Document:

exv10w21

 

Exhibit 10.21

REAL ESTATE SALE AGREEMENT

	 	 	 	 
	DATE:
	 	September 8, 2006
	 
	 	 	 

	SELLER:
	 	GREAT WESTERN LAND & RECREATION, INC.

7373 North Scottsdale Road

Suite C 140

Scottsdale, Arizona 85253

	 	 	 

	BUYER:
	 	SUNBELT INVESTORS LLC.

6 Cardinal Rd.

Hilton Head, SC 29926-3720

	 	 	 

	ESCROW
AGENT
	 	
Texas
American Title Co.

	 	 	 	 

	1.	 	Agreement. Subject to the terms and conditions of this Agreement, Seller agrees to
sell and Buyer agrees to purchase, for the Purchase Price (as hereinafter defined) and on the
terms and conditions set forth herein, certain land containing approximately 200 acres
situated in Harris County, Texas, legally described in Exhibit “A” attached hereto, together
with all improvements, chattels and fixtures thereon, easements, rights and other privileges
appurtenant thereto or associated therewith (hereinafter collectively referred to as the
“Property”). Currently the Property is 100% owned by Westchester Lakes, LLC, a Texas limited
liability company, and this Real Estate Sales Agreement includes both Westchester Lakes, LLC.
and the real estate described in Exhibit “A”.

	2.	 	Escrow Opening and Closing. Upon execution of this Agreement by Buyer and Seller,
the parties shall cause an escrow (the “Escrow”) to be established with Escrow Agent.
“Opening of Escrow” as used herein shall mean the day on which Escrow Agent receives a copy of
this Agreement executed by Buyer and Seller. Buyer and Seller shall close before September 29,
2006 provided that all contingencies listed by the Bank of Houston are satisfied and that in
particular certain drainage issues are resolved as outlined in Exhibit “B” attached. The
Closing shall occur at the office of the Escrow Agent, or at such other place or time as Buyer
and Seller mutually agree in writing. At or prior to the Closing, each of the parties shall
execute and deliver such documents and perform such acts as are provided for herein, or as are
necessary, to consummate the transaction contemplated hereunder. All obligations of the
parties to be performed at or prior to Closing are conditions precedent to the Closing as well
as covenants.

	3.	 	Purchase Price and Payment Terms. The total purchase price to be paid for the
Property (the “Purchase Price”) shall be equal to the product of (a) $19,000.00 and (b) the
boundaries of the Property as determined by the ALTA Survey described in Section 5 below. For
example, if the total net usable acreage of the Property is 199 acres, then in that event, the
Purchase Price shall equal $3,781,000.00. For the purpose of this agreement, the term “net
usable” acreage shall be deemed to mean the total gross acres within the Property boundaries,
less all right-of-way and easements encumbering the Property. The Purchase Price shall be as
follows:

	 	3.1	 	Earnest Money Deposit. Buyer shall have the option of depositing
earnest money of $1,000.00 in cash or check, which shall be refundable to the Buyer
until all of the conditions precedent to Buyer’s obligation to close this transaction
has been satisfied.

 

 

	 	3.2	 	Balance at Close of Escrow. The remaining balance of the Purchase
Price shall be paid in cash and a second mortgage (Seller’s financing) by Buyer at
Closing. The cash portion shall be in the form of a cashier’s check payable to Escrow
Agent, or by wire transfer of ready funds to the account of Escrow Agent deposited in
Escrow on or before Closing.

	4.	 	Escrow Instructions. The parties shall deliver to Escrow Agent an executed copy of
this Agreement, which shall constitute instructions to Escrow Agent.

	5.	 	Title; Survey. As soon as possible after Opening of Escrow, Escrow Agent shall cause
to be delivered to Buyer a preliminary title report incident to the issuance of an ALTA
extended coverage title insurance policy, together with legible copies of all matters
indicated in Schedule B thereto (collectively, the “Title Report”), and Buyer shall obtain, at
Buyer’s sole cost and expense, a current ALTA survey of the Property (the “Survey”). Buyer
shall have the right to object to any matter indicated in the Title Report or on the Survey by
delivering written notice of such objections to Seller and Escrow Agent on or before the date
that is ten (10) days prior to the Closing Date. With respect to any amendments to the Title
Report or the Survey, Buyer shall have until five (5) days after receipt of such amendments,
together with legible copies of any additional matters described therein, to notify Seller and
Escrow Agent in writing of any matters not previously disclosed to which Buyer objects. After
receipt of Buyer’s objections, Seller shall notify Buyer in writing as to whether Seller will
attempt to cure any objection of Buyer or not cure any such objection. If Seller elects not
to cure any such objection, then within five (5) days thereafter, Buyer may either (a) cancel
this Agreement by written notice delivered to Seller and Escrow Agent, in which event the
Earnest Money, together with all interest accrued thereon, shall be immediately refunded to
Buyer, or (b) waive the objection by written notice to Seller and Escrow Agent and proceed to
close the Escrow. All matters listed on Schedule B-Part 2 to the Title Report, other than
standard exceptions, not objected to by Buyer in accordance with the provisions hereof, or
which are objected to by Buyer but with respect to which Buyer thereafter waives such
objection, shall be deemed to be “Permitted Exceptions.”

	6.	 	Deed and Other Conveyance Documents; Title Insurance. Title to the Property shall be
conveyed to Buyer by a special warranty deed (the “Deed”) in form and content mutually
acceptable to Seller and Buyer. The Deed shall be duly executed by Seller and recorded at
Closing. On or before Closing, Seller and Buyer shall execute and deliver to Escrow Agent an
Affidavit of Value for filing with the Deed and Seller shall execute and deliver to Escrow
Agent a Nonforeign Affidavit in a form acceptable to Buyer, which Affidavit shall be delivered
to Buyer at Closing. At Closing, Seller shall cause to be furnished to Buyer an ALTA Extended
Coverage Owner’s Policy of Title Insurance issued by Escrow Agent, or the unconditional
commitment of Escrow Agent to issue such policy, together with such endorsements as are
reasonably requested by Buyer (which commitment shall be deemed made upon the recordation by
Escrow Agent of the Deed), in the amount of the Purchase Price, insuring fee simple title in
the Property in Buyer, subject only to the Permitted Exceptions. The premium for the standard
coverage portion of the policy shall be paid by Seller and the additional premium payable for
the extended coverage, together with any endorsements requested by Buyer, shall be paid by
Buyer.

	7.	 	Feasibility Inspection. At all times after the Opening of Escrow, Buyer shall have
the right and shall be entitled to enter upon the Property to inspect the Property and to
determine the feasibility of acquiring the Property. Buyer shall have the right to perform
such examinations, inspections or tests, as Buyer deems necessary. In connection with Buyer’s
due diligence investigation, upon Opening of Escrow, Seller shall deliver to Buyer copies of
all reports, studies, environmental and soils assessments (including any Phase I environmental
assessments), plans, specifications and permits, property tax statements, improvement district
assessment statements and other materials or information relating to the Property and which
are in Seller’s possession or control. Seller understands and agrees to abide by the
conditions, terms, and contingencies that are listed in the Houston Bank’s commitment letter
and especially the contingencies relating to drainage and approvals necessary by Harris
County. If Buyer determines in its sole discretion that acquisition of the Property is not
feasible, then Buyer shall have the right to elect to terminate this Agreement by providing
written notice to Seller and Escrow Agent on or before one hundred twenty (120) days after
Opening of Escrow (the “Feasibility Period”); provided, however, that if the Drainage
Contingency described in Section 8 below has not been satisfied as of the Feasibility Period,
then, in that event, the Feasibility Period shall be deemed to be

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	 	 	automatically extended until such time as the Rezoning Contingency has been satisfied. If Buyer
provides such written notice of termination to Seller and Escrow Agent by 5:00 p.m. on the last
day of the Feasibility Period, then this Agreement and the Escrow shall terminate and the
Earnest Money, together with all interest accrued thereon, shall be promptly refunded to Buyer
and neither party shall have any further liability hereunder. If Buyer does not provide written
notice of termination on or before the expiration of the Feasibility Period as provided in the
foregoing, then, in that event, the parties shall proceed to consummate the transaction
contemplated hereby in accordance with the terms and conditions set forth herein.

	8.	 	Drainage Contingency. The Seller and Buyer hereby acknowledge and agree that the
Buyer’s obligations to consummate the transaction contemplated by this Agreement shall be
conditioned and contingent upon the approval by Harris County officials, including the
department or departments responsible for issuing drainage permits to approve off-site
drainage according to the studies by Brown and Gay Engineers and as required by Buyer’s
lender, Bank of Houston. Seller shall cooperate in good faith with Buyer’s drainage
application(s) and shall promptly execute and deliver to Buyer such applications, consents and
approvals as may be reasonably necessary or required by Harris County in order for Buyer to
process such drainage application. In the event that the Drainage Contingency described herein
has not been satisfied for any reason as of the Outside Closing Date, then unless Buyer elects
to waive such Drainage Contingency in writing in its sole discretion, Buyer shall have the
right to elect to terminate this Agreement by written notice to the Seller and Escrow Agent.
Whereupon the Earnest Money shall be refunded to the Buyer and the parties shall have no
further rights, duties or obligations hereunder.

	9.	 	Seller Financing. The Seller has agreed to provide Seller Financing in the form of a
second mortgage or second deed of trust to Buyer. The amount shall be limited to $2,200,000.00
(plus or minus 10% depending on the closing costs, administrative cost, Bank fees and
commitment costs) and on final appraisal cost. The second mortgage shall have similar terms to
those shown in Exhibit “C”. Buyer and the Bank of Houston may be required to enter into an
agreement with Seller whereby Seller will agree to not take action to either (a) accelerate
the 2nd mortgage note; or (b) petition for bankruptcy unless agreed upon by the
Bank of Houston. However, this “Standstill Agreement” will not prevent Buyer from prepayment
of the 2nd mortgage at any time without penalty.

	10.	 	Seller’s Covenants, Representations and Warranties. Seller hereby represents,
warrants, covenants and agrees with Buyer as follows:

     (a) Seller has not subjected any portion of the Property to any interest,
charge or assessment that is not shown as an existing lien on the record of any taxing
authority that levies taxes or assessments.

     (b) Seller has not received any notice from any governmental authority
having jurisdiction over the Property requiring or specifying any work to be done to the
Property.

     (c) Seller has not received any notice of, and has not itself caused, any
violation of any statute, ordinance, rule or regulation of any federal, state, county or
municipal authority in connection with air pollution, water pollution, environmental
protection, or any other governmental action relating to the Property.

     (d) Seller has not received any notice of the exercise of eminent domain or
condemnation, pending or threatened, which in any way affects the Property or any portion
thereof, from any governmental or other authority authorized to exercise such power.

     (e) Seller has not entered into any unrecorded leases, contracts or
obligations affecting the Property. Seller will supply all record, notes, contracts and
letters associated with BD Realty, Brad Dill, and the management of the Property to date.

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     (f) Seller has received no notice of any claims, actions, suits or other
proceedings pending or threatened by any person or entity with respect to the Property.

     (g) Seller has, or will have on or before the Closing, performed, observed
and complied with all of the covenants, agreements and conditions required by this Agreement
to be performed, observed and complied with by Seller, and will execute and deliver all
documents required to be executed and delivered by Seller in order to consummate the
transaction contemplated herein.

The covenants, representations and warranties of Seller hereunder shall survive the closing of this
transaction and the recordation of the Deed. In the event any of the covenants, representations or
warranties described herein are untrue or breached by Seller, Seller shall indemnify, defend and
hold harmless Buyer and Buyer’s successors and assigns, from and against any and all claims, costs,
damages, liabilities, expenses, charges and fees (including attorneys’ fees) incurred by Buyer, or
its successors or assigns, as a result of the untruth or breach of any of the representations or
warranties made by Seller hereunder.

	11.	 	Proration of Property Taxes; Closing Costs. The Seller and Buyer hereby acknowledge
and agree that, upon the Closing, all real property taxes and assessments payable with respect
to the Property shall be prorated as of the Closing based upon the latest available
information. If such information is changed or newer information is provided after Closing,
as a result of tax protests, tax refunds or changes in tax rates or valuation, then the
parties shall make such agreements, one to the other, outside of Escrow, as may be necessary
to adjust the proration of taxes to the actual amounts. All recording and similar charges
shall be allocated between Seller and Buyer in Escrow Agent’s customary manner, and Escrow
Agent’s fees shall be paid one-half by Seller and one-half by Buyer. Except as expressly
provided in the foregoing or elsewhere to the contrary in this Agreement, Buyer and Seller
shall each bear its own costs, expenses and fees (including attorneys’ fees) in connection
with the transaction contemplated hereby.

	12.	 	Default; Remedies.

	 	12.1	 	Default by Buyer. If Buyer defaults hereunder, actual damages to
Seller will be difficult to calculate, but Buyer and Seller agree that the amount of
the Earnest Money is a reasonable approximation thereof. Accordingly, if Buyer
defaults, Seller shall be entitled to terminate this Agreement and receive the Earnest
Money as Seller’s sole and absolute remedy.
	 
	 	12.2	 	Default by Seller. If Seller defaults hereunder, Buyer may elect, as
Buyer’s sole and exclusive remedy, to either (a) seek specific performance of this
Agreement, or (b) terminate this Agreement by written notice to Seller and Escrow
Agent, whereupon the Earnest Money, together with all accrued interest thereon, shall
be promptly refunded to Buyer. However, if after signing this Real Estate Sale
Agreement but before closing Seller decides to sell this property or the limited
liability company that owns this Property to an outside third party, (or not at all).
Seller can be required by Buyer to pay for certain costs incurred (“Breakup fee”)
during these negotiations. The maximum amount for the Breakup fee shall be $50,000.00.
	 
	 	12.3	 	Waiver. Excuse or waiver of the performance by the other party of any
obligation under this Agreement shall only be effective if evidenced by a written
statement signed by the party so excusing. No delay in exercising any right or remedy
shall constitute a waiver thereof, and no waiver by Seller or Buyer of the breach of
any covenant of this Agreement shall be construed as a waiver of any preceding or
succeeding breach of the same or any other covenant or condition of this Agreement.

	13.	 	Miscellaneous.

	 	13.1	 	Notices. No notice, consent, approval or other communication provided
for herein or given in connection herewith shall be validly given, made, delivered or
served unless it is in writing and delivered personally, sent by overnight courier, or
sent by registered or certified United States mail,

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	 	 	 	postage prepaid, with return receipt requested, to the parties at the respective
addresses listed above, or to such other addresses as any party hereto may designate in
writing and deliver in a like manner to the other party. Notices, consents, approvals,
and communications given by mail shall be deemed delivered upon the earlier of
forty-eight (48) hours after deposit in the United States mail in the manner provided
above or upon delivery to the respective addresses set forth above if delivered
personally or sent by overnight courier.

	 	13.2	 	Interpretation. The captions of the Sections of this Agreement are for
convenience only and shall not govern or influence the interpretation hereof. This
Agreement is the result of negotiations between the parties and, accordingly, shall not
be construed for or against either party regardless of which party drafted this
Agreement or any portion thereof. Time is of the essence of this Agreement.
	 
	 	13.3	 	Successors and Assigns. All of the provisions hereof shall inure to
the benefit of and be binding upon the personal representatives, heirs, successors and
assigns of Seller and Buyer.
	 
	 	13.4	 	No Partnership, Third Person. It is not intended by this Agreement to,
and nothing contained in this Agreement shall, create any partnership, joint venture or
other similar arrangement between Seller and Buyer. No term or provision of this
Agreement is intended to, or shall, be for the benefit of any person, firm, corporation
or other entity not a party hereto (including, without limitation, any broker), and no
such party shall have any right or cause of action hereunder.
	 
	 	13.5	 	Entire Agreement. This Agreement constitutes the entire agreement
between and reflects the reasonable expectations of the parties pertaining to the
subject matter hereof. All prior and contemporaneous agreements, representations and
understandings of the parties, oral or written, are hereby superseded and merged
herein. No change or addition is to be made to this Agreement except by a written
agreement executed by all of the parties.
	 
	 	13.6	 	Severability and Waiver. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any other
provision hereof. Any waivers must be in writing and signed by the parties sought to
be charged. The waiver by any party of a right provided hereunder shall not be deemed
to be a continuing waiver of that right or a waiver of any other right.
	 
	 	13.7	 	Further Documents. Buyer and Seller shall execute and deliver all such
documents and perform all such acts as reasonably requested by the other party from
time to time, prior to and following the Closing, to carry out the matters contemplated
by this Agreement.
	 
	 	13.8	 	Arizona Law. This Agreement shall be governed by the laws of the State
of Arizona.
	 
	 	13.9	 	Date of Performance. If the date of performance of any obligation or
the last day of any time period provided for herein should fall on a Saturday, Sunday
or legal holiday, then said obligation shall be due and owing, and said time period
shall expire, on the first day thereafter which is not a Saturday, Sunday or legal
holiday. Except as may otherwise be set forth herein, any performance provided for
herein shall be timely made if completed no later than 5:00 p.m., Phoenix time, on the
day of performance.
	 
	 	13.10	 	Counterparts. This Agreement may be executed in any number of
counterparts. Each such counterpart hereof shall be deemed an original, but all
counterparts shall constitute but one agreement.
	 
	 	13.11	 	No Brokerage Commission. Each party hereto represents and warrants to the
other that it has not employed any broker or finder in connection with the transaction
contemplated by this Agreement and that, as a result thereof, no brokerage commission
shall be payable upon the consummation of this transaction. Each party hereto shall
indemnify, defend and hold harmless the other from and against any and all liability and
expense, including, without limitation, reasonable attorneys’ fees, arising from any
claim by any broker, agent or finder for commissioners, finder’s fees or similar charges,
arising out

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	 	 	 	of the act of the indemnifying party. Notwithstanding any provision herein to the
contrary, the obligations of the parties pursuant to this section shall survive the
Closing and any termination hereof.

	 	13.12	 	Confidentiality. Prior to the Closing, neither Seller nor Buyer shall
disclose to any third party the existence of this Agreement or any of the terms or
conditions with respect to the sale and transfer of the Property by Seller to Buyer
without the prior written consent of the other party hereto, which consent may be
withheld in the sole and absolute discretion of such party. The foregoing restriction
shall not apply to the extent that either party hereto must disclose any aspect of this
Agreement in connection with the obtaining of legal or financial advice or counsel.

SIGNATURE PAGE FOLLOWS

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     IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date written
above.

	 	 	 	 	 
	 	“SELLER”

GREAT WESTERN LAND & RECREATION, INC., a Nevada Corporation

 	 
	 	By  	/s/ Carla Waltman
 	 
	 	 	Name:  	Carla Waltman 	 
	 	 	Title:  	Corporate Secretary 	 

	 	 	 	 	 
	 	 	 
	 	By  	                                              /s/ David Weber
 	 
	 	 	Name:  	David Weber 	 
	 	 	Title:  	President and CEO 	 
	 

	 	 	 	 	 
	 	“BUYER”

SUNBELT INVESTORS LLC.

 	 
	 	By  	/s/ Roger Clark
 	 
	 	 	Name:  	Roger Clark 	 
	 	 	Title:  	Managing Member 	 
	 

APPROVAL BY ESCROW AGENT

     Escrow Agent hereby (a) acknowledges receipt of a fully executed copy or counterpart copies of
the foregoing Agreement on this 13th day of September, 2006, which date is hereby designated as the
“Opening of Escrow” date, and (b) agrees to establish an escrow (Escrow No. 650061619) in
accordance therewith and act in accordance with the provisions of the Agreement. Escrow Agent
further agrees to deliver immediately to Buyer and Seller fully executed copies of the Agreement.

	 	 	 	 	 
	 	Texas American Title

 	 
	 	By  	/s/ Karla Davis
 	 
	 	 	Name Karla Davis 	 
	 	 	Title Escrow Assistant 	 

7exv10w22

 

Exhibit 10.22

PROMISSORY NOTE

			
	DATE:	 	September 28, 2006

			
	MAKER:	 	Sunbelt Investors, L.L.C., a Nevada limited liability company

MAKER’S MAILING ADDRESS:

Sunbelt Investors, L.L.C.

6 Carnival Rd.

Hilton Head, South Carolina 22926-3720

Beaufort County, South Carolina

			
	PAYEE:	 	Great Western Land and Recreation, Inc., a Nevada corporation

PLACE FOR PAYMENT:

Great Western Land and Recreation, Inc.

7373 North Scottsdale Rd., Suite C 140

Scottsdale, Arizona 85253

Maricopa County, Arizona, or any other place that Payee may designate in writing.

PRINCIPAL AMOUNT: $1, 974, 681.20. The maximum amount of this promissory note (the “Note”) shall
not exceed TWO MILLION TWO HUNDRED THOUSAND AND 00/100 U.S. DOLLARS ($2,200,000.00) (plus ten
percent (10%) depending on the closing costs, administrative cost, bank fees and commitment costs).

ANNUAL INTEREST RATES:

Year One:

Interest will accrue at the rate of zero percent (0%) for the first six (6) months of this
Note; thereafter, if the Note has not been paid in full or transferred, the applicable
interest rate for the next six (6) months shall be one percent (1%). In partial
consideration for this low interest rate in the first year, Maker warrants to grant to Payee
the right of first refusal to purchase the property made the basis of this transaction,
which right of first refusal shall exist and continue throughout the pendency of this Note.

Year Two:

In year two (2) of the Note interest shall accrue at a rate of three percent (3%), however
Payee extends Maker the option of applying to the second year interest the FIFTY THOUSAND
AND 00/100 U.S. DOLLARS ($50,000.00) of consideration for the second year of the Non-Compete
Agreement executed concurrently herewith between Maker and Payee.

Year Three:

In year three (3) of this Note, the applicable interest rate shall be six percent (6%),
however Payee extends Maker the option of exchanging to Payee a one-third (1/3) interest in
Houston Promenade Four, L.L.C. (an Arizona limited liability company, located at 7373 North
Scottsdale Rd., Suite C 140, Scottsdale, Arizona 85253, Maricopa County, Arizona), at its
then appraised value as determined by a neutral valuation expert in the industry, as
currency to be applied against the interest due for the third year.

Years Four and Five and any other year for which this Note is extended:

For years four (4) and five (5), and for any year beyond the fifth year through which this
Note is extended, interest shall accrue at a rate of six percent (6%).

 

 

Consideration for Favorable Interest Rates:

In consideration of the favorable interest rates in this Note and upon Payee’s requests,
Maker covenants to abide by the following conditions at all times during the pendency of the
indebtedness reflected by this Note:

	 	1.	 	Each of the lot sizes in the Westchester Lakes development will be no less than
fifty (50) feet across the front of the lot, except for an occasional corner lot, so as
not to compete with the lot sizes in the Mallard Crossing development;
	 
	 	2.	 	Maker will cooperate with Payee to obtain drainage casements and participate in
good faith using reasonable best efforts in the search for appropriate drainage
solutions for both the Westchester Lakes development and the Mallard Crossing
development; and
	 
	 	3.	 	Maker and Payee agree to each work independently, in good faith and using
reasonable best efforts, as is in each’s own interest, to obtain a third party buyer to
purchase the Property, as soon as is practical.

MATURITY DATE: The Maturity Date for this Note shall be September 30, 2011, on which date payment
is due in full on the Principal Amount and all outstanding interest. However, Payee grants to Maker
an opportunity to extend this Note for an extra two (2) year period. The extension option must be
exercised by Maker in writing to Payee no less that thirty (30) days prior to the Maturity Date of
this Note as specified herein.

INTEREST RATE ON MATURED, UNPAID AMOUNTS: Three quarters of one percent (3/4%) per month.

TERMS OF PAYMENT (PRINCIPAL AND INTEREST):

The Principal Amount is due and payable on September 30, 2011, and the interest is due and payable
annually as it accrues on the 30th day of September each year. Payments will be applied first to
accrued interest and the remainder to reduction of the Principal Amount.

SECURITY FOR PAYMENT: This Note is secured by a Deed of Trust dated September 29, 2006 from Sunbelt
Investors, L.L.C. to James W. Christian, trustee, which covers the following real property:

All the land in a 199.98 acre tract located in the J. Ratcliffe Survey, Abstract No. 664,
Harris County, Texas being all that certain called 199.98 acre tract as described in the
deed from Stephen L Baker, Robert S. Baker, Michael W. Baker, Emily Marianne Baker and Mark
Baker to Great Western Acquisitions, L.L.C. dated March 31, 2004 and recorded under Harris
County Clerk File No. X513066, the subject land being more particularly described on Exhibit
“A” attached hereto and incorporated herein by reference as if set forth at length.

MAKER’S PROMISE TO PAY:

Maker promises to pay to the order of Payee the Principal Amount plus interest at the applicable
Annual Interest Rate. This Note is payable at the Place for Payment and according to the Terms of
Payment. All unpaid amounts are due by the Maturity Date. After maturity, Maker promises to pay any
unpaid principal balance plus interest at the Annual Interest Rate on Matured, Unpaid Amounts.

If Maker defaults in the payment of this Note or in the performance of any obligation in any
instrument securing or collateral to this Note, Payee may declare the unpaid principal balance,
earned interest, and any other amounts owed on the Note immediately due. Notwithstanding any other
provision of this Note, in the event of a default, before exercising any of Payee’s remedies under
this Note or any deed of trust securing it, Payee will first give Maker written notice of default
and Maker will have thirty (30) days after notice is given in which to cure the default. To be
effective, such written notice must be sent to: 1) Roger Clark at 6 Carnival Rd., Hilton Head, SC
22926-3702, AND

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2) Jay N. Torok at 7656 East Sweetwater Ave., Scottsdale, AZ 85260, or to any other address(es) as
Maker may designate in writing. If the default is not cured thirty (30) days after notice, Maker
and each surety, endorser, and guarantor waive all demand for payment, presentation for payment,
notice of intention to accelerate maturity, notice of acceleration of maturity, protest, and notice
of protest, to the extent permitted by law.

Maker also promises to pay reasonable attorney’s fees and court and other costs if this Note is
placed in the hands of an attorney for collection or enforcement. These expenses will bear interest
from the date of advance at the Annual Interest Rate on Matured, Unpaid Amounts. Maker will pay
Payee these expenses and interest on demand at the Place for Payment. These expenses and interest
will become part of the debt evidenced by the Note and will be secured by any security for payment,

PREPAYMENT: Maker may prepay this Note in any amount at any time before the Maturity Date without
penalty or premium. However, Maker covenants that it shall not prepay the full balance of this Note
prior to extinguishing the first lien indebtedness to Bank of Houston, to which this Note and its
accompanying Deed of Trust are subordinate.

APPLICATION OF PREPAYMENT: Prepayments will be applied first to accrued interest and the remainder
to installments on principal in the inverse order of maturity so that they will be applied to the
last maturing principal installments first. These prepayments will not reduce the amount or time of
payment of the remaining installments, which will continue until the Principal Amount and all
accrued interest are paid. Interest on the prepaid principal will immediately cease to accrue.

Interest on the debt evidenced by this Note will not exceed the maximum rate or amount of
non-usurious interest that may be contracted for, taken, reserved, charged, or received under law.
Any interest in excess of that maximum amount will be credited on the Principal Amount or, if the
Principal Amount has been paid, refunded. On any acceleration or required or permitted prepayment,
any excess interest will be canceled automatically as of the acceleration or prepayment or, if the
excess interest has already been paid, credited on the Principal Amount or, if the Principal Amount
has been paid, refunded. This provision overrides any conflicting provisions in this Note and all
other instruments concerning the debt.

Maker is responsible for all obligations represented by this Note.

When the context requires, singular nouns and pronouns include the plural.

A default exists under this Note if: (1) (a) Maker or (b) any other person liable on any part of
this Note or who grants a lien or security interest on property as security for any part of this
Note (an “Other Obligated Party”) fails to timely pay or perform any obligation or covenant in any
written agreement between Payee and Maker or any Other Obligated Party; (2) any warranty, covenant,
or representation in this Note or in any other written agreement between Payee and Maker or any
Other Obligated Party is materially false when made; (3) a receiver is appointed for Maker, any
Other Obligated Party, or any property on which a lien or security interest is created as security
(the “Collateral Security”) for any part of this Note; (4) any Collateral Security is assigned for
the benefit of creditors; (5) a bankruptcy or insolvency proceeding is commenced by Maker, a
partnership of which Maker is a general partner, or an Other Obligated Party; (6) (a) a bankruptcy
or insolvency proceeding is commenced against Maker, a partnership of which Maker is a general
partner, or an Other Obligated Party and (b) the proceeding continues without dismissal for sixty
(60) days, the party against whom the proceeding is commenced admits the material allegations of
the petition against it, or an order for relief is entered; (7) any of the following parties is
dissolved, begins to wind up its affairs, is authorized to dissolve or wind up its affairs by its
governing body or persons, or any event occurs or condition exists that permits the dissolution or
winding up of the affairs of any of the following parties: Maker, a partnership of which Maker is a
general partner, or an Other Obligated Party; and (8) any Collateral Security is impaired by loss,
theft, damage, levy and execution, issuance of an official writ or order of seizure, or
destruction, unless it is promptly replaced with collateral security of like kind and quality or
restored to its former condition.

This Note will be construed under the laws of the State of Arizona, without regard to choice-of-law
rules of any jurisdiction.

3

 

	 	 	 	 	 
	 	SUNBELT INVESTORS, L.L.C.,

a Nevada limited liability company

 	 
	 	/s/ Jay N. Torok
 	 
	 	Jay N. Torok, President and Secretary 	 
	 	 	 
	 

4

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