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<br />2.2 Payments will be applied first to accrued interest and the remainder to <br />reduction of the Principal Amount. <br /> <br />2.3 This Note is payable at the Place for Payment. <br /> <br />2.4 All unpaid amounts are due by the Maturity Date, at which time they will reach <br />maturity. Mter maturity, Borrower promises to pay any unpaid principal balance plus <br />interest at the Annual Interest Rate. <br /> <br />2.5 Borrower may prepay this Note in any amount at any time before the Maturity <br />Date without penalty or premium. <br /> <br />2.6 This Note is secured by a deed of trust of even date herewith from Borrower to <br />Knox Askins, trustee, (the "Deed of Trust") which covers the following real property <br />(such real property being the "Collateral Security"): <br /> <br />All of Lots 6, 7, 8, 9, 10, and the West fifty-six and four tenths (56.4) feet <br />of Lots 11,12 and 13, in Block One Hundred Ninety-Eight (198) of TOWN <br />OF LA PORTE, an addition in Harris County, Texas, according to the <br />map or plat thereof recorded in Volume 8, Page 16 of the Map Records of <br />Harris County, Texas. <br /> <br />2.7 If Lender is obligated to indemnify Borrower under the terms of the PSA or if <br />Lender defaults on the PSA, Borrower may elect to apply the amounts owed under the <br />PSA to the outstanding, unpaid principal and accrued, unpaid interest, and such sums <br />will be reduced by that amount. <br /> <br />Article III <br />DEFAULT <br /> <br />3.1 An "Event of Default' exists under this Note if: <br />3.1.1 Borrower fails to timely payor perform any obligation or covenant in this <br />Note; <br />3.1.2 any warranty, covenant, or representation in this Note is materially false <br />when made; <br />3.1.3 a receiver is appointed for Borrower or the Collateral Security; <br />3.1.4 any Collateral Security is assigned for the benefit of creditors; <br />3.1.5 a bankruptcy or insolvency proceeding is commenced by Borrower and <br />continues for at least sixty (60) days; or <br />3.1.6 Borrower is dissolved, begins to wind up its affairs, or is authorized to <br />dissolve or wind up its affairs by its governing body or persons. <br /> <br />3.2 If an Event of Default exists under this Note or the Deed of Trust, Lender may <br />declare the unpaid principal balance, earned interest, and any other amounts owed on <br />the Note immediately due. <br /> <br />Page -2- <br />