Exhibit 10.1
SENIOR SECURED REVOLVING CREDIT LOAN AGREEMENT
Dated as of March 12, 2009
between
FIRST TRINITY CAPITAL CORPORATION
as Borrower
AND
FIRST NATIONAL BANK OF MUSKOGEE,
as Lender

 

 

--------------------------------------------------------------------------------

 

SENIOR SECURED REVOLVING CREDIT AGREEMENT
This SENIOR SECURED REVOLVING CREDIT AGREEMENT, dated as of March 12, 2009 is
entered into among FIRST TRINITY CAPITAL CORPORATION an Oklahoma corporation as
borrower, with its principal and chief place of business at 7633 East 63rd
Place, Suite 230, Tulsa, OK 74133 (the “Borrower”) and FIRST TRINITY FINANCIAL
CORPORATION an Oklahoma corporation as guarantor, with its principal and chief
place of business at 7633 East 63rd Place, Suite 230, Tulsa, OK 74133 (the
“Guarantor”),and FIRST NATIONAL BANK OF MUSKOGEE, as lender, with its main
banking offices at 510 North Main, Muskogee, Oklahoma 74401 (the “Lender”).
The parties hereto agree as follows:
ARTICLE I
DEFINITIONS, INTERPRETATION AND ACCOUNTING TERMS
Section 1.1 Defined Terms. As used in this Agreement, the following terms have
the following meanings:
“Accounting Terms and Principles. All accounting determinations required to be
made pursuant hereto shall, unless expressly otherwise provided herein, be made
in accordance with GAAP and as applicable, statutory required financial
statements of Governmental Authorities. No change in the accounting principles
used in the preparation of any Financial Statement hereafter adopted by Borrower
shall be given effect if such change would affect a calculation that measures
compliance with any provision of Article V or VIII unless the Borrower and the
Lender agree to modify such provisions to reflect such changes in GAAP and, as
applicable subsidiaries insurance companies, statutory required financial
statements, and, unless such provisions are modified, all Financial Statements,
Compliance Certificates and similar documents provided hereunder shall be
provided together with a reconciliation between the calculations and amounts set
forth therein before and after giving effect to such change in GAAP.
“Affiliate” means any corporate affiliate of the borrower.
“Agreement” means this Revolving Credit Agreement.
“Anti-Terrorism Laws” has the meaning specified in Section 4.13(a).
“Anti-Terrorism Order” has the meaning specified in Section 4.13(a).
“Applicable Prime Rate Margin” means twenty five basis points (0.25%).
“Availability Period” shall mean the period commencing on the Closing Date and
ending on the earlier of (i) the date the Commitment is suspended or terminated
in accordance with the terms and provisions of the Loan Documents or (ii) then
applicable Maturity Date.

 

 

--------------------------------------------------------------------------------

 

“Benefit Plan” means any employee benefit plan as defined in Section 3(3) of
ERISA (whether governed by the laws of the United States or otherwise) to which
Borrower incurs or otherwise has any obligation or liability, contingent or
otherwise.
“Borrower” has the meaning specified in the preamble hereto.
“Borrowing” means a borrowing consisting of a Revolving Loan on the same day by
the Lender according to its Commitment.
“Borrowing Base” means, insofar as advances under the Revolver Commitment are
concerned, eighty percent (70%) of the outstanding amount of eligible Premium
Financed Contracts.
“Borrowing Base Advances” means all Revolving Loan advances.
“Business Day” means any day of the year that is not a Saturday, Sunday or a day
on which banks are required or authorized to close in Muskogee, Oklahoma.
“Cash Equivalents” means (a) any readily-marketable securities (i) issued by, or
directly, unconditionally and fully guaranteed or insured by the United States
federal government or (ii) issued by any agency of the United States federal
government the obligations of which are fully backed by the full faith and
credit of the United States federal government, (b) any Dollar-denominated time
deposit, insured certificate of deposit, overnight bank deposit or bankers’
acceptance issued or accepted by (i) Lender or (ii) any commercial bank that is
(A) organized under the laws of the United States, any state thereof or the
District of Columbia, (B) “adequately capitalized” (as defined in the
regulations of its primary federal banking regulators) and (C) has Tier 1
capital (as defined in such regulations) in excess of $250,000,000 and
(c) shares of any United States money market fund that (i) has substantially all
of its assets invested continuously in the types of investments referred to in
clause (a) or (b) above with maturities as set forth in the proviso below,
(ii) has net assets in excess of $500,000,000 and (iii) has obtained from either
S&P or Moody’s the highest rating obtainable for money market funds in the
United States; provided, however, that the maturities of all obligations
specified in any of clauses (a) or (b) above shall not exceed 365 days.
“Change in Control” shall mean any event, transaction or occurrence as a result
of which, at any time, the Borrower ceases to own 100% of the outstanding Equity
Interests of each of the Subsidiaries.
“Closing Date” means the effective date of this Agreement.
“Code” means the U.S. Internal Revenue Code of 1986.
“Collateral” means all property and interests in property and all proceeds
thereof now owned or hereafter acquired by Borrower which a Lien is granted or
purported to be granted pursuant to any Loan Document, including without
limitation, all of Borrower’s right, title and interest in the Pledged Equity
Interests and all of Borrower’s right, title and interest in the Premium
Financed Contracts.

 

2

--------------------------------------------------------------------------------

 

“Commitment” means, with respect to Lender, the commitment of Lender to make the
$3,000,000 Revolver Commitment for Revolving Loans.
“Compliance Certificate” means a certificate substantially in the form of
Exhibit C.
“Constituent Documents” means, with respect to any Person, collectively and, in
each case, together with any modification of any term thereof, (a) the articles
of incorporation, certificate of incorporation, constitution or certificate of
formation of such Person, (b) the bylaws, operating agreement or joint venture
agreement of such Person, (c) any other constitutive, organizational or
governing document of such Person, whether or not equivalent, and (d) any other
document setting forth the manner of election or duties of the directors,
officers or managing members of such Person or the designation, amount or
relative rights, limitations and preferences of any Stock of such Person.
“Contractual Obligation” means, with respect to any Person, any provision of any
Security issued by such Person or of any document or undertaking (other than a
Loan Document) to which such Person is a party or by which it or any of its
property is bound or to which any of its property is subject.
“Default” means any Event of Default and any event that, with the passing of
time or the giving of notice or both, would become an Event of Default.
“Disclosure Documents” means, collectively, (a) all confidential information
memoranda and related materials prepared in connection with the syndication of
the Facilities and (b) all other documents filed by Borrower with the United
States Securities and Exchange Commission.
“Dollars” and the sign “$” each mean the lawful money of the United States of
America.
“Domestic Person” means any “United States person” under and as defined in
Section 770l(a)(30) of the Code.
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
“ERISA Affiliate” means any corporation or trade or business under common
control with Borrower as determined under section 4001(a)(14) of ERISA.
“ERISA Event” means, with respect to Borrower and any ERISA Affiliate, (a) a
“reportable event” as defined in section 4043 of ERISA (other than a reportable
event not subject to the provision for thirty (30) days notice to the PBGC under
regulations issued under section 4043 of ERISA), (b) the withdrawal of Borrower
or any ERISA Affiliate from a Plan during a Benefit Plan year in which it was a
“substantial employer” as defined in section 4001(a)(2) of ERISA, (c) the filing
of a notice of intent to terminate a Benefit Plan under section 4041(c) of
ERISA, (d) the institution of proceedings to terminate a Benefit Plan by the
PBGC, (e) the failure to make required contributions which would reasonably be
expected to result in the imposition of a lien under section 412 of the Code or
section 302 of ERISA, or (f) any other event or condition which would reasonably
be expected to constitute grounds under section 4042 of ERISA for the
termination of, or the appointment of a trustee to administer, any Benefit Plan.

 

3

--------------------------------------------------------------------------------

 

“Event of Default” has the meaning specified in Section 9.1.
“Federal Reserve Board” means the Board of Governors of the United States
Federal Reserve System and any successor thereto.
“Financial Statement” means each financial statement delivered pursuant to
Section 4.3 or Section 6.1.
“Fiscal Quarter” means each three (3) fiscal month period ending on March 31,
June 30, September 30 or December 31.
“Fiscal Year” means the twelve month period ending on December 31 of each year.
“FTCC” means First Trinity Capital Corp., a Oklahoma corporation, and its
successors and permitted assigns.
“GAAP” mean generally accepted accounting principles (including methodology)
utilized in accordance with FASB or other acceptable accounting standards
insofar as the annual audited financials to be furnished to the Lender by
Borrower in accordance with the terms and provisions of this Agreement.
“Governmental Authority” means any nation, sovereign or government, any state or
other political subdivision thereof, any agency, authority or instrumentality
thereof and any entity or authority exercising executive, legislative, taxing,
judicial, regulatory or administrative functions of or pertaining to government,
including any central bank, stock exchange, regulatory body, arbitrator, public
sector entity, supra-national entity (including the European Union and the
European Central Bank) and any self-regulatory organization (including the
National Association of Insurance Commissioners).
“Guarantor” means First Trinity Financial Corp. (FTFC) and its successors and
assigns.
“Guaranty” means the instrument of guarantee by which the Guarantor absolutely
and unconditionally guarantees the repayment of the Note and the Obligations.
“Guaranty Obligation” means, as applied to any Person, any direct or indirect
liability, contingent or otherwise, of such Person for any Indebtedness, lease,
dividend or other obligation (the “primary obligation”) of another Person (the
“primary obligor”), if the purpose or intent of such Person in incurring such
liability, or the economic effect thereof, is to guarantee such primary
obligation or provide support, assurance or comfort to the holder of such
primary obligation or to protect or indemnify such holder against loss with
respect to such primary obligation.

 

4

--------------------------------------------------------------------------------

 

“Indebtedness” of any Person means, without duplication, any of the following,
whether or not matured: (a) all indebtedness for borrowed money, (b) all
obligations evidenced by notes, bonds, debentures or similar instruments,
(c) all reimbursement and all obligations with respect to (i) letters of credit,
bank guarantees or bankers’ acceptances or (ii) surety, customs, reclamation or
performance bonds (in each case not related to judgments or litigation) other
than those entered into in the ordinary course of business, (d) all obligations
to pay the deferred purchase price of property or services, other than trade
payables incurred in the ordinary course of business, (e) all obligations
created or arising under any conditional sale or other title retention
agreement, regardless of whether the rights and remedies of the seller or lender
under such agreement in the event of default are limited to repossession or sale
of such property, (f) all capitalized lease obligations, (g) all obligations,
whether or not contingent, to purchase, redeem, retire, defease or otherwise
acquire for value any of its own Stock or Stock Equivalents (or any Stock or
Stock Equivalent of a direct or indirect parent entity thereof) prior to the
date that is 180 days after the Maturity Date, valued at, in the case of
redeemable preferred Stock, the greater of the voluntary liquidation preference
and the involuntary liquidation preference of such Stock plus accrued and unpaid
dividends, (h) all payments that would be required to be made in respect of any
Hedging Agreement in the event of a termination (including an early termination)
on the date of determination and (i) all Guaranty Obligations for obligations of
any other Person constituting Indebtedness of such other Person.
“Indemnified Matter” has the meaning specified in Section 10.3.
“Indemnitee” has the meaning specified in Section 10.3.
“IRS” means the Internal Revenue Service of the United States and any successor
thereto.
“Liabilities” means all claims, actions, suits, judgments, damages, losses,
liability, obligations, responsibilities, fines, penalties, sanctions, costs,
fees, taxes, commissions, charges, disbursements and expenses, in each case of
any kind or nature (including interest accrued thereon or as a result thereto
and fees, charges and disbursements of financial, legal and other advisors and
consultants), whether joint or several, whether or not indirect, contingent,
consequential, actual, punitive, treble or otherwise.
“Lien” means any mortgage, deed of trust, pledge, hypothecation, assignment,
charge, deposit arrangement, encumbrance, easement, lien (statutory or other),
security interest or other security arrangement and any other preference,
priority or preferential arrangement of any kind or nature whatsoever, including
any conditional sale contract or other title retention agreement, the interest
of a lessor under a capital lease and any synthetic or other financing lease
having substantially the same economic effect as any of the foregoing.
“Loan” has the meaning specified in Section 2.1.
“Loan Documents” means, collectively, this Agreement, any Note, the Pledge
Agreement, and, when executed, each document executed by Borrower and delivered
to the Lender in connection with or pursuant to any of the foregoing or the
Obligations, together with any modification of any term, or any waiver with
respect to, any of the foregoing.
“Loan Parties” means Borrower and Guarantor.

 

5

--------------------------------------------------------------------------------

 

“Marketable Assets” shall mean (a) any readily-marketable Securities with
maturities which exceed 365 days (i) issued by, or directly, unconditionally and
fully guaranteed or insured by the United States federal government or
(ii) issued by any agency of the United States federal government the
obligations of which are fully backed by the full faith and credit of the United
States federal government, (b) any readily-marketable direct obligations issued
by any other agency of the United States federal government, any state of the
United States or any political subdivision of any such state or any public
instrumentality thereof, in each case having a rating of at least “A-1” from S&P
or at least “P-1” from Moody’s, (c) any commercial paper rated at least “A-1” by
S&P or “P-1” by Moody’s and issued by any Person organized under the laws of any
state of the United States, (d) bonds issued by a Person organized under the
laws of the United States, which bonds have a rating of at least BBB+ by S&P or
at least Baa1 by Moody’s and (e) stock issued by Persons organized under the
laws of the United States, which stock is traded on a United States national
stock exchange or another reputable stock exchange pre-approved by the Lender as
set forth on Schedule I annexed hereto, as supplemented from time to time.
“Material Adverse Effect” means an effect that results in or causes, or could
reasonably be expected to result in or cause, a material adverse change in any
of (a) the condition (financial or otherwise), business, performance, prospects,
operations or property of the Borrower, (b) the ability of Borrower to perform
its obligations under any Loan Document and (c) the validity or enforceability
of any Loan Document or the rights and remedies of the Lender under any Loan
Document.
“Maturity Date” means (i) April 30, 2009.
“Minimum Liquidity Amount” shall mean, as at any date, without duplication, the
amount of the sum on a consolidated basis of the Guarantor’s unencumbered cash,
Cash Equivalents and other Marketable Assets and Securities which may be
liquidated within five (5) Business Days of such date of calculation.
“Moody’s” means Moody’s Investors Service, Inc.
“Note” mean those certain promissory notes of the Borrower in substantially the
form of Exhibit A-1 (Revolver Note) payable to the order of Lender in the
principal amounts of the Revolver Commitment ($3,000,000), together with all
extensions, renewals, substitutions, replacements, changes in form,
rearrangements or other modifications thereof from time to time.
“Notice of Borrowing” has the meaning specified in Section 2.2.
“Obligations” means, with respect to Borrower, all amounts, obligations,
Liabilities, covenants and duties of every type and description owing by
Borrower to the Lender, any other Indemnitee or any participant, in each case
arising out of, under, or in connection with, any Loan Document, whether direct
or indirect (regardless of whether acquired by assignment), absolute or
contingent, due or to become due, whether liquidated or not, now existing or
hereafter arising and however acquired, and whether or not evidenced by any
instrument or for the payment of money, including, without duplication, (a) all
Loans, (b) all interest, whether or not accruing after the filing of any
petition in bankruptcy or after the commencement of any insolvency,
reorganization or similar proceeding, and whether or not a claim for post-filing
or post-petition interest is allowed in any such proceeding, (c) all other fees,
expenses (including fees, charges and disbursement of counsel), interest,
commissions, charges, costs, disbursements, indemnities and reimbursement of
amounts paid and other sums chargeable to Borrower under any Loan Document.

 

6

--------------------------------------------------------------------------------

 

“Patriot Act” means the USA Patriot Act of 2001 (31 U.S.C. 5318 et seq.).
“PBGC” means the United States Pension Benefit Guaranty Corporation and any
successor thereto.
“Permit” means, with respect to any Person, any permit, approval, authorization,
license, registration, certificate, concession, grant, franchise, variance or
permission from, and any other Contractual Obligations with, any Governmental
Authority, in each case whether or not having the force of law and applicable to
or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
“Permitted Indebtedness” means any Indebtedness of Borrower that is not
prohibited by Section 8.1 or any other provision of any Loan Document.
“Permitted Lien” means any Lien on or with respect to the property of Borrower
that is not prohibited by Section 8.2 or any other provision of any Loan
Document.
“Person” means any individual, partnership, corporation (including a business
trust and a public benefit corporation), joint stock company, estate,
association, firm, enterprise, trust, limited liability company, unincorporated
association, joint venture and any other entity or Governmental Authority.
“Premium Financed Contracts” means all the (non-defaulted) property and casualty
insurance policy indebtedness, obligations and liabilities financed by and owing
to FTCC documented by FTCC’s standard form Premium Finance Agreement and
ancillary or related documentation previously furnished to Lender in compliance
with all applicable federal truth in lending, Regulation Z and applicable
Uniform Consumer Credit Code lending practices and lending disclosure laws,
rules and regulations applicable thereto, and all accounts (including accounts
receivable, contracts and contract rights), general intangibles, payment
intangibles, instruments (including notes receivable), letter of credit rights,
supporting obligations and all proceeds thereof. Premium Financed Contracts
Excluded are Contracts in dispute, Contracts in litigation and contracts over
30 days past due that have not been submitted for cancelation The amount of a
Concentrations of Contracts greater than 10% of a contract to a party is
excluded from borrowings if the total concentration is greater than 10% of total
Premium Financed Contracts unless otherwise approved by bank. The amount of
total Insurance Company Concentrations of Premium Financed Contracts is limited
to 20% of total Premium Financed Contracts unless otherwise approved by bank.
Premium Financed Contracts are required to be issued by an Insurance Company
with an A.M. Best rating of no less than B+.
“Prime Rate” means the variable annual rate quoted or announced from time to
time by JPMorgan Chase Bank as its prime or base rate of interest and shall not
necessarily be the lowest or best interest rate quoted or made available from
time to time by JPMorgan Chase Bank.

 

7

--------------------------------------------------------------------------------

 

“Related Person” means, with respect to any Person, Affiliate of such Person and
each director, officer, employee, agent, trustee, representative, attorney,
accountant and each insurance, environmental, legal, financial and other advisor
(including those retained in connection with the satisfaction or attempted
satisfaction of any condition set forth in Article III) and other consultants
and agents of or to such Person or any of its Affiliates, together with, if such
Person is the Lender, each other Person or individual designated, nominated or
otherwise mandated by or helping the Lender pursuant to and in accordance with
Section 10.4 or any comparable provision of any Loan Document.
“Requirements of Law” means, with respect to any Person, collectively, the
common law and all federal, state, local, foreign, multinational or
international laws, statutes, codes, treaties, standards, rules and regulations,
guidelines, ordinances, orders, judgments, writs, injunctions, decrees
(including administrative or judicial precedents or authorities) and the
interpretation or administration thereof by, and other determinations,
directives, requirements or requests of, any Governmental Authority, in each
case whether or not having the force of law and that are applicable to or
binding upon such Person or any of its property or to which such Person or any
of its property is subject.
“Responsible Officer” means, with respect to any Person, any of the manager,
president, chief executive officer, treasurer, assistant treasurer, controller,
managing member or general partner of such Person but, in any event, with
respect to financial matters, any such officer that is responsible for preparing
the Financial Statements delivered hereunder and, with respect to the documents
delivered pursuant to Section 6.1(b), documents delivered on the Closing Date,
the secretary or assistant secretary of such Person or any other officer
responsible for maintaining the corporate and similar records of such Person.
“Restricted Payment” means (a) any dividend, return of capital, distribution or
any other payment or Sale of property for less than fair market value, whether
direct or indirect and whether in cash, Securities or other property, on account
of any Stock or Stock Equivalent of the Borrower, or any of its Subsidiaries, in
each case now or hereafter outstanding, including with respect to a claim for
rescission of a Sale of such Stock or Stock Equivalent and (b) any redemption,
retirement, termination, defeasance, cancellation, purchase or other acquisition
for value, including treasury stock acquisitions or transactions, whether direct
or indirect (including through the use of Hedging Agreements, the making,
repayment, cancellation or forgiveness of Indebtedness and similar Contractual
Obligations), of any Stock or Stock Equivalent of Borrower or of any direct or
indirect parent entity of the Borrower, now or hereafter outstanding, and any
payment or other transfer setting aside funds for any such redemption,
retirement, termination, cancellation, purchase or other acquisition, whether
directly or indirectly and whether to a sinking fund, a similar fund or
otherwise.
“Revolving Loans” means all loans advanced or made hereunder to the Borrower
pursuant to the Revolver Commitment.
“Revolver Commitment” means the commitment of the Lender to make or advance
Revolving Loans to the Borrower pursuant to the terms, provisions and conditions
of this Agreement.

 

8

--------------------------------------------------------------------------------

 

“S&P” means Standard & Poor’s Rating Services.
“Sale and Leaseback Transaction” means, with respect to any Person (the
“obligor”), any Contractual Obligation or other arrangement with any other
Person (the “counterparty”) consisting of a lease by such obligor of any
property that, directly or indirectly, has been or is to be Sold by the obligor
to such counterparty or to any other Person to whom funds have been advanced by
such counterparty based on a Lien on, or an assignment of, such property or any
obligations of such obligor under such lease.
“Secured Party” means the Lender and any other holder of any Obligation of
Borrower.
“Security” means all Stock, Stock Equivalents, voting trust certificates, bonds,
debentures, instruments and other evidence of Indebtedness, whether or not
secured, convertible or subordinated, all certificates of interest, share or
participation in, all certificates for the acquisition of, and all warrants,
options and other rights to acquire, any Security.
“Security Agreement” means that certain Security Agreement and Assignment
between FTCC and the Lender in form, scope and substance acceptable to the
Lender, as amended, modified, restated or otherwise supplemented from time to
time, and granting in favor of the Lender a first priority security interest in
all Premium Financed Contracts now or hereafter owned or acquired by FTCC,
including for all purposes, all such Premium Financed Contracts the possession
of which is held by Borrower as the agent for the sole benefit of Lender, as
secured party.
“Sell” means, with respect to any property, to sell, convey, transfer, assign,
license, lease or otherwise dispose of, any interest therein or to permit any
Person to acquire any such interest, including, in each case, through a Sale and
Leaseback Transaction or through a sale, factoring at maturity, collection of or
other disposal, with or without recourse, of any notes or accounts receivable.
“Solvent” means, with respect to any Person as of any date of determination,
that, as of such date, (a) the value of the assets of such Person (both at fair
value and present fair saleable value) is greater than the total amount of
Liabilities (including contingent and unliquidated Liabilities) of such Person,
(b) such Person is able to pay all Liabilities of such Person as such
Liabilities mature and (c) such Person does not have unreasonably small capital.
In computing the amount of contingent or unliquidated Liabilities at any time,
such Liabilities shall be computed at the amount that, in light of all the facts
and circumstances existing at such time, represents the amount that can
reasonably be expected to become an actual or matured liability.
“Stock Equivalents” means all securities convertible into or exchangeable for
Stock or any other Stock Equivalent and all warrants, options or other rights to
purchase, subscribe for or otherwise acquire any Stock or any other Stock
Equivalent, whether or not presently convertible, exchangeable or exercisable.
“Stock” means all shares of capital stock (whether denominated as common stock
or preferred stock), equity interests, beneficial, partnership or membership
interests, joint venture interests, participations or other ownership or profit
interests in or equivalents (regardless of how designated) of or in a Person
(other than an individual), whether voting or non-voting.

 

9

--------------------------------------------------------------------------------

 

“subsidiary(ies)” means, with respect to any Person (the “parent”) at any date,
any corporation, limited liability company, partnership, association, joint
venture or other entity the accounts of which would be consolidated with those
of the parent in the parent’s consolidated financial statements if such
financial statements were prepared in accordance with GAAP as of such date, as
well as any other corporation, limited liability company, partnership,
association or other entity (a) of which securities or other ownership interests
representing more than 50% of the equity or more than 50% of the ordinary voting
power or, in the case of a partnership, more than 50% of the general partnership
interests are, as of such date, owned, controlled or held, or (b) that is, as of
such date, otherwise Controlled, by the parent or one or more subsidiaries of
the parent or by the parent and one or more subsidiaries of the parent.
“Subsidiary” means any subsidiary of Borrower or FTFC.
“Net Worth” means, as of any date, shareholders’ equity or consolidated net
worth of the Borrower or any loan party, as determined in accordance with GAAP.
“Tax Return” has the meaning specified in Section 4.7.
“Tribunal” shall mean any municipal, state, commonwealth, federal, foreign,
territorial or other sovereign, governmental entity, governmental department,
court, commission, board, bureau, agency or instrumentality.
“UCC” means the Uniform Commercial Code of any applicable jurisdiction and, if
the applicable jurisdiction shall not have any Uniform Commercial Code, the
Uniform Commercial Code as in effect in the State of Oklahoma.
“United States” means the United States of America.
“Voting Stock” means Stock of any Person having ordinary power to vote in the
election of members of the board of directors, managers, trustees or other
controlling Persons, of such Person (irrespective of whether, at the time, Stock
of any other class or classes of such entity shall have or might have voting
power by reason of the occurrence of any contingency).
Section 1.2 Interpretation.
(a) Certain Terms. Except as set forth in any Loan Document, all accounting
terms not specifically defined herein shall be construed in accordance with
(except for the term “property”, which shall be interpreted as broadly as
possible, including, in any case, cash, Securities, other assets, rights under
Contractual Obligations and Permits and any right or interest in any property)
state law. The terms “herein”, “hereof” and similar terms refer to this
Agreement as a whole. In the computation of periods of time from a specified
date to a later specified date in any Loan Document, the terms “from” means
“from and including” and the words “to” and “until” each mean “to but excluding”
and the word “through” means “to and including.” In any other case, the term
“including” when used in any Loan Document means “including without limitation.”
The term “documents” means all writings, however evidenced and whether in
physical or electronic form, including all documents, instruments, agreements,
notices, demands, certificates, forms, financial statements, opinions and
reports. The term “incur” means incur, create, make, issue, assume or otherwise
become directly or indirectly liable in respect of or responsible for, in each
case whether directly or indirectly, and the terms “incurrence” and “incurred”
and similar derivatives shall have correlative meanings.

 

10

--------------------------------------------------------------------------------

 

(b) Certain References. Unless otherwise expressly indicated, references (i) in
this Agreement to an Exhibit, Schedule, Article, Section or clause refer to the
appropriate Exhibit or Schedule to, or Article, Section or clause in, this
Agreement and (ii) in any Loan Document, to (A) any agreement shall include,
without limitation, all exhibits, schedules, appendixes and annexes to such
agreement and, unless the prior consent of Lender required therefore is not
obtained, any modification to any term of such agreement, (B) any statute shall
be to such statute as modified from time to time and to any successor
legislation thereto, in each case as in effect at the time any such reference is
operative and (C) any time of day shall be a reference to Muskogee, Oklahoma
time. Titles of articles, sections, clauses, exhibits, schedules and annexes
contained in any Loan Document are without substantive meaning or content of any
kind whatsoever and are not a part of the agreement between the parties hereto.
Unless otherwise expressly indicated, the meaning of any term defined (including
by reference) in any Loan Document shall be equally applicable to both the
singular and plural forms of such term.
ARTICLE II
THE FACILITIES
Section 2.1 Revolver Commitment. On the terms and subject to the conditions
contained in this Agreement, Lender agrees to make Loans in Dollars to the
Borrower from time to time during the Availability Period in an aggregate
principal amount at any time outstanding for all such Revolving Loans by Lender
not to exceed the Borrowing Base of the Revolver Commitment within the limits of
the Revolver Commitment. Borrower may borrow under this Section 2.1, prepay
under Section 2.6 and re-borrow under this Section 2.1.
Section 2.2 Borrowing Procedures.
(a) Revolving Loans Advances. Each Revolving Loan Borrowing shall be made on
notice, given not later than (x)11:00 A.M. (Muskogee, Oklahoma time) on the
proposed Borrowing by the Borrower to Lender. Each such notice of a Borrowing (a
“Notice of Borrowing”) shall be by telephone, confirmed promptly in writing, or
telecopier in substantially the form of Exhibit B hereto, specifying therein the
requested (i) date of such Borrowing, and (ii) aggregate amount of such
Borrowing. To the extent Borrower submits a Notice of Borrowing at a time when
no Loan advances remain outstanding and unpaid at the time of such Notice of
Borrowing, Borrower shall submit a current and duly executed and completed
Compliance Certificate/Borrowing Base Certificate (in addition to the submission
thereof required monthly by Section 6.1(b)) demonstrating with then current
numbers that Borrower is in compliance with Sections 5.1 through 5.4, inclusive,
and that no Default or Event of Default has occurred and is continuing.
(b) Mandatory. Each Commitment shall terminate on its stated Maturity Date.

 

11

--------------------------------------------------------------------------------

 

Section 2.3 Repayment of Obligations. The Borrower shall repay all outstanding
principal amounts of the Loans (and all accrued and unpaid interest, together
with all other outstanding Obligations) on the Maturity Date.
Section 2.4 Optional Prepayments. The Borrower may prepay the outstanding
principal amount of the Loans comprising part of the same Borrowing in whole or
ratably in part without any premium or penalty together with all accrued
interest thereon.
Section 2.5 Mandatory Prepayments.
(a) Excess Outstandings. On any date on which the aggregate principal amount of
the Revolving Loans exceeds the Available Borrowing Amount then in effect, the
Borrower will immediately prepay the Revolving Loans in an aggregate amount
sufficient to reduce such outstanding amount as of such date of payment to an
amount not to exceed the limitations of Section 2.1.
(b) Application of Payments. Any payments made to the Lender pursuant to this
Section 2.6, shall be applied to the Obligations in accordance with
Section 2.9(b).
Section 2.6 Interest.
(a) Rate. Subject to the provisions of subsection (c) below), the Loan will bear
interest on the outstanding principal amount thereof for each Interest Period at
a rate per annum equal to the sum of the J.P. Morgan Chase Prime Rate at all
times in effect plus the Prime Rate Margin of .25 of one percent. The rate shall
have a floor of no less than 5% at any time.
(b) Payments. Interest accrued shall be payable in arrears if accrued on the
principal amount of the Loan, on the last day of each calendar month and at
maturity.
(c) Default Interest. Notwithstanding the rates of interest specified in clause
(a) above or elsewhere in any Loan Document, effective immediately upon (A) the
occurrence of any Event of Default under Section 9.1(e)(ii) or (B) the delivery
of a notice by the Lender the Borrower during the continuance of any other Event
of Default and, in each case, for as long as such Event of Default shall be
continuing, the principal balance (including any Obligation that bears interest
by reference to the rate applicable to any other Obligation) then due and
payable shall bear interest at a rate that is four percent (4%) per annum in
excess of the interest rate applicable to such Obligations from time to time,
payable on demand or, in the absence of demand, on the date that would otherwise
be applicable.
Section 2.7 Loan Fees. In addition to all other fees paid by Borrower to the
Lender under the Loan Documents (including, without limitation, pursuant to
Section 10.2), the Borrower agrees to pay all third party costs incurred during
the term of this loan.

 

12

--------------------------------------------------------------------------------

 

Section 2.8 Application of Payments.
(a) Application of Voluntary Prepayments. Unless otherwise provided in Section
2.6(b), this Section 2.9 or elsewhere in any Loan Document, all payments and any
other amounts received by the Lender from or for the benefit of the Borrower
shall be applied to repay the Obligation of the Borrower.
(b) Application of Mandatory Prepayments. Subject to the provisions of clause
(c) below with respect to the application of payments during the continuance of
an Event of Default, any payment made by the Borrower to the Lender pursuant to
Section 2.6 or any other prepayment of the Obligations required to be applied in
accordance with this clause (b) shall be applied first, to repay accrued and
unpaid interest on the Loan, second to repay the outstanding principal balance
of the Loan and then, any excess shall be retained by the Borrower.
(c) Application of Payments During an Event of Default. Borrower hereby
irrevocably waives the right to direct the application during the continuance of
an Event of Default of any and all payments in respect of any Obligation and any
proceeds of Collateral and agrees that, notwithstanding the provisions of clause
(a) above, the Lender may, apply all payments in respect of any Obligation, all
funds on deposit and all other proceeds of Collateral (i) first, to pay
Obligations in respect of any cost or expense reimbursements, fees or
indemnities then due to the Lender, (ii) second, to pay interest then due and
payable in respect of the Loan, which shall include all such interest, whether
or not accruing after the filing of any petition in bankruptcy or the
commencement of any insolvency, reorganization or similar proceeding, and
whether or not a claim for post-filing or post-petition interest is allowed in
any such proceeding, (iii) third, to repay the outstanding principal amount of
the Loan, and (iv) fourth, to the ratable payment of all other Obligations.
Section 2.9 Payments and Computations.
(a) Procedure. The Borrower shall make payment under any Loan Document not later
than 11:00 a. m. (Muskogee, Oklahoma time) on the day when due to the Lender.
Payments received by the Lender after 1100 a. m. (Muskogee, Oklahoma time) shall
be deemed to be received on the next Business Day.
(b) Computations of Interest and Fees. All computations of interest and of fees
shall be made by the Lender on the basis of a year of 360 days , in each case
for the actual number of days (including the first day but excluding the last
day) occurring in the period for which such interest and fees are payable. Each
determination of an interest rate or the amount of a fee hereunder shall be made
by the Lender (including determinations of a Prime Rate in accordance with the
definitions of “Prime Rate”) and shall be conclusive, binding and final for all
purposes, absent manifest error.
(c) Payment Dates. Whenever any payment hereunder shall be stated to be due on a
day other than a Business Day, the due date for such payment shall be extended
to the next succeeding Business Day without any increase in such payment as a
result of additional interest or fees; provided, however, that such interest and
fees shall continue accruing as a result of such extension of time.

 

13

--------------------------------------------------------------------------------

 

Section 2.10 Evidence of Debt.
(a) Records of Lender. Lender shall maintain in accordance with its usual
practice accounts evidencing Indebtedness of the Borrower to Lender resulting
from the Loan of Lender from time to time, including the amounts of principal
and interest payable and paid to Lender from time to time under this Agreement.
(b) Prima Facie Evidence. The entries made in the accounts maintained pursuant
to clause (a) above shall, to the extent permitted by applicable Requirements of
Law, be prima facie evidence of the existence and amounts of the obligations
recorded therein; provided, however, that no error in such account and no
failure of the Lender to maintain any such account shall affect the obligations
of Borrower to repay the Loans in accordance with their terms.
(c) Note. Borrower shall promptly execute and deliver the Note payable to the
order of Lender evidencing the Revolving Loan and substantially in the form of
Exhibit A.
ARTICLE III
CONDITIONS TO LOANS
Section 3.1 Conditions Precedent to Initial Loans. The obligation of Lender to
make the initial Loan on the Closing Date is subject to the satisfaction or due
waiver of each of the following conditions precedent on or before the Closing
Date:
(a) Certain Documents. The Lender shall have received on or prior to the Closing
Date each of the following, each dated the Closing Date unless otherwise agreed
by the Lender, in form and substance satisfactory to the Lender:
(i) this Agreement duly executed by the Borrower, the Note conforming to the
requirements set forth in Section 2.11(c) and the Guaranty duly executed and
delivered by FTFC;
(ii) the Security Agreement duly executed by FTCC, together with (A) copies of
UCC and other appropriate search reports and of all effective prior filings
listed therein, together with evidence of the termination of such prior filings
and other documents with respect to the priority of the security interest of the
Lender in the Collateral, in each case as may be reasonably requested by the
Lender, and (B) all documents representing all Securities being pledged pursuant
to such Pledge Agreement and related undated powers or endorsements duly
executed in blank;
(iii) a copy of each Constituent Document of Borrower and FTFC, certified as of
a recent date by such Governmental Authority, if applicable, together with, if
applicable, certificates attesting to the good standing of Borrower and FTFC in
such jurisdiction and each other jurisdiction where Borrower or FTFC is
qualified to do business as a foreign entity or where such qualification is
necessary (and, if appropriate in any such jurisdiction, related tax
certificates);

 

14

--------------------------------------------------------------------------------

 

(iv) a certificate of the secretary or other officer of Borrower and FTFC in
charge of maintaining books and records of Borrower and FTFC certifying as to
(A) the names and signatures of each officer of Borrower and FTFC authorized to
execute and deliver any Loan Document, (B) the Constituent Documents of Borrower
and FTFC attached to such certificate are complete and correct copies of such
Constituent Documents as in effect on the date of such certification (or, for
any such Constituent Document delivered pursuant to clause (v) above, that there
have been no changes from such Constituent Document so delivered) and (C) the
resolutions or members’ consent of Borrower’s and FTFC’s board of directors or
other appropriate governing body approving and authorizing the execution,
delivery and performance of each Loan Document to which Borrower or FTFC is a
party;
(v) a certificate of the Borrower to the effect that (A) each condition set
forth in Section 3.1 has been satisfied, (B) the Borrower is Solvent after
giving effect to the Loan advance made at Closing, if any, and the application
of the proceeds thereof in accordance with Section 7.8 and the payment of all
estimated legal, accounting and other fees and expenses related hereto and
thereto, (C) the Representations and Warranties of Article IV hereof are true
and correct in all respects, including without limitation, Sections 4.1, 4.4,
4.5, 4.6 and 4.7 thereof, and (D) that no Default or Event of Default or other
Material Adverse Effect has occurred and continues insofar as Borrower or its
financial condition, business, business operations or results or properties,
have occurred or as a result of any pending or threatened litigation or
administrative claims or proceedings against Borrower, Guarantor and/or any of
its Subsidiaries;
(vi) such other documents and information as the Lender may reasonably request.
(b) Fees and Expenses. There shall have been paid to the Lender, all fees and
all reimbursements of costs or expenses, in each case due and payable under any
Loan Document on or before the Closing Date.
(c) Consents. Borrower shall have received all membership and other consents and
authorizations required pursuant to any Contractual Obligation (including,
pursuant to any Constituent Document) with any other Person and shall have
obtained all Permits of, and effected all notices to and filings with, any
Governmental Authority, in each case, as may be necessary in connection with the
consummation of the transactions contemplated in any Loan Document.
Section 3.2 Conditions Precedent to Loan. The obligation of Lender on any date
(including the Closing Date) to make any Loan is subject to the satisfaction of
the following conditions precedent:
(a) Requests. The Lender shall have received to the extent required by Article
II, a written, timely and duly executed and completed Notice of Borrowing.

 

15

--------------------------------------------------------------------------------

 

(b) Representations and Warranties, No Defaults: The following statements will
be true on such date, both before and after giving effect to such Loan: (i) the
representations and warranties set forth in any Loan Document shall be true and
correct (A) if such date is the Closing Date, on and as of such date and
(B) otherwise, in all material respects on and as of such date or, to the extent
such representations and warranties expressly relate to an earlier date, on and
after such earlier date and (ii) no Default or Event of Default shall be
continuing and no Material Adverse Effect has occurred.
(c) Additional Matters. The Lender shall have received such additional documents
and instruments and upon notice as the Lender may reasonably request.
The representations and warranties set forth in any Notice of Borrowing (or any
certificate delivered in connection therewith) shall be deemed to be made again
on and as of the date of the relevant Loan and the acceptance of the proceeds
thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
To induce the Lender to enter into the Loan Documents, the Borrower represents
and warrants to each of them each of the following on and as of each date
applicable pursuant to Section 3.2:
Section 4.1 Legal Existence; Compliance with Law. Each of Borrower and any loan
party is duly organized, validly existing and in good standing under the laws of
the jurisdiction of its organization, (b) each of Borrower and any loan party is
duly registered to do business as a foreign entity and in good standing under
the laws of each jurisdiction where such registration is necessary to conduct
the business of Borrower and any loan party or own accounts, except where the
failure to be so qualified or in good standing would not, in the aggregate, have
a Material Adverse Effect, (c) has all requisite power and authority and the
legal right to own, pledge, mortgage and operate its property, to lease or
sublease any property it operates under lease or sublease and to conduct its
business as now or currently proposed to be conducted, (d) each of Borrower and
any loan party is in compliance with its Constituent Documents, (e) is in
compliance with all applicable Requirements of Law except where the failure to
be in compliance would not have a Material Adverse Effect and (f) has all
necessary Permits from or by, has made all necessary filings with, and has given
all necessary notices to, each Governmental Authority having jurisdiction, to
the extent required for such ownership, lease, sublease, operation, occupation
or conduct of business, except where the failure to obtain such Permits, make
such filings or give such notices would not, in the aggregate, have a Material
Adverse Effect.

 

16

--------------------------------------------------------------------------------

 

Section 4.2 Loan and Related Documents.
(a) Power and Authority. The execution, delivery and performance by Borrower and
any loan party of the Loan Documents to which it is a party and the consummation
of the transactions contemplated therein (i) are within such Borrower’s similar
powers and, at the time of execution thereof, have been duly authorized by all
necessary corporate and similar action (including, if applicable, consent of
holders of its Securities), (ii) do not (A) contravene Borrower’s or loan
party’s Constituent Documents, (B) violate any applicable Requirement of Law,
(C) conflict with, contravene, constitute a default or breach under, or result
in or permit the termination or acceleration of, any Contractual Obligation of
Borrower or any of its Subsidiaries other than those that would not, in the
aggregate, have a Material Adverse Effect and are not created or caused by, or a
conflict, breach, default or termination or acceleration event under, any Loan
Document or (D) result in the imposition of any Lien (other than a Permitted
Lien) upon any property of Borrower or any of Guarantors Subsidiaries and
(iii) do not require any Permit of, or filing with, any Governmental Authority
or any consent of, or notice to, any Person, other than (A) with respect to the
Loan Documents, the filings required to perfect the Liens created by the Loan
Documents, and (B) those listed on Schedule 4.2 and that have been, or will be
prior to the Closing Date, obtained or made, copies of which have been, or will
be prior to the Closing Date, delivered to the Lender, and each of which on the
Closing Date will be in full force and effect.
(b) Due Execution and Delivery. From and after its delivery to the Lender, each
Loan Document and Related Document has been duly executed and delivered to the
other parties thereto by Borrower and Guarantor is the legal, valid and binding
obligation of Borrower and any loan party and is enforceable in accordance with
its terms.
Section 4.3 Financial Statements.
(a) Each annual audited Financial Statement fairly present in all respects the
consolidated financial position and cash flow of the Borrower and Guarantor as
at the dates indicated and for the periods indicated in accordance with GAAP.
(b) On the Closing Date, (i) Borrower has no material liability or other
obligation (including Indebtedness, Guaranty Obligations, contingent Liabilities
and Liabilities for taxes, long-term leases and unusual forward or long-term
commitments) that is not reflected in the Financial Statements referred to in
clause (a) above or in the notes thereto and not otherwise permitted by this
Agreement and (ii) since the date of the unaudited Financial Statements
referenced in clause (a) above, there has been no Sale of any material property
of the Borrower or Guarantor and no purchase or other acquisition of any
material property.
Section 4.4 Material Adverse Effect. Since January 01, 2009 there have been no
events, circumstances, developments or other changes in facts that would, in the
aggregate, have a Material Adverse Effect.
Section 4.5 Solvency. Both before and after giving effect to (a) the Loans made
on or prior to the date this representation and warranty is made, (b) the
disbursement of the proceeds of such Loan, (c) the payment and accrual of all
transaction costs in connection with the foregoing, the Borrower is solvent and
the Guarantor is solvent on a consolidated and consolidating basis.

 

17

--------------------------------------------------------------------------------

 

Section 4.6 Litigation. There are no pending or, to the knowledge of Borrower,
Guarantor threatened actions, investigations, suits, proceedings, audits,
claims, demands, orders or disputes affecting Borrower, Guarantor or any of its
Subsidiaries with, by or before any Governmental Authority other than those that
cannot reasonably be expected to affect the Obligations, the Loan Documents, and
the other transactions contemplated therein and would not, in the aggregate,
have a Material Adverse Effect.
Section 4.7 Taxes. All federal, state, local and foreign income and franchise
and other material tax returns, reports and statements (collectively, the “Tax
Returns”) required to be filed by Borrower, Guarantor or any Affiliate have been
filed with the appropriate Governmental Authorities in all jurisdictions in
which such Tax Returns are required to be filed, all such Tax Returns are true
and correct in all material respects, and all taxes, charges and other
impositions reflected therein or otherwise due and payable have been paid prior
to the date on which any Liability may be added thereto for non-payment thereof
except for those contested in good faith by appropriate proceedings diligently
conducted and for which adequate reserves are maintained on the books of the
appropriate Affiliate in accordance with GAAP, as applicable. No Tax Return is
under audit or examination by any Governmental Authority and no notice of such
an audit or examination or any assertion of any claim for Taxes has been given
or made by any Governmental Authority. Proper and accurate amounts have been
withheld by each Affiliate from their respective employees for all periods in
full and complete compliance with the tax, social security and unemployment
withholding provisions of applicable Requirements of Law and such withholdings
have been timely paid to the respective Governmental Authorities.
Section 4.8 Margin Regulations.
(a) Margin Stock. No part of the proceeds of the Loans hereunder will be used,
directly or indirectly, for the purpose of purchasing or carrying any “margin
stock” within the meaning of Regulation U, or for the purpose of purchasing or
carrying or trading in any other securities. If requested by the Lender, the
Borrower will furnish to the Lender a statement to the foregoing effect in
conformity with the requirements of FR Form U-1 referred to in said
Regulation U. No indebtedness being reduced or retired out of the proceeds of
the Loans hereunder was or will be incurred for the purpose of purchasing or
carrying any margin stock within the meaning of Regulation U or any “margin
security” within the meaning of Regulation T.
(b) Securities Laws. None of the transactions contemplated by this Agreement
(including the direct or indirect use of the proceeds of the Loans) will violate
or result in a violation of the Securities Act of 1933, as amended, or the
Securities Exchange Act, or regulations issued pursuant thereto, or
Regulation T, U or X.
(c) Investment Company Act. Neither Borrower nor any Subsidiary thereof is
subject to regulation under the Investment Company Act of 1940, as amended. In
addition, neither Borrower nor any Subsidiary thereof is (i) an “investment
company” registered or required to be registered under the Investment Company
Act of 1940, as amended.
Section 4.9 No Burdensome Obligations; No Defaults. Borrower, Guarantor is not a
party to any Contractual Obligation, Borrower, Guarantor does not have any
Constituent Documents containing obligations, and, to the knowledge of Borrower
and Guarantor, there are no applicable Requirements of Law, in each case the
compliance with which would have, in the aggregate, a Material Adverse Effect.
Borrower and Guarantor(and, to the knowledge of Borrower and Guarantor, no other
party thereto) is not in default under or with respect to any Contractual
Obligation of Borrower and Guarantor, other than those that would not, in the
aggregate, have a Material Adverse Effect.

 

18

--------------------------------------------------------------------------------

 

Section 4.10 No Legal Bar. The execution, delivery and performance of the Loan
Documents, the borrowings hereunder and the use of the Loan advances or letters
of credit issued hereunder will not violate any Requirement of Law or any
contractual obligation of the Borrower, Guarantor or any Subsidiary thereof
(except those as to which waivers or consents have been obtained and those which
would not reasonably be expected to have a Material Adverse Effect), and will
not result in, or require, the creation or imposition of any Lien on any of its
properties or revenues pursuant to any Requirement of Law or contractual
obligation. Neither Borrower, Guarantor nor any Subsidiary thereof is in default
under or with respect to any of its contractual obligations in any respect that
has had or would reasonably be expected to have a Material Adverse Effect.
Section 4.11 Full Disclosure. The information prepared or furnished by or on
behalf of Borrower and Guarantor in connection with any Loan Document (including
the information contained in any Financial Statement or Disclosure Document) or
any other transaction contemplated therein, does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements contained therein, in light of the circumstances when made, not
misleading; provided, however, that projections contained therein are not to be
viewed as factual and that actual results during the periods covered thereby may
differ from the results set forth in such projections by a material amount. All
projections that are part of such information (including those set forth in any
Projections delivered subsequent to the Closing Date) are based upon good faith
estimates and stated assumptions believed to be reasonable and fair as of the
date made in light of conditions and facts then known and, as of such date,
reflect good faith, reasonable and fair estimates of the information projected
for the periods set forth therein.
Section 4.12 No Employee Plan. Borrower and Guarantor does not maintain any
employee pension Benefit Plan subject to Title IV of the Employee Retirement
Income Security Act of 1974.
Section 4.13 Anti Terrorism.
(a) Borrower and Guarantor is not in violation in any material respects of any
United States Requirements of Law relating to terrorism, sanctions or money
laundering (the “Anti-Terrorism Laws”), including the United States Executive
Order No. 13224 on Terrorist Financing (the “Anti-Terrorism Order”) and the
Patriot Act.
(b) Borrower and Guarantor (i) is not listed in the annex to, or is otherwise
subject to the provisions of, the Anti-Terrorism Order, (ii) is not owned or
controlled by, or acting for or on behalf of, any person listed in the annex to,
or is otherwise subject to the provisions of, the Anti-Terrorism Order,
(iii) does not commit, threaten or conspire to commit or supports “terrorism” as
defined in the Executive Order or (iv) is not named as a “specially designated
national and blocked person” in the most current list published by the U.S.
Treasury Department Office of Foreign Assets Control.

 

19

--------------------------------------------------------------------------------

 

(c) Borrower and Guarantor do not (i) conduct any business or engages in making
or receiving any contribution of funds, goods or services to or for the benefit
of any person described in clauses (b)(i) through (b)(iv) above, (ii) deal in,
or otherwise engage in any transactions relating to, any property or interests
in property blocked pursuant to the Anti-Terrorism Order or (iii) engage in or
conspire to engage in any transaction that evades or avoids, or has the purpose
of evading or avoiding, or attempts to violate, any of the prohibitions set
forth in any Anti-Terrorism Law.
Section 4.14 Solvency. The Borrower and Guarantor (and with respect to its
Subsidiaries, after taking into account each Subsidiary’s rights of
contribution), on a consolidated basis, are not insolvent, the Borrower’s assets
and Guarantor’s assets(and with respect to its Subsidiaries, if any, after
taking into account each Subsidiary’s rights of contribution), on a consolidated
basis, exceed their Liabilities, and Borrower and Guarantor(and with respect to
its Subsidiaries, if any, after taking into account each Subsidiary’s rights of
contribution) will be rendered insolvent by the execution and performance of
this Agreement and the Loan Documents.
Section 4.15 Possession of Franchises, Licenses. Each Loan Party possesses all
franchises, certificates, licenses, permits and other authorizations from
governmental political subdivisions or regulatory authorities, free from
burdensome restrictions, that are necessary in any material respect for the
ownership, maintenance and operation of its properties and assets, and each Loan
Party is not in violation of any thereof in any material respect.
Section 4.16 Leases. Each Loan Party enjoys peaceful and undisturbed possession
of all leases necessary in any material respect for the operation of their
respective businesses properties and assets, none of which contains any unusual
or burdensome provisions which might materially affect or impair the operation
of such properties and assets. All such leases are valid and subsisting and are
in full force and effect.
ARTICLE V
FINANCIAL COVENANTS
Section 5.1 Minimum Net Worth. Guarantor shall not permit its consolidated Net
Worth to be less than $9,500,000, as calculated in accordance with GAAP and
measured as of the end of each fiscal quarter period, commencing December 31,
2008. Borrower shall not permit it’s Net Worth to be less $3,500,000 as
calculated in accordance with GAAP and measured as of the end of each fiscal
quarter period commencing December 31, 2008.
Section 5.2 Debt to Worth Ratio. The Borrower will maintain a ratio of
consolidated Debt to consolidated Tangible Net Worth, measured as of the end of
each fiscal quarter period, commencing December 31, 2008, not in excess of 1.00
to 1.0.
Section 5.3 Minimum Liquidity Amount. Guarantor on a consolidated basis shall
not permit its Minimum Liquidity Amount to be less than $250,000 as measured as
of the end of each fiscal quarter period, commencing December 31, 2008.

 

20

--------------------------------------------------------------------------------

 

ARTICLE VI
REPORTING COVENANTS
The Borrower and Guarantor agrees with the Lender to each of the following, as
long as the Obligation or the Commitment remains outstanding:
Section 6.1 Financial Statements. The Borrower shall deliver to the Lender each
of the following:
(a) Annual Audited Consolidated Financial Statements/Tax Returns. As soon as
practicable after the end of each fiscal year, and in any event within 120 days
of each fiscal year end, commencing December 31, 2008, Borrower shall furnish to
the Lender its financial statement and Guarantor shall furnish to the Lender its
audited consolidated financial statements an unqualified opinion from its
independent auditing firm, or another independent auditing firm acceptable to
the Lender, which such annual financial statements shall be prepared in
accordance with GAAP and in form and scope previously furnished to Lender.
Copies of (i) statutory required annual audited calendar year end financial
statements of Guarantors subsidiaries shall be furnished to the Lender in no
event later than June 30 of the following calendar year, and (ii) all federal
Tax Returns or extensions of the Guarantor (including all schedules thereto)
shall be furnished to the Lender no later than each April 15 (commencing
April 30, 2009 for the 2008 Tax Returns).
(b) Quarterly Financial Statements. Borrower shall maintain a standard system of
accounting and shall furnish to the Lender as soon as practicable after the end
of each of the initial three (3) quarterly periods of each fiscal year,
commencing with the quarter ending March 31, 2009, and in any event within
forty-five (45) days after the end of each said calendar quarter, operating
statements for, Borrower and consolidated operating statements for Guarantor
which shall be certified by the chief financial officer thereof to fairly
present the financial condition of the Borrower and Guarantor for such period as
prepared in accordance with GAAP and on a statutory/insurance regulatory basis
as applicable, and shall include at least a balance sheet as at the end of such
period and a statement of income and expenses, all in reasonable detail.
(c) Compliance Certificate/Borrowing Base Certificate. Within thirty (30) days
following the close of each calendar month, a monthly borrowing base certificate
effective as of the last business date of the prior calendar month, each of the
monthly reports required by clauses (i) and (ii) above in form, scope and
substance acceptable to the Lender.
(d) Monthly Borrowing Base Report. Within thirty (30) days of the end of each
calendar month, a written report prepared by or on behalf of the Borrower
certifying (i) the aggregate current value of non-defaulted Premium Financed
Contracts, which report shall provide, as of the end of such previous month a
summary statement detailing the types and agings maintained thereby.

 

21

--------------------------------------------------------------------------------

 

(e) Notice of Litigation. Immediately upon becoming aware of the existence of
any action, suit or proceeding at law or in equity before any Tribunal, an
adverse outcome in which would (i) materially impair the ability of Borrower,
Guarantor and its Subsidiaries to carry on their respective businesses
substantially as now conducted, (ii) materially and adversely affect the
consolidated condition (financial or otherwise) of Borrower, or (iii) result in
monetary damages in excess of $100,000, Borrower and Guarantor will give the
Lender a written notice specifying the nature thereof and what actions, if any,
Borrower and Guarantor is taking and proposes to take with respect thereto.
(f) Notice of Default. Immediately upon the happening of any condition or event
which constitutes an Event of Default or Default or any default or event of
default under any other loan, mortgage, financing or security agreement, the
Borrower will give the Lender a written notice thereof specifying the nature and
period of existence thereof and what actions, if any, Borrower is taking and
proposes to take with respect thereto.
Section 6.2 Notice of Other Events. The Borrower shall give the Lender notice of
each of the following (which may be made by telephone if promptly confirmed in
writing) promptly (but in any event within five (5) Business Days) after the
Borrower knows or has reason to know of it: (a)(i) any Default and (ii) any
event, including, without limitation, any environmental law violation, report or
citation, that would have a Material Adverse Effect, specifying, in each case,
the nature and anticipated effect thereof and any action proposed to be taken in
connection therewith, (b) any ERISA Event that causes or results in a Material
Adverse Effect, (c) the commencement of, or any material developments in, any
action, investigation, suit, proceeding, audit, claim, demand, order or dispute
with, by or before any Governmental Authority affecting Borrower or any Loan
Party or any property of Borrower or any Loan Party that seeks injunctive or
similar relief, (ii) in the reasonable judgment of the Borrower, exposes
Borrower or any Loan Party to liability in an aggregate amount in excess of
$100,000 or (iii) if adversely determined would have a Material Adverse Effect.
Section 6.3 Copies of Notices and Reports. The Borrower shall promptly deliver
or cause to be delivered to the Lender copies of each of the following: (a) all
documents that Borrower or any Loan Party files with any securities exchange or
any Governmental Authority exercising similar functions, (b) all press releases
not made available directly to the general public, and (c) any material document
transmitted or received pursuant to, or in connection with, any Contractual
Obligation governing Indebtedness of Borrower or any Subsidiary thereof.
Section 6.4 Taxes. The Borrower shall give the Lender notice of each of the
following (which may be made by telephone if promptly confirmed in writing)
promptly after any Responsible Officer of Borrower or any loan party knows or
has reason to know of it: (a) the creation, or filing with the IRS or any other
Governmental Authority, of any Contractual Obligation or other document
extending, or having the effect of extending, the period for assessment or
collection of any taxes with respect to any Affiliate and (b) the creation of
any Contractual Obligation of any Tax Affiliate, or the receipt of any request
directed to any Affiliate, to make any adjustment under Section 481(a) of the
Code, by reason of a change in accounting method or otherwise, which would have
a Material Adverse Effect.

 

22

--------------------------------------------------------------------------------

 

Section 6.5 Other Information. The Borrower shall provide the Lender with such
other documents and information with respect to the business, property,
condition (financial or otherwise), legal, financial or corporate or similar
affairs or operations of Borrower, Guarantor and each Subsidiary thereof as the
Lender may from time to time reasonably request.
ARTICLE VII
AFFIRMATIVE COVENANTS
The Borrower agrees with the Lender to each of the following, as long as the
Obligation or the Commitment remains outstanding:
Section 7.1 Maintenance of Existence. It and each Loan Party shall preserve and
maintain its legal existence, except in the consummation of transactions
expressly permitted by Sections 8.4 and 8.7, and preserve and maintain it rights
(charter and statutory), privileges franchises and Permits necessary or
desirable in the conduct of its business.
Section 7.2 Compliance with Laws. Each Loan Party shall comply with all
applicable Requirements of Law, Contractual Obligations and Permits, except for
such failures to comply that would not, in the aggregate, have a Material
Adverse Effect.
Section 7.3 Payment of Obligations. Each Loan Party shall pay or discharge
before they become delinquent (a) all material claims, taxes, assessments,
charges and levies imposed by any Governmental Authority and (b) all other
lawful claims that if unpaid would, by the operation of applicable Requirements
of Law, become a Lien upon any property of such Loan Party, except, in each
case, for those whose amount or validity is being contested in good faith by
proper proceedings diligently conducted and for which adequate reserves are
maintained on the books of such Loan Party in accordance with GAAP.
Section 7.4 Maintenance of Property. Each Loan Party shall maintain and preserve
all rights, permits, licenses, approvals and privileges (including all Permits)
necessary, used or useful, whether because of its ownership, lease, sublease or
other operation or occupation of property or other conduct of its business, and
shall make all necessary or appropriate filings with, and give all required
notices to, Government Authorities, except for such failures to maintain and
preserve the above that would not, in the aggregate, have a Material Adverse
Effect.
Section 7.5 Maintenance of Insurance. Each Loan Party shall maintain or cause to
be maintained in full force and effect any policies of insurance of any kind
with respect to the property and businesses of such Loan Party with financially
sound and reputable insurance companies or associations of a nature and
providing such coverage as is sufficient and as is customarily carried by
businesses of the size and character of the business of the Borrower.
Section 7.6 Keeping of Books. Borrower shall, and shall cause each Loan Party
to, keep proper books of record and account, in which full, true and correct
entries shall be made in accordance with GAAP, and all other applicable
Requirements of Law of all financial transactions and the assets and business of
such Loan Party.

 

23

--------------------------------------------------------------------------------

 

Section 7.7 Access to Books and Property. Borrower shall permit the Lender, as
often as reasonably requested, at any reasonable time during normal business
hours and with reasonable advance notice to (a) visit and inspect the Premium
Financed Contracts and other assets and property of each Loan Party and examine
and make copies of and abstracts from, the corporate (and similar), financial,
operating and other books and records of each Loan Party; (b) discuss the
affairs, finances and accounts of each Loan Party with any officer or director
of each Loan Party, and (c) communicate directly with any registered certified
public accountants. Each Loan Party shall authorize its registered certified
public accountants to communicate directly with the Lender and to disclose to
the Lender all financial statements and other documents and information as they
might have and the Lender reasonably requests with respect to each Loan Party.
Section 7.8 Use of Proceeds. The proceeds of the Loans shall be used by the
Borrower solely in accordance with this agreement as Revolving Loan advances are
concerned, for the funding of Premium Financed Contracts by and to the extent in
compliance with and subject to the Borrowing Base terms and provisions for
Borrower’s and Guarantors general working capital purposes, all secured by a
first priority Lien in favor of Lender.
Section 7.9 ERISA Reporting Requirements. Borrower and all loan parties shall
furnish or cause to be furnished to the Lender:
(a) promptly and in any event (i) within thirty (30) days after Borrower or any
loan parties any ERISA Affiliate knows or has reason to know that any ERISA
Event described in clause (a) of the definition of ERISA Event or any event
described in section 4063(a) of ERISA with respect to any Plan of Borrower or
any loan parties or any ERISA Affiliate has occurred, and (ii) within ten
(10) days after Borrower or any loan parties or any ERISA Affiliate knows or has
reason to know that any other ERISA Event with respect to any Plan of Borrower
or any loan parties or any ERISA Affiliate has occurred or a request for minimum
funding waiver under section 412 of the Code with respect to any Plan of
Borrower or any loan parties or any ERISA Affiliate has been made, a written
notice describing such event and describing what action is being taken or is
proposed to be taken with respect thereto, together with a copy of any notice of
event that is given to the PBGC;
(b) promptly and in any event within two (2) Domestic Business Days after
receipt thereof by Borrower or any loan parties or any ERISA Affiliate from the
PBGC, copies of each notice received by Borrower or any loan parties or any
ERISA Affiliate of the PBGC’s intention to terminate any Plan or to have a
trustee appointed to administer any Plan;
(c) promptly and in any event within thirty (30) days after the receipt by
Borrower of a request therefor by Lender, copies of any annual and other report
(including Schedule B thereto) with respect to a Plan filed by Borrower or any
loan parties or any ERISA Affiliate with the United States Department of Labor,
the Internal Revenue Service or the PBGC;

 

24

--------------------------------------------------------------------------------

 

(d) promptly, and in any event within ten (10) Domestic Business Days after
receipt thereof, a copy of any correspondence Borrower or any loan parties or
any ERISA Affiliate receives from the Plan Sponsor (as defined by section
4001(a)(10) of ERISA) of any Plan asserting withdrawal liability pursuant to
section 4219 or 4202 of ERISA upon Borrower or any loan parties or any ERISA
Affiliate, and a statement from the chief financial officer of Borrower or any
loan parties or such ERISA Affiliate setting forth details as to the events
giving rise to such withdrawal liability and the action which Borrower or any
loan parties or such ERISA Affiliate is taking or proposes to take with respect
thereto;
(e) notification within thirty (30) days of the effective date thereof of any
material increases in the benefits of any existing Plan which is not a
multi-employer plan (as defined in section 4001(a)(3) of ERISA), or the
establishment of any new Plans, or the commencement of contributions to any Plan
to which Borrower or any ERISA Affiliate was not previously contributing;
(f) notification within three (3) Domestic Business Days after Borrower or any
loan parties or any ERISA Affiliate knows or has reason to know that any such
Credit Party or any such ERISA Affiliate has or intends to file a notice of
intent to terminate any Plan under a distress termination within the meaning of
section 4041(c) of ERISA and a copy of such notice; and
(g) promptly after receipt of written notice of commencement thereof, notice of
all (i) claims made by participants or beneficiaries with respect to any Plan
and (ii) actions, suits and proceedings before any court or governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign, affecting Borrower or any loan parties or any ERISA Affiliate with
respect to any Plan, except those which, in the aggregate, if adversely
determined would not reasonably be expected to have a Material Adverse Effect.
Section 7.10 Additional Documents or Instruments. The Borrower and Guarantor
will from time to time and as often as the Lender may request, execute and
deliver to the Lender such financing statements, additional and supplemental
security and/or pledge agreements, mortgages, assignments and other reports,
certificates, data and writings the Lender may request to evidence, perfect,
more fully evidence or perfect or evaluate the Lender’s continuing first
priority security interest in the Collateral.
ARTICLE VIII
NEGATIVE COVENANTS
The Borrower and Guarantor agrees with the Lender to each of the following, as
long as the Obligation or the Commitment remains outstanding, without the prior
written consent of the Lender to the contrary:
Section 8.1 Indebtedness. Neither Borrower nor any other Loan Party shall,
directly or indirectly, incur or otherwise remain liable with respect to or
responsible for, any Indebtedness except for the following:
(a) the Obligations; and
(b) Indebtedness of the Borrower and other Loan Parties existing on the date
hereof and set forth on Schedule 8.1.

 

25

--------------------------------------------------------------------------------

 

Section 8.2 Liens. Borrower shall not incur, maintain or otherwise suffer to
exist or permit or cause any other Loan Party to incur, maintain or otherwise
suffer to exist, any Lien upon or with respect to any of its assets or property
(including, without limitation, on any of its assets), in each case whether now
owned or hereafter acquired, or assign any right to receive income or profits,
except for the following:
(a) Liens created pursuant to any Loan Document;
(b) Liens existing on the date hereof and set forth on Schedule 8.2 and
(c) Liens imposed statutorily by applicable Governmental Authorities on assets
of FLAC.
Section 8.3 Asset Sales. Neither Borrower nor any other Loan Party shall Sell
any assets, including, without limitation, assets constituting Collateral other
than (i) in the normal and ordinary business operations of Borrower or such Loan
Party in excess of $100,000 in the aggregate on a cumulative basis, and (ii) day
to day management and operation of the bond, stock and other acceptable
investment asset portfolios thereof in accordance with statutory requirements
and customary for business entities similarly situated in the insurance
industry.
Section 8.4 Fundamental Changes. Neither Borrower nor any other Loan Party shall
(a) merge, consolidate or amalgamate with any Person, (b) create any subsidiary
or acquire all or substantially all of the Stock or Stock Equivalents of any
Person or (c) acquire any brand or all or substantially all of the assets of any
Person or all or substantially all of the assets constituting any line of
business, division, branch, operating division or other unit operation of any
Person, in each case except for the following: the merger, consolidation or
amalgamation of any affiliate of the Borrower into any Person without the prior
written consent of the bank.
Section 8.5 Change in Nature of Business. Neither Borrower nor any other Loan
Party shall carry on any business, operations or activities (whether directly,
through a joint venture, in connection with an acquisition or otherwise)
substantially different from those carried on by the Borrower or such Loan Party
at the date hereof and business, operations and activities reasonably related
thereto.
Section 8.6 Transactions with Affiliates. Neither Borrower nor any other Loan
Party shall, except as otherwise expressly permitted herein, enter into any
other transaction directly or indirectly with, or for the benefit of, any
Affiliate of the Borrower (including Guaranty Obligations with respect to any
obligation of any such Affiliate), except for (a) transactions in the ordinary
and normal course of business on a basis no less favorable to such Loan Party as
would be obtained in a comparable arm’s length transaction with a Person not an
Affiliate of the Borrower, (b) reasonable salaries and other reasonable director
or employee compensation to officers and directors of Borrower in the normal and
ordinary course of business to the extent not resulting in a violation of any
covenant of this agreement (c) inter-company loans, payables or receivables
entered into in the normal and ordinary course of business to the extent not
resulting in a violation of any covenant of this agreement.

 

26

--------------------------------------------------------------------------------

 

Section 8.7 Modification of Certain Documents. Neither Borrower nor any other
Loan Party shall waive, amend or otherwise modify any term of any Constituent
Document of, or otherwise change the capital structure of, Borrower (including
the terms of any of their outstanding Stock or Stock Equivalents. except for
private or public offerings.
Section 8.8 Accounting Changes; Fiscal Year. Neither Borrower nor any other Loan
Party shall change its (a) accounting treatment or reporting practices, except
as required by GAAP or any Requirement of Law, or (b) its fiscal year or its
method for determining fiscal quarters or fiscal months.
Section 8.9 Margin Regulations. Neither Borrower nor any other Loan Party shall
use all or any portion of the proceeds of any credit extended hereunder to
purchase or carry margin stock (within the meaning of Regulation U of the
Federal Reserve Board) in contravention of Regulation U of the Federal Reserve
Board.
Section 8.10 ERISA. Except in such instances where an omission or failure would
not reasonably be expected to have a Material Adverse Effect, Borrower or any
loan party will not, nor will Borrower or any loan party permit any ERISA
Affiliate to (a) take any action or fail to take any action which would result
in a violation of ERISA, the Code or other Laws applicable to the Plans
maintained or contributed to by it or any ERISA Affiliate, or (b) modify the
term of, or the funding obligations or contribution requirements under any
existing Plan, establish a new Plan, or become obligated or incur any liability
under a Plan that is not maintained or contributed to by Borrower or any ERISA
Affiliate as of the Closing Date.
Section 8.11 Dividends/Distributions/Restricted Payments. Except only for
extraordinary dividends received from Borrower’s life insurance Subsidiaries
that are (i) approved by the applicable Governmental Authority the Borrower or
any other loan party will not declare, pay or become obligated to declare or pay
any Restricted Payment, including (i) distribution or dividend on any class of
its stock now or hereafter outstanding, and (ii) distribution or dividend of
cash or property to holders thereof or redeem, retire, purchase, repurchase or
otherwise acquire, directly or indirectly, any of its stock now or hereafter
outstanding, whether as a treasury stock acquisition or other stock redemption
or repurchase or otherwise.
ARTICLE IX
EVENTS OF DEFAULT
Section 9.1 Events of Default. Each of the following shall be an Event of
Default:
(a) the Borrower shall fail to pay (i) any principal of any Loan when the same
becomes due and payable or (ii) any interest on any Loan, any fee under any Loan
Document or any other Obligation (other than those set forth in clause
(i) above) and, in the case of this clause (ii), such non-payment continues for
a period of 3 Business Days after the due date therefor; or
(b) any representation, warranty or certification made or deemed made by or on
behalf of Borrower in any Loan Document or by or on behalf of Borrower (or any
Responsible Officer thereof) in connection with any Loan Document (including in
any document delivered in connection with any Loan Document) shall prove to have
been incorrect in any material respect when made or deemed made; or

 

27

--------------------------------------------------------------------------------

 

(c) Borrower or any loan party shall fail to comply with any covenant or other
provision of any Loan Document if such failure shall remain unremedied for
20 days after the earlier of (A) the date on which Borrower becomes aware of
such failure and (B) the date on which notice thereof shall have been given to
Borrower by the Lender; or
(d) (i) any Loan Party shall fail to make any payment when due (whether due
because of scheduled maturity, required prepayment provisions, acceleration,
demand or otherwise) beyond any applicable grace period on any Indebtedness of
such Loan Party, (ii) any other event shall occur or condition shall exist under
any Contractual Obligation relating to any such Indebtedness, if the effect of
such event or condition is to accelerate, or to permit the acceleration of, the
maturity of such Indebtedness or (iii) any such Indebtedness shall become or be
declared to be due and payable, or be required to be prepaid, redeemed, defeased
or repurchased (other than by a regularly scheduled required prepayment), prior
to the stated maturity thereof; or
(e) (i) any Loan Party shall generally not pay its debts as such debts become
due, shall admit in writing its inability to pay its debts generally or shall
make a general assignment for the benefit of creditors, (ii) any proceeding
shall be instituted by or against such Loan Party seeking to adjudicate it
bankrupt or insolvent or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, composition of it or its debts or
any similar order, in each case under any Requirement of Law relating to
bankruptcy, insolvency or reorganization or relief of debtors or seeking the
entry of an order for relief or the appointment of a custodian, receiver,
trustee, conservator, liquidating agent, liquidator, other similar official or
other official with similar powers, in each case for it or for any substantial
part of its property and, in the case of any such proceedings instituted against
(but not by or with the consent of) such Loan Party, either such proceedings
shall remain undismissed or unstayed for a period of 60 days or more or any
action sought in such proceedings shall occur or (iii) any Loan Party shall take
any corporate or similar action or any other action to authorize any action
described in clause (i) or (ii) above; or
(f) one or more judgments, orders or decrees (or other similar process) shall be
rendered against any Loan Party (i)(A) in the case of money judgments, orders
and decrees, involving an aggregate amount (excluding amounts adequately covered
by insurance payable to such Loan Party to the extent the relevant insurer has
not denied coverage therefor) in excess of $100,000 or (B) otherwise, that would
have, in the aggregate, a Material Adverse Effect and (ii)(A) enforcement
proceedings shall have been commenced by any creditor upon any such judgment,
order or decree or (B) such judgment, order or decree shall not have been
vacated or discharged for a period of 30 consecutive days and there shall not be
in effect (by reason of a pending appeal or otherwise) any stay of enforcement
thereof; or

 

28

--------------------------------------------------------------------------------

 

(g) (i) any provision of any Loan Document shall, at any time after the delivery
of such Loan Document, fail to be valid and binding on, or enforceable against,
Borrower or Guarantor or (ii) any Loan Document purporting to grant a Lien to
secure any Obligation shall, at any time after the delivery of such Loan
Document, fail to create a valid and enforceable Lien on any Collateral
purported to be covered thereby or such Lien shall fail or cease to be a
perfected Lien with the priority required in the relevant Loan Document, or
Borrower or Guarantor shall state in writing that any of the events described in
clause (i) or (ii) above shall have occurred; or
(h) an ERISA Event shall have occurred that, when taken together with all other
ERISA Events that have occurred, could reasonably be expected to have a Material
Adverse Effect on Borrower, any other Loan Party and their respective business
operations; or
(i) there shall occur any repudiation, cancellation or invalidation or any
attempt to repudiate, cancel or invalidate the Guaranty by any one or more of
the Guarantors or any breach, violation or other failure of any Guarantor to
comply with the terms, provisions and conditions of the Guaranty; or
(j) the occurrence of a Change in Control.
Section 9.2 Remedies. During the continuance of any Event of Default, the Lender
may, by notice to the Borrower and in addition to any other right or remedy
provided under any Loan Document or by any applicable Requirement of Law, do
each of the following: (a) declare all or any portion of the Commitment
terminated, whereupon the Commitment shall immediately be reduced by such
portion or, in the case of a termination in whole, shall terminate together with
any obligation Lender may have hereunder to make any Loan or (b) declare
immediately due and payable all or part of any Obligation (including any accrued
but unpaid interest thereon), whereupon the same shall become immediately due
and payable, without presentment, demand, protest or further notice or other
requirements of any kind, all of which are hereby expressly waived by Borrower;
provided, however, that, effective immediately upon the occurrence of the Event
of Default specified in Section 9.1(e), (x) the Commitment of Lender to make
Loans shall automatically be terminated and (y) each Obligation (including in
each case any accrued all accrued but unpaid interest thereon) shall
automatically become and be due and payable, without presentment, demand,
protest or further notice or other requirement of any kind, all of which are
hereby expressly waived by Borrower.
ARTICLE X
MISCELLANEOUS
Section 10.1 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the Borrower or any loan parties, the Lender, all future
holders of the Loans and their respective successors and assigns, except that
the Borrower may not assign or transfer any of its rights or obligations under
this Agreement without the prior written consent of the Lender.

 

29

--------------------------------------------------------------------------------

 

Section 10.2 Costs and Expenses. Any action taken by Borrower under or with
respect to any Loan Document, even if required under any Loan Document or at the
request of Lender, shall be at the expense of Borrower, and Lender shall not be
required under any Loan Document to reimburse Borrower therefor except as
expressly provided therein. In addition, the Borrower agrees to pay or reimburse
upon demand (a) the Lender for all reasonable third party out-of-pocket costs
and expenses incurred by it in connection with the investigation, development,
preparation, negotiation, syndication, execution, interpretation or
administration of, any modification of any term of or termination of, any Loan
Document, any other document prepared in connection therewith or the
consummation and administration of any transaction contemplated therein, in each
case including the reasonable fees, charges and disbursements of legal counsel
to the Lender and fees or charges incurred by Lender for its quarterly field
audit retained by or on behalf of Lender, and (b) Lender, for all costs and
expenses incurred in connection with (i) any refinancing or restructuring of the
credit arrangements provided hereunder in the nature of a “work-out”, (ii) the
enforcement or preservation of any right or remedy under any Loan Document, any
Obligation, with respect to the Collateral or any other related right or remedy
or (iii) the commencement, defense, conduct of, intervention in, or the taking
of any other action with respect to, any proceeding (including any bankruptcy or
insolvency proceeding) related to Borrower, Loan Documents, Obligations (or the
response to and preparation for any subpoena or request for document production
relating thereto), including fees and disbursements of counsel (including
allocated costs of internal counsel).
Section 10.3 Indemnities. Borrower agrees to indemnify, hold harmless and defend
the Lender and its Related Persons (each such Person being an “Indemnitee”) from
and against all Liabilities (including brokerage commissions, fees and other
compensation) that may be imposed on, incurred by or asserted against any such
Indemnitee in any matter relating to or arising out of, in connection with or as
a result of (i) any Loan Document, any Disclosure Document, any Obligation (or
the repayment thereof), the use or intended use of the proceeds of any Loan or
any securities filing of, or with respect to, Borrower, (ii) any actual or
prospective investigation, litigation or other proceeding, whether or not
brought by any such Indemnitee (and including attorneys’ fees in any case),
whether or not any such Indemnitee is a party thereto, and whether or not based
on any securities or commercial law or regulation or any other Requirement of
Law or theory thereof, including common law, equity, contract, tort or
otherwise, or (iv) any other act, event or transaction related, contemplated in
or attendant to any of the foregoing (collectively, the “Indemnified Matters”);
provided, however, that the Borrower shall not have any liability under this
Section 10.3 to any Indemnitee with respect to any Indemnified Matter, and no
Indemnitee shall have any liability with respect to any Indemnified Matter other
than (to the extent otherwise liable), to the extent such liability has resulted
primarily from the gross negligence or willful misconduct of such Indemnitee.
Furthermore, Borrower waives and agrees not to assert against any Indemnitee,
any right of contribution with respect to any Liabilities that may be imposed
on, incurred by or asserted against any Related Person.
Section 10.4 Survival. Any indemnification or other protection provided to any
Indemnitee pursuant to any Loan Document (including pursuant to Section 10.2
(Costs and Expenses), Section 10.3 (Indemnities) or this Section 10.4) and all
representations and warranties made in any Loan Document shall (A) survive the
termination of the Commitment and the payment in full of other Obligations and
(B) inure to the benefit of any Person that at any time held a right thereunder
(as an Indemnitee or otherwise) and, thereafter, its successors and permitted
assigns.
Section 10.5 Limitation of Liability for Certain Damages. In no event shall any
Indemnitee be liable on any theory of liability for any special, indirect,
consequential or punitive damages (including any loss of profits, business or
anticipated savings). The Borrower hereby waives, releases and agrees not to sue
upon any such claim for any special, indirect, consequential or punitive
damages, whether or not accrued and whether or not known or suspected to exist
in its favor.

 

30

--------------------------------------------------------------------------------

 

Section 10.6 Lender-Creditor Relationship. The relationship between the Lender
on the one hand, and the Borrower and Guarantor, on the other hand, is solely
that of lender and creditor. Lender has no fiduciary relationship or duty to
Borrower or Guarantor arising out of or in connection with, and there is no
agency, tenancy or joint venture relationship between the Secured Parties and
the Borrower or any loan parties by virtue of, any Loan Document or any
transaction contemplated therein.
Section 10.7 Right of Setoff. Lender is hereby authorized, without notice or
demand (each of which is hereby waived by the Borrower), at any time and from
time to time during the continuance of any Event of Default and to the fullest
extent permitted by applicable Requirements of Law, to set off and apply any and
all deposits of borrower (whether general or special, time or demand,
provisional or final) to the obligations at any time owing by Borrower to Lender
to or for the credit or the account of Borrower, not the Lender, against any
Obligation of Borrower now or hereafter existing, whether or not any demand was
made under any Loan Document with respect to such Obligation. Lender agrees
promptly to notify the Borrower and the Lender after any such setoff and
application made by Lender; provided, however, that the failure to give such
notice shall not affect the validity of such setoff and application. The rights
under this Section 10.7 are in addition to any other rights and remedies
(including other rights of setoff) that the Lender may have.
Section 10.8 Marshaling; Payments Set Aside. Lender shall not be under any
obligation to marshal any property in favor of Borrower or any other party or
against or in payment of any Obligation. To the extent that Lender receives a
payment from the Borrower, from the proceeds of the Collateral, from the
exercise of its rights of setoff, any enforcement action or otherwise, and such
payment is subsequently, in whole or in part, invalidated, declared to be
fraudulent or preferential, set aside or required to be repaid to a trustee,
receiver or any other party, then to the extent of such recovery, the obligation
or part thereof originally intended to be satisfied, and all Liens, rights and
remedies therefor, shall be revived and continued in full force and effect as if
such payment had not occurred.
Section 10.9 Notices.
(a) Addresses. All notices, demands, requests, directions and other
communications required or expressly authorized to be made by this Agreement
shall, whether or not specified to be in writing but unless otherwise expressly
specified to be given by any other means, be given in writing and (i) addressed
to the party to be notified at its address specified in the first paragraph of
this Agreement, if to the Borrower to the attention of Greg Zahn, and if to the
Lender, to the attention of David W. Wood, Vice President, or (ii) addressed to
such other address as shall be notified in writing to the other party hereto.

 

31

--------------------------------------------------------------------------------

 

(b) Effectiveness. All communications described in clause (a) above and all
other notices, demands, requests and other communications made in connection
with this Agreement shall be effective and be deemed to have been received
(i) if delivered by hand, upon personal delivery, (ii) if delivered by overnight
courier service, one Business Day after delivery to such courier service,
(iii) if delivered by mail, when deposited in the mails, and (iv) if delivered
by facsimile, upon sender’s receipt of confirmation of proper transmission.
Section 10.10 Governing Law. This Agreement, each other Loan Document that does
not expressly set forth its applicable law, and the rights and obligations of
the parties hereto and thereto shall be governed by, and construed and
interpreted in accordance with, the law of the State of Oklahoma.
Section 10.11 Jurisdiction.
(a) Submission to Jurisdiction. Any legal action or proceeding with respect to
any Loan Document may be brought in the courts of the State of Oklahoma located
in the City of Muskogee, or of the United States of America for the Eastern
District of Oklahoma and, by execution and delivery of this Agreement, the
Borrower hereby accepts for itself and in respect of its property, generally and
unconditionally, the jurisdiction of the aforesaid courts. The parties hereto
hereby irrevocably waive any objection, including any objection to the laying of
venue or based on the grounds of forum non conveniens, that any of them may now
or hereafter have to the bringing of any such action or proceeding in such
jurisdictions.
(b) Non-Exclusive Jurisdiction. Nothing contained in this Section 10.11 shall
affect the right of the Lender to serve process in any other manner permitted by
applicable Requirements of Law or commence legal proceedings or otherwise
proceed against Borrower in any other jurisdiction.
Section 10.12 Waiver of Jury Trial. Each party hereto hereby irrevocably waives
trial by jury in any suit, action or proceeding with respect to, or directly or
indirectly arising out of, under or in connection with, any Loan Document or the
transactions contemplated therein or related thereto (whether founded in
contract, tort or any other theory). Each party hereto (A) certifies that no
other party and no Related Person of any other party has represented, expressly
or otherwise, that such other party would not, in the event of litigation, seek
to enforce the foregoing waiver and (B) ) acknowledges that it and the other
parties hereto have been induced to enter into the Loan Documents, as
applicable, by the mutual waivers and certifications in this Section 10.12.
Section 10.13 Severability. Any provision of any Loan Document being held
illegal, invalid or unenforceable in any jurisdiction shall not affect any part
of such provision not held illegal, invalid or unenforceable, any other
provision of any Loan Document or any part of such provision in any other
jurisdiction.

 

32

--------------------------------------------------------------------------------

 

Section 10.14 Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. Signature pages may
be detached from multiple separate counterparts and attached to a single
counterpart. Delivery of an executed signature page of this Agreement by
facsimile transmission or electronic transmission shall be as effective as
delivery of a manually executed counterpart hereof.
Section 10.15 Entire Agreement. The Loan Documents embody the entire agreement
of the parties and supersede all prior agreements and understandings relating to
the subject matter thereof and any prior letter of interest, commitment letter,
fee letter, confidentiality and similar agreements involving Borrower and the
Lender, or any of Guarantors Affiliates relating to a financing of substantially
similar form, purpose or effect. In the event of any conflict between the terms
of this Agreement and any other Loan Document, the terms of this Agreement shall
govern (unless such terms of such other Loan Documents are necessary to comply
with applicable Requirements of Law, in which case such terms shall govern to
the extent necessary to comply therewith).
Section 10.16 Exculpation Provisions. Each of the parties hereto specifically
agrees that it has a duty to read this Agreement and the Loan Documents and
agrees that it is charged with notice and knowledge of the terms of this
Agreement and the Loan Documents; that it has in fact read this Agreement and is
fully informed and has full notice and knowledge of the terms, conditions and
effects of this Agreement; that it has been represented by independent legal
counsel of its choice throughout the negotiations preceding its execution of
this Agreement and the Loan Documents; and has received the advice of its
attorney in entering into this Agreement and the Loan Documents; and that it
recognizes that certain of the terms of this Agreement and the Loan Documents
result in one party assuming the liability inherent in some aspects of the
transaction and relieving the other party of its responsibility for such
liability. Each party hereto agrees and covenants that it will not contest the
validity or enforceability of any exculpatory provision of this Agreement and
the Loan Documents on the basis that the party had no notice or knowledge of
such provision or that the provision is not “conspicuous.”
Section 10.17 Exceptions to Covenants. Borrower or any loan party shall not be
deemed to be permitted to take any action or fail to take any action which is
permitted as an exception to any of the covenants contained herein or which is
within the permissible limits of any of the covenants contained herein if such
action or omission would result in the breach of any other covenant contained
herein.

 

33

--------------------------------------------------------------------------------

 

Section 10.18 Participation. Lender may, without notice to or consent of the
Borrower, sell participations to one or more Persons (a “Credit Participant”) in
all or a portion of its rights, obligations or rights and obligations under this
Agreement (including all or a portion of its Loans); provided, however, that
(i) Lender’s obligations under this Agreement shall remain unchanged,
(ii) Lender shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) the participant shall be entitled to the
right of set-off contained in this Agreement, and (v) the Borrower shall
continue to deal solely and directly with Lender in connection with Lender’s
rights and obligations under this Agreement, and Lender shall retain the sole
right to enforce the obligations of the Borrower relating to the Loans and other
obligations owing to Lender and to approve any amendment, modification, or
waiver of any provision of this Agreement (other than amendments, modifications,
or waivers (i) decreasing the amount of principal of or the rate at which
interest is payable on Note, (ii) extending any scheduled principal payment date
or date fixed for the payment of interest on the Loans or Note, (iii) extending
its Commitment, or (iv) release the Borrower or any Guarantor from its or their
obligations under the Loan Documents).
Section 10.19 Patriot Act Notice. Lender, to the extent subject to the USA
Patriot Act of 2001 (31 U.S.C. 5318 et seq.), hereby notifies the Borrower and
any loan party, pursuant to Section 326 thereof, it is required to obtain,
verify and record information that identifies each of the Loan parties,
including the name and address of the Borrower and other information allowing
Lender to identify the Borrower in accordance with such act.

 

34

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.

            BORROWER:
FIRST TRINITY CAPITAL CORPORATION
      By:   /s/ Gregg Zahn         Greg Zahn,        President and Chief
Executive Officer        BORROWER:
FIRST TRINITY CAPITAL CORPORATION
      By:   /s/ William Lay         W. Sherman Lay,        Chief Financial
Officer        GUARANTOR:
FIRST TRINITY FINANCIAL CORPORATION
      By:   /s/ Gregg Zahn         Greg Zahn,        President and Chief
Executive Officer        GUARANTOR:
FIRST TRINITY FINANCIAL CORPORATION
      By:   /s/ William Lay         W. Sherman Lay,        Chief Financial
Officer     

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective officers thereunto duly authorized, as of the date first
above written.

            FIRST NATIONAL BANK OF MUSKOGEE
      By:   /s/ David W. Wood         David W. Wood        President     

 

35

--------------------------------------------------------------------------------

 

SCHEDULE I
Pre-Approved Real Estate Transfers

 

 

--------------------------------------------------------------------------------

 

SCHEDULE 4.2
Consents

 

 

--------------------------------------------------------------------------------

 

SCHEDULE 8.1
Existing Indebtedness

 

 

--------------------------------------------------------------------------------

 

SCHEDULE 8.2
Existing Liens