EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is made and entered into
as of this ______ day of May, 2003, by and among Total Compensation Group
Consulting, Inc., a Texas corporation (the "Company"), John Pesce ("Pesce") an
individual residing in the state of Texas, Mike Cochran ("Cochran"), an
individual residing in the state of Texas, Arthur A. Howard ("Howard"), an
individual residing in the state of Texas, Geoffrey Calaway ("Calaway"), an
individual residing in the state of Texas, W.M. Hartman ("W. Hartman"), an
individual residing in the state of Texas, Edward F. Harman, III ("E. Hartman"),
an individual residing in the state of Texas, M.B. Donaldson ("Donaldson"), an
individual residing in the state of Texas, Teri Hoyt ("Hoyt"), an individual
residing in the state of Texas, Alycia Andrews ("Andrews"), an individual
residing in the state of Texas, Charles Francis ("Francis"), an individual
residing in the state of Texas, Tom Cook ("Cook"), an individual residing in the
state of Arizona, David Allen ("Allen"), an individual residing in the state of
Texas, and Marcus Smith ("Smith"), an individual residing in the state of Texas
(collectively Pesce, Cochran, Howard, Calaway, W. Hartman, E. Hartman,
Donaldson, Hoyt, Andrews, Francis, Cook, Allen and Smith shall be referred to
herein as the "Sellers"), Financial Industries Corporation, a Texas corporation
("FIC") and FIC Financial Services, Inc., a Nevada corporation ("Purchaser" or
"FICFS").
WHEREAS, the Sellers are the owners of all of the issued and outstanding
shares of the Company's capital stock, which consists of 28,313 shares of common
stock par value $0.10 per share ("Company Stock");
WHEREAS, the Sellers desire to sell the Company Stock to the Purchaser, on
the terms and subject to the conditions set forth herein; and
WHEREAS, the Purchaser desires to purchase all of the Seller's right, title
and interest to the Company Stock, on the terms and subject to the conditions
set forth herein.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
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Section 1. Purchase and Sale of the Company Stock.
1.1 Purchase and Sale; Closing. At the Closing (as defined below) the
Purchaser shall purchase, and the Sellers shall to sell to the Purchaser (the
"Purchase"), the Company Stock. The purchase price for the Company Stock (the
"Purchase Price") shall consist of an aggregate sale price equal to the sum of
(i) $1,984,824.00 in cash, by payment of cashier's check or wire transfer of
immediately available funds to the account of each Seller set forth on their
respective signature page, as included on and made a part of Schedule 1.1
attached hereto; and (ii) a total of 90,945 [$1,327,797 divided by $14.60]
shares of FIC's common stock, par value $0.20 per share (the "FIC Stock"), as
allocated to each Seller set forth on their respective signature page. The
portion of the Purchase Price which involves the exchange of FIC Stock for the
Company Stock is subject to the terms and conditions of sections 1.2 and 4.4
herein. At the Closing, the Sellers shall deliver to the Purchaser certificates
representing all of the outstanding Company Stock, against payment by the
Purchaser of the Purchase Price. The Company Stock acquired in the Purchase
shall be delivered to Purchaser at the Closing, free and clear of any and all
liens, claims or encumbrances (other than any such liens, claims or encumbrances
created by Purchaser). Subject to satisfaction of all conditions to close, the
Closing shall occur at such place and time as the parties may mutually agree.
The date on which the Closing actually occurs is referred to herein as the
Closing Date.
1.2 Stock Restrictions. The FIC Stock issued to Sellers pursuant to Section
1.1 shall be held in escrow by Purchaser as follows:
(a) Each Seller, other than Pesce and Cochran, agree that the
transferability of the FIC Stock issued to them as part of the Purchase
Price shall be restricted and otherwise locked up for a minimum period of
twelve (12) months following the Closing Date (the "Lockup Restrictions").
During the period of the Lockup Restrictions, Purchaser shall hold the FIC
Stock in escrow (the "Escrow Fund"). Any sales of the FIC Stock upon the
expiration of the Escrow Fund will remain subject to compliance with
applicable federal and state securities laws. Upon expiration of the
intended term for the Lockup Restrictions or upon a Change of Control of
FIC (but only if the employment agreements between (i) FICFS and Pesce and
(ii) FICFS and Cochran, both dated even date herewith (the "Employment
Agreements") have not been ratified by the buyer as described in Section
1.21(d) of the Employment Agreements) Purchaser shall, within three (3)
days, deliver to each Seller his or her respective shares of FIC Stock
previously held in the Escrow Fund. During the period covered by the Lockup
Restrictions, and at all times thereafter, the FIC Stock issued as a part
of the Purchase Price shall carry with it all the relative rights and
preferences of all of the shares of common stock of FIC, and each holder of
such FIC Stock shall enjoy and be entitled to the relative rights and
preferences as all of the holders of common stock of FIC, including,
without limitation, the right to vote such shares and to receive dividends
related thereto.
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(b) Pesce and Cochran agree that the FIC Stock issued to them as a
portion of the Purchase Price shall be held in escrow by Purchaser as
follows:
(i) Establishment of the Pesce-Cochran Escrow Fund. At the
Closing, all of the FIC Stock issued to Pesce and Cochran will be
deposited with Purchaser to be held in escrow (the "Pesce-Cochran
Escrow Fund"). The Pesce-Cochran Escrow Fund will be governed by the
terms set forth in this Section 1.2(b).
(ii) Escrow Period; Distribution of Pesce-Cochran Escrow Fund
upon Termination of Escrow Period. Subject to the following
requirements, the Pesce-Cochran Escrow Fund shall be in existence
beginning on the Closing Date and shall terminate on the date which is
three (3) years from the Closing Date. The FIC Stock in the
Pesce-Cochran Escrow Fund shall be distributed as follows: (i) on the
date which is one year from the Closing Date, as long as the
Employment Agreements have not been terminated by their respective
terms (unless such termination specifically vests Pesce and Cochran in
the FIC Stock pursuant to the Employment Agreements), Purchaser shall
distribute forty percent (40%) of the FIC Stock held in the
Pesce-Cochran Escrow Fund to Pesce and Cochran, in equal amounts; (ii)
on the date which is two years from the Closing Date, as long as the
Employment Agreements have not been terminated by their respective
terms (unless such termination specifically vests Pesce and Cochran in
the FIC Stock pursuant to the Employment Agreements), Purchaser shall
distribute two-thirds (2/3) of the remaining FIC Stock held in the
Pesce-Cochran Escrow Fund to Pesce and Cochran, in equal amounts; and
(iii) on the date which is three years from the Closing Date, as long
as the Employment Agreements have not been terminated by their
respective terms (unless such termination specifically vests Pesce and
Cochran in the FIC Stock pursuant to the Employment Agreements),
Purchaser shall distribute the remaining FIC Stock held in the
Pesce-Cochran Escrow Fund to Pesce and Cochran, in equal amounts. Any
sales of FIC Stock released from the Pesce-Cochran Escrow Fund will
remain subject to compliance with applicable federal and state
securities laws.
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(iii) Forfeit of Shares in Escrow Fund. If at any time during the
period which is within three (3) years of the Closing Date, Pesce or
Cochran terminate their Employment Agreement for other than Good
Reason (as defined in their respective Employment Agreements), or are
terminated with Cause (as defined in their respective Employment
Agreements), as such terms are defined therein, Pesce and Cochran
shall forfeit any amount of FIC Stock remaining in the Pesce-Cochran
Escrow Fund and such shares shall revert to Purchaser.
(iv) Early Termination of the Pesce-Cochran Escrow Fund. In the
event of a Change of Control of FIC (unless the Employment Agreements
have been ratified by the buyer as described in Section 1.21(d) of the
Employment Agreements), or in the event that the employment of Pesce
or Cochran is terminated Without Cause (as defined in their respective
Employment Agreements) or in the event Pesce or Cochran terminate
their employment agreement for Good Reason (as defined in their
respective Employment Agreements), then the restrictions applicable to
the Pesce-Cochran Escrow Fund shall immediately be terminated, and all
FIC Stock held in the Pesce-Cochran Escrow Fund shall, within three
(3) days, be distributed to Pesce and Cochran, in equal amounts.
Section 2. Representations and Warranties of the Sellers. The Sellers
hereby represent and warrant, jointly and severally, to Purchaser that, as of
the date of this Agreement:
2.1 Organization and Standing. The Company is a corporation duly formed,
validly existing and in good standing under the laws of the State of Texas. The
Company has all requisite corporate power and authority to own, lease and
operate its properties and to carry on its business as now being conducted. The
Company is duly qualified or registered as a foreign corporation to transact
business under the laws of, and in each jurisdiction where, the character of its
activities or the location of the properties owned or leased by it requires such
qualification or registration, except where the failure to be so duly qualified
or licensed and in good standing could not reasonably be expected to have a
material adverse effect on the business, properties, results of operations or
condition of the Company and its subsidiaries taken as a whole (a "Material
Adverse Effect"). The Purchaser has been furnished a complete and correct copy
of the Company's Articles of Incorporation and Bylaws, as currently in effect.
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2.2 Authority.
(a) All corporate action on the part of Sellers necessary for the
authorization, execution, delivery and performance of this Agreement and
any other documents, instruments and transactions contemplated by this
Agreement (collectively, the "Documents"), and the performance of all the
obligations of Sellers hereunder have been taken or will be taken at or
prior to the Closing. The execution, delivery and performance of this
Agreement and the Documents and the consummation of the transactions
contemplated hereby and thereby have been duly and validly authorized by
the Board of Directors of the Company (the "Board"), do not require any
further corporate proceedings on the part of the Company, and do not and
will not violate or conflict with the Company's Articles of Incorporation
or Bylaws. This Agreement and the Documents have been and will be duly and
validly executed and delivered by the Company and the Sellers, and
constitute valid and legally binding obligations of the Company and the
Sellers, enforceable against the Company and the Sellers in accordance with
their respective terms, except that enforcement thereof may be limited by
(i) bankruptcy, insolvency, reorganization, moratorium or similar laws now
or hereafter in effect relating to creditors' rights and remedies generally
and (ii) general principles of equity (regardless of whether enforceability
is considered in a proceeding at law or in equity).
(b) Each individual Seller has the capacity to execute and deliver
this Agreement, to carry out his or her obligations hereunder and to
consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered on behalf of each Seller and, assuming the due
authorization, execution and delivery by the Purchaser, constitutes a
legal, valid and binding obligation of each Seller enforceable in
accordance with its terms, except as may be limited by bankruptcy,
insolvency, moratorium or other laws affecting creditors' rights generally
and general principles of equity.
2.3 Absence of Conflicting Agreements or Required Consents. The execution,
delivery and performance by the Sellers and the Company of this Agreement does
not and will not violate, conflict with or result in the breach or default of
any provision of the Company's Articles of Incorporation or Bylaws. Other than
as set forth in Schedule 2.3 attached hereto, except for such violations,
conflicts, breaches, defaults, consents, approvals, authorizations, orders,
Actions, registrations, filings, declarations, notifications and Encumbrances
that would not, individually or in the aggregate, reasonably be expected to have
a Material Adverse Effect or materially impair or delay the consummation of the
transactions contemplated hereby, the execution, delivery and performance by the
Sellers and the Company of this Agreement do not and will not (a) conflict with
or violate any law or Governmental Order applicable to the Sellers or the
Company or any of their respective properties or assets, (b) require any
consent, approval, authorization or other order of, action by, registration or
filing with or declaration or notification to any Governmental Authority or any
other party, or (c) conflict with, result in any violation or breach of,
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constitute a default (or event which with the giving of notice, or lapse of time
or both, would become a default) under, require any consent under, or give to
others any rights of termination, amendment, acceleration, suspension,
revocation or cancellation of, or result in the creation of any Encumbrance on
any of the Sellers' or the Company's respective assets, or result in the
imposition or acceleration of any payment, time of payment, vesting or increase
in the amount of compensation or benefit payable, pursuant to, any note, bond,
mortgage or indenture, contract, agreement, lease, sublease, license or permit,
or franchise to which a Seller or the Company is a party or by which their
respective assets are bound.
2.4 Ownership of the Company Stock.
(a) The Sellers constitute all shareholders of the Company. The
authorized capital of the Company immediately prior to the Closing consists
of 500,000 shares of common stock, par value $0.10, of which 28,313 shares
are issued and outstanding and 500,000 shares of preferred stock, par value
$0.10 of which 0 shares are issued and outstanding. Of the shares
outstanding, 16,110 are Class A common stock, 3,890 are Class B common
stock, 2,222 are Class C common stock, 2,778 are Class D common stock,
2,778 are Class E common stock, and 535 are Class F common stock. There are
no other authorized or outstanding classes or series of capital stock of
the Company. Upon the consummation of the transactions contemplated hereby,
Purchaser will own, directly or indirectly, 100% of the issued and
outstanding shares in the Company. No person or entity has any preemptive
right to purchase any shares or any other securities of the Company. There
are no outstanding securities or other instruments of the Company which are
convertible into or exchangeable for any shares of the Company and there
are no commitments to issue such securities or instruments or otherwise
make a person or entity a shareholder of the Company (except the Purchaser
pursuant to this Agreement). Except as set forth in Schedule 2.4, attached
hereto, there is no existing option, warrant, right, call, or commitment of
any character granted or issued by the Company governing the issuance of
any shares of the Company or any "phantom" securities giving the holder
thereof any economic attributes of ownership. All shares of the Company
have been offered, issued and sold in compliance with applicable law. The
Company Stock constitutes all of the outstanding shares of the Company.
(b) The Sellers have good and marketable title to, and own, the Common
Stock, beneficially and of record. The Common Stock is fully paid and
non-assessable and, except for any right of the Purchaser under this
Agreement, is free and clear of all Encumbrances, demands, preemptive
rights and adverse claims of any nature. The Sellers have full voting power
over all Common Stock, subject to no proxy, shareholders' agreement, voting
trust or other agreement relating to the voting of any of the shares of the
Company. There is no agreement between the Sellers and any other person or
entity with respect to the disposition of the Common Stock. Upon the
consummation of the Closing the Sellers will have transferred to the
Purchaser good title to all Common Stock.
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2.5 Litigation. Except as disclosed in Schedule 2.5, (i) there is no Action
against the Sellers (with respect to the Company) or the Company pending, or, to
the knowledge of the Seller or the Company, threatened to be brought by or
before any person, entity or Governmental Authority, in each case with respect
to the Company, which would, if adversely determined as to such Seller or the
Company, result in a liability to the Company, (ii) neither the Sellers nor the
Company are subject to any Governmental Order (nor, to the knowledge of the
Company and the Sellers, are there any such Governmental Orders threatened to be
imposed by any Governmental Authority), in each case with respect to the Company
and (iii) there is no Action pending, or, to the knowledge of the Sellers or the
Company, threatened to be brought before any Governmental Authority, that seeks
to question, delay or prevent the consummation of the transactions contemplated
hereby.
2.6 Financial Statements. Except as noted thereon, the unaudited financial
statements of the Company provided to Purchaser by the Company for the monthly
periods from January 1, 2003 through February 28, 2003, and for the one month
and twelve months ended December 31, 2002 (the "Company Financial Statements")
were prepared on a modified cash basis of accounting to reflect the accrual of
certain expenses and the recording of certain accounts receivable and certain
accounts payable, but otherwise in accordance with Statements of Standards for
Accounting and Review Services issued by the American Institute of Certified
Public Accountants (the "Standards"), applicable to the business of the Company
during the periods involved, consistently applied in accordance with past
accounting practices, and fairly present the financial condition and the results
of operations of the Company as of the dates and for the periods indicated.
Necessary adjustments have been made in order for the Company's tax returns to
be prepared and filed on a cash basis of accounting. Except as set forth on
Schedule 2.6 attached hereto, for liabilities contemplated by this Agreement or
as reflected in the Company Financial Statements, as of their respective dates,
the Company did not have any debts, obligations, guaranties of obligations of
another or liabilities (contingent or otherwise) outside the ordinary course of
business that would be required in accordance with the Standards to be disclosed
in the Company Financial Statements, or otherwise discloed in a manner
consistent with past accounting practices, and except for such debts,
obligations, guaranties or liabilities incurred in the ordinary course of
business which, individually or in the aggregate, could not reasonably be
expected to have a Material Adverse Effect.
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2.7 Absence of Certain Changes or Events. Except as set forth on Schedule
2.7 attached hereto, since December 31, 2002 through the date of this Agreement
and the Closing, (a) other than in the ordinary course of business consistent
with past practice, the Company has not sold, transferred, leased, subleased,
licensed or otherwise disposed of any material assets (for the purposes of this
clause (a), a "material asset" is an individual asset that has a value in excess
of $10,000 or assets that have an aggregate value in excess of $25,000); (b) the
Company has not made any material change in any method of accounting or
accounting practice or policy used by the Company, other than changes required
by law or under GAAP; (c) the Company has not suffered any material casualty
loss or damage, whether or not covered by insurance; (d) there has not been any
direct or indirect redemption or other acquisition by the Company of any Common
Stock, or any declaration, setting aside or payment of any distribution in
respect of the Common Stock; (e) there has not been any Material Adverse Effect;
(f) the Company has been operated only in the ordinary and usual course
consistent with past practice; (g) the Company has not created, incurred,
assumed or guaranteed any liabilities, obligations or Indebtedness for borrowed
money (other than from Purchaser); (h) the Company has not compromised, settled,
granted any waiver or release relating to, or otherwise adjusted any material
Action, Indebtedness or any other claims or rights of the Company; (i) the
Company has not paid or promised a bonus to any employee (unless such bonus is
reflected on or reserved against in the Company Financial Statements), (j) the
Company has not entered into any employment or consulting agreement or
arrangement with any person and no prior employment agreements or consulting
agreements or arrangements have been modified, and (k) the Company has not
entered into any agreement, contract, commitment or arrangement to do any of the
foregoing.
2.8 Material Contracts. Complete and accurate copies of all written
Material Contracts of the Company have been delivered or made available to the
Purchaser except as otherwise noted and set forth in Schedule 2.8. Each Material
Contract is legal, valid and binding on the Company and, to the knowledge of the
Sellers and the Company, the other parties thereto, and enforceable in
accordance with the terms thereof, (b) each Material Contract is in full force
and effect, (c) neither the Company nor the Sellers are in default under any
Material Contract, (d) neither the Sellers nor the Company has waived any of
their respective rights under any Material Contract and (e) to the knowledge of
the Sellers and the Company, no other party to any Material Contract has
breached or is in default thereunder and there does not exist any event or
condition that, with or without the lapse of time or the giving of notice, would
become such a breach or default or would cause the acceleration of any
obligation thereunder. Notwithstanding the foregoing, the Securities Exchange
Commission rules require that the Company obtain the consent of those clients
who have signed an Investment Advisory Agreement ("IAA") with the Company in
connection with any transaction that would result in a material change in the
ownership of the Company. The Company and Sellers represent that they will use
their best efforts to obtain these consents prior to the consummation of the
transaction contemplated by this Agreement with regard to each current signed
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IAA with applicable clients of the Company. In the event any client with an IAA
elects not to consent to such matter, such clients may elect to terminate the
applicable IAA. The Company and Sellers represent and warrant that in the event
of such a termination, the Company and Sellers will use their best efforts to
have a new IAA signed by the applicable terminating client within a reasonable
period of time after the transaction contemplated by this Agreement is
completed, but can make no assurances with regard to whether or when such
terminating clients will sign new IAA with the Company.
2.9 Insurance. Except as set forth in Schedule 2.9, attached hereto, (i)
all insurance policies to which the Company is a party or under which the
Company is covered as an additional named insured or otherwise (or replacement
policies therefore) are in full force and effect, and the Sellers or the Company
has paid all premiums due and are not in default, (ii) no notice of cancellation
or non-renewal with respect to, or disallowance of any claim under, any such
policy has been received by the Sellers or the Company and (iii) neither the
Sellers nor the Company have been refused insurance with respect to the Company,
nor has coverage with respect to the Company been previously canceled or
materially limited, by an insurer to which a Seller or the Company has applied
for such insurance, or with which a Sellers or the Company has held insurance,
within the last three years.
2.10 Permits and Licenses; Compliance with Law.
(a) Except as set forth in Schedule 2.10, attached hereto, (i) the
Company currently holds all the permits, licenses, authorizations,
certificates, exemptions and approvals of Governmental Authorities or other
persons or entities necessary for the current operation and conduct of the
Company in all material respects as it is being conducted by the Company
(collectively, "Permits"), and all Permits are in full force and effect,
(ii) the Company has not received written notice from any Governmental
Authority revoking, canceling, rescinding, materially modifying or refusing
to renew any Permit and (iii) the Company is in compliance in all material
respects with the requirements of all Permits.
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(b) Except as disclosed in Schedule 2.10, attached hereto, (i) the
Company is in compliance in all material respects with all laws and
Governmental Orders applicable to the conduct of the Company as it is being
conducted and (ii) the Company has not been charged by any Governmental
Authority with a violation of any law or any Governmental Order relating to
the conduct of the Company.
2.11 Employee Benefit Matters.
(a) Schedule 2.11, attached hereto, identifies each Employee Benefit
Plan. Purchaser has been furnished copies of the Employee Benefit Plans
(and, if applicable, related trust agreements) and all amendments thereto
and written interpretations thereof together with the three most recent
annual reports (Form 5500 including, if applicable, Schedule B thereto) and
the most recent actuarial valuation report prepared in connection with any
Employee Benefit Plan. Neither the Company nor any of their ERISA
Affiliates have now, or have maintained in the past, any Employee Benefit
Plan which is (i) a multiemployer plan, (ii) a Title IV Plan or (iii)
Employee Benefit Plan maintained in connection with any trust described in
Section 501(c)(9) of the Internal Revenue Code (the "Code").
(b) No transaction prohibited by Section 406 of ERISA or Section 4975
of the Code has occurred with respect to any Employee Benefit Plan or
arrangement which is covered by Title I of ERISA which transaction has or
will cause the Company to incur any material liability under ERISA, the
Code or otherwise, excluding transactions effected pursuant to and in
compliance with a statutory or administrative exemption.
(c) Each Employee Benefit Plan that is intended to be qualified under
Section 401(a) of the Code is so qualified and has been so qualified during
the period since its adoption; each trust created under any such Employee
Benefit Plan is exempt from tax under Section 501(a) of the Code and has
been so exempt since its creation. Purchaser has been provided with the
most recent determination letter of the Internal Revenue Service relating
to each such Employee Benefit Plan. Each Employee Benefit Plan has been
maintained in substantial compliance with its terms and with the
requirements prescribed by any and all applicable statutes, orders, rules
and regulations, including ERISA and the Code.
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(d) The Company does not have any current or projected liability in
respect of post-employment or post-retirement health or medical or life
insurance benefits for retired, former or current employees of the Company.
(e) Except as disclosed in Schedule 2.11, attached hereto, there is no
contract, plan or arrangement (written or otherwise) covering any employee
or former employee of the Company that, individually or collectively, could
give rise to the payment of any amount that would not be deductible
pursuant to the terms of Section 280G of the Code and no employee or former
employee of the Company will become entitled to any bonus, retirement,
severance, job security or similar benefit or enhanced such benefit
(including acceleration of vesting or exercise of an incentive award) as a
result of the transactions contemplated hereby.
(f) There are no pending, or, to the knowledge of any Company, or the
Sellers, threatened or anticipated, claims under or with respect to any
Employee Benefit Plan, by any employee or beneficiary covered under any
such Employee Benefit Plan, or otherwise involving such Employee Benefit
Plan (other than routine claims for benefits).
(g) The Company and Sellers represent and warrant that any Employee
Benefit Plan shall be terminated concurrent with the Closing of this
Agreement.
2.12 Intellectual Property. Except as disclosed in Schedule 2.12, attached
hereto, (a) the rights of the Company in or to its intellectual property do not
conflict with or infringe on the rights of any other person or entity, and the
Company has not received any claim from any person or entity to such effect nor,
to the Company's nor the Sellers' knowledge, has any such claim been threatened,
(b) the Company owns, licenses or otherwise have the right to use, all their
intellectual property and (c) to the knowledge of the Company and Sellers, no
other person or entity is infringing or diluting the rights of the Company with
respect to its intellectual property.
2.13 Taxes. Except as disclosed in Schedule 2.13, attached hereto, (i) all
income and franchise tax returns required to be filed by the Company has been
timely filed, and such income and franchise tax returns are true, complete and
correct in all material respects; (ii) all income and franchise taxes shown on
such tax returns have been timely paid other than such taxes, if any, as are
described in Schedule 2.13 and are being contested in good faith and as to which
adequate reserves (determined in accordance with GAAP) have been provided in the
Company Financial Statements; (iii) no adjustment relating to such tax returns
has been proposed in writing by any tax authority and remains unresolved; (iv)
there are no tax liens on any of the Company's assets (other than liens for
taxes that are not yet due and payable); and (v) all income and franchise taxes
that the Company is required to pay, withhold or collect have been duly paid,
withheld or collected and, to the extent required, have been paid to the proper
tax authority.
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2.14 No Brokers. Except for Arthur A. Howard, the Sellers know of no other
party entitled to any broker, transaction, or finder's fees related to the
transaction contemplated by this Agreement. Each Seller acknowledges and
understands that the Purchaser has agreed to, in addition to the Purchase Price,
pay Arthur A. Howard a transaction closing fee equal to $52,000, simultaneous
with the funding of the Purchase Price. Each of the Sellers further understands
and agrees that such transaction closing fee is payable to Mr. Howard in
addition to other amounts payable to him under this Agreement by the Purchaser.
Each Seller further acknowledges and understands that the Purchaser shall treat
such transaction closing fee as part of the fees, costs and expenses associated
with the acquisition of the Company Stock pursuant to this Agreement.
2.15 Enterprise Interests. Schedule 2.15 contains a complete and correct
listing of each company, entity or enterprise in which the Company has an equity
interest.
2.16 Assets. The Company has good and valid title to all material assets
the Company owns, including those reflected in the Company Financial Statements
or thereafter acquired, except those sold or otherwise disposed of since the
date of the Company Financial Statements not in violation of this Agreement, in
each case free and clear of all Encumbrances.
2.17 Real Property.
(a) Schedule 2.17, attached hereto, sets forth a complete list of all
real property and interests in real property owned in fee by the Company
(the "Owned Properties") and a complete list of all real property and
interests in real property leased by the Company (the "Leased Properties";
an Owned Property or a Leased Property being sometimes referred to herein,
individually, as a "Subject Property" and collectively, as "Subject
Properties"). The Company has good and marketable fee title to all Owned
Property free and clear of all Encumbrances except (i) as set forth on
Schedule 2.17, (ii) easements, covenants, rights-of-way and other similar
restrictions, whether or not of record, (iii) any conditions that may be
shown by a current, accurate survey or physical inspection of any Subject
Property made prior to the Closing and (v) (A) zoning, building and other
similar restrictions, and (B) Encumbrances, easements, covenants,
rights-of-way and other similar restrictions that have been placed by a
developer, landlord or other third party on any Subject Property which is
not owned in fee by the Company and subordination or similar agreements
relating thereto. Except as set forth on Schedule 2.17, all buildings and
structures included within any Owned Property lie wholly within the
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boundaries of the Owned Property and do not encroach upon the property of,
or otherwise conflict with the property rights of, any other party. Except
as set forth in Schedule 2.17, the Company is the lessee of all the Leased
Property and is in possession of the premises purported to be leased
thereunder, and each such lease is a valid obligation of such lessee
without any material default thereunder by such lessee. The consummation of
the transactions contemplated by this Agreement will not result in a breach
of, or a default under, any lease with respect to any Leased Property.
2.18 No Undisclosed Liabilities. Except as set forth on Schedule 2.18, and
except for such debts, obligations, guaranties or liabilities which,
individually or in the aggregate, could not reasonably be expected to have a
Material Adverse Effect, the Company does not have any liabilities or
obligations whatsoever, whether accrued, contingent or otherwise. The Sellers
know of no basis for any claim against the Company or Sellers for any liability
or obligation, except (a) to the extent set forth or reflected in the Company
Financial Statements or disclosed on Schedule 2.6, (b) to the extent expressly
set forth on any Schedule attached hereto or otherwise as described in this
paragraph, (c) liabilities and obligations incurred in the normal and ordinary
course of business, consistent with past practices both as to amount and
frequency, since December 31, 2002, or (d) those which, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
2.19 Acknowledgements of the Sellers. In connection with the issuance of
the FIC Stock as part of the Purchase Price, the Sellers (a) understand that the
FIC Stock has not been registered under the Securities Act or the securities
laws of any state at the time the FIC Stock is delivered to the Sellers; and (b)
acknowledges that each certificate representing the FIC stock will be endorsed
with substantially the following legends: THE SECURITIES EVIDENCED HEREBY HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE ACT), OR
ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE APPLICABLE SECURITIES
UNDER THE ACT AND ANY STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM
REGISTRATION.
2.20 Employment Agreements of Pesce and Cochran. Pesce and Cochran
acknowledge that a material inducement for Purchaser's payment of the Purchase
Price hereunder is Pesce and Cochran entering into employment agreements with
Purchaser, or an affiliate of Purchaser, which contain non-competition and
non-solicitation provisions.
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2.21 Investment Representations. Each Seller who will receive FIC Stock
represents and warrants to FIC and FICFS:
(a) that such Seller and such Seller's advisers (including a Seller
Representative, if any) has been furnished and has carefully read
information pertaining to FIC and its business profile;
(b) that such Seller and such Seller's advisers (including a Seller
Representative, if any) have been furnished all materials relating to FIC
and all matters related to FIC which have been requested, and have been
afforded the opportunity to obtain any additional information necessary to
verify the accuracy of any information set forth in FIC's business profile
and related materials;
(c) that such Seller and such Seller's advisers (including a Seller
Representative, if any) have had an opportunity to ask questions of or
receive answers from FIC or its representatives, and FIC and its
representatives have answered all inquiries which such Seller and his or
her advisers (including a Seller Representative, if any) has put to them
concerning FIC, the FIC Stock or any other matters relating to FIC;
(d) the Seller understands that the FIC Stock has not been registered
under the Securities Act or under the securities laws of any state, that
FIC has no intention to register the FIC Stock, that Seller has no right to
require such registration, and that the FIC Stock cannot be sold unless it
is registered under applicable federal and state securities laws or unless
exemptions from registration are available;
(e) the Seller understands that an investment in FIC involves a high
degree of risk and other considerations relating to a purchase of FIC
Stock, that such Seller is subscribing for the FIC Stock without being
furnished any offering literature or prospectus other than FIC's business
profile, and that this transaction and FIC's business profile most likely
have not been scrutinized by, nor meet the investment guidelines of, the
securities administrator in my state of residence as would be the case with
a full registration because of the FIC Stock made the subject of this
issuance;
(f) that such Seller alone has the requisite knowledge, sophistication
and experience in financial and business matters to enable such Seller to
assess the relative merits and risks of this investment, or together with
such Seller's Representative has the requisite knowledge, sophistication
and experience in financial and business matters to be capable of
evaluating the risks and merits of this investment, and has made such
investigations in connection herewith as have been deemed necessary or
desirable so as not to rely upon FIC or its representatives for legal, tax
or economic information related to this investment;
- 14 -
(g) such Seller is not relying on FIC or its representatives or the
references to any legal opinions, if any, with respect to the legal, tax
and other economic considerations relating to this investment. To the
extent that such Seller has sought advice with regard to such
considerations, such Seller has relied on the advice of, or have consulted
with, his or her personal legal, tax, investment and/or other advisers;
(h) No oral or written representations have been made or oral or
written information furnished to a Seller or a Seller's adviser(s) in
connection with FIC or the FIC Stock which are in any way inconsistent with
the information provided to me related to FIC;
(i) Seller acknowledges and understands that the actual results of
operations of FIC may vary materially from the financial forecast and
financial projections contained in any business profile or plans, and that
neither FIC, nor any of its officers, directors, shareholders, employees,
agents or professionals, including their accountants and attorneys, make
any representation or warranty as to such actual results of operations or
as to any benefits which a Seller may be allocated pursuant to this
investment;
(j) that each Seller has reached the age of majority (if a natural
person) in the jurisdiction of such Seller's residence and is a qualified
accredited investor (whether by hisself or together with a Seller
Representative);
(k) that each Seller has adequate means of providing for current needs
and personal contingencies, has no need for liquidating this investment, is
able to bear the economic risk of an investment in FIC, can sustain the
loss of the entire investment without economic hardship if a total loss
should occur, and such Seller's commitment to similar investments is
reasonable in relation to my net worth;
(l) The FIC Stock being acquired hereunder is being acquired for
Seller's own account, or for one or more fiduciary accounts as to which
Seller has sole investment discretion, for long-term investment and not
with a view to or for resale, fractionalization or division in connection
with any distribution thereof;
(m) Seller is not subscribing for the purchase of FIC Stock as a
result of or subsequent to any advertisement, article, notice or other
communication published in any newspaper, magazine or similar media or
broadcast over television or radio, or any seminar or meeting;
- 15 -
(n) each Seller verifies, under penalty of perjury, that the social
security or taxpayer identification number shown next to such Seller's
signature is true, correct and complete and that Seller is not subject to
backup withholding either (i) because Seller has not been notified that
Seller is subject to backup withholding as a result of a failure to report
all interest or dividends, or (ii) because the Internal Revenue Service has
notified Seller that Seller is no longer subject to backup withholding;
(o) Within five days after receipt of a request from FIC, each Seller
will provide such information and deliver such documents as may reasonably
be necessary to comply with any and all laws and ordinances to which FIC is
subject.
Section 3. Representations of Purchaser and FIC. Purchaser and FIC
represent and warrant to the Company and the Sellers that:
3.1 Authority. FICFS (a) is duly formed, validly existing and in good
standing under the laws of the State of Nevada, (b) has full organizational
power and authority to execute, deliver and perform this Agreement and any other
Documents to which it is a party. This Agreement and the Documents have been and
will be duly and validly executed and delivered by FICFS, and, assuming this
Agreement and the Documents constitute the valid and legally binding obligations
of the Company and the Sellers, this Agreement and the Documents constitute
valid and binding agreements of FICFS, enforceable against FICFS in accordance
with their terms, except that enforcement thereof may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to creditors' rights and remedies generally and (b)
general principles of equity (regardless of whether enforceability is considered
in a proceeding at law or in equity).
3.2 Consents and Approvals. No consent from or filing with any person
(including, without limitation, any governmental authority) on the part of
Purchaser is required in connection with the execution or delivery by Purchaser
of this Agreement or the consummation by Purchaser of the transactions
contemplated hereby.
3.3 Offering. Subject to the truth and accuracy of the Company's and the
Sellers' representations and warranties set forth in Section 2 of this
Agreement, the offer and issuance of the FIC Stock as contemplated by this
Agreement is exempt from the registration requirements of any applicable state
and federal securities laws (other than notice filings required under applicable
law), and neither the Purchaser, FIC, nor any authorized agent acting on their
behalf will take any action that would cause the loss of such exemption.
- 16 -
3.4 Litigation. Except as set forth in Schedule 3.4 attached hereto, there
is no action, suit, proceeding or investigation pending or, to Purchaser's
knowledge, threatened against Purchaser that questions the validity of this
Agreement or the right of Purchaser to enter into this Agreement and to
consummate the transactions contemplated hereby.
3.5 Ownership of Shares. The FIC Stock delivered by Purchaser hereunder as
consideration for a portion of the Purchase Price for the Company Stock, when
delivered in accordance with the terms of this Agreement for the consideration
set forth herein, will be duly and validly issued, fully paid, and
nonassessable, free and clear of any encumbrances (other than encumbrances
created by the Company or the Sellers) and any restrictions on transfer other
than under applicable state and federal securities laws and will convey to the
Sellers good and marketable title to such FIC Stock.
3.6 Broker, Transaction or Finder's Fees. Except for Arthur A. Howard,
neither Purchaser nor FIC know of no other party entitled to any broker,
transaction, or finder's fees related to the transaction contemplated by this
Agreement. Purchaser agrees that, in addition to the Purchase Price, it will pay
Arthur A. Howard a transaction closing fee equal to $52,000, simultaneous with
the funding of the Purchase Price. This transaction closing fee is payable to
Mr. Howard in addition to other amounts under this Agreement to which he shall
be entitled. Purchaser shall treat such transaction closing fee as a part of the
fees, costs and expenses associated with acquisition of the Company Stock
pursuant to this Agreement.
Section 4. Covenants and Agreements.
4.1 Conduct of the Business Prior to Closing; Access. The Company and the
Sellers covenant as follows: (a) Between the date hereof and the Closing Date,
except as expressly contemplated by this Agreement, or except with the written
consent of the Purchaser (which consent shall not be unreasonably withheld), the
Sellers and the Company will use all reasonable efforts to preserve the business
of the Company intact, to preserve the good will of customers, employees and
others having business relations with the Company, to retain their key
employees, and to maintain insurance in full force and effect, will operate
their business in the ordinary course of business consistent with past practice
- 17 -
and will not: (i) subject any of their assets to any Encumbrance that will not
be released at or prior to the Closing Date; (ii) make any material changes in
the operations of the Company; (iii) other than, in each case, in the ordinary
course of business consistent with past practice, sell, transfer, lease,
sublease, license or otherwise dispose of any material assets (for the purposes
of this clause (iii), a "material asset" is an individual asset that has a value
in excess of $10,000 or assets that have an aggregate value in excess of
$25,000); (iv) (A) grant any increase, or announce any increase, in the wages,
salaries, compensation, bonuses, incentives, pension, severance or termination
pay or other benefits payable by the Company to any of the officers or employees
of the Company, including any increase or change pursuant to any Employee
Benefit Plan, (B) establish or increase (or promise to increase) or accelerate
the payment or vesting of any benefits under any Employee Benefit Plan with
respect to officers or employees of the Company or (C) enter into any
employment, consulting or severance agreements with any officers or employees or
consultants to the Company or change the terms thereof, in the case of clauses
(A), (B) and (C), (v) make any material change in any method of accounting or
accounting practice or policy used by the Company, other than changes required
by Law or under GAAP; (vi) terminate or amend in any material respect any
Material Contract; (vii) merge or consolidate with, or acquire securities or any
interest in, any person or entity, or enter into any joint venture, partnership
or similar arrangement; (viii) fail to pay any creditor any amount owed to such
creditor when due (after the expiration of any applicable grace periods), except
if any such amount is being disputed in good faith in the ordinary course of
business consistent with past practice; (ix) terminate, discontinue, close or
dispose of any business operation or otherwise materially change the character
or conduct of its business; (x) declare, set aside or pay any dividend or other
distribution in respect of any the Company Stock; (xi) make any commitments by
the Company for any individual capital expenditure in excess of $20,000; (xii)
amend the Company's Articles of Incorporation or Bylaws; (xiii) amend any
material term of any outstanding Indebtedness, issue or sell any new debt
securities, create, incur, assume or guarantee any Indebtedness or enter into
any new credit facility (other than roll-overs under existing facilities), (xiv)
compromise, settle, grant any waiver or release relating to, or otherwise
adjust, any material Action, Indebtedness or any other claims or rights of the
Company; (xv) enter into any new agreement, contract, commitment or arrangement
that will continue in effect after the Closing Date and not be terminable by the
Company on not more than 60 days' written notice without payment of premium or
penalty; (xvi) make any change in the ownership of the Company or grant or
assign any Company Stock, options, rights or phantom shares in the Company; or
(xvii) enter into any agreement, contract, commitment or arrangement to do any
of the foregoing.
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(b) Pending the Closing Date, the Company shall: (i) Give to the
Purchaser and its representatives reasonable access during normal business
hours to all of the employees, properties, books and records of the Company
and furnish the Purchaser and its representatives with such information
concerning the Company as the Purchaser may reasonably require, including
such access and cooperation as may be necessary to allow the Purchaser and
its representatives to interview the employees, to examine the books and
records of the Company, and to inspect the real property and equipment;
(ii) Furnish the Purchaser within 20 days after the end of each month
ending between the date of this Agreement and the Closing Date a statement
of income and a balance sheet for the Company for the month just ended; and
(iii) From time to time, furnish to the Purchaser such additional
information (financial or otherwise) concerning the Company as the
Purchaser may reasonably request (which right to request information shall
not be exercised in any way which would unreasonably interfere with the
normal operations, business or activities of the Sellers or the Company).
4.2 Cooperation. Following the execution of this Agreement, the Purchaser,
FIC, the Sellers and the Company agree as follows:
(a) The parties shall each use their reasonable best efforts, and
shall cooperate fully with each other in preparing, filing, prosecuting,
and taking any other actions with respect to, any filings, applications,
requests, or actions which are or may be necessary, to obtain the consents,
approvals, authorizations or other orders of any Governmental Authority or
other person which are or may be necessary in connection with the
transactions contemplated by this Agreement.
(b) Without limiting the foregoing, the Sellers shall cooperate with
the Purchaser at the Purchaser's request and in so doing use their best
efforts from and after the Closing Date to obtain consents to the Material
Contracts set forth in Schedule 2.8, as required in accordance with the
terms of such Material Contracts;
(c) If the Purchaser or the Company receives an administrative or
other order or notification relating to any violation or claimed violation
of the rules and regulations of any Governmental Authority that could
affect the Purchase's, the Sellers' or the Company's ability to consummate
the transactions contemplated hereby, the Purchaser, the Sellers or the
Company shall promptly notify the other party or parties thereof and shall
use its reasonable best efforts to take such steps as may be necessary to
remove any such impediment to the transactions contemplated by this
Agreement; and no such notification shall affect the representations or
warranties of the parties or the conditions to their respective obligations
hereunder; and
- 19 -
(d) Subject to the terms and conditions of this Agreement, each of the
parties agrees to use its reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary,
proper or advisable to consummate and make effective the transactions
contemplated hereby as soon as practicable but in no event later than the
Closing.
4.3 Taxes. Income taxes for the year 2003 for the Company shall be
allocated (i) to the Sellers for the period from January 1, 2003 to the Closing
Date, and (ii) to the Purchaser for the period from the Closing Date to December
31, 2003. The Purchaser shall be responsible for filing or causing to be filed
all tax returns required to be filed by or on behalf of the Company after the
Closing Date. The Purchaser and the Sellers shall cooperate with the exchange of
information to allow the Sellers to complete such accounting as shall be
necessary to fulfill the requirements of this Section 4.3, including information
necessary to complete and interim accounting for the year 2003 through the
Closing Date. With respect to any such income tax return required to be filed by
the Purchaser for a taxable period of the Company beginning on or before the
Closing Date, the Purchaser shall deliver, at least twenty days prior to the due
date for filing of such tax return (including extensions), to Sellers a
statement setting forth the amount of tax for which Sellers are responsible
pursuant to this section (the "Statement"), and copies of such tax return.
4.4 Registration Rights.
(a) Registration of Shares. For purposes of this Agreement, "Holder"
means Sellers and "Registrable Shares" means any shares of FIC Stock held
by a Holder, and any and all shares of FIC Stock issued as (or issuable
upon the conversion or exercise of any warrant, right or other security
that is issued as) a dividend or other distribution with respect to, or in
exchange for, or in replacement of, shares of FIC Stock held by a Holder
until the date on which (i) such share of FIC Stock has been effectively
registered under the Securities Act and disposed of in accordance with the
a Shelf Registration Statement (as defined below), (ii) such share of FIC
Stock is distributed to the public pursuant to Rule 144 under the
Securities Act, or (iii) such share of FIC Stock may be sold or transferred
pursuant to Rule 144(k) under the Securities Act (or any similar provision
then in effect). During the time which a Holder holds Registrable Shares,
if FIC files with the SEC a shelf registration statement pursuant to Rule
415 under the Securities Act (a "Shelf Registration Statement") on Form S-1
or Form S-3, if the use of such form is then available as determined by
FIC, FIC agrees to include the Registrable Shares held by the Holders as
part of such Shelf Registration Statement. FIC has no obligation pursuant
to this section 4.4 or this Agreement to file a Shelf Registration
Statement.
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(b) Suspension of Registration. Notwithstanding anything to the
contrary in this Section 4.4, FIC may prohibit offers and sales of
Registrable Shares pursuant to a Shelf Registration Statement at any time
if (A)(i) it is in possession of material non-public information, (ii) the
Board of Directors of FIC believes in good faith that such prohibition is
necessary in order to avoid a legal requirement to disclose such material
non-public information and (iii) the Board of Directors of FIC believes in
good faith that disclosure of such material non-public information would
not be in the best interests of FIC and its shareholders, (B)(i) FIC has
made a public announcement relating to an acquisition or business
combination transaction including FIC and/or one or more of its
subsidiaries that is material to FIC and its subsidiaries taken as a whole
and (ii) the Board of Directors of FIC believes in good faith that it would
be impracticable at the time to obtain any financial statements relating to
such acquisition or business combination transaction that would be required
to be set forth in the Shelf Registration Statement, or (C) such Shelf
Registration Statement contains financial information that no longer meets
the requirements of any applicable rule of Regulation S-X (the period
during which any such prohibition of offers and sales of Registrable Shares
pursuant to a Shelf Registration Statement is in effect pursuant to clause
(A) or (B) of this subsection (c) is referred to herein as a "Suspension
Period"). A Suspension Period shall commence on and include the date on
which the Holders of Registrable Shares covered by a Shelf Registration
Statement receive written notice from FIC that offers and sales of
Registrable Shares cannot be made thereunder in accordance with this
subsection (c) and shall, with respect to each Holder, end on the date on
which that Holder either is advised in writing by FIC that offers and sales
of Registrable Shares pursuant to the Shelf Registration Statement and use
of the prospectus contained therein may be resumed (a "Resumption Notice")
or receives a copy of a prospectus supplement. FIC agrees that it must
promptly deliver a Resumption Notice to each Holder when none of the
requisite conditions for the Suspension Period continue to exist or a
prospectus supplement as soon as reasonably practicable.
(c) Damages. Neither FIC nor Purchaser shall not be liable to any
Holders for damages pursuant to this Section 4.4.
(d) No Further Obligations of FIC. Neither FIC nor Purchaser shall
have any further obligations to Holders pursuant to this Section 4.4.
(e) Further Obligations of the Holders. In the event that FIC files a
Shelf Registration Statement in connection with the registration of
Registrable Shares pursuant to this Section 4.4, each Holder agrees to
timely provide to FIC, at its request, such information and materials as it
may reasonably request in order to effect the registration of such
Registrable Shares.
- 21 -
(f) Expenses. In the event that FIC files a Shelf Registration
Statement pursuant to this section 4.4, FIC shall bear, on behalf of the
Holders, all reasonable costs and expenses of such registration, including,
but not limited to, the Company's printing, legal and accounting fees and
expenses, and SEC filing fees. Holders shall be responsible for any fees
and disbursements of Holders' counsel. Further, neither FIC nor Purchaser
shall have any obligation to pay or otherwise bear the commissions or
discounts attributable to the Registrable Shares being offered and sold by
the Holders.
(g) Indemnification of FIC.
(i) Right to Indemnification. In the event that FIC registers any
of the Registrable Shares under the Securities Act, each Holder of the
Registrable Shares so registered will indemnify and hold harmless FIC
and Purchaser, each of their directors, each of their officers who
have signed or otherwise participated in the preparation of the
registration statement, and each underwriter of the Registrable Shares
so registered (including any broker or dealer through whom such of the
shares may be sold) from and against any and all losses, claims,
damages, expenses or liabilities, joint or several, to which they or
any of them may become subject under the Securities Act, applicable
state securities laws or under any other statute or at common law or
otherwise, and, except as hereinafter provided, will reimburse FIC or
Purchaser and each such director, officer, underwriter or controlling
person for any legal or other expenses reasonably incurred by them or
any of them in connection with investigating or defending any actions
whether or not resulting in any liability, insofar as such losses,
claims, damages, expenses, liabilities or actions arise out of or are
based upon any untrue statement or alleged untrue statement of a
material fact contained in the registration statement, in any
preliminary or amended preliminary prospectus or in the final
prospectus (or in the registration statement or prospectus as from
time to time amended or supplemented) or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary in order to make the
statements therein not misleading, but only insofar as any such
statement or omission was made in reliance upon and in conformity with
information furnished in writing to FIC in connection therewith by
such Holder expressly for use therein; provided, however, that such
Holder's obligations hereunder shall be limited to an amount equal to
the proceeds received by such Holder from Registrable Shares sold in
such registration.
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(ii) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which FIC or
Purchaser seeks indemnification under this subsection (g) but it is
judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal
or the denial of the last right of appeal) that such indemnification
may not be enforced in such case notwithstanding that this subsection
(g) provides for indemnification, in such case, then FIC, Purchaser
and such Holder will contribute to the aggregate losses, claims,
damages or liabilities to which they may be subject (after
contribution from others) in such proportion as is appropriate to
reflect the relative fault of FIC on the one hand and of such Holder
on the other in connection with the statements or omissions which
resulted in such losses, claims, damages or liabilities, as well as
any other relevant equitable considerations. The relative fault of FIC
on the one hand and of the Holder on the other shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state
a material fact relates to information supplied by FIC on the one hand
or by the Holder on the other, and each party's relative intent,
knowledge, access to information and opportunity to correct or prevent
such statement or omission; provided, however, that, in any such case,
(i) no such Holder will be required to contribute any amount in excess
of the public offering price of all such Registrable Shares offered by
it pursuant to such registration statement; and (ii) no person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) will be entitled to contribution from any
person who was not guilty of such fraudulent misrepresentation. Except
as otherwise provided in this clause (ii), the provisions of Section
5.4 shall govern the notice and other procedural aspects of any
indemnification claim brought pursuant to this subsection (g).
Section 5. Indemnification.
5.1 Survival. The representations, warranties covenants and other
agreements of the parties contained herein or in any Document shall survive the
Closing for a period of two (2) years following the Closing Date (the "Survival
Period").
- 23 -
5.2 Indemnification by the Company and the Sellers. The Company and the
Sellers, jointly and severally, shall indemnify FIC, Purchaser and their
affiliates, partners, principals, officers, directors, managers, members,
employees, independent contractors, agents, representatives, and other similarly
situated parties, and the successors, heirs and personal representatives of any
of them (collectively, "Purchaser Indemnified Parties"), against and hold them
harmless from any and all damage, claim, loss, liability and expense (including,
without limitation, reasonable expenses of investigation and attorneys' fees and
expenses) (collectively, "Damages") incurred or suffered by any Purchaser
Indemnified Party arising out of or relating to any breach of any
representation, warranty, covenant or other agreement of the Company or Sellers
contained herein or in any Document, that is asserted in writing to the Company
or Sellers prior to the expiration of the Survival Period. Notwithstanding the
provisions of this Section 5.2, the maximum liability of the Company and the
Sellers under this Agreement shall be the aggregate amount of consideration paid
by Purchaser hereunder, and each Seller's maximum liability shall be limited to
an amount equal to the proceeds received by him or her pursuant to this
Agreement.
5.3 Indemnification by Purchaser. Purchaser shall indemnify the Sellers and
their respective successors, heirs and personal representatives (collectively,
the "Sellers Indemnified Parties"), against and hold them harmless from any and
all Damages incurred or suffered by any Sellers Indemnified Party arising out of
or relating to any breach of any representation, warranty, covenant or other
agreement of Purchaser contained herein or in any Document, that is asserted in
writing to Purchaser prior to the expiration of the Survival Period.
Notwithstanding the provisions of this Section 5.3, the maximum liability of
Purchaser under this Agreement shall be the aggregate amount of consideration
paid by Purchaser hereunder and the maximum liability of Purchaser to any Seller
shall be limited to an amount equal to the consideration paid to such Seller
pursuant to this Agreement.
5.4 Indemnification; Notice and Settlements. A party seeking
indemnification pursuant to Sections 5.2 or 5.3 (an "Indemnified Party") with
respect to a claim, action or proceeding initiated by a person who is not a
Purchaser Indemnified Party or a Sellers Indemnified Party shall give prompt
written notice to the party from whom such indemnification is sought (the
"Indemnifying Party") of the assertion of any claim, or the commencement of any
action or proceeding, in respect of which indemnity may be sought hereunder;
provided that the failure to give such notice shall not affect the Indemnified
Party's rights to indemnification hereunder, unless such failure shall prejudice
- 24 -
in any material respect the Indemnifying Party's ability to defend such claim,
action or proceeding. The Indemnifying Party shall have the right to assume the
defense of any such action or proceeding at its expense. If the Indemnifying
Party shall elect not to assume the defense of any such action or proceeding, or
fails to make such an election within 20 days after it receives such notice
pursuant to the first sentence of this Section 5.4, the Indemnified Party may
assume such defense at the expense of the Indemnifying Party. The Indemnified
Party shall have the right to participate in (but not control) the defense of an
action or proceeding defended by the Indemnifying Party hereunder and to retain
its own counsel in connection with such action or proceeding, but the fees and
expenses of such counsel shall be at the Indemnified Party's expense unless (i)
the Indemnifying Party and the Indemnified Party have mutually agreed in writing
to the retention of such counsel or (ii) the named parties in any such action or
proceeding (including impleaded parties) include the Indemnifying Party and the
Indemnified Party, and representation of the Indemnifying Party and the
Indemnified Party by the same counsel would create a conflict (in which case the
Indemnifying Party shall not be permitted to assume the defense of such claim,
action or proceeding); provided that, unless otherwise agreed by the
Indemnifying Party, if the Indemnifying Party is obligated to pay the fees and
expenses of such counsel, the Indemnifying Party shall be obligated to pay only
the fees and expenses associated with one attorney or law firm (plus local
counsel as required), as applicable, for the Indemnified Party. An Indemnifying
Party shall not be liable under Section 5.2 or 5.3 for any settlement effected
without its written consent, of any claim, action or proceeding in respect of
which indemnity may be sought hereunder.
Section 6. Conditions to Closing.
6.1 Conditions to Purchaser's and FIC's Obligations. The obligation of
Purchaser and FIC to consummate the transactions to be performed by it in
connection with the Closing is subject to satisfaction of the following
conditions:
(a) No court or governmental entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any order or other
law (whether temporary, preliminary or permanent) that is in effect and
enjoins or otherwise prohibits consummation of the transactions
contemplated by this Agreement.
(b) The representations and warranties of the Company and the Sellers
contained herein (or in any certificate delivered pursuant hereto) that are
qualified by reference to a Material Adverse Effect shall be true and
correct as of the Closing as if made as of the Closing and all other
representations and warranties of the Company shall be true and correct as
of the Closing as if made as of the Closing, except for such inaccuracies
as have not had a Material Adverse Effect, and Purchaser shall have
received a certificate to such effect dated the Closing Date and executed
by a duly authorized officer of the Company.
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(c) The covenants and agreements of the Company and the Sellers to be
performed on or prior to the Closing shall have been duly performed in all
material respects, and Purchaser shall have received a certificate to such
effect dated the Closing Date and executed by a duly authorized officer of
the Company.
(d) The Sellers shall have delivered certificates representing the
Company Stock in the name of Purchaser.
(e) Pesce and Cochran shall have entered into employment contracts
with FICFS.
6.2 Conditions to the Company's and the Sellers' Obligations. The
obligation of the Company and the Sellers to consummate the transactions to be
performed by them in connection with the Closing is subject to satisfaction of
the following conditions:
(a) No court or governmental entity of competent jurisdiction shall
have enacted, issued, promulgated, enforced or entered any order or other
law (whether temporary, preliminary or permanent) that is in effect and
enjoins or otherwise prohibits consummation of the transactions
contemplated by this Agreement.
(b) The representations and warranties of Purchaser and FIC contained
herein (or in any certificate delivered pursuant hereto) that are qualified
by reference to a material adverse effect shall be true and correct as of
the Closing as if made as of the Closing and all other representations and
warranties of Purchaser and FIC shall be true and correct as of the Closing
as if made as of the Closing, except for such inaccuracies as would not
materially impair the transactions contemplated by this Agreement, and the
Company shall have received a certificate to such effect dated the Closing
Date and executed by Purchaser.
(c) The covenants and agreements of Purchaser and FIC to be performed
on or prior to the Closing shall have been duly performed in all material
respects, and the Company shall have received a certificate to such effect
dated the Closing Date and executed by Purchaser.
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(d) Purchaser shall have delivered the Purchase Price.
(e) FICFS shall have entered into employment contracts with Pesce and
Cochran.
Section 7. Termination.
7.1 Termination. This Agreement may be terminated at any time prior to the
Closing:
(a) by mutual written agreement of the Sellers, Purchaser, and FIC; or
(b) by either the Sellers or Purchaser (including FIC) by giving
written notice of such termination to the other party, if such other party
shall breach any of its material covenants or agreements under this
Agreement which would result in a failure of the condition set forth in
Section 6.1(c), in the case of a termination by Purchaser or FIC, and the
condition set forth in Section 6.2(c), in the case of a termination by the
Sellers, and such breach, if reasonable possibility of cure therefore
exists, has not been cured within twenty (20) days following the giving of
written notice of such breach by the non-breaching party to the breaching
party; or
(c) by either Purchaser or the Sellers by giving written notice of
such termination to the other party, if any order permanently enjoining or
otherwise prohibiting consummation of the transactions contemplated hereby
shall become final and non-appealable; or
(d) by Purchaser or the Sellers by giving written notice of such
termination to the other, if any condition to such party's obligations
hereunder has not been satisfied or waived and the Closing shall not have
occurred on or prior to May 30, 2003; provided, however, that the right to
terminate this Agreement pursuant to this Section 7.1(d) shall not be
available to any party who is then in material breach of this Agreement; or
(e) by Purchaser or by the Sellers if FICFS and Pesce and Cochran have
not entered into employment agreements.
7.2 Effect of Termination. In the event of the termination of this
Agreement in accordance with Section 7.1 hereof, this Agreement shall thereafter
become void and have no effect, and no party hereto or its respective affiliates
or their directors, officers, employees, shareholders or agents shall have any
liability to the other parties hereto or their respective affiliates, directors,
officers, employees, shareholders or agents except for the obligations of the
parties hereto; provided, that nothing herein will relieve any party from
liability for a breach of this Agreement prior to such termination.
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Section 8. Definitions.
Unless otherwise stated in this Agreement, the following capitalized terms
have the following meanings:
"Action" means any action, suit, claim, arbitration, grievance, complaint,
charge, proceeding or investigation (of which either the Sellers or the Company
have knowledge) commenced by or pending before any Governmental Authority.
"Change of Control" means, for purposes of Section 1.2 herein, the
definition given to the term "Change of Control" in the Employment Agreements.
"Employee Benefit Plans" means all "employee benefit plans" within the
meaning of Section 3(3) of ERISA (whether or not subject to ERISA), all bonus,
stock option, stock purchase, incentive, deferred compensation, supplemental
retirement, severance and other employee benefit plans, programs, policies or
arrangements, and all employment, retention, change of control or compensation
agreements, in each case for the benefit of, or relating to, any current
employee or former employee of the Company.
"Encumbrance" means any security interest, pledge, mortgage, lien
(including tax liens), charge, encumbrance, easement, adverse claim, adverse
preferential arrangement, restriction or defect in title.
GAAP means United States generally accepted accounting principles and
practices as in effect from time to time and applied consistently throughout the
periods involved.
"Governmental Authority" means any United States federal, state or local
government or any foreign government, any governmental, regulatory, legislative,
executive or administrative authority, agency or commission or any court,
tribunal, or judicial body.
"Governmental Order" means any order, writ, judgment, injunction, decree,
stipulation, determination or award entered by or with any Governmental
Authority. Governmental Orders shall not include Permits.
"Indebtedness" means obligations with regard to borrowed money and shall
expressly not include either accounts payable or accrued liabilities that are
incurred in the ordinary course of business or obligations under capital,
financing or operating leases regardless of how such leases maybe classified or
accounted for on financial statements.
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"Material Contracts" means the written agreements, contracts, policies,
plans, mortgages, understandings, arrangements or commitments to which the
Sellers or the Company is a party as described below:
(i) any agreement or contract providing for payments to any person or
entity in excess of $20,000 per year, excluding leases of equipment or real
property or licenses with respect to Intellectual Property, which are
subject to paragraph (iv) below;
(ii) any employment agreement, consulting agreement or similar
contract;
(iii) any retention or severance agreement or similar contract with
respect to any individual who is to be employed by the Company following
the Closing Date;
(iv) any lease of equipment or real property or license with respect
to Intellectual Property (other than licenses granted in connection with
the purchase of equipment or other assets) by the Company from another
person or entity providing for payments to another person or entity in
excess of $25,000 per year;
(v) any joint venture, partnership or similar agreement or contract of
the Company;
(vi) any agreement or contract under which the Company has borrowed or
loaned any money in excess of $25,000 or issued or received any note, bond,
indenture or other evidence of Indebtedness in excess of $25,000 or
directly or indirectly guaranteed Indebtedness, liabilities or obligations
of others in an amount in excess of $25,000; or
(vii) any agreement or contract with any officer, manager, Seller or
employee of the Company or any of their family members (other than
employment agreements covered in clause (i) or agreements or contracts
containing terms substantially similar to terms available to employees
generally).
Section 9. Miscellaneous.
9.1 Successors and Assigns. The provisions of this Agreement shall be
binding upon, and inure to the benefit of, the permitted respective successors,
assigns, heirs, executors and administrators of the parties hereto.
9.2 Entire Agreement. This Agreement, including all schedules and exhibits
hereto, embody the entire agreement and understanding between the parties hereto
with respect to the subject matter hereof and thereof and supersede all prior
agreements and understandings relating to such subject matters.
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9.3 Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. Signatures delivered by telecopy shall
be considered for all purposes to be the same as original signatures.
9.4 Severability. If any provision of this Agreement is held by final
judgment of a court of competent jurisdiction to be invalid, illegal or
unenforceable, such invalid, illegal or unenforceable provision shall be severed
from the remainder of this Agreement, and the remainder of this Agreement shall
be enforced. In addition, the invalid, illegal or unenforceable provision shall
be deemed to be automatically modified, and, as so modified, to be included in
this Agreement, such modification being made to the minimum extent necessary to
render the provision valid, legal and enforceable.
9.5 Governing Law; Venue. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas, irrespective of any
conflict-of-laws rule or principle of any jurisdiction that might refer the
governance or construction of this Agreement to the laws of any other
jurisdiction. This Agreement can be performed in whole or in part in Travis
County, Texas, and venue for any action relating to this Agreement shall be
proper only in federal or state courts located within Travis County, Texas. Each
party agrees that it must bring any action related to this Agreement or any
other Document only in the federal or state courts located within Travis County,
Texas.
9.6 Notices. Any notices or demands required or permitted to be given
hereunder shall be deemed sufficiently given if in writing and delivered,
transmitted or mailed (with all postage and charges prepaid), addressed to the
recipient at the address provided below, or at such other address as any party
may from time to time designate by written notice to the other parties given in
accordance with this Section 9.6. Any such notice, if personally delivered or
transmitted by facsimile, shall be deemed to have been given on the date so
delivered or transmitted or, if mailed, be deemed to have been given on the day
after such notice is placed in the United States mail in accordance with this
Section 9.6.
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Purchaser: FIC Financial Services, Inc.
6500 River Place Blvd., Building One
Austin, Texas 78730
Attn: William P. Tedrow
FIC: Financial Industries Corporation
6500 River Place Blvd., Building One
Austin, Texas 78730
Attn: Gene Payne and Ted Fleron
Company: Total Compensation Group Consulting, Inc.
4201 Bee Cave Road, Suite C-101
Austin, Texas 78746
Attn: Mike Cochran
Each of the Sellers: At the address set forth opposite their
respective names on their respective
signature pages included on and made a
part of Schedule 1.1, attached hereto.
9.7 Further Assurances. Each party of this Agreement hereby covenants and
agrees, without the necessity of any further consideration, to execute and
deliver any and all such further documents and take any and all such other
actions as may be reasonably necessary to appropriately carry out the intent and
purposes of this Agreement and the other Documents and to consummate the
transactions contemplated. Each party will use its good faith efforts to carry
out and comply with the provisions of this Agreement.
9.8 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the parties hereto and their
respective successors and permitted assigns.
9.9 Adjustments in Shares Issued Pursuant to Section 1.1. The number of
shares of FIC Stock to be issued pursuant to Section 1.1 of this Agreement shall
be adjusted in the event the Closing does not take place on May 19, 2003; and in
such event, the parties agree that the price per share, based on formula defined
in such section, shall be recalculated, and adjustments may be made in the
number of shares of FIC Stock issuable, without the necessity of any further
signature or other requirements on the part of the Sellers, the Purchaser, the
Company, or any other party.
[Signature page follows]
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SIGNATURE PAGE
TO
STOCK PURCHASE AGREEMENT
IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase
Agreement as of the day and year first above written.
PURCHASER: FIC FINANCIAL SERVICES, INC.
By:_____________________________________
Name:___________________________________
Title:__________________________________
FINANCIAL INDUSTRIES CORPORATION
By:_____________________________________
Name:___________________________________
Title:__________________________________
COMPANY: Total Compensation Group Consulting, Inc.
By:_____________________________________
Name:___________________________________
Title:__________________________________
[Add individual Seller signature pages]
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