NOTE PURCHASE AGREEMENT

 Exhibit 10.02

Note Purchase Agreement

This Note Purchase Agreement (the "Agreement") is made as of this 13 ^th  day of December, 2005 among JRPM Investments, Ltd., a Texas limited partnership ("JRPM"), Bluebonnet Investments, Ltd., a Texas limited partnership ("BIL" and, collectively with JRPM, the "Purchasers" and each a "Purchaser"), and First Financial Corporation, a Texas corporation ("Issuer").

Introduction

Whereas , Issuer desires to obtain funding so that it may increase the working capital of itself and its subsidiary, First Preference Mortgage Corp. ("FPMC") and Purchasers desire to make that funding available to Issuer and FPMC upon the terms and conditions set forth herein.

Now, Therefore , in consideration of the foregoing, the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Purchasers and Issuer hereby agree as follows:

Article I
Definitions

1.01          Definitions .  In addition to the terms defined elsewhere herein, when used herein, the following capitalized terms have the meanings indicated:

"Act of Bankruptcy" means the occurrence of any of the following with respect to Issuer: (a) an assignment for the benefit of its creditors; (b) an admission in writing of its inability to pay its debts as they become due; (c) filing of a voluntary petition in bankruptcy; (d) an adjudication of bankruptcy or insolvency; (e) filing any petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future applicable law pertinent to such circumstances; (f) filing any answer admitting or not contesting the material allegations of a bankruptcy, insolvency or similar petition filed against Issuer; (g) seeking or consenting to, or acquiescing in, the appointment of any trustee, receiver or liquidator of Issuer; (h) sixty (60) calendar days elapse after the commencement of an action against Issuer seeking reorganization, arrangement, composition, readjustment, liquidation, dissolution or similar relief under any present or future applicable law without such action being dismissed or without all orders or proceedings thereunder affecting the operations or the business of Issuer being stayed, or if a stay of any such order or proceedings is thereafter set aside and the action setting it aside is not timely appealed; or (i) sixty (60) calendar days elapse after the appointment, without the consent or acquiescence of Issuer, of any trustee, receiver or liquidator of Issuer or of all or any substantial part of the assets and properties of Issuer without such appointment being vacated.

"Act of Dissolution" means the occurrence of any action initiating, or any event that results in, the dissolution, liquidation, winding-up or termination of Issuer.

"Book Value" or "Book Value per Share" means the consolidated total stockholder's equity of the Issuer divided by the number of Shares of the Issuer outstanding, as shown in the Issuer's most recent balance sheet included in the Issuer's most recent annual report on Form 10-KSB or quarterly report on Form 10-QSB, on file with the SEC or, if the Issuer is no longer required to file such reports, the most recent annual or quarterly balance sheet of the Issuer, which balance sheet shall be prepared by the Issuer in accordance with generally accepted accounting principles, consistently applied.

"Business Day" means any day other than a Saturday, Sunday or a day on which banks in Waco, Texas are authorized or required by law to close.

"Common Stock" means the Issuer's common capital stock, no par value per share.

"Exchange Act" means the United States Securities Exchange Act of 1934, as amended.

"Holder" means JRPM or BIL and any person to whom a Note is transferred in accordance with the terms of such Note and this Agreement.

"Intercreditor Agreement" means the Intercreditor Agreement dated the date hereof among the Issuer and each Holder from time to time party thereto.

"Issuer Constituent Documents" means Issuer's articles or certificate of incorporation, by-laws and all amendments and supplements thereto, together with good standing certificates from each jurisdiction in which Issuer is required to maintain good standing issued by the Secretary of State of such jurisdiction no earlier than thirty (30) calendar days prior to the date hereof.

"Note" means any of Note 1, Note 2 or Note 3, and any other promissory note issued in replacement of a Note.

"Note 1" means that certain promissory note, dated the date of this Agreement, in the initial principal amount of $350,000, made by the Issuer in favor of BIL.

"Note 2" means that certain convertible promissory note, dated the date of this Agreement, in the initial principal amount of $350,000, made by the Issuer in favor of JRPM and any note issued on (i) partial conversion of such Note in accordance with Section 3.02(c) or (ii) assignment thereof in accordance with Section 2.04.

"Note 3" means that certain convertible promissory note, dated the date of this Agreement, in the initial principal amount of $500,000, made by the Issuer in favor of JRPM and any note issued on (i) partial conversion of such Note in accordance with Section 3.02(c) or (ii) assignment thereof in accordance with Section 2.04.

"Note Register" means the record maintained by the Issuer detailing the current Holder of each Note.

"Notes" means Note 1, Note 2 and Note 3, collectively.

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"Obligations" means, collectively, all of Issuer's indebtedness, liabilities and obligations arising under this Agreement and the Notes and any renewals, modifications and extensions thereof, including, but not limited to, the principal, interest, late charges and other sums due and owing under the Notes.

"Person" means any individual, corporation, partnership, limited liability company, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity.

"Pledge Agreement" means, collectively, the Pledge Agreements dated the date hereof in favor of JRPM by Issuer and by FPMC, respectively.

"Purchase Price" has the meaning provided for in Section 4.01.

"Record Date" has the meaning provided for in Section 3.04(d).

"Related Documents" means the Notes, the Pledge Agreement, the Intercreditor Agreement, the deeds of trust dated the date of this Agreement pursuant to which the Notes are secured, and all other documents delivered pursuant to this Agreement by Issuer or by FPMC.

"SEC" means the United States Securities and Exchange Commission.

"Securities Act" means the United States Securities Act of 1933, as amended.

"Shares" means shares of the Issuer's common capital stock.

Article II
Purchase of Notes

2.01          Purchase of Note 1 .  BIL hereby purchases Note 1 from Issuer, and Issuer acknowledges such purchase and receipt from BIL of cash in the principal amount of $350,000.

2.02          Purchase of Note 2 .  JRPM hereby purchases Note 2 from Issuer, and Issuer acknowledges such purchase and receipt from JRPM of cash in the principal amount of $350,000.

2.03          Purchase of Note 3 .  JRPM hereby purchases Note 3 from Issuer, and Issuer acknowledges such purchase and receipt from JRPM of cash in the principal amount of $500,000.

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2.04          Assignment .  The Notes shall not be assignable, except that JRPM may assign Note 2 and Note 3, or any portion thereof, provided such assignment complies with the requirements set forth in Sections 7.04 and 7.05 hereof.  Such assignment shall be effective upon the completion of (a) the delivery of the original Note to be assigned in whole or in part to the Issuer, (b) the payment by assignee to assignor of the face amount of the new Note to be issued to assignee, (c) the execution and delivery of new Notes to each assignee and the assignor, as the case may be, with face amounts corresponding to the principle, interest and other amounts owed to each such Holder after giving effect to such assignments and (d) the execution and delivery of an amendment to the Intercreditor Agreement to make such assignee a party thereto.  Upon any such permitted assignment, the Issuer shall record the name of the new Holder in the Note Register.

2.05          Prepayment Only Upon Notice .  Each Note may be prepaid, but only as provided for therein; provided, however, that neither Note 2 nor Note 3 may be prepaid unless notice of such prepayment has been given by the Issuer to the Holder of the Note proposed to be prepaid at least 15 Business Days before the proposed prepayment.  Any prepayment of Note 2 or Note 3 will be subject to the Holder's prior exercise of the Holder's conversion right in accordance with Article III hereof on any day prior to such prepayment.

2.06          Surrender of Notes .  The Issuer may, after payment of all principal, interest and other amounts owed under any Note, require the surrender of such Note to the Issuer in a reasonable period after payment in full. 

Article III
Conversion of Notes

3.01          Conversion Right and Conversion Price .

(a)                Subject to and upon compliance with the provisions of this Article, at the option of the Holder thereof, Note 2 and Note 3 or any portion of the unpaid principal amount thereof which is $1,000 or an integral multiple of $1,000 may be converted at the principal amount thereof, or of such portion thereof, into duly authorized, fully paid and non-assessable shares of Common Stock, at the Conversion Price in effect at the time of conversion, determined as hereinafter provided.  With respect to either such Note, such conversion right shall expire upon the first to occur of (i) the repayment thereof in full or (ii) 5:00 pm, Waco, Texas time, on the maturity date of such Note; provided however, that if the Issuer does not have sufficient shares of Common Stock to accommodate the conversion of the Notes and if JRPM has given to the Issuer a Request to Call Meeting, as provided in Section 5.01(b), such date shall be extended until the tenth Business Day after the date that the Issuer has sufficient shares of Common Stock to accommodate the conversion of the Notes.

(b)               The price at which each Share of Common Stock shall be delivered upon each conversion (the " Conversion Price ") shall initially be (i) equal to the greater of $2.50 per Share and the Book Value per Share in the case of any conversion of Note 2, with Book Value being determined as of the date of such conversion and (ii) the number of dollars that is equal to the quotient obtained by dividing 500,000 by 326,472 per Share in the case of any conversion of Note 3. The Conversion Price shall be adjusted in certain instances as provided in paragraphs (a), (b) and (c) of Section 3.04 hereof.

3.02          Exercise of Conversion Right .

(a)                To exercise the conversion right, the Holder of any Note to be converted shall, on a Business Day, surrender such Note duly endorsed or assigned to the Issuer or in blank, at the Issuer's principal office in Waco, Texas, accompanied by a duly signed conversion notice substantially in the form attached as Exhibit B hereto stating that the Holder elects to convert such Note or, if less than the entire principal amount thereof is to be converted, the portion thereof to be converted.

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(b)               Notes shall be deemed to have been converted immediately prior to the close of business on the day of surrender of such Notes for conversion in accordance with the foregoing provisions, and at such time the rights of the Holders of such Notes as Holders, to the extent of the converted principal thereof, shall cease and the Person or Persons entitled to receive the Common Stock issuable upon conversion shall be treated for all purposes as the record holder or holders of such Common Stock at such time. As promptly as practicable on or after the conversion date of any Note, the Issuer shall cause to be issued and delivered to the Holder a certificate or certificates for the number of full shares of Common Stock issuable upon conversion, together with payment in lieu of any fraction of a share as provided in Section 3.03 hereof and payment of any interest and other amounts owed on the converted portion of the Note that was accrued and unpaid on the date of conversion.

(c)                In the case of any Note which is converted in part only, upon such conversion the Issuer and the Holders shall execute, at the expense of the Issuer, a new Note or Notes of authorized denominations in aggregate principal amount equal to the unconverted portion of the principal owed under such Notes.

3.03          No Fractional Shares .   No fractional shares of Common Stock shall be issued upon conversion of any Note or Notes. If more than one Note shall be surrendered for conversion at one time by the same Holder, the number of full shares which shall be issued upon conversion thereof shall be computed on the basis of the aggregate principal amount of the Notes (or specified portions thereof) so surrendered. Instead of any fractional share of Common Stock which would otherwise be issued upon conversion of any Note or Notes (or specified portions thereof), the Issuer shall pay a cash adjustment in respect of such fraction (calculated to the nearest one-100th of a share) in an amount equal to the Conversion Price applicable to the conversion.

3.04          Adjustment of Conversion Price .  The Conversion Price shall be subject to adjustments, calculated by the Issuer, from time to time as set forth below; provided, that no such adjustment shall be made as a result of any event provided for below if the Conversion Price shall have been appropriately adjusted by virtue of a change in Book Value resulting from such event.

(a)                In case Issuer shall hereafter pay a dividend or make a distribution to all holders of the outstanding Common Stock in shares of Common Stock, the Conversion Price in effect at the opening of business on the date following the date fixed for the determination of stockholders entitled to receive such dividend or other distribution shall be reduced by multiplying such Conversion Price by a fraction:

(i)                  the numerator of which shall be the number of shares of Common Stock outstanding at the close of business on the Record Date fixed for such determination, and

(ii)                the denominator of which shall be the sum of such number of shares and the total number of shares constituting such dividend or other distribution.

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Such reduction shall become effective immediately after the opening of business on the day following the Record Date.  If any dividend or distribution of the type described in this Section 3.04(a) is declared but not so paid or made, the Conversion Price shall again be adjusted to the Conversion Price which would then be in effect if such dividend or distribution had not been declared.

(b)               In case the outstanding shares of Common Stock shall be subdivided into a greater number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such subdivision becomes effective shall be proportionately reduced, and conversely, in case outstanding shares of Common Stock shall be combined into a smaller number of shares of Common Stock, the Conversion Price in effect at the opening of business on the day following the day upon which such combination becomes effective shall be proportionately increased, such reduction or increase, as the case may be, to become effective immediately after the opening of business on the day following the day upon which such subdivision or combination becomes effective.

(c)                If the Issuer shall issue shares of Common Stock or rights to acquire or instruments convertible into shares of Common Stock, in any case at a price below the Conversion Price at the close of business at the last Business Day immediately preceding such issuance, the Conversion Price shall be adjusted so that it shall equal the Conversion Price in effect at the close of business on such Business Day multiplied by a fraction (i) the numerator which is the number of shares of Common Stock outstanding at the close of business on such Business Day plus the number of shares which the aggregate price of which such shares were sold by the Issuer or the aggregate price of which such rights or interests are exercisable or convertible into shares with Common Stock would purchase at the current Conversion Price and (ii) the nominator of which is the number of shares of Common Stock outstanding of the close of business on such Business Day plus the total number of shares of Common Stock so issued were issuable pursuant to such rights or instruments.

(d)               For purposes of this Section 3.04, "Record Date" shall mean, with respect to any dividend, distribution or other transaction or event in which the holders of Common Stock have the right to receive any cash, securities or other property or in which the Common Stock (or other applicable security) is exchanged for or converted into any combination of cash, securities or other property, the date fixed for determination of stockholders entitled to receive such cash, securities or other property (whether such date is fixed by the board of directors of Issuer or by statute, contract or otherwise).

(e)                All calculations under this Article III shall be made by Issuer and shall be made to the nearest cent or to the nearest one hundredth of a share, as the case may be. No adjustment need be made for a change in the par value of the Common Stock.

(f)                 In any case in which this Section 3.04 provides that an adjustment shall become effective immediately after a Record Date for an event, Issuer may defer until the occurrence of such event (i) issuing to the Holder of any Note converted after such Record Date and before the occurrence of such event the additional shares of Common Stock issuable upon such conversion by reason of the adjustment required by such event over and above the Common Stock issuable upon such conversion before giving effect to such adjustment and (ii) paying to such holder any amount in cash in lieu of any fraction pursuant to Section 3.03 hereof.

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(g)                For purposes of this Section 3.04, the number of shares of Common Stock at any time outstanding shall not include shares held in the treasury of Issuer.  Issuer will not pay any dividend or make any distribution on shares of Common Stock held in the treasury of Issuer. 

3.05          Notice of Adjustments of Conversion Price .  Whenever the Conversion Price is adjusted as herein provided, Issuer shall promptly mail to each Holder at the address of such Holder as it appears in the Note Register, an Officers' Certificate setting forth the adjusted Conversion Price and showing in reasonable detail the facts upon which such adjustment is based within 20 days of the effective date of such adjustment. Failure to deliver such notice shall not affect the legality or validity of any such adjustment.

3.06          Cancellation of Converted Notes .  All Notes delivered for conversion or for assignment shall be canceled by the Issuer.

3.07          Effect of Reclassification, Consolidation, Merger or Sale . 

(a)                If any of following events occur, namely:

(i)           &n