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FORM OF ESCROW AGREEMENT

Real Estate Escrow Agreement

FORM OF ESCROW AGREEMENT | Document Parties: United Development Funding III, L.P. You are currently viewing:
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United Development Funding III, L.P.

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Title: FORM OF ESCROW AGREEMENT
Governing Law: Oklahoma     Date: 8/26/2005

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                                                                    EXHIBIT 10.1

 

                       UNITED DEVELOPMENT FUNDING [LOGO]

 

                            FORM OF ESCROW AGREEMENT

 

Coppermark Bank

3333 Northwest Expressway

Oklahoma City, Oklahoma   73112

 

      Re:    United Development Funding III, L.P.

 

Ladies and Gentlemen:

 

      United Development Funding III, L.P., a Delaware limited partnership (the

"Partnership"), will issue in a public offering (the "Offering") units of its

limited partnership interests (the "Units") pursuant to a Registration Statement

on Form S-11 filed by the Partnership with the Securities and Exchange

Commission. The units will be offered by select members of the National

Association of Securities Dealers, Inc. (NASD) on a "best efforts" basis (each

being referred to herein as a "Dealer" and collectively as the "Dealers"). The

Partnership is entering into this Escrow Agreement (the "Agreement") to set

forth the terms on which Coppermark Bank (the "Escrow Agent"), will hold and

disburse the proceeds from subscriptions for the purchase of the Units in the

Offering until such time as the Partnership has received subscriptions for Units

resulting in total minimum capital raised of $1,000,000 (the "Required Capital")

and, thereafter, until otherwise directed by the Partnership.

 

      The Partnership hereby appoints Coppermark Bank as Escrow Agent for

purposes of holding the proceeds from the subscriptions for the Units, on the

terms and conditions hereinafter set forth:

 

      1. Persons subscribing to purchase the Units (the "Subscribers") will be

instructed by the Dealers to remit the purchase price in the form of checks,

drafts, wires, Automated Clearing House (ACH) or money orders (hereinafter

referred to as "Instruments of Payment") payable to the order of "United

Development Funding III, L.P. Escrow Account" (the "Escrow Account"). Any

Instruments of Payment made payable to a party other than the Escrow Agent shall

be returned to the Dealer who submitted such Instrument of Payment. Within one

business day after receipt of any Instruments of Payment, a Dealer will (a) send

to the Escrow Agent each Subscriber's name, address, executed IRS Form W-9,

number of Units purchased and purchase price remitted (the "Subscription

Materials"), and (b) send to the Escrow Agent such Instrument of Payment unless

such Subscription Materials were previously sent to the Escrow Agent. The Escrow

Agent shall cause funds received to be held in the Escrow Account as provided

herein until such Escrow Account has closed pursuant to paragraph 3(a) hereof.

The Escrow Agent shall notify the Partnership from time to time during the term

of this Agreement of the names of any Subscribers for whom the Escrow Agent has

not received a properly executed IRS Form W-9.

 

      2. The Escrow Agent will promptly process for collection the Instruments

of Payment upon deposit into the Escrow Account. Deposits will be held in the

Escrow Account until such funds are disbursed in accordance with paragraph 3

hereof. Prior to disbursement of the funds deposited in the Escrow Account, such

funds will not be subject to claims by creditors of the Company, any Dealer or

any of their affiliates. If any of the Instruments of Payment are returned to

the Escrow Agent for nonpayment prior to the receipt of the Required Capital,

the Escrow Agent shall promptly notify the submitting Dealer and the Partnership

in writing via mail, email or facsimile of such nonpayment, and is authorized to

debit

 

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the Escrow Account in the amount of such returned payment as well as any

interest earned on the amount of such payment.

 

      3. (a) Subject to the provisions of subparagraphs 3(b)-3(d) below, once

collected funds in the Escrow Account are an amount equal to or greater than the

Required Capital, the Escrow Agent shall promptly notify the Partnership and,

upon receiving written instruction from the Partnership, (i) disburse to the

Partnership, by check, ACH or wire transfer, the funds in the Escrow Account

representing the gross purchase price for the Units, and (ii) disburse to the

Subscribers or the Partnership, as applicable, any interest thereon pursuant to

the provisions of subparagraph 3(d). For purposes of this Agreement, the term

"collected funds" shall mean all funds received by the Escrow Agent that have

cleared normal banking channels and are in the form of cash or a cash

equivalent. After such time, the Escrow Account shall remain open and the

Partnership shall continue to cause subscriptions for the Units to be deposited

therein until the Partnership informs the Escrow Agent in writing to close the

Escrow Account. Thereafter, any subscription documents and instruments of

payment received by the Escrow Agent from Subscribers shall be forwarded

directly to the Partnership.

 

            (b) At the close of business on ___________ ___, 2006, which is one

year from the effective date of the Offering (the "Expiration Date"), the Escrow

Agent shall promptly notify the Partnership (the "Expiration Notice") if it is

not in receipt of Subscription Materials received on or before the Expiration

Date and Instruments of Payment dated not later than the Expiration Date for the

purchase of Units providing for total purchase proceeds that equal or exceed the

Required Capital (from all sources but exclusive of any funds received from

subscriptions for Units from entities for which the Partnership has notified the

Escrow Agent are affiliated with the Partnership). Following the tenth calendar

day after the date of the Expiration Notice, the Escrow Agent shall promptly

return directly to each Subscriber the collected funds deposited in the Escrow

Account on behalf of such Subscriber, or shall return the Instruments of Payment

delivered, but not yet processed for collection prior to such time, together

with interest in the amounts calculated pursuant to paragraph 6 for each

Subscriber at the address provided in the Subscription Materials. However, the

Escrow Agent shall not be required to remit any payments until funds represented

by such payments have been collected.

 

            (c) If the Partnership notifies the Escrow Agent that it rejects any

subscription for which the Escrow Agent has collected funds, the Escrow Agent

shall promptly issue a refund to the rejected Subscriber. If the Partnership

rejects any subscription for which the Escrow Agent has not yet collected funds

but has submitted the Subscriber's check for collection, the Escrow Agent shall

promptly return the funds in the amount of the Subscriber's check to the

rejected Subscriber after such funds have been collected. If the Escrow Agent

has not yet submitted a rejected Subscriber's check for collection, the Escrow

Agent shall promptly remit the Subscriber's check directly to the Subscriber.

 

            (d) At any time after funds are disbursed upon the Partnership's

instructions pursuant to subparagraph 3(a) above, on the tenth day following the

date of receipt of such instruction, the Escrow Agent shall promptly provide

directly to each Subscriber the amount of the interest payable to the

Subscribers. However, the Escrow Agent shall not be required to remit any

payments until the Escrow Agent has collected funds represented by such

payments. The forgoing notwithstanding, interest, if any, earned on accepted

subscription proceeds will be payable to a Subscriber only if the Subscriber's

funds have been held in escrow by the Escrow Agent for at least 35 days.

Interest, if any, earned on accepted subscription proceeds of Subscribers' funds

held less than 35 days will be paid to the Partnership. The Escrow Agent may use

such reasonable allocation methods as it determines to be equitable in

allocating interest income among Subscribers and as between the Subscribers and

the Partnership if the funds bear interest at multiple rates during the escrow

period.

 

            (e) After the Required Capital has been received and the proceeds of

the Escrow Account have been distributed to the Partnership, any Instruments of

Payment received by the Escrow Agent shall be deposited in the Escrow Account

within one business day. Upon receiving written

 

                                      -2-

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instruction from the Partnership, the Escrow Agent shall (i) disburse to the

Partnership, by check, ACH or wire transfer, the funds in the Escrow Account,

and (ii) disburse to the Subscribers or the Partnership, as applicable, any

interest thereon pursuant to the provisions of subparagraph 3(d). In the event

that any Instruments of Payment are returned for nonpayment, the Escrow Agent is

authorized to debit the Escrow Account in accordance with paragraph 2 hereof.

 

            (f) Any disbursement of funds by the Escrow Agent to Subscribers

shall be made to the persons named in the Subscription Materials at the address

stated therein by cashiers' check mailed by United States mail.

 

            (e) If at the time of any required disbursement of interest to a

Subscriber, the Escrow Agent has not received a properly executed IRS Form W-9,

the Escrow Agent shall withhold from any interest distribution such amount as

may be required to be withheld by law and remit such withheld amounts to the

Internal Revenue Service in timely fashion.

 

      4. Prior to the disbursement of funds deposited in the Escrow Account in

accordance with the provisions of paragrap


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