**Exhibit 10.17**

 

**PROMISSORY NOTE**

 
|   | Account No                                                                                |
|--------|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   | Officer                                           |

 

Borrower LANCER PARTNERSHIP,LTD., a Texas limited partnership
| Amount$15,000,000.00 | Date: DECEMBER | ,2004 |
|----------------------|----------------|-------|

 

For value received, thereceipt and sufficiency of which is hereby acknowledged, the undersigned,jointly and severally, (hereinafter, “Borrower”, whether one or more) promiseto pay to**the order of International Bank ofCommerce (hereinafter, “Lender”), at 130 E. Travis, San Antonio, Bexar County,Texas the sum of FIFTEEN MILLION AND NO / 100 DOLLARS Dollars ($ 15. 000. 000.00),* in legal and lawful money of the United States of America, with interestas it accrues on the outstanding principal balance from date of advance of suchprincipal until paid.

 

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* or so much thereof as maybe advanced from time to time,

* * SEE ADDENDUM TOPROMISSORY NOTE ATTACHED HERETO AND INCORPORATED HEREIN.

 

To secure payment of thisNote, and, *to*the extent allowed by law, all otherindebtedness which may at any time be owing by the Borrower, or any of them,Borrower hereby grants *to*Lender asecurity interest and lien on the following

collateral

 

SEE EXHIBIT “A” ATTACHEDHERETO AND INCORPORATE HEREIN.

 

Borrower agrees to**take adequate care of the collateral and to insure thecollateral with a company satisfactory to Lender, for such hazards, and in suchamounts as Lender directs. If Borrower fails to furnish Lender with proof ofrequired insurance coverage, Lender shall have the authority to purchaseinsurance (including single interest insurance, which may provide protectiononly for Lender) and add the premium for such insurance; with interest at theloan pre-maturity contract rate, *to*the balanceof this Note.

 

The interest is calculatedon a 360-day factor applied on a 365-day year, or a 366-day year, in the eventthat the year is a leap year, on the unpaid principal to the date of eachinstallment paid. Provided, however, that in the event the interest ratereaches the maximum rate allowed by applicable law, said maximum legal rateshall be computed on a full calendar year 365/365 days basis or on a 366/366days basis, in the event that the year is a leap year. The interest charged andherein contracted for will riot exceed the maximum allowed by law.

 

To the extent allowed bylaw, matured unpaid amounts will bear interest computed on a full calendar year365/365 days basis or on a 366/366 days basis, in the event that the year is aleap year, at the highest legal rate of interest allowed by Texas Law, unlessFederal Law allows a higher interest rate, in which case, Borrower agrees topay the rate’ allowed by Federal Law. If applicable law does not set a maximumrate of interest for matured unpaid amounts, then Borrower agrees that themaximum rate for such amounts shall be eighteen percent (18%) per annum.

 

To the extent allowed bylaw, as the late payment charge under this Note, lender may in its solediscretion (i) increase the interest on the principal portion of any paymentamount that is not received by the payment due date to the maximum rate allowedby law, computed on a full calendar year basis from the payment due date untilpaid, or (ij), should any payment not be made within ten (10) days from the duedate, require Borrower to pay a one time “late charge” per late payment equalto five percent (5%) of the amount of the past due principal and interest ofsuch payment, with a minimum of $10.00 and a maximum of $1,500.00 per latepayment. The “Iate charge” may be assessed without notice, and shall beimmediately due and payable.

 

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The outstanding and unpaidprincipal of this Note and all accrued and unpaid interest are payable asfollows:

 
| **Number of  Payments** | ** ** | **Frequency** | ** ** | **Amount of Payments** | ** ** | **When Payments are Due** | ** ** |
|-------------------------|------------|---------------|------------|------------------------|------------|---------------------------|------------|
| ** **              | ** ** | ** **    | ** ** | ** **             | ** ** | ** **                | ** ** |
| ** **              | ** ** | ** **    | ** ** | ** **             | ** ** | ** **                | ** ** |

 

SEE ADDENDUM TO PROMISSORY NOTEATTACHED HERETO AND INCORPORATED HEREIN.

 
| Final  Maturity Date: | DECEMBER 30,  2007 |
|-----------------------|--------------------|

 

All outstanding unpaidprincipal, all accrued and unpaid interest; and all fees, late charges, and/orother charges incurred in this transaction by, or for the benefit of, Borrowerwhich remain due and owing on the Final Maturity Date are due and payable onsuch date.

 

THIS OBLIGATION HAS A BALLOONPAYMENT PROVISION:

 

THIS LOAN IS PAYABLE IN FULL ONTHE FINAL MATURITY DATE SET FORTH HEREIN IF NO PRIOR DEMAND HAS BEEN MADE. ONTHE FINAL MATURITY DATE YOU MUST REPAY THE ENTIRE OUTSTANDING UNPAID PRINCIPALBALANCE, ALL ACCRUED AND UNPAID INTEREST, AND ALL FEES, LATE CHARGES, AND/OROTHER CHARGES INCURRED IN THIS TRANSACTION BY, OR ON BEHALF OF, BORROWER, WHICHREMAIN UNPAID. LENDER IS UNDER NO OBLIGATION TO REFINANCE THE LOAN, OR ANYPORTION THEREOF, AT THAT TIME. YOU WILL THEREFORE BE REQUIRED TO MAKE PAYMENTOUT OF OTHER ASSETS YOU MAY OWN, OR YOU WILL HAVE TO FIND A LENDER, WHICH MAYBE THIS LENDER, WHICH AGREES TO LEND YOU THE MONEY TO REFINANCE. IF YOUREFINANCE THIS LOAN AT MATURITY, YOU MAY HAVE TO PAY SOME OR ALL OF THE CLOSINGCOSTS NORMALLY ASSOCIATED WITH A NEW LOAN, EVEN IF YOU OBTAIN REFINANCING FROMTHIS LENDER.

 

The failure of Borrower to payany of the payment(s) of principal or any interest thereon, fees and/or latecharges when the same is due and payable, shall permit Lender, at its option,to accelerate the maturity, of all, or any portion, of the remaining unpaidprincipal balance outstanding, all accrued and unpaid interest and all accruedand unpaid late charges of this Note, whereupon the same shall be due andpayable immediately.

 

**Borrowerand Lender intend that the loan evidenced by this Note (the “Loan”) shall be instrict compliance with applicable usury laws. If at any time any interestcontracted for, charged, or received under this Note or otherwise in connectionwith. the Loan would be usurious under applicable law, then regardless of theprovisions, of this Note or the documents and instruments evidencing, securingor otherwise executed in connection with ti1e,Loan or any action. or event(including, without limitation, prepayment of principal hereunder oracceleration of maturity by the Lender) which may occur with respect to thisNote or the Loan, it is agreed that all sums determined to be usurious shall beimmediately credited by the Lender as a payment of principal hereunder, or Ifthis Note has already been paid, immediately refunded to the Borrower. Allcompensation which constitutes interest under applicable law in connection withthe Loan shall be amortized, prorated, allocated and spread over the fullperiod of time any indebtedness is owing by Borrower to the greatest extentpermissible without exceeding the applicable maximum rate allowed by applicablelaw in effect from time to time during such period.**

 

In no event shall theprovisions of Chapter 346, of the Texas Finance Code (which regulates certainrevolving loan accounts and revolving triparty accounts) apply to the loan.

 

IN THE EVENT ANY ITEM, ITEMS,TERMS OR PROVISIONS CONTAINED IN THIS INSTRUMENT ARE IN CONFLICT WITH THE LAWSOF THE STATE OF TEXAS, OR FEDERAL LAW, THIS INSTRUMENT. SHALL BE AFFECTED ONLYAS TO ITS APPLICATION TO SUCH ITEM, ITEMS, TERMS’ ‘OR PROVISIONS, AND SHALL INALL OTHER RESPECTS REMAIN IN FULL FORCE AND EFFECT. IT IS UNDERSTOOD AND AGREEDTHAT IN NO EVENT AND UPON NO CONTINGENCY SHALL THE BORROWER OR ANY PARTY LIABLETHEREON, OR THEREFORE, BE REQUIRED TO PAY INTEREST IN EXCESS OF THE RATEALLOWED BY THE LAWS OF THE: STATE OF TEXAS OR FEDERAL LAW, IF SUCH LAW PERMITSA GREATER RATE OF INTEREST. THE INTENTION OF THE PARTIES BEING TO CONFORMSTRICTLY TO THE USURY LAWS AS NOW OR HEREINAFTER CONSTRUED BY THE COURTS HAVINGJURISDICTION.

 

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***THE BORROWER, ENDORSERS;SURETIES, GUARANTORS AND ALL PERSONS TO BECOME LIABLE ON THIS NOTE (THE “OBLIGORS”)HEREBY, JOINTLY AND SEVERALLY, WAIVE EXPRESSLY ALL NOTICES OF OVERDUEINSTALLMENT PAYMENTS, AND DEMANDS FOR PAYMENT THEREOF, NOTICES OF INTENTION TOACCELERATE MATURITY, NOTICES OF ACTUAL ACCELERATION OF MATURITY, PRESENTMENT,DEMAND FOR PAYMENT, NOTICES OF

***Except as provided inSection 1.14.1 and 1.14.2 of the Loan Agreement of even date herewith betweenBorrower and Lender (“Loan Agreement”)

 

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DISHONOR, DISHONOR, PROTEST,NOTICES OF PROTEST, AND DILIGENCE IN COLLECTION HEREOF. EACH OBLIGOR CONSENTSTHAT THE LENDER OR OTHER HOLDER OF THIS NOTE MAY AT ANY TIME, ANDFROM TIME TOTIME UPON REQUEST OF OR BY AGREEMENT WITH ANY OF THEM, RENEW THIS NOTE AND/OREXTEND THE DATE OF ATURITY HEREOF OR CHANGE THE TIME OR METHOD OF PAYMENTSWITHOUT NOTICE TO ANY OF THE OTHER OBLIGORS, MAKERS, SURETIES OR ENDORSERS WHOSHALL REMAIN BOUND FOR THE PAYMENT HEREOF. BUGORS WAIVE EXPRESSLY THE LATEFILING OF’ANY SUIT OR CAUSE OF’ACTION HEREON, OR ANY DELAY IN THE HANDLINGOFANY COLLATERAL. OBLIGORS AGREE THAT HOLDER’S ACCEPTANCE OF PARTIAL ORDELINQUENT PAYMENTS OR FAILURE OF HOLDER TO EXERCISE ANY RIGHT OR REMEDYCONTAINED HEREIN OR IN ANY INSTRUMENT GIVEN AS SECURITY FOR THE PAYMENTOF THISNOTE SHALL NOT BE A WAIVER OF ANY OBLIGATION OF THE OBLIGORS ORCONSTITUTE.WAIVER OF ANY PRIOR OR SUBSEQUENT DEFAULT. THE HOLDER MAY REMEDY ANYDEFAUL T WITHOVT WAIVING THE DEFAULT REMEDIED AND MAY WAIVE ANY DEFAULT WITHOUTWAIVING ANY OTHER PRIOR OR SUBSEQUENT DEFAULT.

 

To the extent allowed bylaw, as security for this Note, and all other indebtedness which may at anytime be owing by Borrower (and any endorsers and/or guarantors hereof) toLender or other holder hereof, the Borrower (and any endorsers and/orguarantors hereof) gives to Lender or other holder hereof, a security interest,a lien and contractual right of set-off in and to all of the Borrower’s (andany endorsers and/or guarantors hereof) money, credits, accounts and/or otherproperty now in, or at any time here after coming within the custody or controlof Lender or other holder hereof, or any member of Bank or branch Bank ofInternational Bancshares Corporation, whether held in a general or specialaccount or depositor for safekeeping or otherwise.  Every such security interest and right ofset-off may be exercised without demand or notice to Borrower (and anyendorsers and/or guarantors hereof.)  Nosecurity interest or right of set-off to enforce such security shall be deemedto have been waived by any act or conduct on the part of Lender, or by anyfailure to exercise such right of set-off or to enforce such security interest,or by any delay in so doing.  Every rightof set-off and security interest shall continue in full force and effect untilsuch right of set-off or security interest is specifically waived or releasedby an instrument in writing executed by Lender. The foregoing is in addition to and not in lieu of any rights of set-offallowed by law.

 

In connection with anytransaction between Borrower and Lender at any time in the past, present orfuture, in the event Borrower, individually or jointly with others, has grantedor grants Lender a lien on any real and/or personal property, Borrower agreesthat the lien on such real and/or personal property shall also secure theindebtedness of Borrower to Lender evidenced by this Note and all renewals,extensions and modifications hereof.

 

If this Note, or any parthereof, is not paid according to its terms, is placed in the hands of anattorney for collection, or is collected through Probate, Bankruptcy or otherjudicial or non-judicial proceedings, whether matured by expiration of time orby the exercise of the option given to the Lender to mature it, the Borrowerand all parties now or hereafter personally liable hereon hereby now agree toand shall pay an additional amount equal to a reasonable and necessary attorney’sfees and associated costs for collection. Said attorney’s fees and costs if collection, once liquidated and paidby Lender or otherwise allowed by law, will bear interest at the rate ofinterest applied to the matured and past-due principal balance of this Note assuch rate may change from time to time from date due until repaid.

 

In the event any legal action or proceeding, byarbitration or otherwise, is commenced with the enforcement of, or anydeclaration of rights under this Note and/or any instrument or writtenagreement required or delivered under or pursuant to the terms of this Note,and/or any controversy or claim, whether sounding in contract, tort or statute,legal or equitable, involving in any way the financing or the transaction(s),the subject of this Note or any other proposed or actual loan or extension ofcredit, the prevailing party shall be entitled to recover reasonable andnecessary attorney’s fees, paralegal costs (including allocated costs forin-house legal services), costs, expenses, expert witness fees and costs, andother necessary disbursements made in connection with any such action orproceeding.

 

Lender, in its solediscretion and without obligation on Lender to do so, any advance and pay sumson behalf and for the benefit of Borrower for costs necessary for theprotection and preservation of the collateral securing this Note and othercosts that me be appropriate, in Lender’s sole discretion, including but notlimited to insurance premiums, ad valorem taxes, and attorney’s fees.  Any sums which may be so paid out by Lenderand all sums paid for insurance premiums, as aforesaid, including the costs,expenses and attorney’s fees paid in any suit affecting said property shallbear interest from the dates of such payments at the prematurity contract rateapplied to the principal balance of this Note and shall be paid by Borrower toLender upon demand, at the same place at which this Note is payable, and shallbe deemed a part of the debt and recoverable as such in all aspects.

 

Borrower reserves the rightto prepay, prior to maturity, all or any part of the principal of this Notewithout penalty, and interest shall immediately cease on any amount soprepaid.  All prepayments shall beapplied to the last maturing installments of principal, without interruptingthe regular installment payments.

 

Any assumption, if permittedby Lender, by ant other person or persons, partnership, corporation,organization or any other entity without the express written consent of Lender,shall not release the liability of Borrower for the payment of this Note.

 

In the event that thehereinafter described collateral, if any, is sold, conveyed, or otherwisedisposed of without the prior written consent of the Lender other than in theordinary course of business, the maturity of this Note may, at the option ofthe Lender, be accelerated and Lender may immediately demand payment of thethen outstanding principal sum together with all accrued and unpaid interestdue thereon.

 

Borrower and Lender herebyexpressly acknowledge and agree that in the event of a default under this Noteor under any document executed by Borrower in connection with, or to secure thepayment of, this Note (I) Lender shall not be required to comply withSubsection 3.05 (d) of the Texas Revised Partnership Act and (2) Lender shallnot be required to proceed against or exhaust the assets of Borrower beforepursuing any remedy against one or more of the partners of Borrower of theproperty of such partners.

 

**ARBITRATION.**

**LENDER AND BORROWER FURTHER AGREEAS FOLLOWS:**

 

**I.****             ****PROVISIONS APPLICABLE TOCONSUMER.RELATED CLAIMS OF $75,000.00 OR LESS IN ACTUAL DAMAGES:**

 

**(a)****          ****WITH REGARD TO ALL CONSUMERRELATED CLAIMS OF $75,000.00 OR LESS IN ACTUAL DAMAGES, ANY AND ALLCONTROVERSIES OR CLAIMS ARISING OUT OF THIS CONTRACT, ITS NEGOTIATION AND/ORTHE BREACH THEREOF, SHALL BE SETT.LED BY ARBITRATION ADMINISTERED BY THEAMERICAN ARBITRATION ASSOCIATION UNDER ITS SUPPLEMENTAL PROCEDURES FORRESOLUTION OF CONSUMER.RELATED DISPUTES AND CONSUMER DUE PROCESS PROTOCOL(WHICH ARE INCORPORATED HEREIN FOR ALL PURPOSES), AND JUDGMENT ON THE AWARDRENDERED BY THE ARBITRATOR(S) MAY BE ENTERED IN ANY COURT HAVING JURISDICTIONTHEREOF**. **IT IS INTENDED BY ALL PARTIES THAT THIS ARBITRATION CLAUSE MEET ANDINCLUDE ALL FAIRNESS STANDARDS AND PRINCIPLES OF THE AMERICAN ARBITRATIONASSOCIATION’S CONSUMER DUE PROCESS PROTOCOL AND DUE PROCESS IN PREDISPUTEARBITRATION.**

 

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**(b)****          ****INSTEAD OF PROCEEDING INARBITRATION, ANY PARTY HERETO MAY PURSUEITS CLAIMIN THE CONSUMER’S LACAL SMALLCLAIMS COURT, IF THE CONSUMER-RELATED CLAIM IS WITHIN THE SMALL CLAIMS COURTJURISDICTION LIMITS. IF THE SMALL CLAIMS COURT OPTION IS CHOSEN THE PARTY MUSTCONTACT THE SMALL CLAIMS COURT DIRECTLY.**

 

**(c)****          ****THE PARTIES FURTHER AGREE THAT(i) NO ARBITRATION PROCEEDING HEREUNDER SHALL BE CERTIFIED AS A CLASS ACTION ORPROCEED AS A CLASS ACTION; OR ON A BASIS INVOLVING CLAIMS BROUGHT IN APURPORTED REPRESENTATIVE CAPACITY ON BEHALF OF THE GENERAL PUBLIC, OTHERCUSTOMERS OR POTENTIAL CUSTOMERS OR PERSONS SIMILARLY SITUATED AND (II) NOARBITRATION PROCEEDING HEREUNDER SHALL BE CONSOLIDATED WITH, OR JOINED IN ANYWAY WITH, ANY OTHER ARBITRATION PROCEEDING.**

 

**(d)****          ****THIS ARBITRATION PROVISION SHALLSURVIVE ANY TERMINATION, AMENDMENT, OR EXPIRATION OF THE AGREEMENT IN WHICHTHIS PROVISION IS CONTAINED, UNLESS ALL OF THE PARTIES OTHERWISE EXPRESSLYAGREE IN WRITING.**

 

**(e)****          ****THE PARTIES ACKNOWLEDGE THAT THISAGREEMENT EVIDENCES A TRANSACTION INVOLVING INTERSTATE COMMERCE. THE FEDERAL ARBITRATIONACT SHALL GOVERN THE INTERPRETATION, ENFORCEMENT, AND PROCEEDINGS PURSUANT TOTHE ARBITRATION CLAUSE OF THIS AGREEMENT.**

 

**II.****           ****ADDITIONAL PROVISIONS FORCONSUMER-RELATED CLAIMS ABOVE $75,000.00 IN ACTUAL DAMAGES AND/OR ALLCOMMERCIAL CLAIMS:**

 

**(a)****          ****ANY ARBITRATION INVOLVINGCONSUMER-RELATED CLAIMS ABOVE $75,000.00 IN ACTUAL DAMAGES AND/OR COMMERCIALCLAIMS HEREUNDER SHALL BE BEFORE AT LEAST THREE NEUTRAL ARBITRATORS ASSOCIATEDWITH THE AMERICAN ARBITRATION ASSOCIATION AND SELECTED IN ACCORDANCE WITH THECOMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATION ASSOCIATION. FAILUREOF ANY ARBITRATOR TO DISCLOSE ALL FACTS WHICH MIGHT TO AN OBJECTIVE OBSERVERCREATE A REASONABLE IMPRESSION OF THE ARBITRATORIS PARTIALITY, AND/OR MATERIALERRORS OF LAW SHALL BE GROUNDS [IN ADDITION TO ALL OTHERS] FOR VACATUR OF ANAWARD RENDERED PURSUANT TO THIS AGREEMENT.**

 

**(b)****          ****THE PARTIES FURTHER AGREE THAT(i) NO ARBITRATION PROCEEDING HEREUNDER SHALL BE CERTIFIED AS A CLASS ACTION ORPROCEED AS A CLASS ACTION, OR ON A BASIS INVOLVING CLAIMSBROUGHT IN APURPORTED REPRESENTATIVE CAPACITY ON BEHALF OF THE GENERAL PUBLIC, OTHERCUSTOMERS OR POTENTIAL CUSTOMERS OR PERSONS SIMILARLY SITUATED AND (ii) NOARBITRATION PROCEEDING HEREUNDER SHALL BE CONSOLIDATED WITH, OR JOINED IN ANYWAY WITH, ANY OTHER ARBITRATION PROCEEDING.**

 

**(c)****          ****THIS ARBITRATION PROVISION SHALLSURVIVE ANY TERMINATION, AMENDMENT, OR EXPIRATION OF THE AGREEMENT IN WHICHTHIS PROVISION IS CONTAINED, UNLESS ALL OF THE PARTIES OTHERWISE EXPRESSLYAGREE IN WRITING.**

 

**(d)****          ****THE PARTIES ACKNOWLEDGE THAT THISAGREEMENT EVIDENCES A TRANSACTION INVOLVING INTERSTATE COMMERCE. THE FEDERALARBITRATION ACT SHALL GOVERN THE INTERPRETATION, ENFORCEMENT, AND PROCEEDINGSPURSUANT TO THE ARBITRATION CLAUSE OF THIS AGREEMENT.**

 

**III.****          ****ADDITIONAL PROVISIONS FOR ALLCOMMERCIAL CLAIMS:**

 

**(a)****          ****ANY AND ALL COMMERCIALCONTROVERSIES BETWEEN THE PARTIES, SHALL BE RESOLVED BY ARBITRATION INACCORDANCE, WITH THE COMMERCIAL ARBITRATION RULES OF THE AMERICAN ARBITRATIONASSOCIATION IN EFFECT AT THE TIME OF FILING, UNLESS THE COMMERCIAL ARBITRATIONRULES CONFLICT WITH THIS PROVISION, AND IN SUCH EVENT THE TERMS OF THISPROVISION SHALL CONTROL TO THE EXTENT OF THE CONFLICT.**

 

**(b)****          ****THE AWARD OF THE ARBITRATORS, ORA MAJORITY OF THEM, SHALL BE FINAL, AND JUDGMENT UPON THE AWARD RENDERED MAY BEENTERED IN ANY COURT, STATE OR FEDERAL, HAVING JURISDICTION. THE ARBITRATIONAWARD SHALL BE IN WRITING AND SPECIFY THE FACTUAL AND LEGAL BASIS FOR THEAWARD. UPON THE REQUEST OF ANY PARTY, THE AWARD SHALL INCLUDE FINDINGS OF FACTAND CONCLUSION OF LAW.**

 

**(c)****          ****ARBITRABLE DISPUTES INCLUDE ANYAND ALL CONTROVERSIES OR CLAIMS BETWEEN THE PARTIES OF WHATEVER TYPE OR MANNER,INCLUDING WITHOUT LIMITATION, ANY CLAIM ARISING OUT OF OR RELATING TO THISSECURITY INSTRUMENT, ALL PAST, PRESENT AND/OR FUTURE CREDIT FACILITIES AND/ORAGREEMENTS INVOLVING THE PARTIES, ANY TRANSACTIONS BETWEEN OR, INVOLVING THEPARTIES, AND/OR ANY ASPECT OF ANY PAST OR PRESENT RELATIONSHIP OF THE PARTIES,WHETHER BANKING OR OTHERWISE, SPECIFICALLY INCLUDING ANY ALLEGED TORT COMMITTEDBY ANY PARTY.**

 

**(d)****          ****THE PARTIES SHALL ALLOW ANDPARTICIPATE IN DISCOVERY IN ACCORDANCE WITH THE FEDERAL RULES OF CIVILPROCEDURE FOR A PERIOD OF ONE HUNDRED TWENTY (120) DAYS AFTER THE FILING OF THEORIGINAL RESPONSIVE PLEADING. DISCOVERY MAY CONTINUE THEREAFTER AS AGREED BYTHE PARTIES OR AS ALLOWED BY THE ARBITRATORS. UNRESOLVED DISCOVERY DISPUTESSHALL BE BROUGHT TO THE ATTENTION OF THE ARBITRATORS BY WRITTEN MOTION FORPROPER DISPOSITION, INCLUDING RULING ON ANY ASSERTED OBJECTIONS, PRIVILEGES,AND PROTECTIVE ORDER REQUESTS AND AWARDING REASONABLE ATTORNEY’S FEES TO THEPREVAILING PARTY.**

 

**(e)****          ****IN THE EVENT THE AGGREGATE OF ALLAFFIRMATIVE CLAIMS ASSERTED EXCEED $500,000.00, EXCLUSIVE OF INTEREST ANDATTORNEY’S FEES, OR UPON THE WRITTEN REQUEST OF ANY PARTY, (1) PRIOR TO THEDISSEMINATION OF A LIST OF POTENTIAL ARBITRATORS. THE AMERICAN ARBITRATIONASSOCIATION SHALL CONDUCT AN IN PERSON ADMINISTRATIVE CONFERENCE WITH THEPARTIES AND THEIR**

 

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**ATTORNEYS FOR THE FOLLOWINGPURPOSES AND FOR SUCH ADDITIONAL PURPOSES AS THE PARTIES OR THE AMERICANARBITRATION ASSOCIATION MAY DEEM APPROPRIATE, (A) TO OBTAIN ADDITIONALINFORMATION ABOUT THE NATURE AND MAGNITUDE OF THE DISPUTE AND THE ANTICIPATED LENGTHOF HEARINGS AND SCHEDULING; (B) TO DISCUSS THE VIEW OF THE PARTIES ABOUT ANYTECHNICAL AND/OR OTHER SPECIAL QUALIFICATIONS OF THE ARBITRATORS; AND (C) TOCONSIDER, WHETHER MEDIATION OR OTHER METHODS OF DISPUTE RESOLUTION MIGHT BEAPPROPRIATE, AND (2) AS PROMPTLY AS PRACTICABLE AFTER THE SELECTION OF THEARBITRATORS, A PRELIMINARY HEARING SHALL BE HELD AMONG THE PARTIES, THEIRATTORNEYS AND THE ARBITRATORS WITH THE AGREEMENT OF THE ARBITRATORS AND THEPARTIES, THE PRELIMINARY HEARING MAY BE CONDUCTED BY TELEPHONE CONFERENCE CALLRATHER THAN IN PERSON. AT THE PRELIMINARY HEARING THE MATTERS THAT MAY BECONSIDERED SHALL INCLUDE, WITHOUT LIMITATION, A PREHEARING SCHEDULING ORDERADDRESSING (A) EACH PARTY’S DUTY TO SUBMIT A DETAILED STATEMENT OF CLAIMS, DAMAGESAND/OR DEFENSES, A STATEMENT OF THE ISSUES ASSERTED BY EACH PARTY AND ANY LEGALAUTHORITIES THE PARTIES MAY WISH TO BRING TO THE ATTENTION OF THE ARBITRATORS;(B) RESPONSES AND/OR REPLIES TO THE PLEADINGS FILED IN COMPLIANCE WITH SUBPART2(A): (C) STIPULATIONS REGARDING ANY UNCONTESTED FACTS; (D) EXCHANGE ANDPREMARKING OF ALL DOCUMENTS WHICH EACH PARTY BELIEVES MAY BE OFFERED AT THEFINAL ARBITRATION HEARING; (E) THE IDENTIFICATION AND AVAILABILITY OFWITNESSES, INCLUDING EXPERTS, AND SUCH ADDITIONAL MATTERS REGARDING WITNESSESINCLUDING THEIR BIOGRAPHIES AND A SHORT SUMMARY OF THEIR EXPECTED TESTIMONY,(F) WHETHER A STENOGRAPHIC OR OTHER OFFICIAL RECORD OF THE PROCEEDINGS SHALL BEMAINTAINED; AND (G) THE POSSIBILITY OF UTILIZING MEDIATION OR OTHER ALTERNATIVEMETHODS OF DISPUTE RESOLUTION.**

 

**(f)****           ****FOR PURPOSES OF THIS PROVISION, “THEPARTIES” MEAN BORROWER AND LENDER, AND EACH AND ALL PERSONS AND ENTITIESSIGNING THIS AGREEMENT OR ANY OTHER AGREEMENTS BETWEEN OR AMONG ANY OF THEPARTIES AS PART OF THIS TRANSACTION. “THE PARTIES” SHALL ALSO INCLUDEINDIVIDUAL PARTNERS, AFFILIATES, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND/ORREPRESENTATIVES OF ANY PARTY TO SUCH DOCUMENTS, AND SHALL INCLUDE ANY OTHEROWNER AND HOLDER OF THIS AGREEMENT.**

 

**(g)****          ****THE PARTIES SHALL HAVE THE RIGHTTO INVOKE SELF-HELP REMEDIES (SUCH AS SET-OFF, NOTIFICATION OF ACCOUNT DEBTORS,SEIZURE AND/OR FORECLOSURE OF COLLATERAL, AND NON- JUDICIAL SALE OF PERSONALPROPERTY AND REAL PROPERTY COLLATERAL) BEFORE, DURING OR AFTER ANY ARBITRATION AND/ORREQUEST ANCILLARY OR PROVISIONAL JUDICIAL REMEDIES (SUCH AS GARNISHMENT,ATTACHMENT, SPECIFIC PERFORMANCE, RECEIVER, INJUNCTION OR RESTRAINING ORDER,AND SEQUESTRATION) BEFORE OR AFTER ANY ARBITRATION. THE PARTIES NEED NOT AWAITTHE OUTCOME OF THE ARBITRATION BEFORE USING SELF-HELP REMEDIES. USE OFSELF-HELP OR ANCILLARY AND/OR PROVISIONAL JUDICIAL REMEDIES SHALL NOT OPERATEAS A WAIVER OF EITHER PARTY’S RIGHT TO COMPEL ARBITRATION. ANY ANCILLARY ORPROVISIONAL REMEDY WHICH WOULD BE AVAILABLE FROM A COURT AT LAW SHALL BEAVAILABLE FROM THE ARBITRATORS, INCLUDING INJUNCTION AND RESTRAINING ORDERS.**

 

**(h)****           THEPARTIES AGREE THAT ANY ACTION REGARDING ANY CONTROVERSY BETWEEN THE PARTIESSHALL EITHER BE BROUGHT BY ARBITRATION, AS DESCRIBED HEREIN, OR BY JUDICIALPROCEEDINGS, BUT SHALL NOT BE PURSUED SIMULTANEOUSLY IN DIFFERENT ORALTERNATIVE FORMS. A TIMELY WRITTEN NOTICE OF INTENT TO ARBITRATE PURSUANT TOTHIS AGREEMENT STAYS AND/OR ABATES ANY AND ALL ACTION IN A TRIAL COURT, SAVEAND EXCEPT A HEARING ON A MOTION TO COMPEL ARBITRATION AND/OR THE ENTRY OF ANORDER COMPELLING ARBITRATION AND STAYING AND/OR ABATING THE LITIGATION PENDINGTHE FILING OF THE FINAL AWARD OF THE ARBITRATORS. ALL REASONABLE AND NECESSARYATTORNEY’S FEES AND ALL TRAVEL COSTS SHALL BE AWARDED TO THE PREVAILING PARTYON ANY MOTION TO COMPEL ARBITRATION AND MUST BE PAID TO SUCH PARTY WITHIN TEN(10) DAYS OF THE SIGNING OF THE ORDER COMPELLING ARBITRATION.**

 

**(i)****           ****ANY PARTY SEEKING TO ARBITRATESHALL SERVE A WRITTEN NOTICE OF INTENT TO ARBITRATE TO ANY AND ALL OPPOSINGPARTIES WITHIN 360 DAYS AFTER DISPUTE HAS ARISEN. A DISPUTE IS DEFINED TO HAVEARISEN ONLY UPON RECEIPT OF SERVICE OF JUDICIAL PROCESS, INCLUDING SERVICE OF ACOUNTERCLAIM, FAILURE TO SERVE A WRITTEN NOTICE OF INTENT TO ARBITRATE WITHINTHE TIME SPECIFIED ABOVE SHALL BE DEEMED A WAIVER OF THE AGGRIEVED PARTY’SRIGHT TO COMPEL ARBITRATION OF SUCH CLAIM. THE ISSUE OF WAIVER PURSUANT TO THISAGREEMENT IS AN ARBITRABLE DISPUTE.**

 

**(j)****           ****ACTIVE PARTICIPATION IN PENDINGLITIGATION DURING THE 360 DAY NOTICE PERIOD, WHETHER AS PLAINTIFF OR DEFENDANT,IS NOT A WAIVER OF THE RIGHT TO COMPEL ARBITRATION. ALL DISCOVERY OBTAINED INTHE PENDING LITIGATION MAY BE USED IN ANY SUBSEQUENT ARBITRATION PROCEEDING.**

 

**(k)****          ****THE PARTIES FURTHER AGREE THAT(i) NO ARBITRATION PROCEEDING HEREUNDER SHALL BE CERTIFIED AS A CLASS ACTION ORPROCEED AS A CLASS ACTION, OR ON A BASIS INVOLVING CLAIMS BROUGHT IN APURPORTED REPRESENTATIVE CAPACITY ON BEHALF OF THE GENERAL PUBLIC, OTHERCUSTOMERS OR POTENTIAL CUSTOMERS OR PERSONS SIMILARLY SITUATED AND (ii) NOARBITRATION PROCEEDING HEREUNDER SHALL BE CONSOLIDATED WITH, OR JOINED IN ANYWAY WITH, ANY OTHER ARBITRATION PROCEEDING.**

 

**(l)****           ****ANY ARBITRATOR SELECTED SHALL BEKNOWLEDGEABLE IN THE SUBJECT MATTER OF THE DISPUTE. EACH OF THE PARTIES SHALLPAY AN EQUAL SHARE OF THE ARBITRATION COSTS, FEES, EXPENSES, AND OF THEARBITRATORS’ FEES, COSTS AND EXPENSES.**

 

**(m)****         ****ALL STATUTES OF LIMITATIONS WHICHWOULD OTHERWISE BE APPLICABLE SHALL APPLY TO ANY AND ALL CLAIMS ASSERTED IN ANYARBITRATION PROCEEDING HEREUNDER AND THE COMMENCEMENT OF ANY ARBITRATIONPROCEEDING TOLLS SUCH STATUTES OF LIMITATIONS.**

 

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**(n)****          ****IN ANY ARBITRATION PROCEEDINGSUBJECT TO THIS PROVISION, THE ARBITRATORS, OR MAJORITY OF THEM, ARESPECIFICALLY EMPOWERED TO DECIDE (BY DOCUMENT ONLY, OR WITH A HEARING, AT THEARBITRATORS’ SOLE DISCRETION) PRE-HEARING MOTIONS WHICH ARE SUBSTANTIALLYSIMILAR TO PRE HEARING MOTIONS TO DISMISS AND MOTIONS FOR SUMMARY ADJUDICATION.**

 

**(o)****          ****THIS ARBITRATION PROVISION SHALLSURVIVE ANY TERMINATION, AMENDMENT, OR EXPIRATION OF THE AGREEMENT IN WHICHTHIS PROVISION IS CONTAINED, UNLESS ALL OF THE PARTIES OTHERWISE EXPRESSLYAGREE IN WRITING.**

 

**(p)****          ****THE PARTIES ACKNOWLEDGE THAT THISAGREEMENT EVIDENCES A TRANSACTION INVOLVING INTERSTATE COMMERCE. THE FEDERALARBITRATION ACT SHALL GOVERN THE INTERPRETATION ENFORCEMENT, AND PROCEEDINGSPURSUANT TO THE ARBITRATION CLAUSE OF THIS AGREEMENT.**

 

**(q)****          ****THE ARBITRATORS, OR A MAJORITY OFTHEM, SHALL AWARD ATTORNEY’S FEES AND COSTS TO THE PREVAILING PARTY PURSUANT TOTHE TERMS OF THIS AGREEMENT.**

 

**(r)****          ****NEITHER THE PARTIES NOR THEARBITRATORS MAY DISCLOSE THE EXISTENCE, CONTENT, OR RESULTS OF ANY ARBITRATIONHEREUNDER WITHOUT PRIOR WRITTEN CONSENT OF ALL PARTIES AND/OR COURT ORDER.**

 

**(s)****          ****VENUE OF ANY ARBITRATIONPROCEEDING HEREUNDER SHALL BE IN BEXAR COUNTY, TEXAS.**

 

THE TERM LENDER INCLUDES ANYOTHER OWNER AND HOLDER OF THIS NOTE AND THEIR RESPECTIVE SUCCESSORS ANDASSIGNS. THIS NOTE IS GOVERNED BY APPLICABLE TEXAS LAW, EXCEPT TO THE EXTENTTHE USURY LAWS OF TEXAS ARE PRE-EMPTED BY FEDERAL LAW, IN WHICH CASE, SUCHFEDERAL LAW SHALL APPLY VENUE OF ALL ACTIONS ON THIS NOTE, SHALL LIE IN BEXARCOUNTY, TEXAS, AND ALL OBLIGATIONS REQUIRED HEREIN ARE PERFORMABLE IN BEXARCOUNTY, TEXAS.

 

This Note will be governedby, construed and enforced in accordance with federal law and the laws of theState of Texas. This Note has been accepted by Lender in the State of Texas.

 

If the loan proceeds are tobe used primarily for personal, family or household use, the following noticeshall apply:

 

NOTICE TO CONSUMERS: UNDERTEXAS LAW IF YOU CONSENT TO THIS AGREEMENT YOU MAY BE SUBJECT TO A FUTURERATING AS HIGH AS 24% ANNUAL PERCENTAGE RATE, OR THE STATE USURY CEILING,WHICHEVER IS LESS.

 

**NO ORALAGREEMENTS.**

 

**THIS WRITTEN AGREEMENT REPRESENTSTHE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCEOF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.**

 

**THERE ARE NO UNWRITTEN ORALAGREEMENTS BETWEEN THE PARTIES.**

 
| LANCER PARTNERSHIP, LTD.,  a Texas limited partnership |              |   |
|--------------------------------------------------------|-------------------|--------|
| By:  Lancer Capital Corporation,                       |              |   |
| a  Delaware corporation, General Partner               |              |   |
|                                                   |              |   |
| By:                                                    | /s/ Scott Adams   |   |   |   |
|                                                   |              |   |
| Name:                                                  | Scott Adams       |   |   |   |
|                                                   |              |   |
| Title:                                                 | Secretary         |   |   |   |
|                                                   |              |   |
| Address:                                               | 6655 LANCER BLVD. |   |   | City/State: | SAN ANTONIO, TEXAS 78219 |
|                                                        |                   |        |  |  |  |  |  |

 

6

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****ADDENDUM TO PROMISSORY NOTE**

 

This Addendum to PromissoryNote (“Addendum”) is executed by the undersigned and made a part of thatcertain Promissory Note (“Note”) dated **December          ,2004**, executed by Lancer Partnership, Ltd., a Texas limitedpartnership (the “Borrower”) and payable to the order of International Bank ofCommerce (the “Lender”) in the original principal sum of Fifteen Million andNo/100 Dollars **($15,000,000.00)**.

 

The interest rate on thisNote shall be either (A) or (B) below, as determined in accordance withBorrower’s election:

 

A.            The interest rate shall be floating at 0.50percent per annum below the New York Prime Rate (“Prime Rate”) (described below)as it fluctuates from time to time.  Thestarting interest rate on this Note shall be 4.75% percent per annum.  The rate of interest due hereunder shall berecomputed as of the date of any change in the Prime Rate.

 

The New York Prime Rateshall mean the annual lending rate of interest announced from time to time byJP Morgan Chase & Co., New York, New York, as its prime rate.  If the New York Prime Rate has been selectedas the Prime Rate and if, thereafter, a prime rate is not announced by JPMorgan Chase & Co., New York, New York, then the Wall Street Journal PrimeRate (as defined herein) shall be the Prime Rate.  The Wall Street Journal Prime Rate shall meanthe variable rate of interest established and quoted from time-to-time in the “MoneyRates” column in the “Money & Investing” Section of The Wall StreetJournal (Southwest Edition) as its Prime Rate.

 

B.            The interest rate on this Note shall be equalto the Index Rate (as defined herein) plus the Applicable Margin (as defined inthe Loan Agreement) per annum.  The term “IndexRate” as used herein shall mean the thirty (30), sixty (60) or ninety (90) day(as elected by Borrower) LIBOR Rate (as defined herein) on a 360-day year basisdetermined as hereinafter provided. “LIBOR Rate” means the interest per annumas determined by Lender at which United States dollar deposits are offered bybanks in the London Interbank market two (2) business days prior to thecommencement of such interest period. Borrower acknowledges that many of Lender’s commercial or other loansmay be priced in relation to the LIBOR Rate, that it is not necessarily thelowest or best rate of interest actually charged on any loan, and that Lendermay make various commercial or other loans at rates of interest having norelationship to the LIBOR Rate.

 

C.            This Note is made pursuant to and is governedin all respects by the Loan Agreement. In the case of any conflict between the terms and provisions of thisNote and those of the Loan Agreement, the terms and provisions of the Loan Agreementshall control.

 

D.

 
| **Number  of  Payments** | ** ** | **Frequency** | ** ** | **Amount of  Payments**                                                                        | ** ** | **When Payments  are Due**                                                                                                            |
|--------------------------|------------|---------------|------------|------------------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------------------------------------------------|
| (a)  Thirty-five (35)    |       | Monthly       |       | Interest  only on the outstanding principal balance.                                           |       | Commencing  January 30, 2005 and continuing on the last day of each successive calendar  month until and including November 30, 2007. |
|                     |       |          |       |                                                                                           |       |                                                                                                                                  |
| (b)  One (1)             |       |          |       | All  outstanding principal and all accrued, unpaid interest thereon shall be due  and payable. |       | On  Final Maturity Date.                                                                                                              |

 

FinalMaturity Date: DECEMBER 30, 2007.

 

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THISLOAN IS PAYABLE IN FULL ON**DECEMBER 30, 2007.** YOU MUST REPAY THE ENTIRE PRINCIPAL BALANCE OFTHE LOAN AND UNPAID INTEREST THEN DUE. THE BANK IS UNDER NO OBLIGATION TO REFINANCE THE LOAN.  YOU WOULD, THEREFORE, BE REQUIRED TO MAKEPAYMENT OUT OF OTHER ASSETS YOU MAY OWN, OR YOU WOULD HAVE TO FIND A LENDER,WHICH MAY BE THE BANK YOU HAVE THIS LOAN WITH AT MATURITY.  YOU MAY HAVE TO PAY SOME OR ALL THE CLOSINGCOSTS NORMALLY ASSOCIATED WITH A NEW LOAN EVEN IF YOU OBTAIN REFINANCING FROMTHE SAME BANK.

 

ThisNote is a revolving note evidencing a line of credit loan from Lender toBorrower.  During the term of this Note,Borrower may borrow, repay and reborrow hereunder at any time under this Noteprovided, however, that the principal balance outstanding under this Note atany time shall not exceed Fifteen Million and No/100 Dollars **($15,000,000.00). **Theunpaid balance of this Note shall increase and decrease with each new advanceor payment hereunder, as the case may be, and although the entire principalbalance of this Note may be paid in full from time to time, this Note shall notbe deemed terminated or canceled as a result thereof.

 

Executed this          day of December, 2004.

 

 

**BORROWER:**

 

**LancerPartnership, Ltd., a Texas limited partnership**

 
| **By:  Lancer Capital Corporation,**    |
|----------------------------------------------|
| **a Delaware corporation, General  Partner** |
|                                         |
|                                         | **By:** | **/s/  Scott Adams** |   |
|                                         | **Name:** | **Scott  Adams** |   |
|                                         | **Title:** | **   Secretary** |   |
|                                              |  |  |  |  |  |

 

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EXHIBIT “A”

 

A.            Equipment. All equipment of Debtor now or hereafteracquired by Debtor, including without limitation, including without limitation,furniture, machinery, vehicles and trade fixtures, together with any and allaccessions, attachments and other additions to, substitutes and replacementsfor and improvements of the equipment, whether now owned or at any time hereafteracquired or made, together with all tools, parts and appurtenances now or atany timer hereafter used in and together with all proceeds of the equipmentdescribed or referred to above, including insurance payable by reason of lossor damage thereto, and all proceeds of any policy of insurance required on theCollateral by Secured Party, including any refunds or unearned premiums inconnection with any cancellation, adjustment or termination of any such policyof insurance.

 

B.            Inventory. All inventory of Debtor, wheneveracquired and whether now or hereafter existing, including but not limited toall goods, wares and merchandise intended for sale or lease by Debtor or to befurnished by Debtor, under contracts of service and all raw materials, goods inprocess, finished goods and supplies of every nature used or usable inconnection with the manufacturing, processing, packing, shipping, advertising,selling, leasing or furnishing of such services, goods, wares and merchandise;all certificates of title, manufacture’s statements of origin and otherdocuments arising from or related to such inventory; and all accessions,attachments and other additions to, substitutes for, replacements for,improvements to and returns of such inventory; and all proceeds of suchinventory.

 

C.            Fixtures.

 

(1)           All of the property, personal orotherwise, whether now existing or hereafter arising, existing or created, nowor hereafter attached to or incorporated into or used in or about the Debtor’spremises, including all furniture, appliances, furnishings, goods, equipment,and machinery owned by Debtor and other tangible personal property now orhereafter affixed, attached or related to such property or now or hereafteraffixed, attached or related to such property or used in connection therewith,and all replacements, substitutions and additions for or to any of theforegoing;

 

(2)           All accessories, attachments and otheradditions to, substitutes and replacements for, and improvements of, theproperty described in (a) above, whether now owned or at any time hereafteracquired or made, together with all tools, parts and appurtenances now or atany time used in connection therewith;

 

(3)           All products and proceeds, including,without limitation, insurance proceed of, and additions, improvements andaccessions to, all and any of the property described above, excluding proceedsused to replace worn-out or obsolete equipment or other property.

 

D.            Accounts Receivable. All accounts and chattel paper of Debtor,whenever acquired and whether now or hereafter existing, including, but notlimited to, accounts and chattel paper which arise out of: (i) the sale orother disposition of goods; (ii) the furnishing of services; (iii) thefurnishing of, the use of, or the lease of any of the Collateral, and (iv) theagreement to provide any of the above; and all proceeds relating to, resultingfrom or arising in connection with any such accounts and/or chattel paper.

 

ThisSecurity Agreement is being executed pursuant to the terms and provisions of thatcertain Loan Agreement of even date herewith between Debtor and Secured Partyand which Loan Agreement will govern in case of conflict with this Agreement.

 

Togetherwith all books, records, files, computer software, documents and otherinformation pertaining to, and all containers and packages for, the propertydescribed or referred to in subsections A through D above, and the proceeds ofall of the foregoing.

 

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