Contracts. As additional security for the Loans, Borrower
transfers and assigns the Purchase Contracts to Lender. In connection with this assignment Borrower
irrevocably appoints Lender as Borrower’s agent and attorney-in-fact with full power of
substitution to, after an Event of Default, exercise every right granted to Borrower under the
Purchase Contracts and to do all things Borrower could do under or in connection with the Purchase
Contracts. Borrower agrees that this power of attorney is coupled with an interest and cannot be
revoked. Lender’s rights under this Section are in addition to all other rights and remedies Lender
may have under this Agreement or any of the other Loan Documents. This assignment will inure to the
benefit of Lender, its successors and assigns, any purchaser upon foreclosure of the Deed of Trust,
and any receiver in possession of the Lot or Home.

     10.4 Assignment of Other Contracts. As additional security for the payment of the
Loans and Borrower’s other Obligations under the Loan Documents, and the performance of the
covenants and agreements under the Loan Documents, Borrower hereby transfers and collaterally
assigns to Lender all of Borrower’s rights, titles and interests, but not its obligations, in,
under and to any all other contracts and agreements between Borrower and any Persons pertaining to
the construction of the Home and each Project (the “Other Contracts”), whether now existing or
hereafter entered into, upon the following terms and conditions:

     (a) Borrower represents and warrants that the copy of any Other Contracts it has
furnished to Lender is a true and complete copy thereof and that Borrower’s interest therein
is not subject to any claim, setoff, or encumbrance.

     (b) neither this assignment nor any action by Lender shall constitute an assumption by
Lender of any obligations under any Other Contracts, and Borrower shall continue to be
liable for all obligations of Borrower thereunder, Borrower hereby agreeing to perform all
of its obligations under any Other Contracts. Borrower indemnifies and holds Lender
harmless against and from any loss, cost, liability, or expense (including, but not limited
to, reasonable attorneys’ fees) resulting from any failure of Borrower to so perform, except
for matters as a result of the gross negligence or willful misconduct of Lender;

     (c) during the existence and continuance of an Event of Default, Lender shall have the
right at any time (but shall have no obligation) to take in its name or in the name of
Borrower such action as Lender may at any time reasonably determine to be necessary or
advisable to cure any default under any Other Contracts or to protect the rights of
Borrower, Lender thereunder. Lender shall incur no liability if any action so taken by it
shall prove to be inadequate or invalid, and Borrower agrees to hold Lender free and
harmless against and from any loss, cost, liability or expense (including, but not limited
to, reasonable attorneys’ fees) incurred in connection with any such action, except for a
loss, cost, liability or expense resulting solely from Lender’s intentional actions or gross
negligence;

     (d) during the existence and continuance of an Event of Default, Borrower hereby
irrevocably constitutes and appoints Lender as Borrower’s attorney-in-fact, in Borrower’s
name or in Lender’s name, to enforce all rights of Borrower under any Other Contracts;

40

 

     (e) except during the existence of an Event of Default, Borrower shall have the right
to exercise its rights as owner under any Other Contracts, provided that Borrower shall not
cancel or amend such Other Contracts or do or suffer to be done any act which would impair
the security constituted by this assignment without the prior written consent of Lender,
which shall not be unreasonably withheld or delayed; and

     (f) upon the request of Lender, Borrower shall use its best efforts to cause each
Person that is a party to any Other Contract to deliver to Lender, a consent to the
foregoing assignment in form and substance satisfactory to Lender.

     10.5 INDEMNITY MATTERS. WITHOUT LIMITATION, THE FOREGOING INDEMNITIES CONTAINED IN
SECTIONS 10 SHALL APPLY TO LENDER WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART ARE
CAUSED BY OR ARISE OUT OF, OR ARE CLAIMED TO BE CAUSED BY OR ARISE OUT OF, THE NEGLIGENCE (WHETHER
SOLE, COMPARATIVE OR CONTRIBUTORY) OR STRICT LIABILITY OF LENDER. HOWEVER, SUCH INDEMNITIES SHALL
NOT APPLY TO LENDER TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES
OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LENDER.

ARTICLE XI

DEFAULT

     11.1 Default. For purposes of this Agreement, the following events shall constitute
an “Event of Default”:

     (a) the failure of Borrower to make any payment required by this Agreement or any Note
in full on or before the tenth (10th) day following the date such payment is due
(or declared due pursuant to the terms of this Agreement or such Note); or

     (b) any financial statement, representation, warranty, or certificate made or furnished
by or with respect to Borrower or any Borrower-Related Party contained in this Agreement or
any other Loan Document or made in connection herewith or therewith, shall be materially
false, incorrect, or incomplete when made; or

     (c) Borrower or any Borrower-Related Party shall fail to perform or observe any
covenant or agreement contained in this Agreement or any other Loan Document that is not
separately listed in this Section 11.1 as an Event of Default (collectively, a
“Covenant Breach”), and the same remains unremedied for ten (10) days thereafter; or

     (d) any “event of default” or “default” occurs under any Loan Document other than this
Agreement that is not separately listed in this Section 11.1; or

     (e) the entry of a decree or order for relief by a court having jurisdiction in respect
of Borrower or any Borrower-Related Party 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 or any Borrower-Related Party for any substantial
part of their respective properties or the Property, or ordering the winding up or
liquidation of such person’s affairs; or

41

 

     (f) the commencement by Borrower or any Borrower-Related Party 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 or any Borrower-Related
Party for any substantial part of their respective properties or the Property, or the making
by Borrower or any Borrower-Related Party of any assignment for the benefit of creditors, or
the admission by Borrower or any Borrower-Related Party in writing of its inability to pay
its debts generally as they become due; or

     (g) the appointment of or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or similar official of all or a substantial part of the
assets of Borrower or any Borrower-Related Party or the Property in a proceeding brought
against or initiated by Borrower or any Borrower-Related Party or the Property;

     (h) if Borrower or any Borrower-Related Party that is an entity is liquidated or
dissolved or winds up their affairs, or the sale or liquidation of all or substantially all
of the assets of Borrower or any Borrower-Related Party that is an entity; or

     (i) any Disposition of any Project occurs without payment in full to Lender of the
Partial Release Amount related to such Project, or the Principal Officers cease to have
day-to-day control and management of the Managing Member, or the Managing Member ceases to
have day-to-day control and management of the Borrower; or

     (j) any “default” or “event of default” not cured within the grace period, if any, for
such default or event of default (the terms “default” and “event of default” have the
meaning given to such terms in the agreements and documents described below), shall occur
under (i) any credit agreement, loan agreement, promissory note or other document evidencing
Indebtedness for borrowed money to which Borrower is a party as a borrower, debtor,
guarantor or other obligor, (ii) any subordination agreement, security agreement, pledge
agreement, guaranty, deed of trust, or other agreement providing guaranty of or security or
collateral for Indebtedness, executed by or binding upon Borrower, (iii) 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 is a party, if any of Lender or any member of the UDF Group or any of their
respective affiliates is also a party to such agreement; or

     (k) the death or disability at any time while the Debt is outstanding of any Principal
Officer; or

     (l) in Lender’s opinion, any material adverse change occurs in the financial condition
or business of Borrower or any Borrower-Related Party; or

     (m) Borrower alleges that any Loan Document is invalid or is not binding upon Borrower
for any reason; or

     (n) Borrower or any Borrower-Related Party suffers the entry against it of a final
judgment for the payment of money in excess of $50,000 which is not covered by insurance
which is not paid in full within ten (10) days thereafter; or

42

 

     (o) Borrower or any Borrower-Related Party suffers a writ or warrant of attachment or
any similar process to be issued by any tribunal against all or any substantial part of its
properties or the Collateral, and such writ or warrant of attachment or any similar process
is not stayed or released within thirty (30) days after the entry or levy thereof or after
any stay is vacated or set aside; or

     (p) in Lender’s opinion, the prospect for payment or the prospect for performance with
respect to this Agreement or any other agreement that Borrower or any Borrower-Related Party
may have with Lender is impaired and Lender so notifies Borrower in writing; or

     (q) Borrower or any Borrower-Related Party fails to comply with any covenant or
agreement in any of Sections 9.1, 9.2, 9.4, 9.5, 9.9, 9.11, 9.16, 9.19, 9.20, 9.22,
9.38, 9.40 or 9.41 in any respect; or

     (r) Borrower fails to maintain the minimum Available Liquidity for a given month as set
forth in Section 9.39(a) and fails to increase its minimum Available Liquidity to
the amount required by Section 9.39(a) by the 15th day of the following month; or

     (s) Borrower fails to maintain the minimum Tangible Net Worth for a given month as set
forth in Section 9.39(b) and fails to increase its minimum Tangible Net Worth to the
amount required by Section 9.39(b) by the 15th day of the following month; or

     (t) Borrower fails to deliver the quarterly financial statements, the Financial
Statement Certification, or the Compliance Certificate by the date required by Section
9.7(a) and such failure remains unremedied by the fifteenth day thereafter; or

     (u) If any Lien for labor, services or materials performed or furnished in connection
with the construction of any improvements is filed against any Lot or Home and it is not
paid or released or bonded within thirty (30) days after it is filed. Notwithstanding the
foregoing, the filing of such a Lien will not be an Event of Default if within thirty (30)
days after such Lien filing, Borrower pays all accrued interest and unpaid principal balance
of the applicable Loan so that the Home which is the subject of said Lien is eligible to be
released from the liens of the Deed of Trust securing repayment of Loan; or

     (v) If the building permit for any Home is revoked or if any Home violates a
Governmental Requirement in such a manner that it cannot be occupied as a single family
residence. Notwithstanding the foregoing, such revocation or violation will not be an Event
of Default if within thirty (30) days after such revocation or violation, Borrower pays all
accrued interest and unpaid principal balance of the applicable Loan so that the Home which
is the subject of said revocation or violation is eligible to be released from the liens of
the Deed of Trust securing repayment of Loan; or

     (w) If Borrower executes any conditional bill of sale, chattel mortgage, or other
security instrument covering any materials, fixtures, or articles of personal property
intended to be incorporated into the Lot, or covering articles of personal property placed
in any of the Homes, or if Borrower files a financing statement publishing notice of such
security interest, or if any of such materials, fixtures, or articles of personal property
are not purchased in such a manner that their ownership vests unconditionally in Borrower,
free from encumbrances, on delivery at the Lot.

43

 

     11.2 Occurrence of Event of Default. Upon the occurrence of an Event of Default,
Lender shall have the immediate right, at the sole discretion of Lender and without notice,
presentment for payment, demand, notice of nonpayment or nonperformance, protest, notice of
protest, notice of intent to accelerate, notice of acceleration or any other notice or any other
action (ALL OF WHICH BORROWER AND THE BORROWER-RELATED PARTIES HEREBY EXPRESSLY WAIVE AND
RELINQUISH) (i) to declare the entire unpaid balance of the Debt (including the outstanding
principal balance hereof, including all sums advanced or accrued hereunder or under any other Loan
Document, and all accrued but unpaid interest thereon) at once immediately due and payable (and
upon such declaration, the same shall be at once immediately due and payable) and may be collected
forthwith, whether or not there has been a prior demand for payment and regardless of the
stipulated date of maturity, (ii) to foreclose any liens and security interests securing payment
hereof or thereof (including any liens and security interests covering all or any portion of the
Mortgaged Property (as defined in the Deeds of Trust)), (iii) refuse to make any Loan or Advance to
Borrower, even if Lender had previously agreed to make such Loan or Advance, and (iv) to exercise
any of Lender’s other rights, powers, recourses and remedies under this Agreement, under any other
Loan Document or at law or in equity, and the same (A) shall be cumulative and concurrent, (B) may
be pursued separately, singly, successively or concurrently against Borrower, any Borrower-Related
Party or others obligated for the repayment of the Debt or any part hereof, or against any one or
more of them, or against all or any portion of the Mortgaged Property, at the sole discretion of
Lender, (C) may be exercised as often as occasion therefor shall arise, it being agreed by Borrower
and the Borrower-Related Parties that the exercise, discontinuance of the exercise of or failure to
exercise any of the same shall in no event be construed as a waiver or release thereof or of any
other right, remedy or recourse, and (D) are intended to be, and shall be, nonexclusive. All
rights and remedies of Lender hereunder and under the other Loan Documents shall extend to any
period after the initiation of foreclosure proceedings, judicial or otherwise, with respect to all
or any portion of the Mortgaged Property. No delay on the part of Lender in exercising any power
or right shall operate as a waiver of such power or right nor shall any single or partial exercise
of any power or right further preclude exercise of that power or right.

     11.3 Attorneys Fees. If Lender retains an attorney-at-law in connection with any
Event of Default or at maturity or to collect, enforce, or defend the Notes or any part hereof, or
any of the other Loan Documents, in any lawsuit or in any probate, reorganization, bankruptcy or
other proceeding, or otherwise, Borrower agrees to pay all reasonable costs and expenses of
collection, including but not limited to, Lender’s reasonable attorneys’ fees, whether or not any
legal action shall be instituted.

     11.4. Complete Construction. In addition to the remedies set forth in Section
11.2(i) through (iv), Lender may enter into possession of the Lot and Home and, at Lender’s
option, in the name and on behalf of Borrower, do anything in connection with the construction of
the Homes that Borrower could do in its own behalf, including without limitation, any one or more
of the following: (a) perform all work necessary to complete construction of the Homes then under
construction or discontinue any such work, whether commenced by Borrower or Lender, (b) assume
Borrower’s rights, and powers under any contract Borrower has entered into in connection with the
Lot or the construction of the Homes, (c) execute all certificates and applications that are
required under any construction contract, (d) make any additions, changes, and corrections in the
Plans and Specifications which in Lender’s judgment are necessary or desirable to complete
construction of the Homes in substantially the same manner as contemplated by the Plans and
Specifications, (e) employ architects, contractors, subcontractors, engineers, inspectors, and
security guards, and other persons to perform services or furnish materials or equipment in
connection with any action Lender takes under this Section, (f) continue any existing construction
contracts or subcontracts, (g) pay, settle, or comprise any existing bills or claims which are or
may become liens against the Lot or Home or may be necessary or desirable for the completion of the
work or the clearing of title, (h) prosecute and defend all actions or proceedings in connection
with the Lot or Home or the construction of the Homes; and (i) use any funds which remain
unadvanced on the

44

 

Loans for the purposes described in this Section. All amounts expended by Lender pursuant to
this Section will be deemed to have been disbursed to Borrower as Advances and be secured by the
Deed of Trust. For the purposes described in this Section and the enforcement of the terms and
conditions of this Agreement, Borrower irrevocably appoints Lender as Borrower’s agent and
attorney-in-fact with full power of substitution to exercise all of the rights and remedies granted
to Lender by this Section. Borrower agrees that this power of attorney is coupled with an interest
and cannot be revoked.

ARTICLE XII

MISCELLANEOUS

     12.1 Usury Laws. Notwithstanding anything to the contrary contained in this Agreement
or any other Loan Document:

     (a) It is expressly stipulated and agreed to be the intent of Borrower and Lender at
all times to comply strictly with the applicable Texas law governing the maximum rate or
amount of interest payable on the Debt, or applicable United States federal law to the
extent that such law permits Lender to contract for, charge, take, reserve or receive a
greater amount of interest than under Texas law. If the applicable law is ever judicially
interpreted so as to render usurious any amount contracted for, charged, taken, reserved or
received in respect of the Debt, including by reason of the acceleration of the maturity or
the prepayment thereof, then it is Borrower’s and Lender’s express intent that all amounts
charged in excess of the Highest Lawful Rate shall be automatically canceled, ab initio, and
all amounts in excess of the Highest Lawful Rate theretofore collected by Lender shall be
credited on the principal balance of the Debt (or, if the Debt has been or would thereby be
paid in full, refunded to Borrower), and the provisions of the Notes and the other Loan
Documents shall immediately be deemed reformed and the amounts thereafter collectible
hereunder and thereunder reduced, without the necessity of the execution of any new
document, so as to comply with the applicable laws, but so as to permit the recovery of the
fullest amount otherwise called for hereunder and thereunder; provided, however, if the
Notes have been paid in full before the end of the stated term hereof, then Borrower and
Lender agree that Lender shall, with reasonable promptness after Lender discovers or is
advised by Borrower that interest was received in an amount in excess of the Highest Lawful
Rate, either credit such excess interest against the Debt then owing by Borrower to Lender
and/or refund such excess interest to Borrower. Borrower hereby agrees that as a condition
precedent to any claim seeking usury penalties against Lender, Borrower will provide written
notice to Lender, advising Lender in reasonable detail of the nature and amount of the
violation, and Lender shall have sixty (60) days after receipt of such notice in which to
correct such usury violation, if any, by either refunding such excess interest to Borrower
or crediting such excess interest against the Debt then owing by Borrower to Lender. All
sums contracted for, charged, taken, reserved or received by Lender for the use, forbearance
or detention of the Debt shall, to the extent permitted by applicable law, be amortized,
prorated, allocated or spread, using the actuarial method, throughout the stated term of the
Notes (including any and all renewal and extension periods) until payment in full so that
the rate or amount of interest on account of the Debt does not exceed the Highest Lawful
Rate from time to time in effect and applicable to the Debt for so long as debt is
outstanding. In no event shall the provisions of Chapter 346 of the Texas Finance Code
(which regulates certain revolving credit loan accounts and revolving triparty accounts)
apply to the Notes or any other part of the Debt. Notwithstanding anything to the contrary
contained herein or in any of the other Loan Documents, it is not the intention of Lender to
accelerate the maturity of any interest that has not accrued at the time of such
acceleration or to collect unearned interest at the time of such acceleration. The terms and
provisions of this paragraph shall control and

45

 

supersede every other term, covenant or provision contained herein, in any of the other Loan
Documents or in any other document or instrument pertaining to the Debt.

     (b) To the extent that Lender is relying on Chapter 303 of the Texas Finance Code to
determine the Highest Lawful Rate payable on the Notes or any other part of the Debt,
Lender will utilize the weekly ceiling from time to time in effect as provided in such
Chapter 303, as amended. To the extent United States federal law permits Lender to contract
for, charge, take, receive or reserve a greater amount of interest than under Texas law,
Lender will rely on United States federal law instead of such Chapter 303 for the purpose
of determining the Highest Lawful Rate. Additionally, to the extent permitted by applicable
law now or hereafter in effect, Lender may, at its option and from time to time, utilize
any other method of establishing the Highest Lawful Rate under such Chapter 303 or under
other applicable law by giving notice, if required, to Borrower as provided by such
applicable law now or hereafter in effect.

     12.2 Indemnity; Release. Borrower and the Borrower-Related Parties jointly and
severally agree 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 Agreement 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 Loans evidenced hereby are contractually usurious, and
(c) any use, handling, storage, transportation, or disposal of hazardous or toxic materials on or
about the Property or any part thereof or any real properties owned, managed or operated by
Borrower or any Borrower-Related Party. Notwithstanding anything herein or in any other Loan
Document to the contrary, nothing in this Section 12.2 shall be deemed to provide for or
require any Borrower-Related Party not otherwise the Borrower or Guarantor hereunder to be liable
for the repayment of the Debt or performance of any of the obligations of Borrower or a Guarantor
under the Loan Documents unless expressly set forth herein or therein.

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 and the Borrower-Related Parties) 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 Agreement and it successors and assigns but also to each
partner, director, officer, attorney, employee, representative and affiliate of such Person.

FOR GOOD AND VALUABLE CONSIDERATION SET FORTH HEREIN, INCLUDING THE PROMISES, AGREEMENTS,
COVENANTS, REPRESENTATIONS AND OBLIGATIONS SET

46

 

FORTH IN THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS, EACH BORROWER AND EACH BORROWER-RELATED PARTY
HEREBY RELEASES AND FOREVER DISCHARGES, AND COVENANTS NOT TO SUE OR FILE ANY CHARGES OR CLAIMS
AGAINST, LENDER FOR ANY AND ALL EXISTING OR FUTURE CLAIMS, DEMANDS AND CAUSES OF ACTION, IN
CONTRACT OR IN TORT, AT LAW OR IN EQUITY, KNOWN OR UNKNOWN, PENDING OR THREATENED (COLLECTIVELY,
“CLAIMS”), FOR ALL EXISTING AND FUTURE DAMAGES AND REMEDIES ARISING OUT OF OR IN ANY WAY ASSOCIATED
WITH THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE LOANS MADE PURSUANT HERETO AND THERETO
(NOTWITHSTANDING ANYTHING CONTAINED HEREIN TO THE CONTRARY, IN NO EVENT SHALL THIS WAIVER BE DEEMED
TO BE INCLUDE A WAIVER OF ANY CLAIM AGAINST LENDER ARISING DIRECTLY OUT OF LENDER’S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT, WHETHER ARISING OUT OF TORT OR CONTRACT).

     12.3 Mutual Understanding. Borrower and the Borrower-Related Parties jointly and
severally represent and warrant to Lender that they have read and fully understand the terms and
provisions hereof, have had an opportunity to review this Agreement and the other Loan Documents
with legal counsel and have executed this Agreement and the other Loan Documents based on their own
judgment and advice of counsel. If an ambiguity or question of intent or interpretation arises,
this Agreement will be construed as if drafted jointly by Borrower, the Borrower-Related Parties
and Lender and no presumption or burden of proof will arise favoring or disfavoring any party
because of authorship of any provision of this Agreement.

     12.4 Set-Off. Borrower hereby gives and confirms to Lender a right of set-off of all
moneys, securities and other property of Borrower (whether special, general or limited) and the
proceeds thereof, now or hereafter delivered to remain with or in transit in any manner to Lender,
its correspondents or its agents from or for Borrower, whether for safekeeping, custody, pledge,
transmission, collection or otherwise or coming into possession of Lender in any way, and also, of
all other liabilities and obligations now or hereafter owed by Borrower to Lender, contracted with
or acquired by Lender, whether joint, several, absolute, contingent, secured, unsecured, matured or
unmatured, hereby authorizing Lender at any time after an Event of Default has occurred and is
continuing, without prior notice, to apply such balances, credits of claims or any part thereof, to
such liabilities in such amounts as it may select, whether contingent, unmatured or otherwise, and
whether any collateral security therefor is deemed adequate or not. The rights described herein
shall be in addition to any collateral security described in any separate agreement executed by
Borrower.

     12.5 Cumulative Remedies. All rights and remedies that Lender is afforded by reason
of this Agreement are separate and cumulative with respect to Borrower and the Borrower-Related
Parties or any of them 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.

     12.6 No Third Party Beneficiaries. The benefits of this Agreement will not inure to
any third party. This Agreement will not be construed to make or render Lender liable to any
materialmen, subcontractors, contractors, laborers, or others for goods and materials supplied or
labor performed in connection with any construction of any of the Homes. Lender is not liable for
the manner in which any Advances under this Agreement may be applied by Borrower or any of
Borrower’s contractors or subcontractors. Notwithstanding anything contained in the Loan Documents
or any conduct or course of conduct by Borrower or Lender, before or after the date of this
Agreement, this Agreement will not be

47

 

construed as creating any rights, claims, or causes of action against Lender, or any of its
officers, directors, agents or employees, in favor of any contractor, subcontractor, supplier of
labor or materials, or any of their respective creditors, or any other person or entity other than
Borrower. Without limiting the generality of the foregoing, Advances made to any Person other than
Borrower (including, without limitation, any contractor, subcontractor or supplier of labor or
materials) will not be deemed recognition by Lender of any third-party beneficiary status claimed
by any such person or entity.

     12.7 Notice. Any notice, request or other communication required or given hereunder
or under any other Loan Document shall be given in writing by any of the following methods: (a)
registered or certified mail, (b) facsimile, (c) delivered personally by courier service, or (d)
delivered by nationally recognized overnight delivery service; in each case, addressed to the
respective parties as follows:

If to Borrower:

Cheldan MM, L.L.C.

6861 Corporation Parkway

Fort Worth, Texas 76126

Facsimile No. (817) 244-9307

Attention: Rick Nunnally

If to 2M Holdings, L.P.:

1221 North I-35 East, Suite 200

Carrollton, Texas 75006

Facsimile No. (469) 892-7201

Attention: Mehrdad Moayedi

If to Cheldan Enterprises, L.P.:

Cheldan Enterprises, L.P.

6861 Corporation Parkway

Fort Worth, Texas 76126

Facsimile No. (817) 244-9307

Attention: Rick Nunnally

48

 

If to Lender:

UDF IV Home Finance, L.P.

1301 Municipal Way

Suite 100

Grapevine, TX 76051

Facsimile No. (214) 530-8211

Attention: David Hanson, UMTH General Services, L.P. — Advisor

With a copy (which shall not constitute notice to Lender) to:

Melissa Youngblood, Esq.

Hallett & Perrin, P.C.

2001 Bryan Street, Suite 3900

Dallas, Texas 75201

Facsimile No. (214) 922-4170

Each notice or other communication will be treated as effective and as having been given and
received (a) if sent by certified mail, or registered mail, three (3) Business Days after deposit
in a regularly maintained receptacle for deposit of United States mail, (b) if sent by facsimile,
upon written or electronic confirmation of facsimile transfer, (c) if delivered by courier, upon
written or electronic confirmation of delivery from such service, or (d) if sent by
nationally-recognized overnight delivery service, upon written or electronic confirmation of
delivery from such service. Borrower’s and the Borrower-Related Parties’ respective addresses for
notice may be changed at any time and from time to time, but only after thirty (30) days’ advance
written notice to Lender and shall be the most recent such address furnished in writing by them to
Lender. Lender’s address for notice may be changed at any time and from time to time, but only
after written notice to Borrower and the Borrower-Related Parties and shall be the most recent such
address furnished in writing by Lender to them. Actual notice, however and from whomever given or
received, shall always be effective when received.

     12.8 Enforcement and Waiver by Lender. Lender shall have the right at all times to
enforce the provisions of this Agreement 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.

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

     12.10 JURISDICTION; VENUE. BORROWER AND EACH BORROWER-RELATED PARTY IRREVOCABLY AGREE
THAT ANY LEGAL PROCEEDING IN RESPECT OF THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS SHALL BE
BROUGHT BY THEM IN THE DISTRICT COURTS OF TARRANT COUNTY, TEXAS, OR THE UNITED STATES DISTRICT
COURTS FOR THE NORTHERN DISTRICT OF TEXAS, FORT WORTH DIVISION (THE “SPECIFIED COURTS”). BORROWER
AND EACH BORROWER-RELATED

49

 

PARTY HEREBY IRREVOCABLY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE SPECIFIED COURTS.
BORROWER AND EACH BORROWER-RELATED PARTY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED
BY LAW, ANY OBJECTION WHICH IT OR HE MAY NOW OR HEREAFTER HAVE THAT THE LAYING OF VENUE OF ANY
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH SPECIFIED COURT HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM AND HEREBY IRREVOCABLY AGREES TO A TRANSFER OF ALL SUCH PROCEEDINGS TO THE SPECIFIED COURTS.
NOTHING HEREIN SHALL AFFECT THE RIGHT OF LENDER TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST BORROWER OR ANY BORROWER-RELATED PARTY IN ANY JURISDICTION OR TO SERVE PROCESS IN ANY
MANNER PERMITTED BY APPLICABLE LAW.

     12.11 Counterparts. This Agreement 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.

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

     12.13 Amendments; Waivers. No amendment or waiver of any provision of this Agreement
nor consent to any departure herefrom, shall in any event be effective unless the same shall be in
writing and signed by 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.

     12.14 Binding Effect; Assignment. This Agreement and the other Loan Documents shall be
binding on Borrower and the Borrower-Related Parties and their respective successors and assigns,
including, without limitation, any receiver, trustee or debtor in possession of or for Borrower or
any Borrower-Related Party, and shall inure to the benefit of Lender and its successors and
assigns. Neither Borrower nor any Borrower-Related Party shall be entitled to transfer or assign
this Agreement and the other Loan Documents in whole or in part without the prior written consent
of Lender. This Agreement and the other Loan Documents are freely assignable and transferable by
Lender without the consent of Borrower and the Borrower-Related Parties. Should the status,
composition, structure or name of Borrower or any Borrower-Related Party change, this Agreement and
the other Loan Documents shall continue to be binding upon such Person and also cover such Person
under the new status composition, structure or name according to the terms hereof and thereof.

     12.15 Time of the Essence. Time is of the essence in this Agreement and the other
Loan Documents.

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

     12.17. Further Assurances. Borrower and the Borrower-Related Parties will, at their
expense, promptly execute and deliver to Lender, all such other and further documents, agreements
and instruments, and shall deliver all such supplementary information, of Borrower and the
Borrower-Related Parties or with respect to the Property and the Collateral in compliance with or
accomplishment of the

50

 

agreements of Borrower and the Borrower-Related Parties under the Loan Documents upon Lender’s
request from time to time.

     12.18 WAIVER OF JURY TRIAL, PUNITIVE DAMAGES, ETC. BORROWER AND EACH BORROWER-RELATED
PARTY HEREBY KNOWINGLY, VOLUNTARILY, INTENTIONALLY, AND IRREVOCABLY (A) WAIVES, TO THE MAXIMUM
EXTENT NOT PROHIBITED BY LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION BASED HEREON, OR DIRECTLY OR INDIRECTLY AT ANY TIME ARISING OUT OF, UNDER OR IN
CONNECTION WITH THIS AGREEMENT OR THE LOAN DOCUMENTS OR ANY TRANSACTION CONTEMPLATED HEREBY OR
THEREBY OR ASSOCIATED HEREWITH OR THEREWITH; (B) WAIVES, TO THE MAXIMUM EXTENT NOT PROHIBITED BY
LAW, ANY RIGHT SUCH PARTY 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 LENDER WOULD
NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS, AND (D) ACKNOWLEDGES THAT
LENDER HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS AND THE
TRANSACTIONS CONTEMPLATED HEREBY AND THEREBY BASED UPON, AMONG OTHER THINGS, THE WAIVERS AND
CERTIFICATIONS CONTAINED IN THIS SECTION. AS USED IN THIS SECTION, “SPECIAL DAMAGES” INCLUDES ALL
SPECIAL, CONSEQUENTIAL, EXEMPLARY, OR PUNITIVE DAMAGES (REGARDLESS OF HOW NAMED), BUT DOES NOT
INCLUDE ANY PAYMENTS OR FUNDS WHICH ANY PARTY HERETO HAS EXPRESSLY PROMISED TO PAY OR DELIVER TO
ANY OTHER PARTY HERETO.

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

     12.21 No Obligation by Lender to Construct. Lender has no liability or obligation in
connection with the Lot or its development or construction of Homes. Lender is not obligated to
inspect the work in progress. Lender is not liable for (i) the performance or default of any
contractor or subcontractor, (ii) any failure to construct, complete, protect, or insure a Home,
(iii) the payment of any cost or expense incurred in connection therewith, or (iv) the performance
or nonperformance of any obligation of Borrower or any Borrower-Related Party to Lender or to any
other Person.

     12.22 No Obligation by Lender to Operate. Notwithstanding anything contained in the
Loan Documents to the contrary, Lender shall not have, and by its execution and acceptance of this
Agreement hereby expressly disclaims, any obligation or responsibility for the management, conduct,
or operation of the business and affairs of Borrower or any Borrower-Related Party. Any term or
condition of the Loan Documents which permits Lender to disburse funds, whether from the proceeds
of the Loans or otherwise, or to take or refrain from taking any action with respect to Borrower,
any Borrower-Related Party, a Lot or Home, or any other collateral for repayment of the Loans,
shall be deemed to be solely to permit Lender to audit and review the management, operation, and
conduct of the business and affairs of

51

 

Borrower and any Borrower-Related Party, and to maintain and preserve the security given by
Borrower to Lender for the Loans, and may not be relied upon by any other person. Further, Lender
shall not have, has not assumed and by its execution and acceptance of this Agreement expressly
disclaims any liability or responsibility for the payment or performance of any indebtedness or
obligation of Borrower or any Borrower-Related Party and no term or condition of the Loan
Documents, should be construed otherwise. Further, Lender shall have no obligation under any
Approved Sales Contract or other agreement for the sale of any Home or Lot. Borrower expressly
acknowledges that no term or condition of the Loan Documents should be construed to deem the
relationship between Borrower, the Borrower-Related Parties, and Lender to be other than that of
debtor and creditor relationship. Borrower shall at all times represent that the relationship
between Borrower, Borrower-Related Parties, and Lender is solely that of borrower, obligated party,
and lender. BORROWER AGREES TO DEFEND, INDEMNIFY, AND HOLD LENDER HARMLESS FROM ANY COST, EXPENSE,
OR LIABILITY INCURRED BY LENDER ARISING OUT OF ANY CLAIM THAT LENDER HAS ANY OBLIGATION OR IS
RESPONSIBLE FOR THE MANAGEMENT, OPERATION, OR CONDUCT OF THE BUSINESS AND AFFAIRS OF BORROWER OR
ANY BORROWER-RELATED PARTY OR AS A RESULT OF ANY CLAIM THAT LENDER HAS ANY OBLIGATION OR IS
RESPONSIBLE FOR THE PAYMENT OR PERFORMANCE OF ANY INDEBTEDNESS OR OBLIGATION OF BORROWER OR ANY
BORROWER-RELATED PARTY.

[The remainder of this page is left blank intentionally; signature page follows]

52

 

     This Agreement has been executed on this the 26th day of April, 2010, effective for all
purposes as of the Effective Date.

	 	 	 	 	 	 	 	 	 	 	 

	BORROWER:	 	CHELDAN MM, L.L.C.,	 	 
	 	 	a Texas limited liability company	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	Cheldan Enterprises, L.P.,	 	 
	 	 	 	 	a Texas limited partnership,	 	 
	 	 	 	 	Its: Member	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	Cheldan Enterprises Management, L.L.C.,	 	 
	 	 	 	 	 	 	a Texas limited liability company	 	 
	 	 	 	 	 	 	Its: General Partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Allen R. Goss, Jr.
 

	 	 
	 	 	 	 	 	 	Name: Allen R. Goss, Jr.	 	 
	 	 	 	 	 	 	Its:      Chief Executive Officer	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	By:	 	2M Holdings, L.P.,	 	 
	 	 	 	 	a Delaware limited partnership	 	 
	 	 	 	 	Its: Member	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	2M Ventures, LLC	 	 
	 	 	 	 	 	 	a Delaware limited liability company	 	 
	 	 	 	 	 	 	Its: General Partner	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	By:
	 	/s/ Mehrdad Moayedi
 

	 	 
	 	 	 	 	 	 	Name: Mehrdad Moayedi	 	 
	 	 	 	 	 	 	Its:      Sole Manager	 	 

53

 

BORROWER-RELATED PARTIES:

Cheldan Enterprises, L.P., a Texas limited partnership, hereby executes this Agreement for the sole
purpose of acknowledging and agreeing to the representations, warranties, covenants and agreements
as same relate to it, specifically in its capacity as a Borrower-Related Party under this
Agreement.

	 	 	 	 	 	 	 	 	 

	 	 	CHELDAN ENTERPRISES, L.P.,	 	 
	 	 	a Texas partnership	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	Cheldan Enterprises Management, L.L.C.,	 	 
	 	 	 	 	a Texas limited liability company	 	 
	 	 	 	 	Its: General Partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Allen R. Goss, Jr.
 

	 	 
	 	 	 	 	Name: Allen R. Goss, Jr.	 	 
	 	 	 	 	Its:      
Chief Executive Officer	 	 

2M Holdings, L.P., a Delaware limited partnership, hereby executes this Agreement for the sole
purpose of acknowledging and agreeing to the representations, warranties, covenants and agreements
as same relate to it, specifically in its capacity as a Borrower-Related Party under this
Agreement.

	 	 	 	 	 	 	 	 	 

	 	 	2M HOLDINGS, L.P.,	 	 
	 	 	a Delaware limited partnership	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	By:	 	2M Ventures, LLC	 	 
	 	 	 	 	a Delaware limited liability company	 	 
	 	 	 	 	Its: General Partner	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:
	 	/s/ Mehrdad Moayedi
 

	 	 
	 	 	 	 	Name: Mehrdad Moayedi	 	 
	 	 	 	 	Its:      Sole Manager	 	 

Mehrdad Moayedi, an individual, hereby executes this Agreement for the sole purpose of
acknowledging and agreeing to the representations, warranties, covenants and agreements as same
relate to it, specifically in its capacity as a Guarantor and a Borrower-Related Party under this
Agreement.

	 	 	 	 	 
	 	 	 
	 	            /s/ Mehrdad Moayedi
 	 
	 	MEHRDAD MOAYEDI 	 
	 	 	 
	 

54

 

     This Agreement has been executed on this the 26th day of April, 2010, effective for
all purposes as of the Effective Date.

	 	 	 	 	 	 	 

	LENDER:	 	UDF IV HOME FINANCE, L.P.,	 	 
	 	 	a Delaware limited partnership	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	UDF IV HF Manager, LLC,	 	 
	 

	 	 	 	a Delaware limited liability company	 	 
	 	 	Its:       General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	United Development Funding IV,	 	 
	 

	 	 	 	a real estate investment trust organized under	 	 
	 

	 	 	 	the laws of the state of Maryland	 	 
	 	 	Its:       Managing Member	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ David Hanson
 

	 	 
	 	 	Name: David Hanson	 	 
	 	 	Its:      Chief Operating Officer	 	 

55

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00177-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00177-of-00352.parquet"}]]