Document:

Exhibit 10.20

 

ASSIGNMENT AND CONSENT

 

The following shall constitute an
assignment and consent to assignment (the “Assignment”) by and among GULFSTREAM
AEROSPACE CORPORATION (“GULFSTREAM”), Altria Corporate Services, Inc., (“ASSIGNOR”)
and Kraft Foods Aviation, LLC (“ASSIGNEE”).

 

WHEREAS,
ASSIGNOR and GULFSTREAM entered into a Gulfstream G550 Sales Agreement (the “Agreement”),
dated December 13, 2004 for the purchase and outfitting of two (2) G550
aircraft, identified in the Agreement as Aircraft #1 and Aircraft #2;

 

WHEREAS,
ASSIGNOR wishes to assign its rights and obligations as to Aircraft #2 under
the Agreement, including its rights and obligations under Section 18,
Warranty Information of the Gulfstream G550 Product Specification incorporated
into the Agreement (as modified by the Agreement) by reference, to ASSIGNEE and
ASSIGNEE wishes to accept the delivery of Aircraft #2 and assume ASSIGNOR’s
rights and obligations as to Aircraft #2 under the Agreement, including the
rights and obligations under Section 18, Warranty Information; and

 

WHEREAS,
GULFSTREAM wishes to give its consent to such assignment.

 

NOW,
THEREFORE, the parties to this Assignment and Consent agree as follows:

 

1.                                       The
rights and obligations as to Aircraft #2 are hereby assigned from ASSIGNOR to
ASSIGNEE.

 

2.                                       GULFSTREAM
agrees and consents to this Assignment.

 

3.                                       The
ASSIGNEE agrees to all terms and conditions contained in Section 18,
Warranty Information (as modified by the Agreement) and further agrees to
perform all obligations of BUYER thereunder.

 

From
the date hereof, ASSIGNOR shall have no further liability under the Agreement
as to Aircraft #2 and the ASSIGNEE hereby assumes all of ASSIGNOR’s rights,
duties and liabilities as to Aircraft #2 under the Agreement.

 

This
Assignment and Consent may be executed in several counterparts each of which
shall be deemed to be an original.

 

IN
WITNESS WHEREOF, the parties hereto have caused this Assignment and Consent to
be executed on this 22nd day of December, 2004, by their duly authorized representatives.

 

	
  GULFSTREAM
  AEROSPACE CORPORATION

  	
   

  	
  Altria Corporate
  Services, Inc.

  
	
  (“GULFSTREAM”)

  	
   

  	
  (“ASSIGNOR”)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BY:

  	
   

  	
   

  	
  BY:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TITLE:

  	
   

  	
   

  	
  TITLE:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Kraft Foods
  Aviation, LLC

  	
   

  	
   

  	
   

  	
   

  
	
  (“ASSIGNEE”)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BY:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TITLE:

  	
   

  	
   

  	
   

  	
   

  
											

 

1Exhibit 4.1

 

LOAN AGREEMENT

 

This Loan
Agreement (“Agreement”) is entered into to be effective the
17th  day of December, 2004 by and between International Bank
of Commerce, a Texas banking association (“Lender”), whose address is 130 E.
Travis, San Antonio, Texas 78205, and Lancer Partnership, Ltd.,
a Texas limited partnership (“Borrower”),
whose address is 6655 Lancer Blvd., San Antonio, Texas 78219.

 

W I T N E S S E T H:

 

1.                                       Lender
has agreed to make a loan to Borrower in an aggregate amount up to Fifteen
Million and No/100 Dollars ($15,000,000.00)
(“Loan”). Such Loan shall be used by Borrower for general corporate working
capital purposes.

 

2.                                       The
Loan shall be evidenced by that certain Promissory Note of even date herewith (“Note”)
in the amount of the Loan executed by Borrower and payable to the order of
Lender.  Repayment of the Loan and
performance of all other obligations of Borrower to Lender in connection with
the Loan shall be governed by the Note and this Agreement, and shall be secured
by:  (i) the Deed of Trust (as defined
herein) covering the Property (as defined herein); (ii) the Assignment of
Leases and Rents (as defined herein); and (iii) the Security Agreement (as
defined herein).

 

Therefore,
in consideration of the mutual covenants, agreements and undertakings herein
contained, Lender and Borrower hereby agree as follows:

 

ARTICLE 1

 

DEFINITIONS

 

For
purposes of this Loan Agreement, the following terms shall have the respective
meanings assigned to them.

 

1.1                               Accounts Receivable.  The term “Accounts Receivable” shall mean all
of Borrower’s and LIS’s (as defined herein) accounts and chattel paper,
whenever acquired and whether now or hereafter existing, including, but not
limited to, accounts and chattel paper which arise out of: (i) the sale or
other disposition of goods; (ii) the furnishing of services; (iii) the
furnishing of, the use of, or the lease of any of any goods, and (iv) the
agreement to provide any of the above; and all proceeds relating to, resulting
from or arising in connection with any such accounts and/or chattel paper.

 

1.2                               Applicable
Margin.  The term “Applicable
Margin” shall mean, with respect to any advance under the Loan, the following
per annum percentages determined by Lender as follows:

 

The
Applicable Margin shall be equal to the percentage set forth below based upon
the ratio of Total Funded Debt to Consolidated EBITDA as of the end of each
fiscal quarter of Borrower with respect to the four (4) fiscal-quarter period
ending as of the end of such fiscal quarter:

 

	
  Ratio of Total Funded Debt to Consolidated EBITDA

  	
   

  	
  LIBOR Spread

  	
   

  	
  Prime Rate Spread

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Less than 2.00 to 1.00

  	
   

  	
  1.75

  	
  %

  	
  - 0.50

  	
  %

  
	
  Greater than or equal to 2.00 to 1.00

  	
   

  	
  2.00

  	
  %

  	
  - 0.50

  	
  %

  

 

1.3                               Assets.  The term “Assets” shall mean all Borrower’s
Accounts Receivables (as defined herein); Equipment (as defined herein) and
Inventory (as defined herein).

 

1.4                               Brazilian
Subsidiary.  The term “Brazilian
Subsidiary” shall mean Lancer do Brasil.

 

1.5                               Business
Day.  The term “Business Day”
shall mean any day except Saturday,

 

 

Sunday or other day on
which commercial banks in San Antonio, Texas are authorized or required by law
to close.

 

1.6                               Closing
Date.  The term “Closing Date”
shall mean the date upon which the initial Loan proceeds are advanced to
Borrower.

 

1.7                               Code.  The term “Code” shall mean the Texas Business
and Commerce Code.

 

1.8                               Commitment.  The term “Commitment” shall mean the
Commitment Letter, dated October 14, 2004,
from Lender to Borrower, such Commitment being incorporated herein by this
reference for all purposes.

 

1.9                               Consolidated
EBITDA.  The term “Consolidated
EBITDA” shall mean for any period, the net income (plus or minus any
extraordinary charges or credit) of the Companies determined on a consolidated
basis, plus (i) the aggregate amount of all
income tax expense of the Companies for such period, plus (ii)
interest expense for such period (including the interest expense with respect
to the Loan and the interest component of payments under any capital lease
obligations) plus (iii) the aggregate amount
deducted in determining consolidated net income of the Companies for such
period for depreciation and amortization expenses of the Companies (as defined
herein).

 

1.10                        Companies.  The term “Companies” shall mean LC and all of
its subsidiaries.

 

1.11                        Debtor
Relief Laws.  The term “Debtor
Relief Laws” shall mean any applicable liquidation, conservatorship,
bankruptcy, moratorium, rearrangement, insolvency, reorganization, or similar
laws affecting the rights or remedies of creditors generally, as in effect from
time to time.

 

1.12                        Deed
of Trust.  The term “Deed of
Trust” shall mean that certain Deed of Trust, Assignment of Rents, Security
Agreement and Financing Statements of even date herewith securing the payment
of the Note and the payment and performance of all obligations specified in the
Deed of Trust and this Agreement, and evidencing a valid and enforceable first
lien on the Property and including an assignment of rents and leases.

 

1.13                        Equipment.  The term “Equipment shall mean all of
Borrower’s equipment now owned or hereafter acquired by Borrower, including
without limitation,  furniture,
machinery, vehicles and trade fixtures, together with any and all accessions,
attachments and other additions to, substitutes and replacements for and improvements
of the equipment, whether now owned or at any time hereafter acquired or made,
together with all tools, parts and appurtenances now or at any time hereafter
used in and together with all proceeds of the equipment described or referred
to above, including insurance payable by reason of loss or damage thereto, and
all proceeds of any policy of insurance on the Equipment, including any refunds
or unearned premiums in connection with any cancellation, adjustment or
termination of any such policy of insurance.

 

1.14                        Event
of Default.  The term “Event of
Default” shall mean the occurrence or happening, at any time and from time to
time, of any one or more of the following:

 

1.14.1                  Payment
of Indebtedness.  If any of the
Indebtedness is not paid when due,  whether
by acceleration or otherwise and such monetary default continues for five (5)
business days following receipt of written notice thereof by Borrower from
Lender.

 

1.14.2                  Performance
of Obligations.  If any of the
Obligations (as defined herein) are not fully and timely performed and
discharged as and when required and such non-monetary default continues for
thirty (30) calendar days following receipt of written notice thereof by
Borrower from Lender.

 

1.14.3                  False
Representation.  If any representation
or warranty made by Borrower under or pursuant to the Loan Documents or any
other documents delivered to Lender in connection therewith shall be false,
erroneous or misleading in any material respect when made.

 

 

1.14.4                  Judgment.  If any final money judgment which impairs the
ability of Borrower to perform under this Agreement, as determined in Bank’s
reasonable discretion,shall be rendered against Borrower or any party liable to
pay any part of the Indebtedness and the same shall not be paid or execution on
the same shall not be stayed by perfection of an appeal or other appropriate
action within sixty (60) days of the rendering of any such final money
judgment.

 

1.14.5                  Voluntary
Bankruptcy.  If Borrower or any party
liable to pay any part of the Indebtedness shall (i) seek entry of an order for
relief as a debtor and a proceeding under the Bankruptcy Code, (ii) seek,
consent to or not contest the appointment of a receiver or trustee for itself
or himself or for all or any part of its or his property, (iii) file a petition
seeking relief under the bankruptcy, arrangement, reorganization or other
debtor relief laws of the United States or any state or any other competent
jurisdiction, (iv) make a general assignment for the benefit of its or his
creditors, or (v) admit in writing its or his inability to pay its or his debts
as they mature.

 

1.14.6                  Involuntary
Bankruptcy.  If (i) a petition is
filed against Borrower or any party liable to pay any part of the Indebtedness
seeking relief under the bankruptcy, arrangement, reorganization or other
debtor relief laws of the United States or any state or other competent
jurisdiction, or (ii) a court of competent jurisdiction enters an order,
judgment or decree appointment, without the consent of Borrower or any party
liable to pay Indebtedness, a receiver or trustee for it or him, or for all or
any part of its or his property, and (iii) such petition, order, judgment or
decree shall not be and remain discharged or stayed within a period of sixty
(60) days after its entry.

 

1.14.7                  Existence
of Other Liens.  If, at any time
during the term of the Loan, there is placed upon the Property or the Assets
(as defined herein) (other than those described in Schedule 3.5 attached
hereto), or the Property or the Assets are made subject to, any lien or
security interest other than the liens and security interests securing the
Loan, except for liens which Borrower is contesting in good faith and which
have been bonded or otherwise secured to the reasonable satisfaction of Lender,
or purchase money liens incurred by Borrower.

 

1.14.8                  Sale,
Lease or Other Transfer.  Any sale,
exchange, assignment, conveyance, transfer of possession or other disposition
of the Property or the Assets or any interest therein or any part thereof by
Borrower to any party whatsoever, other than in the ordinary course of Borrower’s
business.

 

1.14.9                  Change
of Ownership.  Any involuntary change
in controlling ownership of the Property or the Assets, in whole or in part,
excluding minor condemnation, or any change in the control of Borrower.

 

1.14.10            Title
and Lien Priority.  If title of
Borrower to any or all of the Property or the Assets or the status of the Deed
of Trust or the Security Agreement (as defined herein) as a first lien and
security interest on the Property and/or the Assets shall be challenged or
endangered by any party whatsoever and Lender reasonably determines such
challenge will impact Borrower’s ability to perform under the Note.

 

1.14.11            Securities
and Exchange Commission and Justice Department.  Any action or decision of the United States
Securities and Exchange Commission (“SEC”) and/or the United States Justice
Department (“DOJ”): (i) which Lender reasonably determines is of a dollar
amount that will prevent Borrower from being able to perform under the payment
terms or financial covenants of this Agreement, or (ii) that prohibits Borrower
from engaging in its core business activities to such an extent that Borrower
will not be able to continue as a going concern.  In no event will a fine of One Million and
00/100 Dollars ($1,000,000.00) or less constitute a default under (i) above.

 

1.14.12            Other Defaults.  The occurrence of any Event of Default, as
defined or described in (a) any of the other Loan Documents, or (b) any
instrument evidencing, securing or pertaining to any indebtedness which is also
secured by any part of the Property and/or the Assets.

 

 

1.14.13            Levy
on Assets.  A levy on any of the
assets of Borrower or any surety, endorser of the Indebtedness.

 

1.15                        Financial
Statements.  The term “Financial
Statements” shall mean the financial statements and schedules disclosed and
reported by the Companies in quarterly and annual reportings made with the SEC
and an annual consolidating income statement and balance sheet the Companies
and other financial information of Borrower and Guarantor (as defined herein)
requested by Lender, all in a form and with content reasonably acceptable to
Lender.

 

1.16                        Fixtures.  The term “Fixtures” shall mean all of
Borrower’s materials, supplies, equipment, apparatus and other items now or
hereafter attached to, installed on or in the Land or the Improvements, or
which in some fashion are deemed to be fixtures to the Land or Improvements
under the laws of the State of Texas, including the Texas Business and Commerce
Code.  The term “Fixtures” shall include,
without limitation, all items of personalty to the extent that the same may be
deemed Fixtures under applicable law.

 

1.17                        Generally
Accepted Accounting Principles (or “GAAP”).  The term “GAAP” shall mean those principles
and practices (a) which are recognized as such by the Financial Accounting
Standards Board, (b) which are applied for all periods after the date of this
Agreement in a manner consistent with the manner in which such principles and
practices were applied to the most recent financial statements of the relevant
entity or individual furnished to Lender, and (c) which are consistently
applied for all periods after the date hereof so as to reflect properly the
financial condition, and results of operations and changes in financial
positions, of such entity or individual.

 

1.18                        Governmental
Authority.  The term “Governmental
Authority” shall mean the United States, the state, the county, the city, or
any other political subdivision in which the Property is located, and any other
political subdivision, agency, or instrumentality exercising jurisdiction over
Borrower or the Property.

 

1.19                        Governmental
Requirements.  The term “Governmental
Requirements” shall mean all laws, ordinances, rules and regulations of any
Governmental Authority applicable to Borrower or the Property.

 

1.20                        Guarantor.  The term “Guarantor” shall collectively mean
Lancer Corporation, a Texas corporation (“LC”), Lancer Capital Corporation, a
Delaware corporation (“LCC”) and Lancer International Sales, Inc., a Texas
corporation (“LIS”).

 

1.21                        Guaranty.  The term “Guaranty” shall collectively mean
those three (3) certain Guaranty Agreements of even date herewith executed by
LC, LCC and LIS, respectively, in favor of Lender.

 

1.22                        Highest
Lawful Rate.  The term “Highest
Lawful Rate” shall mean the maximum nonusurious rate of interest permitted to
be charged by applicable federal or Texas law (whichever shall permit the
higher lawful rate) from time to time in effect.  At all times, if any, as Chapter One of the
Texas Credit Code as in effect as of the date of this Agreement (“Chapter One”)
shall establish the Highest Lawful Rate, the Highest Lawful Rate shall be the “indicated
rate ceiling” (as defined in Chapter One) from time to time in effect.  If the obligation is an open-end account,
Lender may from time to time, as to then-current and future balances, implement
any other ceiling under Chapter One and/or revise the index, formula or
provision of law used to compute the rate on such obligation, if and to the
extent permitted by, and in the manner provided in, Chapter One.

 

1.23                        Improvements.  The term “Improvements” shall mean any and
all buildings, structures, and other improvements, and any and all accessions,
additions, replacements, substitutions or alterations thereof or appurtenances
thereto, now or at any time hereafter situated, placed or constructed upon the
Land or any part thereof.

 

1.24                        Indebtedness.  The term “Indebtedness” shall mean the
principal of, interest on and all other amounts and payments due under the Note
or secured by the other Loan

 

 

Documents, together with
all funds hereafter advanced by Lender to or for the benefit of Borrower as
contemplated by any covenant or provision herein contained.

 

1.25                        Insurance
Policies.  Insurance policies for
(i) comprehensive general liability insurance for owners; (ii) hazard insurance
against all risk of loss, including collapse, in an amount equal to the greater
of $10,000,000.00 or the full replacement
cost of all Improvements, with annual agreed amount endorsement and sufficient
at all times to prevent Borrower from becoming a co-insurer; (iii) if the
Property is in a “flood hazard area”, a flood insurance policy, or binder
therefore, in an amount equal to the amount of the Loan, or the maximum
available under the Flood Disaster Protection Act of 1973; and (iv) such other
insurance, if any, as Lender may reasonably require from time to time.  All insurance policies shall (i) be issued by
companies, in amounts and on forms reasonably satisfactory to Lender, (ii) have
Borrower as the insured, and (iii) have a provision giving Lender at least
thirty (30) days prior notice of, and as a condition to, cancellation or
material change of the coverage.  All
hazard insurance policies shall contain a standard mortgagee’s endorsement in
favor of Lender and shall name Lender as loss payee.

 

1.26                        Interest
Period.  The term “Interest
Period” shall mean with respect to each Borrowing consisting of a LIBOR Loan,
the period commencing on the date of such Borrowing and ending one (1), two (2)
or three (3) months thereafter, as Borrower may elect in the applicable Notice
of Borrowing.

 

1.27                        Inventory.  The term “Inventory” shall mean all of
Borrower’s inventory, whenever acquired and whether now or hereafter existing,
including but not limited to all goods, wares and merchandise intended for sale
or lease by Borrower or to be furnished by Borrower , under contracts of
service and all raw materials, goods in process, finished goods and supplies of
every nature used or usable in connection 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 other documents 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 such inventory.

 

1.28                        Land.  The term “Land” shall mean the real property
described on Exhibit “B” attached hereto and
incorporated herein by reference.

 

1.29                        Legal
Requirements.  The term “Legal
Requirements” shall mean (a) any and all present and future judicial decisions,
statutes, rulings, rules, regulations, permits, certificates or ordinances of
any Governmental Authority in any way applicable to Borrower or the Property,
including, but not limited to those respecting the ownership, use, occupancy,
possession, operation, maintenance, alteration, repair or reconstruction of the
Property,(b) any and all Leases and other contracts (written or oral) of any
nature to which Borrower may be bound, and (c) any and all restrictions,
reservations, conditions, easements or other covenants or agreements of record
affecting the Property.

 

1.30                        Lender.  The term “Lender” shall mean International
Bank of Commerce.

 

1.31                        LIBOR
Business Day.  The term “LIBOR
Business Day” shall mean any Business Day on which commercial banks are open
for international business in London.

 

1.32                        LIBOR
Loan.  The term “LIBOR Loan”
shall mean an advance to be made pursuant to the applicable Notice of
Borrowing, which will bear interest at the London Interbank Offered Rate plus
the Applicable Margin.

 

1.33                        Loan.  The term “Loan” shall mean the Loan by Lender
to Borrower, in an amount not to exceed the principal sum set forth in the
first paragraph of this Loan Agreement.

 

1.34                        Loan
Documents.  The term “Loan
Documents” shall mean this Agreement, the Deed of Trust, the Note, that certain
Assignment of Leases and Rents of even date herewith (“Assignment of Rents”)
executed by Borrower in favor of Lender covering the Property, the Security
Agreement, the Guaranty and such other instruments evidencing, securing, or
pertaining

 

 

to the Loan as shall,
from time to time, be executed and delivered by Borrower or any other party to
Lender pursuant to this Agreement.

 

1.35                        London
Interbank Offered Rate.  The term
“London Interbank Offered Rate” shall mean, with respect to any Interest Period,
the rate per annum published in the Wall Street Journal (Southwest Edition) in
the “Money Rates” section as the “London Interbank Offered Rates (LIBOR)”
for a period of time equal to the applicable Interest Period, as of two
Business Days proceeding the date of Borrowing.

 

1.36                        Note.  The term “Note” shall mean that certain Real
Estate Lien Note executed by Borrower and payable to the order of Lender dated
the Closing Date in the original principal amount of $15,000,000.00.

 

1.37                        Obligations.  The term “Obligations” shall mean any and all
of the covenants, warranties, representations and other obligations (other than
to repay the Indebtedness) made or undertaken by Borrower or others to Lender
or others as set forth in the Loan Documents.

 

1.38                        Prime
Rate Loan.  The term “Prime Rate
Loan” shall mean an advance to be made pursuant to the applicable Notice of
Borrowing, which will bear interest at the annual lending rate of interest
announced from time to time by JP Morgan Chase & Co., New York, New York,
as its prime rate, less the Applicable Margin.

 

1.39                        Property.  The term “Property” shall mean the Land,
Improvements, Fixtures, and all other property constituting the “Property”, as
described in the Deed of Trust and the collateral described in the Loan Documents,
including:

 

1.39.1  all rights, privileges, tenements,
hereditaments, rights-of-way, easements, appendages and appurtenances in
anywise appertaining thereto, and all right, title and interest of Borrower in
and to any street, ways, alleys, strips or gores of land adjoining the Land or
any part thereof;

 

1.39.2  all betterments, accessions, additions,
appurtenances, substitutions, replacements and revisions thereof and thereto
and all reversions and remainders therein;

 

1.39.3  all of Borrower’s right, title and interest
in and to any award, remuneration, settlement (excluding any income tax or ad
valorem tax refunds) or compensation heretofore made or hereafter to be made by
any Governmental Authority to Borrower, including those for any vacation of, or
change of grade in, any streets affecting the Land or the Improvements;

 

1.39.4  all of Borrower’s rights to all plans and
specifications for the Improvements; all contracts and subcontracts relating to
the Improvements, all deposits (including tenant security deposits) funds,
accounts, contract rights, instruments, documents, and notes or chattel paper
arising from or by virtue of any transactions related to the property described
herein; all permits, licenses, franchises, certificates, and other rights and
privileges obtained in connection with the property described herein; all
proceeds arising from or by virtue of the sale, lease or other disposition of
all or any part of the Property (consent to same not granted or to be implied
hereby); all proceeds (including premium refunds) payable to or to be payable
under each policy of insurance relating to the Property;

 

1.39.5  all other interest of every kind and
character which Borrower now has or at any time hereafter acquires in and to
the above described real and personal property and all property which is used
or useful in connection therewith, including rights of ingress and egress,
easements, licenses, and all reversionary rights or interests of Borrower with
respect to such property.  To the extent permitted
by law, all of the foregoing Personal Property and Fixtures are to be deemed
and held to be a part of and affixed to the real property;

 

1.39.6  any and all other security and collateral of
any nature whatsoever, now or hereafter given for the repayment of the
Indebtedness or the performance and discharge of the Obligations.

 

 

As
used in this Loan Agreement, the term “Property” is expressly defined as
meaning all or, where the context permits or requires, any portion of the above
and all or, where the context permits or requires, any interest therein.

 

1.40                        Security
Agreement.  The term “Security
Agreement” shall mean those (2) certain Security Agreements of even date
herewith between Borrower and Lender, and LIS and Lender respectively, securing
payment of the Note and evidencing a valid and enforceable first lien on the
Assets.

 

1.41                        Title
Company.  The term “Title Company”
shall mean Chicago Title Insurance Company.

 

1.42                        Title
Report.  The term “Title Report”
shall mean a title report issued by the Title Company effective as of the
Closing Date confirming that the Deed of Trust constitutes a valid first lien
covering the Property.

 

1.43                        Total
Funded Debt.  The term “Total
Funded Debt” shall mean as of any time, the outstanding principal balance of
(i) the Note plus (ii) any other
borrowed-money indebtedness of the Companies determined on a consolidated
basis.

 

1.44                        Additional
Rules of Construction.  Unless
the context otherwise requires:

 

1.44.1  a term has the meaning assigned to it;

 

1.44.2  an
accounting term not otherwise defined has the meaning assigned to it in
accordance with GAAP;

 

1.44.3  “or” is not exclusive;

 

1.44.4  words in
the singular include the plural, and in the plural include the singular; and

 

1.44.5  provisions apply to successive events and
transactions.

 

ARTICLE 2

 

AGREEMENT OF LENDER

 

2.1                               Commitment
of Lender.  Subject to the terms
and conditions hereof, Lender hereby agrees to make the Loan to Borrower
provided that:  (a) Borrower has
satisfied all of the covenants and conditions of this Loan Agreement; and (b)
no Event of Default exists.  Borrower’s
obligation to repay the Loan shall be evidenced by the Real Estate Lien Note
substantially in the form of Exhibit “A”
attached hereto.  The Loan shall be
payable as provided in the Real Estate Lien Note attached as Exhibit “A” hereto.

 

2.2                               Initial
Advance of Loan.  Lender shall
not be obligated to make the initial advance of the Loan to Borrower until
Lender is in receipt of the following, all in form and substance satisfactory
to Lender:

 

2.2.1        this
Agreement duly executed by Borrower and Lender;

 

2.2.2        the
Note executed by Borrower;

 

2.2.3        a
copy of the Deed of Trust executed by Borrower;

 

2.2.4        a
copy of the Security Agreement and related UCC-1 Financing Statements executed
by Borrower and LIS;

 

2.2.5        all
of the other Loan Documents duly executed by the appropriate parties;

 

2.2.6        Certificate(s)
evidencing the Insurance Policies;

 

 

2.2.7        the
Title Report;

 

2.2.8        evidence
satisfactory to Lender that Borrower and Guarantor are duly qualified, in
existence and in good standing under the laws of the jurisdictions of their
formation;

 

2.2.9        evidence
satisfactory to Lender that Borrower (and LIS as to one (1) of the Security
Agreements) is fully authorized and permitted to enter into this Agreement, the
Note, the Deed of Trust, the Security Agreement and the other Loan Documents,
that this Agreement, the Note, the Deed of Trust, the Security Agreement and
the Loan Documents are valid and binding legal obligations of Borrower, enforceable
in accordance with their terms, and that the persons executing such documents
on behalf of Borrower (and LIS) have the authority to execute all of the same
for and on behalf of the Borrower (and LIS);

 

2.2.10      Such
other documents and information as may be required by Lender which are
reasonable by prudent lending standards; and

 

2.2.11      The
further condition that, at the Closing Date, all legal matters and Loan
Documents incident to the transactions herein contemplated shall be reasonably
acceptable to Lender and Stumpf Craddock Massey
& Farrimond, P.C., legal counsel to Lender.

 

2.3                               Method
of Borrowing.

 

(A)                              Borrower
shall give Lender notice in a form satisfactory to Lender (each, a “Notice of
Borrowing”), not later than 11:00 A.M. (San Antonio, Texas time) on (i) with
respect to Prime Rate Loans, the Business Day of each borrowing (“Borrowing”)
consisting of a Prime Rate Loan and (ii) with respect to LIBOR Loans, the
second LIBOR Business Day before each Borrowing consisting of a LIBOR Loan,
specifying:

 

(1)                                  the
date of each Borrowing, which shall be a Business Day in the case of a
Borrowing consisting of a Prime Rate Loan or a LIBOR Business Day in the case
of a Borrowing consisting of a LIBOR Loan;

 

(2)                                  whether
the Borrowing is a Prime Rate Loan or a LIBOR Loan;

 

(3)                                  the
amount of such Borrowing;

 

(4)                                  (i)
the account of Borrower with Lender into which such Borrowing is requested to
be deposited or (ii) complete wiring instructions for any other account of
Borrower to which such Borrowing is requested to be wired; and

 

(5)                                  in
case of a LIBOR Loan, the duration of the Interest Period applicable thereto.

 

(B)                                Not
later than 1:00 P.M. (San Antonio, Texas time) on the date of each Borrowing,
unless Lender determines that any applicable condition precedent has not been
satisfied, Lender will make the funds requested in the Borrowing available to
Borrower in Borrower’s deposit account designated in the applicable Notice of
Borrowing, unless otherwise directed in writing by Borrower and accepted by
Lender.

 

(C)                                Unless
otherwise directed in writing by Borrower and accepted by Lender,  all Borrowings made hereunder shall be
disbursed by credit to the deposit

 

 

account maintained by Borrower with Lender that is
designated in the applicable Notice of Borrowing.

 

2.4                               Interest
on the Loan.  Interest provided
in the Note shall be calculated on sums actually advanced to Borrower pursuant
to the terms of this Agreement.  Borrower’s
liability for payment of principal and interest provided in the Note shall be
limited to principal amounts actually advanced to or for the benefit of
Borrower pursuant to this Agreement and interest on such amounts calculated as
aforesaid.  Interest on the Note shall be
calculated on a 360-day factor applied on a 365-day year, or a 366-day year, in
the event that the year is a leap year.

 

2.5                               Security
for the Loan.  The Note and Loan
will be secured by (i) a first and prior lien on the Property, (ii) a first and
prior lien and security interest on Borrower’s interest in all equipment,
furnishings, inventory and articles of personal property now or hereafter used
in, on, under or about the Property, instruments, documents and general
intangibles, and notes or chattel paper arising from or by virtue of any
transaction related to the Property or the Improvements, (iii) a first and
prior security interest on the Assets, (iv) all proceeds from the collateral
described above, (v) all insurance policies relating in whole or in part to any
of the foregoing, (vi) all substitutions for and replacements of and all
additions and accessions to any of the foregoing, (vii) all guaranties and
security for any of the foregoing, (viii) all the rights, title and interest of
Borrower in and to all books and records relating in whole or in part to any of
the foregoing, and (ix) the Assignment of Rents.

 

ARTICLE 3

 

REPRESENTATIONS AND WARRANTIES OF
BORROWER

 

Borrower
hereby unconditionally represents and warrants to Lender as follows:

 

3.1                               Organization
and Authority of Borrower. 
Borrower and Guarantor are duly organized, validly existing and in good
standing under the applicable laws of the State of Texas and the State of
Delaware, as applicable, and are qualified to do business in the State of
Texas, with full power and authority to enter into this Agreement.

 

3.2                               Execution
and Delivery of Loan Documents.  The execution and delivery of the Loan
Documents executed or delivered or to be executed or delivered by Borrower
and/or Guarantor and the consummation of the transactions contemplated thereby:  (a) are within Borrower’s and/or Guarantor’s
powers and have been and will be duly authorized and all other requisite action
has been taken,  and (b) to the best of
Borrower’s and/or Guarantor’s knowledge, without duty of independent
investigation,  will not violate, be in
conflict with, result in a breach of or constitute (with due notice or lapse of
time, or both) a default under any Legal Requirement or result in the creation
or imposition of any lien, charge or encumbrance of any nature whatsoever upon
any of Borrower’s property or assets, except as contemplated by the provisions
of the Loan Documents.  The Loan
Documents constitute the legal, valid and binding obligations of Borrower,
Guarantor and others obligated under the terms of the Loan Documents, in
accordance with their respective terms, and Borrower has full and lawful
authority to bargain, grant, sell, mortgage, assign, transfer and convey all of
the Property and Assets.

 

3.3                               Information
Supplied by Borrower.  All
information, reports, papers and data given to Lender by Borrower or its
authorized agents with respect to Borrower or others obligated under the terms
of the Loan Documents are accurate, complete and correct in all material
respects and do not omit any fact the inclusion of which is necessary to
prevent the facts contained therein from being materially misleading.  In addition, Borrower’s Financial Statements
heretofore delivered to Lender, taken as a whole, are true, complete and
correct in all material respects, have been prepared in accordance with GAAP consistently
applied, and fairly present the respective financial conditions and results of
operation of the subjects thereof as of the respective dates thereof, taken as
a whole.  No material adverse change has
occurred since the respective dates thereof and no material borrowings have
been made by Borrower since the date thereof other than the borrowings
contemplated hereby or approved in writing by Lender.

 

 

3.4                               No
Defaults.  Borrower is not in
default under any of the Loan Documents, and no event has occurred which by
notice, the passage of time or otherwise would constitute an Event of Default
under any of the Loan Documents.  Except
for with a possible dispute concerning the Brazilian Subsidiary, Borrower is
not in default in the payment of any indebtedness for borrowed money or under
the terms and provisions of any agreement or instrument evidencing any such
indebtedness.  To the best of Borrower’s
knowledge, Borrower is not in default with respect to any order, writ,
injunction, decree or demand of any court or of any other requirement of a
Governmental Authority.

 

3.5                               Liens
on the Property.  Except as
described on Schedule 3.5 attached hereto, Borrower has not made any
contract or arrangement of any kind, which has given rise to (or the
performance of which by the other party thereto would give rise to) a lien or
claim of lien or security interest of a material amount on the Property, the
Assets or other collateral covered by the Loan Documents.

 

3.6                               Complete
Information.  To the best of
Borrower’s knowledge, no representation or warranty of Borrower contained in
any of the Loan Documents, and no statement contained in any certificate,
schedule, list, financial statement or other instrument furnished to Lender by
or on behalf of Borrower contains, or will contain, any untrue statement of a
material fact, or omits, or will omit, to state a material fact necessary to
make the statements contained herein or therein not misleading.

 

3.7                               Payment
of Taxes.  Borrower and Guarantor
have filed all federal, state, county, municipal and city income and other tax
returns and reports required to have been filed by Borrower and Guarantor, and
has paid all taxes which have become due pursuant to such returns or pursuant
to any assessments received by them, and Borrower and Guarantor do not know of
any basis for any additional assessment in respect of any such taxes.  Borrower and Guarantor have paid or will pay
in full all sums lawfully owing or claimed for labor, material, supplies,
personal property (whether or not constituting a Fixture hereunder) and
services of every kind and character used, furnished or installed in the
Property and no claim for same currently exists or will be permitted to become
past due.

 

3.8                               Legal
Proceedings.  Except for the
pending SEC and DOJ investigations for which Borrower can not at this time
comment as to materially, there are no material actions, suits, or proceedings
pending or, to Borrower’s knowledge, without any duty of independent
investigation, threatened in any court or before or by any Governmental
Authority against or affecting Borrower, Guarantor, the Assets, or the
Property, or involving the validity, enforceability, or priority of any of the
Loan Documents, at law or in equity.

 

The
representations and warranties contained in this Article III shall survive
until such time as Borrower has repaid the Loan in full.

 

ARTICLE 4

 

COVENANTS AND AGREEMENTS OF
BORROWER

 

Borrower
hereby covenants and agrees with Lender that it will do, and if necessary will
cause to be done, or arrange to be done, each and all of the following:

 

4.1                               Compliance
with Governmental Requirements.  Borrower shall timely comply with all
Governmental Requirements and deliver to Lender evidence thereof upon request
by Lender.  Borrower assumes full
responsibility for the compliance of the Property and the Assets with all
Governmental Requirements and with sound building and engineering practices
and, notwithstanding any approvals by Lender, Lender shall have no obligations
or responsibility whatsoever for any matter incident to the Property or the
Assets.

 

4.2                               Taxes,
Existence, Regulations and Property. 
Borrower shall at all times (i) pay when due all taxes and governmental
charges of every kind upon it or against its income, profits, the Property or
the Assets; (ii) do all things necessary to preserve Borrower’s and Guarantor’s
qualifications, rights and franchises in all jurisdictions where such
qualification is necessary and/or desirable; (iii) comply with all applicable
Legal Requirements with respect to the conduct of its business and the
ownership of the Property and the Assets; (iv) cause the Property and the

 

 

Assets to be protected,
maintained and kept in good repair and make all replacements and additions to
its property as may be reasonably necessary to conduct its business properly
and efficiently; and (v) upon request by Lender, provide Lender within thirty
(30) days following the date thereof with tax certificates or other evidence
satisfactory to Lender demonstrating that all taxes attributable to the
Property and the Assets have been paid when due.

 

4.3                               Inspection
of the Property.  Borrower shall
permit Lender, any Governmental Authority, and their agents and
representatives, to enter upon the Property for the purpose of inspection of
the Property and/or the Assets at all reasonable times.

 

4.4                               Notices
by Governmental Authorities; Notice of Fire and Casualty Losses.  Borrower shall timely comply with and
promptly furnish to Lender true and complete copies of any official claim by
any Governmental Authority pertaining to the Property and/or the Assets.  Borrower shall promptly notify Lender of any
material fire or other material casualty or any notice of taking or eminent
domain action or proceeding affecting the Property and/or the Assets.

 

4.5                               Costs
and Expenses.  Borrower shall pay
when due all reasonable costs and expenses required by this Loan Agreement,
including, without limitation, (a) all taxes and assessments applicable to the
Property and the Assets, (b) all fees for filing or recording the Loan
Documents, (c) all reasonable fees and expenses of counsel to Lender relating
to the Loan, and (d) all title examination charges .

 

4.6                               Additional
Acts.  In addition to the acts
required herein and contemplated to be performed, executed and/or delivered by
Borrower, Borrower and Guarantor hereby agree, at any time, and from time to
time, to perform, execute and/or deliver to Lender, any and all such further
acts, additional instruments, or further assurances otherwise consistent with
the Loan Documents as Lender may determine to be, in its reasonable discretion,
necessary or proper.

 

4.7                               Inspection
of Books, Records and Assets. 
Borrower and Guarantor shall at all times keep proper books and records
in accordance with GAAP, and other applicable Governmental Requirements, and
shall permit Lender, at all reasonable times, to examine and copy such books
and records.

 

4.8                               Defense
of Actions.  After providing
Borrower notice thereof, Lender may (but shall not be obligated to) commence,
appear in, or defend any action or proceeding purporting to affect the Loan,
the Property, the Assets, or the respective rights and obligations of Lender
and Borrower pursuant to this Loan Agreement. 
Lender may (but shall not be obligated to) pay all necessary expenses,
including reasonable attorneys’ fees and expenses incurred in connection with
such proceedings or actions, which Borrower agrees to repay to Lender upon
demand.

 

4.9                               Prohibition
on Assignment.  Borrower shall
not sell, transfer or convey the Property and/or the Assets or any part thereof
(other than in the ordinary course of business) without the prior written
consent of Lender, which consent shall be given or withheld in the sole
discretion of Lender.  Moreover, Borrower
shall not, and shall not permit the Companies, to sell, transfer or convey all
or a substantial part of the trademarks, patents and/or other intellectual
property assets of Borrower and/or the Companies.

 

4.10                        Payment
of Claims.  Borrower shall
promptly pay or cause to be paid when due all costs and expenses incurred in
connection with the Property and the operation of the Improvements, and
Borrower shall keep the Property and the Assets free and clear of any liens
(other than those described in Schedule 3.5 attached hereto), charges, or
claims other than the lien of the Deed of Trust and the Security Agreement and
other liens approved in writing by Lender and liens then being contested by
Borrower as herein permitted.

 

4.11                        Insurance.  Borrower shall obtain and maintain insurance
upon and relating to the Property in accordance with the provisions of Section 1.24 of this Loan Agreement. 
In case of loss, Lender, at its option, shall be entitled to receive and
retain the proceeds of the Insurance Policies, applying the same upon the
Indebtedness secured hereby; provided, however, that Lender will, if requested
to do so by Borrower, make the proceeds of such insurance available, in
accordance with the provisions of the Deed of Trust and the Security Agreement,
to Borrower to repair or reconstruct the Property if the Loan is not then in
default.  Lender shall have the right,

 

 

but not the obligation,
to make premium payments, at Borrower’s expense, to prevent any cancellation,
endorsement, alteration or reissuance, and such payments shall be accepted by the
insurer to prevent same.

 

4.12                        Security.  Borrower acknowledges and agrees that the
Note and the Loan shall be secured by a first and prior security interest in
the items of security as described in the Loan Documents including, without
limitation, the Security Agreement, the Assignment of Leases and Rents and the
Deed of Trust.

 

4.13                        Mergers,
Consolidation and Dispositions and Acquisitions of Assets.  Borrower and Guarantor shall not, in any
single transaction or series of related transactions, directly or
indirectly:  (a) liquidate or dissolve;
(b) be a party to any merger or consolidation; or (c) sell, convey or lease all
or any substantial part of its assets. Borrower shall notify Lender within five
(5) business days of Borrower or the Companies making an investment of
$1,000,000.00 or more in any entity, project or business.

 

4.14                        Current
Ratio.  At all times during the
term of the Note, Borrower shall cause the Companies to maintain a ratio of:
(i) the current assets (as determined in accordance with GAAP) of the Companies
determined on a consolidated basis, to (ii) the current liabilities (as
determined in accordance with GAAP) of the Companies determined on a
consolidated basis of not less than 1.25 to 1.00, to be measured at the end of
each fiscal quarter of Borrower. 
Borrower shall provide to Lender within forty-five (45) calendar days of
the end of each fiscal quarter of Borrower a certificate certifying the
Companies’ compliance or non-compliance with the Current Ratio, the Total
Funded Debt/EBITDA Ratio and the Minimum New Worth requirements set forth
herein.

 

4.15                        Total
Funded Debt/EBITDA Ratio.  At all
times during the term of the Note, Borrower shall, or cause the Companies to,
maintain a ratio of: (i) Total Funded Debt as of the end of any fiscal quarter
of Borrower to (ii) Consolidated EBITDA for the four-quarter period ending as
of the end of such fiscal quarter of not more than 3.00 to 1.00.

 

4.16                        Minimum
Net Worth.  At all times during
the term of the Note, Borrower shall maintain a net worth of the Companies
determined on a consolidated basis as of the end of any fiscal quarter of
Borrower (excluding 100% of the “Accumulated Other Comprehensive Income/Loss”
balance listed in the “Shareholders Equity” section of the balance sheet
of LC) of not less than the sum of (i) $47,000.00 plus (ii)
75% of the cumulative amount of net income of the Companies determined on a
consolidated basis from June 30, 2004 through the end of such fiscal
quarter end (without regard to, or reduction for, any net loss reported for any
fiscal quarter end).

 

4.17                        Financial Statements.  Borrower shall provide to Lender: (i) copies
of the Companies’ annual audited, consolidated Financial Statements and annual,
unaudited consolidating income statement and balance sheet of the Companies on
or before ninety (90) calendar days following the end of each fiscal year of
Borrower during the term of the Note; (ii) copies of the Companies’ Financial
Statements on or before forty-five (45) calendar days following the end of each
fiscal quarter of Borrower during the term of the Note; (iii) promptly upon
request, copies of the Companies’ operating and financial information and
results in a form and with content as reasonably requested by Lender; (iv) a
description of the content of any notices or correspondence received by
Borrower or the Companies from the SEC and/or the DOJ within three (3) business
days of receipt by Borrower and/or the Companies; and (v) such other financial
information, results and data regarding Borrower, Guarantor and the Companies
as Lender may reasonably request.

 

4.18                        Indebtedness.  Borrower shall not, without the prior written
consent of Lender, create, incur, assume, permit to exist or otherwise become,
directly or indirectly, liable for any indebtedness in excess of $3,000,000.00,
excluding the Loan and any indebtedness incurred in connection with the
Brazilian Subsidiary.

 

4.19                        Commitment
Fee.  Borrower shall pay to
Lender in arrears promptly upon receipt from Lender a commitment fee equal to
1/8 of one percent (1.00%) per annum of the total unused portion , if any, of
the Note during each calendar quarter.

 

 

ARTICLE 5

 

RIGHTS AND REMEDIES OF LENDER

 

5.1                               Rights
of Lender.

 

5.1.1                        Upon
the occurrence of an Event of Default and during the continuation thereof,
Lender shall have the right, but not the obligation, in addition to any other
right or remedy of Lender, in its own name or in the name of Borrower, to enter
into possession of the Property and the Assets, and to employ watchmen and
other safeguards to protect the Property.

 

5.1.2                        Moreover,
upon the occurrence of an Event of Default and during the continuation thereof,
Lender may exercise its right of offset against each account and all other
Property and/or Collateral of Borrower in the possession of Lender, which right
is hereby granted by Borrower to Lender.

 

5.1.3                        Borrower
hereby irrevocably appoints Lender as Borrower’s attorney-in-fact, with full
power of substitution, and in the name of Borrower, if Lender elects to do so,
upon the occurrence of an Event of Default and during the continuation thereof,
to (i) endorse the name of Borrower on any checks or drafts representing
proceeds of the Insurance policies or instruments payable to Borrower with
respect to the Property, and (ii) prosecute or defend any action or proceeding
incident to the Property.  Lender shall
have no obligation to undertake any of the foregoing actions, and if Lender
should do so, it shall have no liability to Borrower for the sufficiency or
adequacy of any such actions taken by Lender.

 

5.2                               Acceleration.  Upon the occurrence of an Event of Default
and during the continuation thereof, Lender may, at its option, declare the
Loan immediately due and payable without notice of any kind.

 

5.3                               Cessation
of Lender’s Obligations.  Upon
the occurrence of an Event of Default and during the continuation thereof, all
obligations of Lender hereunder shall, at Lender’s option, be immediately
suspended.

 

5.4                               Funds
of Lender.  Any funds of Lender
used for any purpose referred to in this Article 5 shall constitute
advances secured by the Loan Documents and shall bear interest at the rate
specified in the Note to be applicable after default thereunder.

 

5.5                               No
Waiver or Exhaustion.  No waiver
by Lender of any of its rights or remedies hereunder, in the Loan Documents, or
otherwise, shall be considered a waiver of any other or subsequent right or
remedy of Lender; no delay or omission in the exercise or enforcement by Lender
of any rights or remedies shall ever be construed as a waiver of any right or remedy
of Lender; and no exercise or enforcement of any such rights or remedies shall
ever be held to exhaust any right or remedy of Lender.

 

ARTICLE 6

 

MISCELLANEOUS

 

6.1                               Notices.  All notices, demands, requests, and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been given when presented by hand delivery, facsimile, overnight
delivery or deposited in a regularly maintained receptacle for the United
States Postal Service, postage prepaid, registered or certified, return receipt
requested, addressed to Borrower or Lender, as the case may be, at the
respective addresses set forth on the first page of this Loan Agreement, or
such other address as Borrower or Lender may from time to time designate by
written notice to the other as herein required. 
Notice deposited in the mail in the manner herein above described shall
be effective, unless otherwise stated in this Agreement, on the date on which
it is received or attempted to be delivered. 
Notice given in any other manner shall be effective only if and when
received by the party to be notified.

 

6.2                               Modifications.  No provision of this Loan Agreement or the
other Loan Documents may be modified, waived, or terminated except by
instrument in writing executed by the party against whom a modification,
waiver, or termination is sought to be enforced.

 

 

6.3                               Severability.  In case any of the provisions of the Loan
Agreement shall for any reason be held to be invalid, illegal, or
unenforceable, such invalidity, illegality, or unenforceability shall not
affect any other provision hereof, and this Loan Agreement shall be construed
as if such invalid, illegal, or unenforceable provision had never been
contained herein.

 

6.4                               Election
of Remedies.  Lender shall have
all of the rights and remedies granted in the Loan Documents and available at
law or in equity, and these same rights and remedies shall be cumulative and
may be pursued separately, successively, or concurrently against Borrower, or
any property governed under the Loan Documents at the sole discretion of
Lender.  The exercise of, or failure to
exercise, any of the same shall not constitute a waiver or release thereof or
of any other right or remedy, and the same shall be non-exclusive.

 

6.5                               Controlling
Agreement.  All agreements
between Borrower and Lender, whether now existing or hereafter arising and
whether written or oral, are hereby limited so that in no event shall the
interest paid, or agreed to be paid, to Lender for the use, forbearance, or
detention of the money to be loaned pursuant to this Loan Agreement, or for the
performance or payment of any covenant or obligation contained herein, exceed
the maximum amount permissible under applicable law.  In the event the maturity of the Note is
accelerated by the holder thereof for any reason, or in the event of voluntary
prepayment by Borrower, then earned interest may never include more than the
maximum amount permissible under applicable law, computed from the date of each
advance of Loan proceeds until maturity or prepayment, and any unearned
interest in excess of the maximum amount permissible under applicable law shall
be canceled automatically and, if theretofore paid, shall be refunded to
Borrower or credited on the principal amount owing on the Note.  If from any circumstances whatsoever
fulfillment of any provision hereof or of any other document evidencing,
securing, or pertaining to the Loan, at the time performance of such provision
shall be due, shall involve transcending the limit of validity prescribed by
law, then the obligation to be fulfilled shall be reduced to the limit of such
validity; and if from any such circumstances Lender shall ever receive anything
of value deemed interest under applicable law which would exceed interest at
the highest lawful rate, the excessive interest shall be applied to the
reduction of the principal amount owing.

 

6.6                               Applicable
Law.  This Loan Agreement and the
Loan Documents are being executed and delivered in the State of Texas and shall
be governed by and construed in accordance with the laws of the State of Texas
and the laws of the United States applicable to transactions within such state
unless the laws of another state require the application of the laws of such
state.  Borrower hereby irrevocably
agrees that any legal proceeding against Lender arising out of or in connection
with this Agreement, or the other Loan Documents, shall be brought in the
District Courts of Bexar County, Texas, or in the United States District Court
for the Western District of Texas, San Antonio Division.

 

6.7                               Usury
Not Intended; Refund of Any Excess Payments.  It is the intent of the parties in the
execution and performance of this Agreement to contract in strict compliance
with the usury laws of the State of Texas and the United States of America from
time to time in effect.  In furtherance
thereof, Lender and Borrower stipulate and agree that none of the terms and
provisions contained in this Agreement or the other Loan Documents shall ever
be construed to create a contract to pay for the use, forbearance or detention
of money with interest at a rate in excess of the Highest Lawful Rate and that
for purposes hereof “interest” shall include the aggregate of all charges which
constitute interest under such laws that are contracted for, reserved, taken,
charged or received under this Agreement. 
In determining whether or not the interest paid or payable, under any
specific contingency, exceeds the Highest Lawful Rate, Borrower and Lender
shall, to the maximum extent permitted under applicable law (a) treat all Loans
as but a single extension of credit (and Borrower and Lender agree that such is
the case and that provision herein for multiple Loans and Notes is for
convenience only), (b) characterize any non-principal payment as an expense,
fee or premium rather than as interest, (c) exclude voluntary prepayments and
the effects thereof, and (d) “spread” the total amount of interest throughout
the entire contemplated term of the Loans. 
The provisions of this paragraph shall control over all other provisions
of the Loan Documents which may be in apparent conflict herewith.  Lender and Borrower agree that Chapter 15 of
the Texas Credit Code shall not apply to this Agreement or the Note.

 

6.8                               Indemnification.  BORROWER AGREES TO
INDEMNIFY, DEFEND AND HOLD LENDER HARMLESS FROM AND AGAINST ANY AND ALL LOSS,
LIABILITY, OBLIGATION, DAMAGE, PENALTY, JUDGMENT, CLAIM, DEFICIENCY AND EXPENSE
(INCLUDING, WITHOUT LIMITATION,

 

 

INTEREST,
PENALTIES, ATTORNEYS’ FEES AND AMOUNTS PAID IN SETTLEMENT) TO WHICH LENDER MAY
BECOME SUBJECT ARISING OUT OF OR BASED UPON THE LOAN DOCUMENTS OR ANY LOAN,
EXCEPT TO THE EXTENT CAUSED BY ANY FAULT OR NEGLIGENCE OF LENDER.

 

6.9                               No
Waiver.  No waiver of any Event
of Default shall be deemed to be a waiver of any other Event of Default.  No failure to exercise or delay in exercising
any right or power under any Loan Document shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right or power preclude any
further or other exercise thereof or the exercise of any other right or
power.  No amendment, modification or
waiver of any Loan Document shall be effective unless the same is in writing
and signed by the person or entity against whom such amendment is sought to be
enforced.  No notice to or demand on
Borrower or any other person shall entitled Borrower or any other person or
entity to any other or further notice or demand in similar or other
circumstances.

 

6.10                        Survival;
Parties Bound.  All
representations, warranties, covenants and agreements made by or on behalf of
Borrower in connection herewith shall survive the execution and delivery of the
Loan Documents, and shall bind Borrower and its successors, trustees, receivers
and assigns and inure to the benefit of the successors and assigns of Lender,
provided that the undertaking of Lender hereunder to make Loans to Borrower
shall not inure to the benefit of any successor or assign of Borrower.  The term of this Agreement shall be until the
final maturity of the Note and the payment of all amounts due under the Loan
Documents.

 

6.11                        Expenses.  Any provision to the contrary
notwithstanding, and whether or not the transactions contemplated by this
Agreement shall be consummated, Borrower shall pay on demand all reasonable
out-of-pocket expenses (including, without limitation, the fees and expenses of
counsel for Lender as previously agreed to) in connection with the filing,
recording, refiling, re-recording, modification and supplementing of the Loan
Documents.  Borrower shall pay all costs
and expenses and reimburse Lender for any and all reasonable expenditures
incurred or expended from time to time, to protect Lender’s security interest
in the Property or the Assets and to collect the debt owed by Borrower to
Lender pursuant to the terms and provisions of this Agreement.  Lender agrees to consult with Borrower
whenever reasonably possible prior to incurring said expenditures in an effort
to mitigate same.

 

6.12                        Arbitration.  Borrower and Lender further agree as follows:

 

Borrower and Lender
further agree as follows:

 

I.                                         Consumer-Related
Claims of $75,000.00 or less in actual damages:

 

6.12.1                  With
regard to all consumer-related claims of $75,000.00 or less in actual damages,
any and all controversies or claims arising out of this contract, its negotiations
and/or the breach thereof, shall be settled by arbitration administered by the
American Arbitration Association under its supplemental procedures for
resolution of consumer-related disputes and consumer due process protocol
(which are incorporated herein for all purposes), and judgment on the award
rendered by the arbitrator(s) may be entered in any court having jurisdiction
thereof.  It is intended by all parties
that this arbitration clause meet and include all fairness standards and
principles of the American Arbitration Association’s consumer due process
protocol and due process in predispute arbitration.

 

6.12.2                  Instead
of proceeding in arbitration, any party hereto may pursue its claim in the
consumer’s local small claims court, if the consumer-related claim meets the
small claims court jurisdictional limits. 
If the small claims court option is chosen, the party must contact the
small claims court directly.

 

6.12.3                  The
parties further agree that (i) no arbitration proceeding hereunder shall be certified
as a class action or proceed as a class action, or on a basis involving claims
brought in a purported representative capacity on behalf of the general public,
other customers or potential customers or persons similarly situated and (ii)
no arbitration proceeding hereunder shall be consolidated with, or joined in
any way with, any other arbitration proceeding.

 

6.12.4                  This
arbitration provision shall survive any termination, amendment, or expiration
of the agreement in which this provision is contained, unless all of the
parties otherwise expressly agree in writing.

 

 

6.12.5                  The
parties acknowledge that this agreement evidences a transaction involving
interstate commerce.  The Federal
Arbitration Act shall govern the interpretation, enforcement, and proceedings
pursuant to the arbitration clause of this agreement.

 

II.                                     Consumer-Related
Claims above $75,000.00 in actual damages and/or commercial claims:

 

6.12.6                  Any
arbitration involving consumer-related claims above $75,000.00 in acutal
damages and/or commercial claims hereunder shall be before at least three (3)
neutral arbitrators associated with the American Arbitration Association and
selected in accordance with the commercial arbitration rules of the American
Arbitration Association.  Failure of any
arbitrator to disclose all facts which might to an objective observer create a
reasonable impression of the arbitrator’s partiality, and/or material errors of
law shall be grounds (in addition to all others) for vacatur of an award
rendered pursuant to this agreement.

 

6.12.7                  The
parties further agree that (I) no arbitration proceeding hereunder shall be
certified as a class action or proceed as a class action, or on a basis
involving claims brought in a purported representative capacity on behalf of the
general public, other customers or potential customers or persons similarly
situated and (ii) no arbitration proceeding hereunder shall be consolidated
with, or joined in any way with, any other arbitration proceeding.

 

6.12.8                  This
arbitration provision shall survive any termination, amendment, or expiration
of the agreement in which this provision is contained, unless all of the
parties otherwise expressly agree in writing.

 

6.12.9                  The
parties acknowledge that this agreement evidences a transaction involving
interstate commerce.  The Federal
Arbitration Act shall govern the interpretation, enforcement, and proceedings
pursuant to the arbitration clause of this agreement.

 

III.                                 Additional
Commercial Claims Provisions:

 

6.12.10            Any
and all commercial controversies between parties, shall be resolved by
arbitration in accordance with the commercial arbitration rules of the American
Arbitration Association in effect at the time of filing, unless the commercial
arbitration rules conflict with this provision, and in such event the terms of
this provision shall control to the extent of the conflict.

 

6.12.11            The
award of the arbitrators, or a majority of them, shall be final, and judgment
upon the award rendered may be entered in any court, state or federal, having
jurisdiction, the arbitration award shall be in writing and specify the factual
and legal basis for the award.  Upon the
request of any party, the award shall include findings of fact and conclusions
of law.

 

6.12.12            “Arbitrable
disputes” include any controversies or claims between the parties of whatever
type or manner, including without limitation, any claim arising our of or
relating to this agreement, all past, present and/or future credit facilities
and/or agreements involving the parties, any transactions between or involving
the parties, and/or any aspect of the past or present relationship of the
parties, whether banking or otherwise, specifically including any alleged tort
committed by any party.

 

6.12.13            The
parties shall allow and participate in discovery in accordance with the Federal
Rules of Civil Procedure for a period of one hundred twenty (120) days after
the filing of the original responsive pleading. 
Discovery may continue thereafter as agreed by the parties or as allowed
by the arbitrators.  Unresolved discovery
disputes shall be brought to the attention of the arbitrators by written motion
for proper disposition, including ruling on any asserted objections,
privileges, and protective order requests and awarding reasonable attorney’s
fees to the prevailing party.

 

 

6.12.14            In
the event the aggregate of all affirmative claims asserted exceed $500,000.00
exclusive of interest and attorney’s fees, or upon the written request of any
party, (1) prior to the dissemination of a list of potential arbitrators, the
American Arbitration Association shall conduct an in person administrative
conference with the parties and their attorneys for the following purposes and
for such additional purposes as the parties or the American Arbitration
Association may deem appropriate, (A) to obtain additional information about
the nature and magnitude of the dispute and the anticipated length of hearings
and scheduling; (B) to discuss the view of the parties about any technical
and/or other special qualifications of the arbitrators; and (C) to consider,
whether medication or other methods of dispute resolution might be appropriate,
and (2) as promptly as practicable after the selection of the arbitrators, a
preliminary hearing shall be held among the parties, their attorneys and the
arbitrators.  With the agreement of the
arbitrators and the parties, the preliminary hearing may be conducted by
telephone conference call rather than in person.  At the preliminary hearing the matters that
may be considered shall include, without limitation, a prehearing scheduling
order addressing (A) each party’s duty to submit a detailed statement of
claims, damages and/or defenses, a statement of the issues asserted by each
party and any legal authorities the parties may wish to bring to the attention
of the arbitrators; (B) responses and/or replies to the pleadings filed in
compliance with subpart 2(A); (C) 
Stipulations regarding any contested facts; (D) exchange and premarking
of all documents which each party believes may be offered at the final
arbitration hearing; (E) the identification and availability of witnesses,
including experts, and such additional matters regarding witnesses including
their biographies and a short summary of their expected testimony, (F) whether
a stenographic or other official record of the proceedings shall be maintained;
and (G) the possibility of untilizing mediation or other alternative methods of
dispute resolution.

 

6.12.15            For
purposes of this provision, “the parties” means Borrower and Lender, and each
of them, and all persons and entities signing this Agreement or any of the
other agreements, security instruments and/or guarantees executed heretofore or
contemporaneously with and as part of the same transaction with the Note.  “The parties” shall also include individual
partners, affiliates, officers, directors, employees, agents and/or
representatives of any party to such dcouments, and shall include any other
owner and holder of this Agreement.

 

6.12.16            The
parties shall have the right to invoke self-help remedies (such as set-off,
notification of account debtors, seizure and/or foreclosure of collateral, and
non-judicial sale of personal property and real property collateral) before,
during or after any arbitration and/or ancillary or provisional judicial
remedies (such as garnishment, attachment, specific performance, receiver,
injunction, or restraining order, and sequestration) before, during, or after
any arbitration.  The parties need not
await the outcome of the arbitration before using self-help or provisional
remedies.  Use of self-help or ancillary
and/or provisional remedies shall not operate as a waiver of either party’s
right or compel arbitration.  Any
ancillary or provisional remedy which would be available from a court of law
shall be available from the arbitrators.

 

6.12.17            The
parties agree that any action regarding any controversy between the parties
shall either be brought by arbitration, as described herein, or by judicial
proceedings, but shall be pursued simultaneously in different or alternative
forms.  A timely written notice of intent
to arbitrate pursuant to this agreement stays and/or abates any and all action
in a trial court, save and except a hearing on a motion to compel arbitration
and/or the entry of an order compelling arbitration and staying and/or abating
the litigation pending the filing of the final award of the arbitrators.  All reasonable and necessary attorney’s fees
and all travel costs shall be awarded to the prevailing party on any motion to
compel arbitration and must be paid to such party within ten (10) days of
signing of the order compelling arbitration.

 

6.12.18            Any
party seeking to arbitrate shall serve a written notice of intent to arbitrate
to any and all opposing parties within three hundred sixty (360) days after
dispute has arisen.  A dispute is defined
to have arisen only upon receipt of service of judicial process, including
service of a counterclaim, failure to serve a written notice of intent to
arbitrate within the time specified above shall be deemed a waiver of the
aggrieved party’s right to compel arbitration of such claim.  The issue of waiver pursuant to this
Agreement is an arbitrable dispute.

 

 

6.12.19            Active
participation in pending litigation during the three hundred sixty (360) day notice
period, whether as plaintiff or defendant, is not a waiver of the right to
compel arbitration.  All discovery
obtained in the pending litigation may be used in any subsequent arbitration
proceeding.

 

6.12.20            The
parties further agree that (i) no arbitration proceeding hereunder shall be
certified as a class action or proceed as a class action, or on a basis
involving claims brought in a purported representative capacity on behalf of
the general public, other customers or potential customers or persons similarly
situated and (ii) no arbitration proceeding hereunder shall be consolidated
with, or joined in any way with, any other arbitration proceeding.

 

6.12.21            Any
arbitrator selected shall be knowledgeable in the subject matter of the
dispute.  Each of the parties shall pay
an equal share of the arbitration costs, fees, expenses, and the of the
arbitrators’ fees, costs and expenses.

 

6.12.22            All
statutes of limitations which would otherwise be applicable shall apply to any
and all claims asserted in any arbitration proceeding hereunder and the
commencement of any arbitration proceeding tolls such statutes of limitations.

 

6.12.23            In
any arbitration proceeding subject to these provisions, the arbitrators, or a
majority of them, are specifically empowered to decide (by documents only, or
with a hearing at the arbitrators’ sole discretion) pre-hearing motions which
are substantially similar to pre-hearing motions to dismiss and motions for
summary adjudication.

 

6.12.24            The
arbitration provision shall survive any termination, amendment, or expiration
of the Agreement in which this is contained, unless all the parties otherwise
expressly agree in writing.

 

6.12.25            The
parties acknowledge that this agreement evidences a transaction involving
interstate commerce.  The Federal
Arbitration Act shall govern the interpretation, enforcement and proceedings
pursuant to the arbitration clause in this agreement.

 

6.12.26            The
arbitrators, or a majority of them, shall award attorney’s fees and costs to
the prevailing party pursuant to the terms of this Agreement.

 

6.12.27            Neither
the parties nor the arbitrators may disclose the existence, consent, or results
of any arbitration hereunder without prior written consent of all parties
and/or court order.

 

6.12.28            Venue
of any arbitration proceeding hereunder will be Bexar County, Texas where
Lender is located.

 

6.13                        Entire
Agreement.  This Agreement
embodies the entire agreement between Borrower and Lender and supersedes all
prior proposals, agreements and understandings relating to the subject matter
hereof.

 

6.14                        Severability.  If any provision of any Loan Documents shall
be invalid, illegal or unenforceable in any respect under any applicable law,
the validity, legality and enforceability of the remaining provisions shall be affected
or impaired thereby.

 

THIS
AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE
CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES.  THERE ARE NO
UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

 

EXECUTED
as of the date first stated above.

 

 

LENDER:

 

International
Bank of Commerce, a Texas banking association

 

	
  By: 

  	
  /s/
  RICHARD L. CAPPS

  	
   

  
	
   

  	
  Richard
  L. Capps, Senior Vice President

  

 

BORROWER:

 

Lancer
Partnership, Ltd.,

a Texas
limited partnership

 

	
  By: 

  	
  Lancer
  Capital Corporation, Inc.,

  
	
   

  	
  a
  Delaware corporation,

  
	
   

  	
  General
  Partner

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ SCOTT ADAMS

  	
   

  
	
   

  	
  Name: 

  	
  Scott Adams

  	
   

  
	
   

  	
  Title: 

  	
  Treasurer

  	
   

  
						

 

AGREED
AND ACCECPTED this 17th day of December, 2004.

 

Lancer
Corporation, a Texas corporation

 

	
  By: 

  	
  /s/ SCOTT ADAMS

  	
   

  
	
  Name: 

  	
  Scott Adams

  	
   

  
	
  Title: 

  	
  Treasurer

  	
   

  
					

 

AGREED
AND ACCECPTED this 17th day of December, 2004.

 

 

Lancer
Capital Corporation, Inc.,

a
Delaware corporation

 

	
  By: 

  	
  /s/ SCOTT ADAMS

  	
   

  
	
  Name: 

  	
  Scott Adams

  	
   

  
	
  Title: 

  	
  Treasurer

  	
   

  
					

 

AGREED
AND ACCECPTED this 17th day of December, 2004.

 

 

Lancer
International Sales, Inc.,

a Texas
corporation

 

	
  By: 

  	
  /s/ SCOTT ADAMS

  	
   

  
	
  Name: 

  	
  Scott Adams

  	
   

  
	
  Title: 

  	
  Treasurer

  	
   

  
					

 

 

SCHEDULE 3.5

 

1.                   Affidavit
for Mechanic’s and Materialman’s Lien dated November 14, 2002 filed by Republic
Powdered Metals, Inc. and recorded in Volume 9674, Page 1339 of the Official
Public Records of Real Property of Bexar County, Texas.

 

2.                   Mechanic’s
and Materialman’s Lien Affidavit dated May 13, 2003 filed by ABC Supply
Company, Inc. and recorded in Volume 10021, Page 0614 of the Official Public
Records of Real Property of Bexar County, Texas.

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