Document:

exv10w3

 

Exhibit 10.3

PROMISSORY NOTE

	 	 	 	 	 
	$325,000.00
	 	Dallas, Texas
	 	March 22, 2006

     FOR VALUE RECEIVED, the undersigned, MBI Mortgage, Inc., a Texas corporation (“Maker”), whose
address is 1845 Woodall Rodgers Freeway, Suite 1225, Dallas, Texas 75201, promises to pay to the
order of CHARTER PRIVATE EQUITY, L.P., a Texas limited partnership (“Payee”) at 1845 Woodall
Rodgers Freeway, Suite 1700, Dallas, Texas 75201, or such other location as Payee may direct, in
lawful money of the United States of America, the principal sum of Three Hundred Twenty-Five
Thousand And No/100 ($325,000.00) with interest on the outstanding principal balance at the rate of
eighteen percent (18%) per annum until paid.

     All sums, principal and interest shall be due and payable on or before June 20, 2006
(“Maturity Date”) through a payment cashier’s check or other immediately available funds at the
above address or, at Payee’s option, by wire transfer to an account designated by Payee or such
other method of payment as Payee shall direct. This Note may be prepaid at any time, in full or in
part, without premium or penalty. This Note is being executed pursuant to a Loan Agreement
executed by the Payee and Maker as of the date hereof.

     Maker and any and all co-makers, endorsers, guarantors and sureties severally waive
presentment for payment, notice of nonpayment, protest, demand, notice of protest, notice of
intention to accelerate, notice of acceleration and dishonor, diligence in enforcement and
indulgences of every kind, and hereby agree that this Note and the liens securing its payment may
be extended and re-extended and the time for payment extended and re-extended from time to time
without notice to them or any of them, and they severally agree that their liability on or with
respect to this Note shall not be affected by any release or change in any security at any time
existing or by any failure to perfect or maintain perfection of any security interest in such
security.

     It is agreed that time is of the essence of this Note, and if the Note is not paid on the
Maturity Date, or, if a default occurs under any instrument now or hereafter executed in
connection with or as security for this Note, thereupon, after the passage of applicable notice and
cure periods, at the option of Payee, the entire unpaid principal balance due and owing on this
Note shall become and be due and payable forthwith without demand, notice of default or of intent
to accelerate the maturity hereof, notice of nonpayment, presentment, protest or notice of
dishonor, all of which are hereby expressly waived by Maker and each other liable party. Failure
to exercise this option upon any such default shall not constitute a waiver of the right to
exercise such option in the event of any subsequent default.

     If the entire unpaid principal balance plus all accrued and unpaid interest due and owing on
this Note is not paid at maturity whether by acceleration or otherwise and is placed in the hands
of an attorney for collection, or suit is filed hereon, or proceedings are had in probate,
bankruptcy, receivership, reorganization, arrangement or other legal proceedings for collection

PROMISSORY NOTE-Page 1 of 3

 

 

hereof, Maker and each other liable party agree to pay Payee its reasonable collection costs,
including a reasonable amount for attorneys’ fees, but in no event to exceed the maximum amount
permitted by law. Maker and each other liable party are and shall be directly and primarily,
jointly and severally, liable for the payment of all sums called for hereunder, and Maker and each
other liable party hereby expressly waive bringing of suit and diligence in taking any action to
collect any sums owing hereon and in the handling of any security hereunder, and Maker and each
other liable party hereby consent to and agree to remain liable hereon regardless of any renewals,
extensions for any period or rearrangements hereof, or any release or substitution of security
herefor, in whole or in part, with or without notice, from time to time, before or after maturity.

     It is the intent of Maker and Payee in the execution of this Note and all other loan documents
to contract in strict compliance with applicable usury law. In furtherance thereof, Maker and Payee
stipulate and agree that none of the terms and provisions contained in this Note, or in any other
instrument executed in connection herewith, shall ever be construed to create a contract to pay for
the use, forbearance or detention of money, interest at a rate or in an amount in excess of the
maximum rate or amount allowed by law (“Maximum Interest”). Neither Maker nor any guarantors,
endorsers or other parties now or hereafter becoming liable for payment of this Note shall ever be
obligated or required to pay interest on this Note at a rate in excess of the Maximum Interest, and
the provisions of this paragraph shall control over all other provisions of this Note and any other
loan documents now or hereafter executed which may be in apparent conflict herewith. Payee
expressly disavows any intention to charge or collect excessive unearned interest or finance
charges in the event the maturity of this Note is accelerated. If the maturity of this Note shall
be accelerated for any reason or if the principal of this Note is paid prior to the end of the term
of this Note, and as a result thereof the interest received for the actual period of existence of
the loan evidenced by this Note exceeds the applicable maximum lawful rate, the holder of this
Note shall credit the amount of such excess against the principal balance of this Note then
outstanding and thereby shall render inapplicable any and all penalties of any kind provided by
applicable law as a result of such excess interest; provided, however, that if the principal
hereof has been paid in full, such excess shall be refunded to Maker. If the holder of this Note
shall receive money (or anything else) which is determined to constitute interest and which would
increase the effective interest rate on this Note or any other indebtedness which Maker or a
guarantor is obligated to pay to holder to a rate in excess of that permitted by applicable law,
the amount determined to constitute interest in excess of the lawful rate shall be credited
against the principal balance of this Note then outstanding or, if the principal balance has been
paid in full, refunded to Maker, in which event any and all penalties of any kind under applicable
law as a result of such excess interest shall be inapplicable. If the holder of this Note shall
not actually receive, but shall contract for, request or demand, a payment of money (or anything
else) which is determined to constitute interest and which would increase the effective interest
rate contracted for or charged on this Note or the other indebtedness evidenced or secured by the
Loan Documents to a rate in excess of that permitted by applicable law, the holder of this Note
shall be entitled, following such determination, to waive or rescind the contractual claim,
request or demand for the amount determined to constitute interest in excess of the lawful rate,
in which event any and all penalties of any kind under applicable law as a result of such excess
interest shall be inapplicable. By execution of this Note Maker acknowledges that Maker believes
the loan evidenced by this Note to be non-usurious and

PROMISSORY NOTE-Page 2 of 3

 

 

agrees that if, at any time, Maker should have reason to believe that such loan is in fact
usurious, Maker will give the holder of this Note notice of such condition and Maker agrees that
the holder shall have sixty (60) days in which to make appropriate refund or other adjustment in
order to correct such condition if in fact such exists.

     Additionally, if, from any circumstance whatsoever, fulfillment of any provision hereof or of
the Loan Agreement or any other loan documents shall, at the time fulfillment of such provision
be due, involve transcending the Maximum Interest then, ipso facto, the obligation to be fulfilled
shall be reduced to the Maximum Interest. The term “applicable law” as used in this Note shall
mean the laws of the State of Texas or the laws of the United States, whichever laws allow the
greater rate or amount of interest, as such laws now exist or may be changed or amended or come
into effect in the future.

     This Note is secured by a security agreement covering all of Maker’s assets, now owned or
hereinafter acquired, executed by Maker in favor of Payee, or any other holder of this Note,
executed simultaneously herewith.

     This Note has been executed and delivered in and shall be construed in accordance with and
governed by the laws of the State of Texas.

	 	 	 	 	 
	 	MAKER:

MBI Mortgage, Inc.

 	 
	 	BY:	/s/ John M. Farkas
 	 
	 	Name:  	John M. Farkas 	 
	 	Title:  	President/Secretary 	 
	 

PROMISSORY NOTE-Page 3 of 3exv10w4

 

Exhibit 10.4

LOAN AGREEMENT

     This Loan Agreement (“Agreement”) is entered into by and between MBI Mortgage, Inc.
(“Borrower”), a Texas corporation with its principal place of business located at 1845 Woodall
Rodgers, Suite 1225, Dallas, Texas 75201, PATRICK A. McGEENEY, whose principal place of business is
the same as Borrower (“Guarantor”), and CHARTER PRIVATE EQUITY, L.P. (“Lender”), a Texas limited
partnership whose address is 1845 Woodall Rodgers Freeway, Suite 1700, Dallas, Texas 75201.

R E C I T A L S:

     WHEREAS, Borrower is in need of financing to provide funding of its acquisition and working
capital needs ; and

     WHEREAS, pursuant to the terms of this Agreement, Lender has agreed to lend Borrower the sum
of Three Hundred Twenty Five Thousand and No/100 Dollars ($325,000.00) to provide the financing
for Borrower’s needs.

     Now therefore, in consideration of the promises, payments, covenants, representations and
warranties hereinafter set forth, the parties hereto agree as follows:

     1. Loan Amount. Pursuant to the terms of this Agreement and satisfaction of the conditions
set forth below, Lender agrees to fund Borrower at closing the sum of Three Hundred Twenty Five
and No/100 Dollars ($325,000.00).

     2. Consideration. In consideration for such loan, Borrower agrees to execute at closing a
promissory note (the “Note”) bearing interest at the rate of eighteen percent (18%) per annum
which Note shall be payable, principal and interest, in currency of the United States of America on
June 20, 2006 (“Maturity Date”). The Note shall be pre-payable without penalty and contain usual
and customary language concerning default, post default interest, attorney’s fees and court costs,
and shall be in the form attached hereto as Exhibit “A.” The Note shall be payable by wire transfer
to an account designated in writing by Lender or such other method of payment, address or account
as Lender shall indicate in writing.

     As additional consideration for the loan, Borrower shall cause Local Telecom Systems, Inc., a
Nevada corporation (“LTSY”), issue warrants (“Warrants”) to purchase 1,200,000 shares (the “Warrant
Shares”) of common stock (the “Common Stock”) of, LTSY at a 50% discount from the fair market value
of the Common Stock at the time the Warrants are exercised, which shall be no later than the fifth
(5th) anniversary of the date of the maturity date of the Note. The Company agrees to
undertake to have the Warrant Shares registered for offer and sale to the Lender within twelve (12)
months from the date of the Warrant so that the Warrant Shares shall not be restricted securities
under the federal securities law, and may be sold by the Lender at any time or times thereafter
without first filing a registration statement under the Securities Act of 1933, as amended (the
“Act”) in connection with the sale of the Warrant Shares.

LOAN AGREEMENT

 

 

     Warrants evidencing the right to purchase Eighty Thousand (80,000) shares of Common Stock
covered by the Warrants (the “Specific Warrants”) shall be subject to a “put” whereby, within
thirty (30) days following the Maturity Date of the Note, Lender may, by sending written notice to
Borrower, require Borrower to purchase the Specific Warrants from Lender for the sum of Ninety
Thousand Five Hundred Fifty Four and No/100 Dollars ($90,554.00) and, in the event Lender does not
exercise such option, Borrower may, by sending written notice to Lender, within thirty (30) days
after the expiration of the “put,” require Lender to sell the Specific Warrants to Borrower for
the sum of Ninety Thousand Five Hundred Fifty Four and No/100 Dollars ($90,554.00). If either the
“put” or the “call” is exercised, the purchase and sale of the Specific Warrants shall occur in the
Lender’s offices within ten (10) days after exercise. Lender shall execute an assignment of the
Warrants and Borrower shall deliver the amount of the purchase price therefor to Lender in cash in
good current funds. In the event Lender does not exercise its “put” option and Borrower does not
exercise its “call” option, such options expire automatically and the Specific Warrants may be
exercised on the terms and during the period as the other Warrants granted to Lender. Unless a
current registration statement under the 1933 Act shall become effective with respect to the
Warrant Shares within twelve (12) months from the date of this Agreement, a put with respect to an
additional 40,000 shares of Common Stock shall be activated, with the put price being $40,000.00;
with second put being effective for a period of thirty (30) days beginning April 1, 2007 and
continuing until April 30, 2007.

     3. Collateral. As collateral to secure repayment of the Note and the obligations of Borrower
under this Agreement and the other documents executed in connection herewith, including, without
limitation, the obligations of Borrower pursuant to the “put” and “call” referred to in Paragraph
2, Borrower shall provide Lender a Security Agreement covering all of Borrower’s assets which shall
constitute a first lien against such assets. Additionally, Patrick A. McGeeney (a member of the
Board of directors of Borrower) (“Guarantor”), shall personally guarantee the Note and the
obligations of Borrower under this Agreement and the other documents executed in connection
herewith, including, without limitation, the obligations of Borrower pursuant to the “put” and
“call” referred to in Paragraph 2, pursuant to the terms of a guaranty agreement containing terms
and conditions acceptable to Lender.

     4. Use of Funds. The proceeds of the Loan shall be used only for the following purposes and
no other use of funds is permitted.

     5. Affirmative Covenants. Borrower shall, unless Lender consents otherwise in writing:

     a. Pay all of Borrower’s taxes, assessments and other obligations, including, but not limited
to taxes and assessments and lawful claims which, if unpaid, might by law become a lien against the
assets of Borrower, as the same become due and payable, except to the extent the same are being
contested in good faith.

LOAN AGREEMENT

 

 

     b. Comply with all applicable laws, rules, regulations and orders of any governmental
authority.

     c. Comply in all respects with all existing and future agreements, indentures, mortgages, or
documents which are binding upon it or affect any of its properties or business.

     d. Keep at all times books and records of account in accordance with GAAP in which full, true
and correct entries will be made of all dealings or transactions in relation to the business and
affairs of Borrower.

     e. Upon reasonable notice allow any representative of Lender to inspect Borrower’s books of
record and accounts and to discuss its affairs, finances and accounts with any of its partners,
officers, directors, employees and agents, all at such reasonable times and as often as Lender may
request.

     f. Preserve and maintain its existence and good standing in Texas and in each other
jurisdiction in which qualification is required.

     g. Make, execute or endorse, acknowledge and deliver or file or cause the same to be done, all
such vouchers, invoices, notices, certifications and additional agreements, undertakings,
conveyances, assignments, financing statements or other assurances, and take any and all such other
action as Lender may from time to time deem necessary or appropriate in connection with this
Agreement or any of the other documents related to this transaction, (i) to cure any defects in the
creation of the documents related to this transaction, or (ii) to evidence further or more fully
describe, perfect or realize on the collateral intended as security, or (iii) to correct any
omissions in the documents related to this transaction, or (iv) to state more fully the security
for the Borrower’s obligations, or (v) to perfect, protect or preserve any liens pursuant to any of
the documents related to this transaction, or (vi) for better assuring and confirming unto Lender
all or any part of the security for any of the Borrower’s obligations.

     6. Negative Covenants of Borrower. Borrower shall not:

     a. Grant, suffer or permit, any contractual or noncontractual lien on or security interest in
any of its other assets.

     b. Enter into any merger or consolidation or liquidation or dissolution.

     c. Make any loan or advance to any individual, partnership, corporation or other entity
without consent of Lender.

     d. Create, incur, assume or become liable in any manner for any indebtedness (for borrowed
money, deferred payment for the purchase of assets, lease payments, as surety or guarantor for the
debt for another, or otherwise) other than to Lender, except for normal trade debts incurred in the
ordinary course of Borrower’s

LOAN AGREEMENT

 

 

business.

     e. Do any of the following if an Event of Default has occurred and is continuing or will
result therefrom: (a) declare or pay any dividends or distributions; or (b) purchase, redeem,
retire or otherwise acquire for value any of its stock now or hereafter outstanding; (c) or make
any distribution of assets to its shareholders as such, whether in cash, assets, or in obligations
of Borrower; or (d) allocate or otherwise set apart any sum for the payment of any dividend or
distribution on, or for the purchase, redemption, or retirement of any partnership interests; or
(e) make any other distribution by reduction of capital or otherwise.

     f. Convey, assign, transfer, sell, lease or otherwise dispose of, in one transaction or a
series of transactions (or agree to do any of the foregoing at any future time), all or
substantially all or a substantial part of its properties or assets (whether now owned or hereafter
acquired) or any part of such properties or assets which are essential to the conduct of its
business substantially as now conducted.

     g. Permit the change of control of Borrower.

     h. Conduct any business other than, or make any material change in the nature of, its business
as carried on as of the date hereof.

     i. Form or acquire any subsidiaries.

     7. Negative Covenants of Guarantor. Guarantor shall not:

     a. Sell, transfer, assign, or otherwise dispose of any of Guarantor’s stock or other interest
in Borrower.

     b. Grant, suffer or permit, any contractual or noncontractual lien on or security interest in
any of its other assets.

     c. Make any loan or advance to any individual, partnership, corporation or other entity
without consent of Lender.

     d. Create, incur, assume or become liable in any manner for any indebtedness (for borrowed
money, deferred payment for the purchase of assets, lease payments, as surety or guarantor for the
debt for another, or otherwise) other than to Lender.

     7. Representations and Warranties. Borrower and Guarantor each hereby represents and warrants
to Lender as follows, which representations and warranties shall be deemed to be made at and as of
the date hereof and in all instances shall be true and correct in all material respects:

     a. Borrower has good and defensible title to all of its assets, and none of such

LOAN AGREEMENT

 

 

assets are subject to any security interest, mortgage, deed of trust, pledge, lien, title
retention document or encumbrance of any character.

     b. The financial statements of Borrower and Guarantor heretofore delivered to Lender have been
prepared in accordance with GAAP (or other sound accounting practices acceptable to Lender) and
fairly present such party’s financial condition as of the date or dates thereof, and there have
been no material adverse changes in such party’s financial condition or operation since the date or
dates thereof.

     c. Borrower is a corporation, duly organized, validly existing and in good standing under the
laws of Texas and has the power and authority to own its property and to carry on its business in
Texas and in each other jurisdiction in which Borrower does business.

     d. Each of Borrower and Guarantor has full power and authority to execute, deliver and perform
the documents to which it is a party and to incur and perform the obligations provided for therein.
No consent or approval of any public authority or other third party is required as a condition to
the validity or performance of any document relating to this transaction, and each of Borrower and
Guarantor is in compliance with all laws and regulatory requirements to which it is subject.

     e. This Agreement and the other documents executed in connection with this transaction by
Borrower and Guarantor constitute valid and legally binding obligations of such party, enforceable
in accordance with their terms.

     f. There is no charter, bylaw, stock provision, partnership agreement or other document
pertaining to the power or authority of Borrower and no provision of any existing agreement,
mortgage, indenture or contract binding on Borrower or Guarantor or affecting any property of such
party, which would conflict with or in any way prevent the execution, delivery or carrying out of
the terms of this Agreement and the other documents executed in connection with this transaction.

     8. Closing. Closing shall occur in Borrower’s offices at a mutually agreeable date and time
but no later than March 20, 2006

          (i) At the closing, following execution of the closing documents, Lender shall provide a
cashier’s check or other certified funds in the amount of Three Hundred Twenty-Five Thousand
Dollars ($325,000.00).

          (ii) At the closing, Borrower shall deliver to Lender the following:

	 	1.	 	The Note dated the day of closing in the
original principal sum of $325,000 bearing interest at the rate of
18% per annum and being due and payable as described in paragraph 2
above The Note shall contain customary default and other provisions
and

LOAN AGREEMENT

 

 

	 	 	 	be in the form attached hereto as Exhibit “B;”
	 
	 	2.	 	Personal Guaranty of Guarantor in the
form attached hereto as Exhibit “C;”
	 
	 	3.	 	Warrant Agreement in the form attached
hereto as Exhibit “D;” and,
	 
	 	4.	 	Security Agreement executed by Borrower for
the benefit of Lender securing payment of the Note covering all of
Borrower’s personal property, tangible and intangible in the form
attached hereto as Exhibit “E.”
	 
	 	5.	 	Security Agreement executed by Guarantor
for the benefit of Lender securing Guarantor’s obligations under the
Guaranty, covering all of the shares of LTSY or Borrower hereafter
acquired by Guarantor.

     9. Events of Default. Any of the following shall constitute events of default (each an
“Event of Default”):

     a. Borrower or Guarantor shall default in the due and punctual payment of any principal or
interest of the Note when due and payable, whether at maturity or otherwise, or in the due and
punctual payment of any of the other obligations of such party when due and payable.

     b. Any representation, warranty or statement made by any Borrower or Guarantor herein or
otherwise in writing in connection herewith or in connection with any of the other documents
executed in connection herewith, and the agreements referred to herein or therein or in any
financial statement, certificate or statement signed by any officer or employee of any Borrower or
Guarantor and furnished pursuant to any provision of the documents executed in connection herewith
shall be breached, or shall be materially false, incorrect or incomplete when made.

     c. Borrower or Guarantor shall default in the due performance or observance of any term,
covenant or agreement contained in this Agreement or the Guaranty, respectively.

     d. Any of the documents executed in connection with this Transaction shall cease to be a
legal, valid and binding agreement enforceable against any party executing the same in accordance
with the respective terms thereof, or shall in any way be terminated, or become or be declared
ineffective or inoperative, or shall in any way whatsoever cease to give or provide the respective
rights, remedies, powers and privileges intended to be created thereby

     e. Borrower, Guarantor, or LTSY shall suspend or discontinue its business

LOAN AGREEMENT

 

 

operations, or shall generally fail to pay its debts as they mature, or shall file a petition
commencing a voluntary case concerning it under any chapter of the United States Bankruptcy Code;
or any involuntary case shall be commenced against any of them under the United States Bankruptcy
Code; or any of them shall become insolvent (howsoever such insolvency may be evidenced).

     10. Remedies. Upon the occurrence of an Event of Default, the entire principal of and accrued
interest on the Note shall forthwith be due and payable without demand, presentment for payment,
notice of nonpayment, protest, notice of protest, notice of intent to accelerate, notice of
acceleration and all other notices and further actions of any kind, all of which are hereby
expressly waived by Borrower. Borrower waives demand, presentment for payment, notice of
nonpayment, protest, notice of protest, notice of intent to accelerate, notice of acceleration and
all other notices and further actions of any kind, all of which are hereby expressly waived by
Borrower. Upon the occurrence and during the continuance of any Event of Default, Lender may (a)
exercise any and all rights under or pursuant to any of the documents executed in connection with
this transaction, and (b) exercise any and all rights afforded to Lender by the laws of the State
of Texas or any other applicable jurisdiction or in equity or otherwise, as Lender may deem
appropriate.

     11. Costs/Indemnity. Borrower shall pay to Lender immediately upon demand the full amount of
all costs and expenses, including reasonable attorneys’ fees, incurred by Lender in connection with
(a) the negotiation, preparation and delivery of this Agreement and each of the documents executed
in connection herewith, and all other costs and attorneys’ fees incurred by Lender for which
Borrower is obligated to pay in accordance with the terms of the Loan Documents, and (b) any
modifications of or consents or waivers under or amendments to or interpretations of this
Agreement, the Note, or the other documents related thereto. Borrower further agrees to pay on
demand all costs and expenses of Lender, if any, in connection with the enforcement (whether
through negotiations, arbitration proceedings, legal proceedings or otherwise) of the documents
relating to this transaction. Borrower further agrees to indemnify Lender and its employees and
agents, from and hold them harmless against any and all losses, liabilities, claims, damages or
expenses which any of them suffers or incurs as a result of Lender’s entering into this Agreement
and the documents relating hereto, or the consummation of the transactions contemplated by this
Agreement, or the use or contemplated use of the proceeds of the loan. IT IS THE INTENTION OF THE
PARTIES THAT THE FOREGOING INDEMNITIES SHALL APPLY TO LOSSES, LIABILITIES, CLAIMS, DAMAGES OR
EXPENSES WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF AN INDEMNIFIED
PARTY. No such indemnified party, however, shall be entitled to be indemnified for its or his own
gross negligence or willful misconduct. In the case of an investigation, litigation or other
proceeding to which the indemnity in this Section applies, such indemnities shall be effective
whether or not such investigation, litigation or proceeding is brought by Borrower, its directors,
shareholders or creditors, or by an indemnified party and whether or not the transactions hereby
are consummated. Borrower shall defend any claim for which an indemnified party is

LOAN AGREEMENT

 

 

entitled to seek indemnity pursuant to the preceding sentence, and the indemnified party shall
cooperate with the defense. The indemnified party may have separate counsel, and Borrower will pay
the expenses and reasonable fees of such separate counsel if either counsel for Borrower or counsel
for the indemnified party shall advise the indemnified party that the interests of both Borrower
and the indemnified party with respect to such claim are or with reasonable certainty will become
adverse. The agreements and obligations of Borrower contained in this Section shall survive payment
in full of the Obligations.

     12. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the
parties, their successors, assigns and/or affiliates.

     13. Waiver of Jury Trial. BORROWER AND LENDER IRREVOCABLY WAIVE ANY AND ALL RIGHT
EITHER OF THEM MAY HAVE TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR CLAIM OF ANY NATURE
RELATING TO THIS AGREEMENT, ANY DOCUMENTS EXECUTED IN CONNECTION WITH THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED IN ANY OF SUCH DOCUMENTS. BORROWER AND LENDER ACKNOWLEDGE THAT THE
FOREGOING WAIVER IS KNOWING AND VOLUNTARY.

     14. Arbitration; Venue; Jurisdiction. The parties acknowledge and agree that this
Agreement is being entered into in Dallas County, Texas and that venue over any disputes shall be
in Dallas County, Texas and that the laws of the State of Texas shall apply to the construction,
interpretation, and/or application of this Agreement. The parties agree that any disputes that may
arise concerning the construction, interpretation or application of this Agreement which cannot be
amicably resolved between the parties shall be resolved through mandatory arbitration conducted by
three arbitrators in accordance with the rules and pursuant to the administration of the American
Arbitration Association. Such arbitration shall be conducted in Dallas County, Texas and shall be
final and binding upon the parties. Any party seeking to reduce an award to a final judgment shall
do so through initiating litigation in a Dallas County Judicial District Court located in Dallas
County, Texas.

     7. Notices. All notices required by this Agreement shall be effective if provided in
writing and mailed to the other party by certified mail, return receipt requested to the following
address or such other address as either party may provide to the other party in writing in the
manner required by this paragraph:

A. If to Lender:

Charter Private Equity, L.P.

1845 Woodall Rodgers Freeway, Suite 1700

Dallas, Texas 75201

LOAN AGREEMENT

 

 

with a copy to:

David A. Weatherbie

Vial, Hamilton, Koch & Knox, L.L.P.

1700 Pacific Avenue, Suite 2800

Dallas, Texas 75201

B. If to Borrower:

MBI Mortgage, Inc.

1845 Woodall Rodgers Freeway, Suite 1225

Dallas, Texas 75201

Attention: Patrick A. McGeeney

     11. Multiple Counterparts. This Agreement may be executed in multiple counterparts,
any of which shall be deemed an original.

     This
Agreement is entered into on this the 22 day of March, 2006.

	 	 	 	 	 
	 	LENDER:

Charter Private Equity, L.P.

 	 
	 	By: Charter Private Equity GP, Inc., 
a Texas corporation, general partner
 	 
	 

	 	 	 	 	 
	 	 	 
	 	By:  	     /s/ Richard Neely
 	 
	 	Name:  	Richard Neely	 
	 	Its:  	     VP	 
	 	 	 	 
	 	 	 	 
	 

	 	 	 	 	 
	 	GUARANTOR:

 	 
	 	/s/ P.A. McGeeney
 	 
	 	Patrick A. McGeeney 	 
	 

LOAN AGREEMENT

 

 

	 	 	 	 	 
	 	BORROWER:

MBI Mortgage, Inc.

 	 
	 	By:  	/s/ John M. Farkas
 	 
	 	Name:  	                  John M. Farkas
 	 
	 	Its:  	                  President/Secretary
 	 
	 	 	 	 
	 	 	 	 
	 

LOAN AGREEMENT

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