UNITED DEVELOPMENT FUNDING III,
L.P.
1702 N. Collins Blvd., Suite 100
Richardson, Texas 75080
Effective Date: September 1,
2006
United
Development Funding, L.P.
1812 Cindy Lane, Suite 200
Bedford, Texas 76021
RE: Credit
Enhancement Fee related to Guaranty of Note
This letter
agreement (this “ Agreement ”) sets forth our
understanding with respect to the Limited Guaranty dated as of
September 1, 2006 (as it may be amended, the “
Guaranty ”) that United Development Funding III, L.P.,
a Delaware limited partnership (“ UDF III ”) has
agreed to enter into, execute and deliver to United Mortgage Trust,
a real estate investment trust organized under the laws of the
state of Maryland (“ UMT ”) for the benefit of
United Development Funding, L.P., a Nevada limited partnership
(“ UDF ”), in connection with the line of credit
provided by UMT to UDF pursuant to that certain Second Amended and
Restated Secured Line of Credit Promissory Note dated June 20,
2006 in the principal amount of U.S. $45,000,000 (as it may be
amended, the “ Note ”). Capitalized terms not
defined herein shall have the meanings given to such terms in the
Guaranty.
In consideration
of UDF III’s agreement to enter into the Guaranty, UDF agrees
to pay UDF III or its assigns a monthly credit enhancement fee for
so long as the Guaranty is outstanding (the “ Credit
Enhancement Fee ”), due in arrears on the fifteenth day
of the following month, commencing on October 15, 2006, in an
amount equal to the result of following calculation, calculated as
of the last day of the month for which such Credit Enhancement Fee
is due:
[Maximum Exposure of UDF III under
the Guaranty] x [Enhancement Percentage]
where
(a) the “ Maximum Exposure of UDF III ” is
equal to the maximum amount of UDF III’s exposure under the
Guaranty taking into consideration the Maximum Liability Amount of
UDF III pursuant to Section 3 of the Guaranty;
provided , that (i) on or before
December 31, 2006, in no event shall the Maximum Exposure of
UD
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