Document:

Form of Warrant Modification Agreement

 EXHIBIT 10.1 
  
 FORM OF 
 WARRANT MODIFICATION AGREEMENT 
  
 This WARRANT
MODIFICATION AGREEMENT (the “Agreement”), dated as of November 14, 2005 (the “Effective Date”), is made pursuant to the terms of the Warrant Agreement and Form of Warrant, dated as of
                    , 200  , (as supplemented or amended to the date of this Agreement, the “Warrant
Agreement”), and is entered into by and between Flag Financial Corporation, a Georgia corporation (“Company”), and
                     (the “Holder”). 
  

WHEREAS, the Company has entered into an Agreement and Plan of Merger pursuant to which the Company will merge with First Capital Bancorp, Inc. with
the Company being the surviving corporation (the “Merger”); 
  
 WHEREAS, in connection with the Merger, the Company has proposed to raise at least $5,000,000 in new capital through the exercise of the outstanding Warrants by the Warrant Holders; 
  
 WHEREAS, in order to induce the Warrant Holders (including the Holder) to
forfeit their rights to exercise the Warrants for the remaining term until the respective expiration dates and to exercise the Warrants on or prior to November 14, 2005 (“Term Forfeiture”), the Company proposes to amend and
reduce the exercise prices of the Warrants to the amounts as set forth below in this Agreement (the “Price Adjustments,” and, together with Term Forfeiture, the “Warrant Adjustments”); 
  
 WHEREAS, the Board of Director of the Company and a special committee of the
Board of Directors of the Company have both determined that the Warrant Adjustments were in the best interests of the Company and its shareholders; 
  
 WHEREAS, the Company and the Holder desire to amend certain terms of the Warrant Agreement by means of this Agreement to reflect the Warrant Adjustments;
and 
  
 WHEREAS, pursuant to the terms of Section 14 of the
Warrant Agreement, the Company and the Holder have the power to amend and modify the terms of the Warrant Agreement. 
  
 NOW, THEREFORE, in consideration of the above premises and for other good and valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the Company and the Holder hereby agree as follows: 
  
 SECTION 1. Definitions; Interpretation. Unless otherwise defined herein, all capitalized terms used herein and defined in the Warrant Agreement shall have the respective 

 meanings given to those terms in the Warrant Agreement. Other rules of construction set forth in the Warrant Agreement,
to the extent not inconsistent with this Agreement, apply to this Agreement and are hereby incorporated by reference. 
  
 SECTION 2. Amendment to Warrant Agreement and Warrant Certificate(s). The Company and the Holder hereby agree as follows: 
  

	 	(a)	Section 4 of the Warrant Agreement shall be amended and restated to read in its entirety as follows: 

  
 “SECTION 4. Duration and Exercise of Warrants.
The Warrants shall expire at 5:01 p.m. Atlanta time on November 14, 2005 (such date of expiration being herein referred to as the “Expiration Date”). The Holder agrees to exercise all of his Warrants effective at 5:00 p.m.
Atlanta time on the Expiration Date. After 5:01 p.m. Atlanta time on the Expiration Date, unexercised Warrants will become wholly void and of no value. 
  
 In connection with the exercise of the Warrants, the Holder agrees to surrender to the Company the Warrant Certificate evidencing his
Warrants, with the form of exercise attached hereto as Exhibit B (the “Exercise Notice”) duly completed and signed, and to pay the Exercise Price in lawful money of the United States of America by certified or official bank check
payable to the order of the Company on or prior to November 10, 2005. The Exercise Price and the number of shares of Common Stock purchasable upon exercise of a Warrant shall be subject to adjustment as provided in Section 9. Except as
provided in Section 9, no adjustment shall be made for any cash dividends or other distributions on or in respect of the Common Stock or other securities purchasable upon the exercise of a Warrant. 
  
 Upon surrender of a Warrant Certificate and payment of the
Exercise Price at the time in effect hereunder in cash or other immediately available funds, the Company shall thereupon promptly cause to be issued and shall deliver to or upon such Holder a certificate for the Common Stock issuable upon the
exercise of each Warrant evidenced by such Warrant Certificate. Such certificate shall be deemed to have been issued and such Holder shall be deemed to have become a holder of record of such shares of Common Stock (a “Shareholder”)
as of the date of the surrender of such Warrant Certificate and payment of the Exercise Price. 
  
 All shares of Common Stock issued upon exercise of the Warrants shall be duly and validly authorized and issued, fully-paid and
non-assessable, free and clear of all liens, claims, charges or encumbrances created by or through the Company.” 

	 	(b)	Section 5 of the Warrant Agreement shall be amended and restated to read in its entirety as follows: 

  
 “SECTION 5. Exercise Price. The Exercise Price
for Warrants issued hereunder shall be                      per share of Common Stock and such initial exercise price shall be subject to
adjustment as provided in Section 9 hereof.” 
  

	 	(c)	The Warrant Certificate(s) evidencing all of the Warrants of the Holder and issued under the Warrant Agreement shall be amended automatically by virtue of this Agreement to the
extent that all references to the Expiration Date therein shall be the effective date of the Merger. 

  
 3. Effect of Agreement. This Agreement shall become effective upon the Effective Date, subject to and contingent upon the right of the Company to
terminate this Agreement and the Warrant Adjustments if the Company elects to terminate the Merger Agreement. Subject to the foregoing sentence, on and after the Effective Date, each reference to the Warrant Agreement shall mean such Warrant
Agreement as amended by this Agreement. 
  
 4. Full Force and
Effect of Warrant Agreement. Except as explicitly amended above, the Warrant Agreement together with its exhibits and attachments thereto shall remain in full force and effect. 
  
 5. Headings. Headings in this Agreement are for convenience of reference only and are not part of the substance
hereof. 
  
 6. Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of Georgia without reference to conflicts of law rules. 
  
 7. Counterparts. This Agreement may be executed in any number of identical counterparts, any set of which signed by all of the parties hereto shall
be deemed to constitute a complete, executed original for all purposes. 
  
 [Signatures on Next Page] 

 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and
year first above written. 
  

					
	COMPANY:	 	FLAG FINANCIAL CORPORATION
	 	 	a Georgia corporation
			
	 	 	By:	 	 /s/ J. Daniel Speight

	 	 	Name:	 	J. Daniel Speight
	 	 	Title:	 	Chief Financial Officer
		
	HOLDER:	 	  

	 	 	Print Name:Amendment No. 1 to 2005 Stock Incentive Plan

 Exhibit 10.1 
  
 Amendment No. 1 to Bronco Drilling Company, Inc. 
 2005 Stock Incentive Plan 
  
 The Bronco Drilling Company, Inc. 2005 Stock Incentive Plan is hereby amended as follows: 
  
 1.         Amendment. 
  
 Delete Section 4.1 and replace it, in its entirety, with the following: 
  
 “4.1 Share Reserve. Subject to the provisions of Section 11.1 relating to adjustments upon changes in
Common Stock, the shares that may be issued pursuant to Awards shall consist of the Company’s authorized but unissued Common Stock, and the maximum aggregate amount of such Common Stock which may be issued upon exercise of all Awards under the
Plan, including Incentive Stock Options, shall not exceed One Million (1,000,000) shares. Awards for fractional shares of Common Stock may not be issued under the terms of the Plan.” 
  
 2.         Execution. To record the adoption
of the Amendment by the Board, the Company has caused its authorized officer to execute the Amendment as of the date specified below. 
  
 [Signature Page Follows] 

 IN WITNESS WHEREOF, upon authorization of the Board of Directors, the undersigned has caused Amendment
No. 1 to the Bronco Drilling Company, Inc. 2005 Stock Incentive Plan to be executed effective as of the 16th
day of November, 2005. 
  

			
	Bronco Drilling Company, Inc.
		
	By:	 	 /s/ D. Frank Harrison

	 	 	D. Frank Harrison
	 	 	Chief Executive Officer

  

 2Exhibit 10.1

THIS NOTE HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE TRANSFERRED UNLESS IT IS
REGISTERED UNDER SUCH ACT OR TRANSFERRED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF SUCH ACT. 

WILSON HOLDINGS, INC. 

Bridge Note 

New York, New York 

November 10, 2005 

WILSON
HOLDINGS, INC., a Nevada corporation (the “Company”), for value received,
promises to pay, subject to the terms and conditions of this Note, to the order of
________________________________ (the “Holder”), the principal sum of
_____________________ DOLLARS ($_______) together with simple interest thereon at the
annual rate of eight percent (8%), on January 10, 2006 (the “Maturity
Date”) in cash. All interest payment calculations required hereunder shall be
computed on the basis of the actual number of days elapsed over a 365-day year. 

     1.            
          Payments. 

1.1     Subject to the right of the
Holder to convert the principal amount of this Note into Securities (as defined and
provided for in Section 2 hereof), the principal amount of this Note shall be payable in
full on the Maturity Date, together with all interest accrued and unpaid thereon. 

1.2     Payment of the principal of this
Note shall be made to Holder at [address], or such other place or places within the United
States as may be specified by the Holder of this Note in a written notice to the Company
at least 5 business days before the payment date. 

1.3     Such payment of principal of this
Note shall be made in lawful money of the United States of America by mailing the
Company’s good check in the proper amount to such Holder at least three days prior to
the due date of such payment or otherwise transferring funds by wire transfer to the
account of such Holder for receipt by such Holder on the due date of such payment. 

1.4     If payment on this Note becomes
due and payable on a Saturday, Sunday or other day on which commercial banks in New York
City are authorized or required by law to close, the maturity thereof shall be extended to
the next succeeding business day. 

1.5     In the event that any interest rate(s) provided for in this Note shall be determined to be unlawful, such interest
rate(s) shall be computed at the highest rate permitted by applicable law. Any payment by
the Company of any interest amount in excess of that permitted by law shall be considered
a mistake, with the excess being applied to the principal amount of this Note without
prepayment premium or penalty; if no such principal amount is outstanding, such excess
shall be returned to the Company. 

 

     

     2.            
          Conversion Right. 

2.1     Upon the closing of any sale of
notes convertible into the Company’s Common Stock on terms reasonably acceptable to
the Holder (such instruments, the “Securities”) prior to the Maturity Date, this
Note may be converted at the option of the Holder into such Securities concurrently with
the closing of the sale of such Securities. 

2.2     If the Holder elects to convert
this Note into Securities pursuant to Section 2.1 above, the Note shall convert
dollar for dollar (principal amount plus all accrued and unpaid interest) into such new
debt instruments concurrently with the closing of the sale of the Securities (if so
elected, the “Conversion Date”). 

2.3     On the Conversion Date, if any,
the Holder shall surrender this Note at the principal office of the Company (or at the
place the closing for the sale of the Securities will occur), together with written notice
that shall state such Holder’s name or the names of the nominee(s) in which such
Holder wishes the certificate or certificates for Securities to be issued. The
certificates for the Securities shall be issued in the name of the Holder (or its
nominees) to such persons on and as of the Conversion Date, if any. 

     3.            
          Representations and Warranties of the Company. 

The Company hereby represents and
warrants to the Holder, as of the date hereof and except as set forth on the disclosure
schedule furnished by the Company to the Holder (the “Disclosure
Schedule”) attached hereto, as follows: 

3.1     Incorporation. The Company
is a corporation duly organized, validly existing and in good standing under the laws of
the State of Nevada and Wilson Family Communities Inc. (the “Subsidiary”) is a
corporation validly existing and in good standing under the laws of the State of Delaware,
and both the Company and the Subsidiary are in good standing as a foreign corporation or
other entity in each jurisdiction in which the nature of the business conducted or the
character of the property owned by it makes such qualification necessary, except where the
failure to be so qualified would not result in a material adverse effect on the assets,
liabilities (contingent or otherwise), business, affairs, operations, prospects or
condition (financial or otherwise) of the Company (a “Material Adverse Effect”).
Each of the Company and the Subsidiary has all requisite corporate power and authority to
carry on its business as now conducted and to carry out the transactions contemplated
hereby. Neither the Company nor the Subsidiary is in violation of any of the provisions of
its Certificate of Incorporation (or other charter document) or By-laws. 

3.2     Capitalization.
 

     (a)    
          The authorized capital stock of the Company consists of (i) 100,000,000 shares
          of Common Stock, of which 17,689,252 shares were outstanding as of the date
          hereof, and (ii) 10,000,000 shares of preferred stock, none of which are
          outstanding as of the date hereof. All shares of the Company’s issued and
          outstanding capital stock have been duly authorized, are validly issued and
          outstanding, and are fully paid and nonassessable. Except for options to
          purchase 850,000 shares of Common Stock under the Company’s 2005 Stock
          Issuance Plan, there are no existing options, warrants, calls, preemptive (or
          similar) rights, subscriptions or other rights, agreements, arrangements or
          commitments of any character obligating the Company to issue, transfer or sell,
          or cause to be issued, transferred or sold, any shares of the capital stock of
          the Company or other equity interests in the Company or any securities
          convertible into or exchangeable for such shares of capital stock or other
          equity interests, and there are no outstanding contractual obligations of the
          Company to repurchase, redeem or otherwise acquire any shares of its capital
          stock or other equity interests. The issuance and sale of this Note will not
          obligate the Company to issue or sell, pursuant to any pre-emptive right or
          otherwise, shares of Common Stock or other securities to any Person (other than
          the Holders) and will not result in a right of any holder of Company securities
          to adjust the exercise, conversion, exchange or reset price under such
          securities. 

2

     

     (b)    
          The Company owns all of the issued and outstanding shares of the common stock of
          Subsidiary. No shares of preferred stock of Subsidiary are issued and
          outstanding. There are no existing options, warrants, calls, preemptive (or
          similar) rights, subscriptions or other rights, agreements, arrangements or
          commitments of any character obligating the Subsidiary to issue, transfer or
          sell, or cause to be issued, transferred or sold, any shares of the capital
          stock of the Subsidiary or other equity interests in the Subsidiary or any
          securities convertible into or exchangeable for such shares of capital stock or
          other equity interests and there are no outstanding contractual obligations of
          the Subsidiary to repurchase, redeem or otherwise acquire any shares of its
          capital stock or other equity interests. 

3.3     Registration Rights. The
Company has not granted or agreed to grant to any Person any right (including
“piggy-back” and demand registration rights) to have any capital stock or other
securities of the Company registered with the SEC or any other government authority. 

3.4     Authorization. All
corporate action on the part of the Company, its officers and directors necessary for the
authorization, execution, delivery and performance of this Note and the consummation of
the transactions contemplated herein and therein has been taken. When executed and
delivered by the Company, this Note shall constitute a legal, valid and binding obligation
of the Company, enforceable against the Company in accordance with its terms, except as
such may be limited by bankruptcy, insolvency, reorganization or other laws affecting
creditors’ rights generally and by general equitable principles. The Company has all
requisite corporate power and authority to enter into this Note and to carry out and
perform its obligations thereunder. 

3.5     Company Documents. The
Company’s Current Report on Form 8-K as filed with the Securities and Exchange
Commission (the “SEC”) on October 17, 2005 (the “Form 8-K”), complied
in all material respects with the requirements of the Securities Exchange Act of 1934 (the
“Exchange Act”), and the rules and regulations promulgated thereunder. That
certain Amended and Restated Preliminary Private Placement Memorandum for 5% Convertible
Notes due 2012 of Wilson Holdings, Inc. dated as of November 4, 2005 (other than the
sections entitled “Company Summary – Summary of the Offering”, “Terms
of the Offering”, the “Offering Memorandum”, “Dilution” and
“Use of Proceeds”), all financial statements of the Subsidiary provided to
Holder (the “Financial Statements”) and the Form 8-K (the Form 8-K, the
Offering Memorandum and the Financial Statements, collectively, the “Company
Documents”) do not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the statements
made therein, in light of the circumstances under which they were made, not misleading.
The Financial Statements and the financial statements included in any other Company
Document (i) comply in all material respects with applicable accounting requirements and
the rules and regulations of the SEC with respect thereto in effect at the time of filing,
(ii) have been prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis during the periods covered thereby, and (iii)
present fairly, in all material respects, the financial position of the Company and the
Subsidiary and the results of operations and cash flows as of the date and for the periods
indicated therein. All material agreements to which the Company is a party or to which the
property or assets of the Company are subject are included as part of or specifically
identified in the Company Documents to the extent required by the rules and regulations of
the SEC as in effect at the time of filing. 

3

3.6     Consents. Except for any
required federal securities or state “blue sky” law filings in connection with
the transactions contemplated hereunder, all consents, approvals, orders and
authorizations required on the part of the Company in connection with the execution or
delivery of, or the performance of the obligations under, this Note and the consummation
of the transactions contemplated herein, have been obtained and will be effective as of
the date hereof. The execution and delivery by the Company of this Note and the
consummation of the transactions contemplated herein do not require the consent or
approval of the stockholders of, or any lender to, the Company. 

3.7    
No Conflict;
Compliance With Laws.  

     (a)    
          The execution, delivery and performance by the Company of this Note, and the
          consummation of the transactions contemplated hereby, do not and will not (i)
          conflict with or violate any provision of the Certificate of Incorporation (or
          other charter documents) or By-laws of the Company or the Subsidiary, (ii)
          breach, conflict with or result in any violation of or default (or an event that
          with notice or lapse of time or both would become a default) under, or give rise
          to a right of termination, amendment, acceleration or cancellation (with or
          without notice or lapse of time, or both) of any obligation, contract,
          commitment, lease, agreement, mortgage, note, bond, indenture or other
          instrument or obligation to which the Company or the Subsidiary is a party or by
          which they or any of their properties or assets are bound, or (iii) result in a
          violation of any statute, law, rule, regulation, order, ordinance or restriction
          applicable to the Company, the Subsidiary or any of their properties or assets,
          or any judgment, writ, injunction or decree of any court, judicial or
          quasi-judicial tribunal applicable to the Company, the Subsidiary or any of
          their properties or assets. 

     (b)    
          Neither the Company nor the Subsidiary (i) is in default under or in violation
          of (and no event has occurred that has not been waived that, with notice or
          lapse of time or both, would result in a default by the Company or the
          Subsidiary), nor has the Company or the Subsidiary received written notice of a
          claim that it is in default under or that it is in violation of, any indenture,
          loan or credit agreement or any other agreement or instrument to which it is a
          party or by which it or any of its properties or assets is bound (whether or not
          such default or violation has been waived), or (ii) is in violation of any
          statute, rule or regulation of any governmental authority, including without
          limitation all foreign, federal, state and local laws relating to taxes,
          environmental protection, occupational health and safety, product quality and
          safety and employment and labor matters, except in each case as does not, and
          could not, reasonably be expected to have, individually or in the aggregate, a
          Material Adverse Effect. 

4

3.8     Absence of Litigation.
Except as set forth on the Disclosure Schedule, there are no pending or, to the
Company’s knowledge, threatened actions, suits, claims, proceedings or investigations
against or involving the Company or the Subsidiary. 

3.9     No Undisclosed Liabilities;
Indebtedness. Since September 30, 2005, the Company and the Subsidiary have incurred
no material liabilities or obligations, whether known or unknown, asserted or unasserted,
fixed or contingent, accrued or unaccrued, matured or unmatured, liquidated or
unliquidated, or otherwise, other than liabilities or obligations arising in the ordinary
course of business. Except for indebtedness reflected in the Company’s balance sheet
as of September 30, 2005, the Company has no indebtedness outstanding as of the date
hereof. The Company is not in default with respect to any outstanding indebtedness or any
instrument relating thereto. 

3.10    
Taxes. The Company and
the Subsidiary has filed (or has had filed on its behalf), will timely file or will cause
to be timely filed, or has timely filed for an extension of the time to file, all material
Tax returns required by applicable law to be filed by it or them prior to or as of the
date hereof, and such Tax returns are, or will be at the time of filing, true, correct and
complete in all material respects. Each of the Company and the Subsidiary has paid (or has
had paid on its behalf) or, where payment is not yet due, has established (or has had
established on its behalf and for its sole benefit and recourse) or will establish or
cause to be established in accordance with United States generally accepted accounting
principles on or before the date hereof an adequate accrual for the payment of, all
material Taxes due with respect to any period ending prior to or as of the date hereof.
“Taxes” shall mean any and all taxes, charges, fees, levies or other assessments
imposed by the U.S. Internal Revenue Service or any other taxing authority (whether state,
county, local or foreign), including any interest, fines, penalties or additional amounts
attributable to or imposed upon any such taxes or other assessments. There are no claims
or assessments pending against the Company or the Subsidiary for any material alleged
deficiency in any Tax payment (or non payment), and neither the Company nor the Subsidiary
has been notified in writing of any material proposed Tax claims or assessments against
the Company or the Subsidiary. 

3.11    
Private Placement;
Communications with Purchasers. Neither the Company nor any person acting on the
Company’s behalf has sold or offered to sell or solicited any offer to sell the Notes
by means of any form of general solicitation or advertising. Neither the Company nor any
of its affiliates nor any person acting on the Company’s behalf has, directly or
indirectly, at any time within the past six (6) months, made any offer or sale of any
security or solicitation of any offer to buy any security under circumstances that would
(i) eliminate the availability of the exemption from registration under Regulation D under
the Securities Act in connection with the sale or issuance of the Notes as contemplated
hereby or (ii) cause the offering or issuance of the Notes pursuant to this Agreement to
be integrated with prior offerings by the Company for purposes of any applicable law,
regulation or stockholder approval provisions. Neither the Company or the Subsidiary is,
or is an affiliate of, an “investment company” within the meaning of the
Investment Company Act of 1940, as amended. No consent, license, permit, waiver, approval
or authorization of, or designation, declaration, registration or filing with, the SEC or
any state securities regulatory authority is required in connection with the offer, sale,
issuance or delivery of the Notes other than the possible filing of Form D with the SEC. 

5

3.12     Material Changes. Except
as set forth on the Disclosure Schedule, since September 30, 2005, the Company has
conducted its business only in the ordinary course, consistent with past practice, and
since such date there has not occurred: (i) a Material Adverse Effect; (ii) any amendments
or changes in the charter documents or by-laws of the Company or the Subsidiary; (iii)
any: (A) incurrence, assumption or guarantee by the Company or the Subsidiary of any debt
for borrowed money other than (1) equipment leases made in the ordinary course of
business, consistent with past practice and (2) any such incurrence, assumption or
guarantee with respect to an amount of $10,000 or less that has been disclosed in the
Company Documents; (B) issuance or sale of any securities convertible into or exchangeable
for securities of the Company other than to directors, employees and consultants pursuant
to existing equity compensation or stock purchase plans of the Company; (C) issuance or
sale of options or other rights to acquire from the Company or the Subsidiary, directly or
indirectly, securities of the Company or any securities convertible into or exchangeable
for any such securities, other than options issued to directors, employees and consultants
in the ordinary course of business, consistent with past practice; (D) issuance or sale of
any stock, bond or other corporate security other than to directors, employees and
consultants pursuant to existing equity compensation or stock purchase plans of the
Company; (E) declaration or making of any payment or distribution to stockholders or
purchase or redemption of any share of its capital stock or other security other than to
or from directors, officers and employees of the Company or the Subsidiary as compensation
for or in connection with services rendered to the Company or the Subsidiary (as
applicable) or for reimbursement of expenses incurred on behalf of the Company or the
Subsidiary (as applicable); (F) sale, assignment or transfer of any of its intangible
assets except in the ordinary course of business, consistent with past practice, or
cancellation of any debt or claim except in the ordinary course of business, consistent
with past practice; (G) waiver of any right of substantial value whether or not in the
ordinary course of business; (H) material change in officer compensation, except in the
ordinary course of business and consistent with past practice; or (I) other commitment
(contingent or otherwise) to do any of the foregoing; (iv) any creation, sufferance or
assumption by the Company or of the Subsidiary of any Lien on any asset or any making of
any loan, advance or capital contribution to or investment in any Person, in an aggregate
amount which exceeds $10,000 outstanding at any time; (v) any entry into, amendment of,
relinquishment, termination or non-renewal by the Company or the Subsidiary of any
material contract, license, lease, transaction, commitment or other right or obligation,
other than in the ordinary course of business, consistent with past practice; or (vi) any
transfer or grant of a right with respect to the intellectual property rights owned or
licensed by the Company or the Subsidiary, except as among the Company and the Subsidiary. 

3.13     Regulatory Permits. The
Company and the Subsidiary possess all certificates, approvals, authorizations and permits
issued by the appropriate federal, state, local or foreign regulatory authorities
necessary to conduct their businesses as described in the Form 8-K, except where the
failure to possess such permits does not, and could not have, individually or in the
aggregate, a Material Adverse Effect (the “Material Permits”), and the Company
has not received any written notice of proceedings relating to the revocation or
modification of any Material Permits except as described in the Company Documents.

 6

3.14     Transactions with Affiliates
and Employees. Except as set forth in the Company Documents, none of the officers or
directors of the Company or the Subsidiary and, to the knowledge of the Company and
Subsidiary, none of the employees of the Company or Subsidiary, is presently a party to
any transaction or agreement with the Company or the Subsidiary, as applicable, (other
than for services as employees, officers and directors) exceeding $60,000, including any
contract, agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise requiring
payments to or from any officer, director or such employee or, to the knowledge of the
Company and Subsidiary, any entity in which any officer, director, or any such employee
has a substantial interest or is an officer, director, trustee or partner. 

3.15     Insurance. The Company
and the Subsidiary are insured by insurers of recognized financial responsibility against
such losses and risks and in such amounts as are prudent and customary for the business in
which the Company and the Subsidiary are engaged. The Company has no reason to believe
that it will not be able to renew existing insurance coverage for itself and the
Subsidiary as and when such coverage expires or to obtain similar coverage from similar
insurers as may be necessary or appropriate to continue business. 

3.16     Internal Accounting
Controls. Except as disclosed in the Company Documents, the Company maintains a system
of internal accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management’s general or specific
authorizations, (ii) transactions are recorded as necessary to permit preparation of
financial statements in conformity with United States generally accepted accounting
principles and to maintain asset accountability, (iii) access to assets is permitted only
in accordance with management’s general or specific authorizations, (iv) the recorded
accountability for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences, and (v) the Company is
otherwise in compliance with the Securities Act of 1933 (the “Securities Act”),
the Exchange Act and all other rules and regulations promulgated by the SEC and applicable
to the Company, including such rules and regulations to implement the Sarbanes-Oxley Act
of 2002, as amended. 

3.17     Solvency. (i) The fair
saleable value of the Company’s assets exceeds the amount that will be required to be
paid on or in respect of the Company’s existing debts and other liabilities
(including known and contingent liabilities) as they mature; (ii) the Company’s
assets do not constitute unreasonably small capital to carry on its business for the
current fiscal year as now conducted and as proposed to be conducted, including its
capital needs taking into account the particular capital requirements of the business
conducted by the Company, projected capital requirements and capital availability thereof;
and (iii) the current cash flow of the Company, together with the proceeds the Company
would receive were it to liquidate all of its assets, after taking into account all
anticipated uses of the cash, would be sufficient to pay all amounts on or in respect of
its debts when such amounts are required to be paid. The Company has no present intention
to incur debts beyond its ability to pay such debts as they mature (taking into account
the timing and amounts of cash to be payable on or in respect of its debt). 

7

     

     4.     
          Cancellation of Note. 

Upon payment in full of all
outstanding obligations under this Note, whether by receipt by the Holder of the
appropriate Securities upon conversion of the Note into Securities pursuant to
Section 2 or cash payment in full, the Company’s obligations in respect of
payment of this Note shall terminate and the Holder shall surrender this Note to the
Company. 

 

          	5. 	  	 Events
               of Default. In the event that (an “Event of Default”): 

               

          	 	(a) 	  	
               the Company defaults for more than ten (10) Business Days in making the
               payment of principal or interest required to be made on this Note; or 

               

          	 	(b) 	  	
               the Company or the Subsidiary: 

               

          	 	(i) 	  	
               commences any case, proceeding or other action (x) under any existing or
               future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
               insolvency, reorganization or relief of debtors, seeking to have an order for
               relief entered with respect to it, or seeking to adjudicate it a bankrupt or
               insolvent, or seeking reorganization, arrangement, composition or other relief
               with respect to it or its debts or (y) seeking appointment of a receiver,
               trustee, custodian or other similar official for it or for all or any
               substantial part of its assets, or shall make a general assignment for the
               benefit of its creditor; or 

               

          	 	(ii) 	  	
               is the debtor named in any other case, proceeding or other action of a nature
               referred to in clause (i) above which (A) results in the entry of an order
               for relief or any such adjudication or appointment or (B) remains
               undismissed, undischarged or unbonded for a period of sixty (60) days; or
               (C) takes any action in furtherance of, or indicating its consent to,
               approval of, or acquiescence in, any of the facts set forth in clause (i) or
               (ii) above; or (D) shall generally not, or shall be unable to, or shall
               admit in writing its inability to, pay its debts as they become due; or 

               

          	 	(c) 	  	
               the Company or the Subsidiary defaults in the payment of principal or defaults
               in the payment of interest on any debt instruments and such default continues
               unremedied for a period of more than ten (10) Business Days. 

               

In
the case of any Event of Default hereunder, then the entire unpaid balance of this Note
(together with all accrued and unpaid interest and late charges) shall ipso facto become
immediately due and payable without notice or demand. The Holder may waive any Event of
Default on such conditions as it shall determine to impose and rescind any acceleration
and its consequences if the rescission would not conflict with any judgment or decree and
if all existing Events of Default have been cured or waived except nonpayment of principal
or interest that has become due solely because of the acceleration: 

8

6.    
          Payment. 

The Company hereby waives presentment
for payment, notice of nonpayment, protest, notice of protest and all other notices,
filing of suit and diligence in collecting the amounts due under this Note and agrees that
the Holder shall not be required first to initiate any suit or exhaust its remedies
against any other person or parties in order to enforce payment of this Note. 

Any payments made by the Company
under this Note shall be made free and clear of, and without deduction or withholding for
or on account of, any present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or hereafter imposed, levied,
collected, withheld or assessed by any governmental authority. The provisions of this
paragraph shall survive the termination of this Note and the payment of all other amounts
payable hereunder 

     7.            
          Covenants. 

7.1         Use of Proceeds. The
proceeds from the sale of this Note will be utilized for the execution of certain land
purchase contracts, earnest money deposits, option fees and future land purchases.
Proceeds from the sale of this Note may also be used to fund day to day operations,
interim construction loans for third party builders and to pay expenses relating to the
issuance of this Note and the sale of the Securities. Proceeds from the sale of this Note,
however, may not be used to pay down the principal amount of, or make any prepayment on,
any indebtedness of the Company or its subsidiaries. 

7.2        
Placement Agent Fees and
Arrangements. The Company shall not amend or change its fee and expense reimbursement
arrangements with Tejas Securities Group, Inc. or its affiliates from those described in
the Offering Memorandum without the consent of the Holder. 

     8.            
          Investment Representations. 

8.1    
Purchase for Investment. Each Holder of this Note hereby acknowledges that this
Note has not been and will not be registered and any Securities to be issued upon
conversion of this Note have not been registered (i) under the Securities Act, on the
ground that the issuance of this Note is exempt from registration under Section 4(2) of
the Securities Act as not involving any public offering or (ii) under any applicable state
securities law on the ground that the issuance of this Note does not involve any public
offering; and that the Company’s reliance on the Section 4(2) exemption of the
Securities Act and on applicable state securities laws is predicated in part on the
representations hereby made to the Company by the Holder that it is acquiring the Note for
investment for its own account, with no intention of distributing the same, subject,
nevertheless, to any requirements of law that the disposition of its property shall at all
times be within its control. 

8.2    
Accredited Investor. Each Holder of this Note represents that it is an
“accredited investor” within the meaning of Rule 501 of the Act, with such
knowledge and experience in financial and business matters as to be capable of evaluating
the merits and risks of a prospective investment in the Note and that it is capable of
bearing the economic risks of such investment. 

9

     

     9.    
          Miscellaneous. 

9.1     Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of
this Note and of a letter of indemnity reasonably satisfactory to the Company, and upon
reimbursement to the Company of all reasonable expenses incident thereto, and upon
surrender or cancellation of the Note, if mutilated, the Company will make and deliver a
new Note of like tenor in lieu of such lost, stolen, destroyed or mutilated Note. 

9.2     In the event that one of the
Events of Default specified in Section 5 hereof has occurred and is continuing, the
Holder of this Note shall be reimbursed by the Company for the payment of its reasonable
attorneys’ fees actually paid relating to the enforcement of any of the provisions of
this Note. 

9.3     This Note and the rights and
obligations of the Company and any Holder hereunder shall be construed in accordance with
and be governed by the laws of the State of New York other than such laws as would result
in the application of the laws of a jurisdiction other than the State of New York. 

9.4     This Note and the rights and
obligations hereunder are not transferable by the Company or the Holder without the prior
written consent of the other party hereto, provided, however, that transfers by the Holder
to its affiliates, or funds such Holder manages or controls, shall not require consent of
the Company; provided further that any such transferee shall be deemed to have made the
representations set forth in Section 8 hereof. 

9.5     Time is of the essence of this
Note. If any provisions of this Note or the application thereof to any person or
circumstance shall be invalid or unenforceable to any extent, the remainder of this Note
and the application of such provisions to other persons or circumstances shall not be
affected thereby and shall be enforced to the greatest extent permitted by law. 

10

        IN
WITNESS WHEREOF, the Company and the Holder have executed this Note as of the day and year
first above written. 

	

 

 

 

 
	

WILSON HOLDINGS, INC.

 

 

By:         /s/ Clark Wilson                      

              Clark Wilson

              President and Chief Executive Officer

 

 

 

	
HOLDER: 

	 	 
	 
	 	 
	By: 	
_________________________
	Name:	
_________________________
	Title	
_________________________

 

 

 

 

 

 

[Signature Page to Note]

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