EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of December 31,
2003, by and between BCDP Holdings, LLP, a Delaware registered limited liability
partnership ("Buyer"), Financial Industries Corporation, a Texas corporation
("FIC"), and FIC Financial Services, Inc., a Nevada corporation ("Seller").
RECITALS
WHEREAS, Seller owns all of the issued and outstanding shares (the
"Shares") of the capital stock of: (i) Paragon Benefits, Inc., a Texas
corporation ("Paragon Benefits"), which consists of 20,000 shares of common
stock, par value $0.10 per share; (ii) The Paragon Group, Inc., a Texas
corporation ("Paragon Group"), which consists of 30,000 shares of common stock,
par value $0.10 per share; (iii) Paragon National, Inc., a Texas corporation
("Paragon National"), which consists of 20,000 shares of common stock, par value
$0.10 per share; (iv) Total Compensation Group Consulting, Inc., a Texas
corporation ("TCG"), which consists of 28,313 shares of common stock, par value
$0.10 per share; and (v) JNT Group, Inc., a Texas corporation ("JNT" and,
together with Paragon Benefits, Paragon Group, Paragon National and TCG, the
"Companies"), which consists of 1,000 shares of common stock, par value $1.00
per share;
WHEREAS, Seller desires to sell the Shares to the Buyer, on the terms and
subject to the conditions set forth herein; and
WHEREAS, the Buyer desires to purchase all of the Seller's right, title and
interest to the Shares, 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:
AGREEMENT
Section 1. Purchase and Sale of the Shares.
1.1 Purchase and Sale; Closing. On the terms and subject to the conditions
herein expressed and based on the representations, warranties, covenants and
agreements contained herein, Seller hereby sells, transfers and assigns the
Shares to Buyer and Buyer hereby purchases the Shares from Seller, all effective
concurrently with the execution of this Agreement (the "Closing") and at such
place and time as the parties may mutually agree. The purchase price ("Purchase
Price") for the Shares shall consist of an amount of cash payable by Buyer equal
to one dollar ($1.00), by payment at Closing. The Shares shall be delivered to
Buyer at the Closing, free and clear of any and all Encumbrances, other than
those restrictions arising from applicable federal and state securities laws.
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1.2 Closing Deliveries. At the Closing:
(a) Seller. The Seller shall deliver, or cause to be delivered, to Buyer
the following:
(i) stock certificates duly endorsed to Buyer, or accompanied by
stock powers duly endorsed to Buyer, representing the Shares
against delivery by Buyer to Seller of the Purchase Price
referred to in Section 1.1;
(ii) evidence satisfactory to Buyer that the liability owed by JNT to
Prosperity Bank in the approximate amount of $74,000 has been
satisfied in full prior to Closing and any collateral, if any,
securing such liability has been released prior to the Closing;
(iii)evidence satisfactory to Buyer that any intercompany payables or
loans owed by the Companies to FIC or any Affiliate of FIC (other
than a Company) have been satisfied in full, canceled or
transferred to an Affiliate other than a Company prior to
Closing;
(iv) a bill of sale (the "Bill of Sale") to be effective prior to the
Closing in the form attached hereto as Exhibit A; and
(v) such other documents, instruments and certificates as Buyer may
reasonably request in connection with the transactions
contemplated by this Agreement.
(b) Buyer. The Buyer shall deliver, or cause to be delivered, to Seller
the following:
(i) the Purchase Price by cash;
(ii) the Bill of Sale; and
(ii) such other documents, instruments and certificates as Seller may
reasonably request in connection with the transactions
contemplated by this Agreement.
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Section 2. Representations and Warranties of FIC and Seller. FIC and Seller
hereby represent and warrant, jointly and severally, to Buyer that, as of the
date of this Agreement:
2.1 Organization and Standing. Each Company is a corporation duly formed,
validly existing and in good standing under the laws of the State of Texas. Each
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
Buyer has been furnished complete and correct copies of the Articles of
Incorporation and Bylaws of each of the Companies, each as currently in effect.
2.2 Authority. The execution, delivery and performance by FIC and Seller of
this Agreement and any other documents, instruments and transactions
contemplated by this Agreement (collectively, the "Documents") to which either
is a party and the consummation by FIC and Seller of the transactions
contemplated hereby and thereby, have been duly authorized by all necessary
corporate action. All corporate action on the part of FIC and Seller and their
officers, directors and shareholders necessary for the authorization, execution
and delivery of the Documents, and the performance of all obligations of FIC and
Seller hereunder and thereunder has been taken. The Documents have been duly
executed and delivered by FIC and Seller and when executed and delivered by the
other parties thereto will constitute valid and legally binding obligations of
FIC and Seller enforceable in accordance with their respective terms, except (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other laws of general application affecting enforcement of creditors' rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief or other equitable remedies and (iii) to the
extent indemnification provisions contained herein or in any Document may be
limited by applicable federal or state securities laws.
2.3 Noncontravention; Required Consents. The execution, delivery and
performance by FIC and Seller of the Documents do not and will not violate,
conflict with or result in the breach or default of any provision of FIC's or
the Seller's Articles of Incorporation or Bylaws. The execution, delivery and
performance by FIC and Seller of the Documents do not and will not (a) conflict
with or violate any law or Governmental Order applicable to FIC or Seller or any
of their respective properties or assets, except in each case for any conflicts
or violations which would not reasonably be expected to have a material adverse
effect on the business of the Companies, (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,
except where such failure to obtain such consent or make such filing would not
reasonably be expected to have a material adverse effect on the business of the
Companies, or (c) conflict with, result in any violation or breach of,
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 FIC's, Seller's, or the Companies' 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 FIC, Seller, or a Company is a party or by which their
respective assets are bound, except in each case for any conflicts, violations,
defaults, acceleration or termination which would not reasonably be expected to
have a material adverse effect on the business of the Companies.
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2.4 Ownership of the Company Stock.
(a) The authorized capital stock of Paragon Benefits is 1,000,000 shares of
common stock, par value $0.10 per share, of which 20,000 shares are issued and
outstanding as of the date hereof; the authorized capital stock of Paragon Group
is 1,000,000 shares of common stock, par value $0.10 per share, of which 30,000
shares are issued and outstanding as of the date hereof; the authorized capital
stock of Paragon National is 1,000,000 shares of common stock, par value $0.10
per share, of which 20,000 shares are issued and outstanding as of the date
hereof; the authorized capital stock of TCG is 500,000 shares of common stock,
par value $0.10 per share, of which 28,313 shares are issued and outstanding as
of the date hereof (consisting of 16,110 shares of Class A Common Stock, 3,890
shares of Class B Common Stock, 2,222 shares of Class C Common Stock, 2,778
shares of Class D Common Stock, 2,778 shares of Class E Common Stock, and 535
shares of Class F Common Stock), and 500,000 shares of preferred stock, par
value $0.10 per share, of which no shares are issued and outstanding; and the
authorized capital stock of JNT is 1,000,000 shares of common stock, par value
$1.00 per share, of which 1,000 shares are issued and outstanding as of the date
hereof. The Seller constitutes the sole shareholder of the Companies. Upon the
consummation of the transactions contemplated hereby, Buyer will own 100% of the
issued and outstanding shares of capital stock of the Companies. No Person has
any preemptive right to purchase any shares of capital stock or any other
securities of the Companies, other than the shareholders of JNT who have
preemptive rights to purchase shares of capital stock of JNT pursuant to the
Articles of Incorporation of JNT and applicable state law. There are no
outstanding securities or other instruments of the Companies which are
convertible into or exchangeable for any shares of capital stock of the
Companies and there are no commitments to issue such securities or instruments
or otherwise make a Person a shareholder of a Company (except the Buyer pursuant
to this Agreement). There is no existing option, warrant, right, call, or
commitment of any character granted or issued by any Company governing the
issuance of any shares of capital stock of such Company or any "phantom"
securities giving the holder thereof any economic attributes of ownership.
(b) The Seller holds of record and owns beneficially the Shares. The Shares
are fully paid and non-assessable and, except for any right of the Buyer under
this Agreement, are free and clear of all Encumbrances, demands, preemptive
rights and adverse claims of any nature, other than transfer restrictions under
federal and state securities laws. Seller has full voting power over all Shares,
and is subject to no proxy, shareholders' agreement, voting trust or other
agreement relating to the voting of any of the Shares. There is no agreement
between the Seller and any other Person with respect to the disposition of the
Shares. Upon the Closing, the Seller will have transferred record and beneficial
ownership of the Shares to the Buyer.
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2.5 Financial Statements. The unaudited balance sheets and profit and loss
statements for the Companies as of November 30, 2003 are set forth on Exhibit B
attached hereto (the "Company Financial Statements"). To the Knowledge of FIC
and Seller, the Company Financial Statements (including any notes thereto)
present fairly the financial condition of the Companies as of the date thereof
and the results of its operations for the period then ended. To the Knowledge of
FIC and Seller, there has been no material change in the financial condition or
results of operations of the Companies since November 30, 2003 which would
reasonably be expected to have a material adverse effect on the business of the
Companies, taken as a whole.
2.6 Assets. The Companies, in the aggregate, have at least one hundred
thirty seven thousand five hundred dollars ($137,500) of cash or cash
equivalents (including checks outstanding), free and clear of all Encumbrances.
2.7 No Brokers. There are no brokers, financial advisors or finders or
other Persons who have any valid claim against Seller or the Companies, or any
of their respective assets for a commission, finders' fee, brokerage fee,
advisory fee or other similar fee in connection with this Agreement, or the
transactions contemplated hereby, by virtue of any actions taken by or on behalf
of the Companies, Seller or the Companies' officers, employees or agents.
2.8 No Subsidiaries. No Company has any Subsidiary.
Section 3. Representations of Buyer. Buyer represents and warrants to FIC
and Seller that:
3.1 Authority. Buyer is duly formed, validly existing and in good standing
under the laws of the State of Delaware, and has full organizational power and
authority to execute, deliver and perform this Agreement and any other Documents
to which it is a party. The execution, delivery and performance by Buyer of this
Agreement and any other Documents to which Buyer is a party and the consummation
by Buyer of the transactions contemplated hereby and thereby, have been duly
authorized by all necessary partnership action. All partnership action on the
part of Buyer and its partners necessary for the authorization, execution and
delivery of the Documents, and the performance of all obligations of Buyer
hereunder and thereunder, has been taken. The Documents have been duly executed
and delivered by Buyer and when executed and delivered by the other parties
thereto will constitute valid and legally binding obligations of Buyer
enforceable in accordance with their respective 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).
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3.2 Noncontravention; Required Consents. The execution, delivery and
performance by Buyer of the Documents do not and will not violate, conflict with
or result in the breach or default of any provision of Buyer's Statement of
Qualification as a Limited Liability Partnership or Partnership Agreement. The
execution, delivery and performance by Buyer of the Documents do not and will
not (a) conflict with or violate any law or Governmental Order applicable to
Buyer or any of its properties or assets, except in each case for any conflicts
or violations which would not reasonably be expected to have a material adverse
effect on the Buyer's business, (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, except where such
failure to obtain such consent or make such filing would not reasonably be
expected to have a material adverse effect on the Buyer's business or (c)
conflict with, result in any violation or breach of, 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 Buyer's 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 Buyer is a party or by which its assets are
bound, except in each case for any conflicts, violations, defaults, acceleration
or termination which would not reasonably be expected to have a material adverse
effect on Buyer's business.
3.3 No Brokers. There are no brokers, financial advisors or finders or
other Persons who have any valid claim against Buyer, or any of its assets for a
commission, finders' fee, brokerage fee, advisory fee or other similar fee in
connection with this Agreement, or the transactions contemplated hereby, by
virtue of any actions taken by or on behalf of the Buyer or the Buyer's
officers, employees or agents.
3.4 Investment Experience. Buyer and each of the partners thereof is
knowledgeable, sophisticated and experienced in business and financial matters
of the type contemplated by this Agreement, is able to evaluate the risks and
merits of an investment in the Shares and is financially able to bear the risks
thereof.
3.5 Company Information. Buyer and each of the partners thereof has been
afforded access to information regarding the Companies sufficient to enable them
to evaluate the risks and merits of purchasing the Shares and executing this
Agreement and consummating the transactions contemplated hereby. The offering of
the Shares to Buyer was made only through direct, personal communication between
Seller and Buyer and the partners thereof or their duly authorized
representatives and not through any public solicitation or advertising.
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3.6 Restricted Securities. Buyer acknowledges that (i) the Shares have not
been registered under the Securities Act or the securities or "blue sky" laws of
any state or other domestic or foreign jurisdiction, (ii) the Shares may not be
sold, transferred or otherwise disposed of except pursuant to an effective
registration statement thereunder or an applicable exemption therefrom and (iii)
the certificates evidencing the Shares shall contain a legend or legends
indicating applicable transfer restrictions.
3.7 Purchase for Own Account. Buyer is acquiring the Shares for investment,
and not with a view towards their public offering or distribution. Buyer
understands that it must bear the economic risk of such investment indefinitely
unless the Shares are registered pursuant to the Securities Act, or an exemption
from such registration is available, and that Seller is not aware of any present
intentions of the Companies to register the Shares. Buyer further understands
that there is no assurance that an exemption from the Securities Act will be
available or, if available, that such exemption will allow the Buyer to dispose
of or otherwise transfer any or all of the Shares under the circumstances, in
the amounts or at the times the Buyer might propose.
Section 4. Covenants and Agreements.
4.1 Reporting. FIC, Seller and Buyer agree to report for tax, financial
accounting, SEC and all other purposes that the Purchase Price reflects the
current value of the Shares and the sole consideration for the Shares.
4.2 JNT Transition.
(a) FIC, Seller and Buyer will devote commercially reasonable
resources necessary to complete their respective responsibilities under the
JNT Transition Plan attached hereto as Exhibit C (the "JNT Transition
Plan") by January 31, 2004.
(b) Buyer acknowledges that on and after the Closing, neither Seller
nor FIC shall have any obligations with respect to the Companies and the
operations thereof other than as set forth in Section 4.2(a).
4.3 Flip Protection.
(a) Upon (i) a sale of more than 50% of the equity securities of any
Company by means of any transaction or series of transactions (including,
without limitation, any reorganization, merger or consolidation) to any
Person (other than an Affiliate of such Company) or any Persons, acting
together, which would constitute a "group" (as such term is defined in Rule
13d-5 promulgated under the Exchange Act), (ii) a sale of all or
substantially all of the assets of any Company to any Person (other than an
Affiliate of such Company) or any Persons, acting together, which would
constitute a "group" (as such term is defined in Rule 13d-5 promulgated
under the Exchange Act) or (iii) an acquisition of the voting control of a
Company (i.e., the ability to elect a majority of the members of the Board
of Directors of a Company) by any Person (other than an Affiliate of such
Company) or any Persons, acting together, which would constitute a "group"
(as such term is defined in Rule 13d-5 promulgated under the Exchange Act)
by means of any transaction or series of transactions (including, without
limitation, any reorganization, merger or consolidation), that is
consummated prior to January 31, 2005, Buyer shall pay Seller at the
closing of such transaction fifty percent (50%) of the proceeds therefrom
(net of fees and expenses incurred by Buyer in respect of such
transaction). Seller agrees and acknowledges that Buyer intends to convert
the Companies into limited partnerships owned directly and indirectly by
Buyer as soon as practicable after the Closing and that this Section 4.3(a)
shall not apply to such conversions.
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(b) Notwithstanding the terms of Section 4.3(a), upon (i) a sale of
more than 50% of the equity securities of any Company by means of any
transaction or series of transactions (including, without limitation, any
reorganization, merger or consolidation) to Industrial-Alliance Pacific
Life Insurance Company ("IAP") or any Affiliate thereof, (ii) a sale of all
or substantially all of the assets of any Company to IAP or any Affiliate
thereof or (iii) an acquisition of the voting control of a Company (i.e.,
the ability to elect a majority of the members of the Board of Directors of
a Company) by IAP by means of any transaction or series of transactions
(including, without limitation, any reorganization, merger or
consolidation) that is consummated prior to June 30, 2006, Buyer shall pay
Seller at the closing of such transaction fifty percent (50%) of the
proceeds therefrom (net of fees and expenses incurred by Buyer in respect
of such transaction).
4.4 COBRA. As of the Closing, the participation by employees of the
Companies in each Benefit Plan sponsored by FIC shall terminate. FIC and Seller
will comply with the applicable continuation coverage requirements for its
Benefit Plans, including (a) Section 4980B of the Internal Revenue Code of 1986,
as amended and Sections 601 through 608, inclusive, of the Employment Retirement
Income Security Act of 1974 and (b) any applicable state statutes mandating
health insurance continuation coverage for employees.
4.5 Earl Johnson. FIC and Seller acknowledge that the Buyer or any of the
Companies may employ Earl Johnson after the Closing. FIC, Seller and Buyer
acknowledge that Earl Johnson has made certain claims against FIC and Seller,
including certain claims arising out of Earl Johnson's employment agreement
between him and Seller. If the Buyer or any of the Companies employs Earl
Johnson after the Closing, FIC and Seller agree, without waiving any rights
related to Earl Johnson, that neither will sue Buyer or any of the Companies
hiring Earl Johnson as an employee or independent contractor with respect to any
matters arising out of Earl Johnson's employment with Seller.
4.6 Taxes.
(a) Seller shall prepare and file (or cause to be prepared and filed)
all returns of and forms required to be filed with respect to the Companies
for any taxable period ending on or before the Closing and shall pay all
Taxes related thereto. Buyer shall prepare and file (or cause to be
prepared and filed) all returns and forms required to be filed with respect
to the Companies for any taxable period ending after the Closing, and pay
(or cause to be paid) all Taxes which accrue with respect to the Companies
for any taxable period ending after the Closing.
(b) Seller shall pay and shall indemnify and hold harmless Buyer
against any and all Taxes of or payable by the Companies attributable to
operations, acts or omissions of the Companies prior to and through the
Closing.
(c) Buyer shall pay and shall indemnify and hold harmless Seller
against any and all Taxes of or payable by the Companies attributable to
operations, acts or omissions of Buyer or the Companies after the Closing.
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(d) Seller shall be entitled to receive all refunds of federal income
taxes of the Companies (and any interest thereon) with respect to all
periods through the Closing (the "Pre-Closing Period"), unless any such
refunds are carried as an asset by the Company on the Closing, and all
refunds of state or local income or franchise taxes of the Companies (and
any interest thereon) with respect to periods ending on or prior to the
Closing. Buyer shall pay to Seller within five business days after receipt
thereof any such refunds received by Buyer.
(e) Buyer shall be entitled to all refunds of federal income taxes of
the Companies with respect to all periods ending after the Closing (the
"Post-Closing Period") (and any interest thereon), and all refunds of state
or local income or franchise taxes of the Companies with respect to periods
ending after the Closing (and any interest thereon). Seller shall pay to
Buyer within five business days after receipt thereof any such refunds
received by Seller.
Section 4.7. Computer Transition. Seller shall provide computer network
support and hosting at no charge to Buyer to allow for an "orderly transition of
the computer networks and websites to Buyer." For purposes of the foregoing, an
orderly transition of the computer networks and websites shall be deemed to have
been completed, and the obligations of Seller under this Section 4.7 shall be
deemed to have been satisfied, upon (i) the transfer to Buyer of all of the
equipment and software set forth on Exhibit A to the Bill of Sale, including
full and complete control of software and hardware, and (i) the transfer of all
computer files of Buyer from Seller's equipment to Buyer's equipment. Such
transition shall be completed as soon as administratively feasible, but shall
not occur later than January 31, 2004.
Section 4.8. Vacate Property. Buyer shall cause the Companies to completely
vacate the property located at 6500 River Place Blvd., Building Four-Suite 201,
Austin, Texas 78730 no later than March 31, 2004.
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"), except for the covenants and other agreements set forth in Sections
4.5, 4.6, 5.2(c), 5.3(b) and 5.4 which shall survive indefinitely and the
covenants and other agreements set forth in Section 4.3 which shall survive as
set forth therein.
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5.2 Indemnification by FIC and Seller. (a) FIC and Seller, jointly and
severally, shall indemnify Buyer and its 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,
"Buyer Indemnified Parties"), against and hold them harmless from one hundred
percent of 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 Buyer
Indemnified Party arising out of or relating to any breach of any
representation, warranty, covenant or other agreement of FIC or Seller contained
herein or in any Document, that is asserted in writing to FIC or Seller prior to
the expiration of the Survival Period. Notwithstanding the provisions of this
Section 5.2(a), the maximum liability of FIC and Seller under this Section
5.2(a) shall be the Purchase Price (other than (i) Damages arising under Section
2.6, (ii) Damages arising under Section 4, (iii) Damages arising out of the
liability owed by JNT to Prosperity Bank in the approximate amount of $74,000
and (iv) Damages arising out of any intercompany payable or loan amount owed to
FIC or any Affiliate thereof (other than the Companies)).
(b) In addition to the provisions of Section 5.2(a), FIC and Seller,
jointly and severally, shall indemnify the Buyer Indemnified Parties against and
hold them harmless from seventy five percent of any and all Damages (other than
Damages for which the Buyer Indemnified Parties are entitled to full
indemnification under Section 5.2(a)) incurred or suffered by any Buyer
Indemnified Party arising out of or relating to the operations of JNT from the
period commencing on October 1, 2003 and ending on the date hereof that are
asserted in writing to FIC or Seller prior to the expiration of the Survival
Period; provided, however, that such indemnity obligation of FIC and Seller
under this Section 5.2(b) shall not exceed in the aggregate one hundred thousand
dollars ($100,000.00).
(c) FIC and Seller, jointly and severally, shall indemnify the Buyer
Indemnified Parties against and hold them harmless from any and all Damages
incurred or suffered by any Buyer Indemnified Party arising out of or relating
to any claim, demand, action or cause of action of whatever kind, character and
description, brought by Earl Johnson or on his behalf in connection with that
certain Employment Agreement, dated as of May, 2003, by and between Earl Johnson
and Seller.
5.3 Indemnification by Buyer.
(a) Buyer shall indemnify Seller and its affiliates (including, without
limitation, FIC), 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, the "Seller Indemnified Parties"), against and hold them
harmless from any and all Damages incurred or suffered by any Seller Indemnified
Party arising out of or relating to any breach of any representation, warranty,
covenant or other agreement of Buyer contained herein or in any Document, or the
application of the indemnification covenant of Section 4.5 herein, that is
asserted in writing to Buyer prior to the expiration of the Survival Period.
Notwithstanding the provisions of this Section 5.3, the maximum liability of
Buyer under this Section 5.3(a) shall be the Purchase Price.
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(b) Buyer shall indemnify the Seller Indemnified Parties (including,
without limitation, FIC) against and hold them harmless from any and all Damages
incurred or suffered by any Seller Indemnified Party arising out of or relating
to any claim, demand, action or cause of action of whatever kind, character and
description, brought by Arthur Howard or on his behalf arising from or relating
to services allegedly provided by Arthur Howard to FICFS or any of the Companies
in connection with that certain Consulting Agreement, dated as of June 1, 2003,
by and between Arthur Howard and TCG.
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
Buyer Indemnified Party or a Seller 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 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. Definitions.
Unless otherwise stated in this Agreement, the following capitalized terms
have the following meanings:
"Affiliate" means, with respect to any Person, any individual, sole
proprietorship, partnership, joint venture, limited liability company, trust,
unincorporated organization, corporation, institution, public benefit
corporation, entity or government instrumentality, division, agency, body or
department that directly or indirectly controls, is controlled by, or is under
common control with such Person. For the purposes of this definition, the term
"control" means (a) the power to direct or cause the direction of management or
policies of such Affiliate, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise, or (b) the power
substantially to influence the direction of strategic management policies of
such Affiliate.
- 11 -
"Benefit Plan" means any pension, profit-sharing, deferred compensation,
retirement, medical, insurance or other plan or arrangement providing benefits
to any employee, including without limitation any employee benefit plan within
the meaning of Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended.
"Encumbrance" means any security interest, pledge, mortgage, lien
(including tax liens), charge, encumbrance, easement, adverse claim, adverse
preferential arrangement, restriction or defect in title.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"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.
"Knowledge" means actual knowledge.
FIC or Seller will be deemed to have "Knowledge" of a particular fact or
other matter if any individual (other than Scott Bell, Mike Cochran, Wayne
Deselle, Chris Murphy, John Pesce, Earl Johnson, William Tedrow and Sheryl
Kinlaw) who is serving, or who has at any time served, as a director or officer
of FIC or Seller (or in any similar capacity) has, or at any time had, actual
knowledge of that fact or other matter.
"Permitted Encumbrances" means (a) Encumbrances for taxes and other
governmental charges and assessments which are not yet due and payable, (b)
Encumbrances of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like Encumbrances arising in the ordinary course of
business for sums not yet due and payable and (c) other Encumbrances or
imperfections on property which are not material in amount or do not materially
detract from the value of or materially impair the existing use of the property
affected by such Encumbrance or imperfection.
"Person" means any individual, corporation, limited liability company,
partnership, limited partnership, association, trust or any other entity or
organization of any kind or character, including a governmental authority.
"Securities Act" means the Securities Act of 1933, as amended.
- 12 -
"Subsidiary" means any sole proprietorship, partnership, joint venture,
limited liability company, trust, unincorporated organization, corporation,
institution, public benefit corporation, entity or government instrumentality,
division, agency, body or department which is under the control of a Company.
"Taxes" means all federal, state, county, local or other taxes, charges,
levies or other assessments of any kind whatsoever, including without
limitation, (a) income, accumulated earnings, franchise, excise, sales, use,
gross receipts, ad valorem, profits, real or personal property, capital stock,
license, payroll, withholding, employment, workers' compensation, social
security, transfers and gains taxes, and (b) interest, penalties, additions to
tax and any similar impositions with respect thereto.
Section 7. Miscellaneous.
7.1 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.
7.2 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, with exception
of the Agreement and Releases entered into as of the date hereof and the Bill of
Sale.
7.3 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.
7.4 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.
7.5 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.
- 13 -
7.6 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 7.6. 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 7.6.
Buyer: BCDP Holdings, LLP
4201 Bee Cave Road, Suite C-101
Austin, Texas 78746
Attn: Scott A. Bell
FIC: Financial Industries Corporation
6500 River Place Blvd., Building One
Austin, Texas 78730
Attn: Gene Payne and Ted Fleron
Seller: FIC Financial Services, Inc.
6500 River Place Blvd., Building One
Austin, Texas 78730
Attn: Ted Fleron
7.7 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.
7.8 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.
[Signature page follows]
- 14 -
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.
BUYER: BCDP HOLDINGS, LLP
By: /S/ Scott A. Bell
_____________________________
Scott A. Bell
Partner
FIC: FINANCIAL INDUSTRIES CORPORATION
By: /s/ Theodore A. Fleron
_____________________________
Theodore A. Fleron
Vice President and Secretary
SELLER: FIC FINANCIAL SERVICES, INC.
By: /s/ Theodore A. Fleron
_____________________________
Theodore A. Fleron
Secretary
- 15 -
EXHIBIT A
BILL OF SALE AND ASSIGNMENT AGREEMENT
This BILL OF SALE AND ASSIGNMENT AGREEMENT (this "Agreement"), is entered
into as of December 30, 2003, by and among PARAGON NATIONAL, INC., a Texas
corporation ("Paragon"), FINANCIAL INDUSTRIES CORPORATION, a Texas corporation
("FIC"), and FIC FINANCIAL SERVICES, INC., a Nevada corporation ("FICFS").
W I T N E S S E T H:
WHEREAS, to induce BCDP Holding, LLP, a Delaware limited liability
partnership ("BCDP"), to enter into a stock purchase agreement pursuant to which
FIC and FICFS will sell, and BCDP will purchase, all of the shares of capital
stock of Paragon, Paragon Benefits, Inc., a Texas corporation, The Paragon
Group, Inc., a Texas corporation, Total Compensation Group Consulting, Inc., a
Texas corporation, and JNT Group, Inc., a Texas corporation, FICFS and FIC
desire to enter into this Agreement to convey to Paragon certain assets of FICFS
and FIC currently located at 6500 River Place Blvd., Building Four-Suite 201,
Austin, Texas 78730;
NOW, THEREFORE, in consideration of the premises, the terms and conditions
set forth herein, the mutual benefits to be gained by the performance thereof
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
SECTION 1. Definitions.
"Encumbrance" shall mean any security interest, pledge, mortgage, lien
(including tax liens), charge, encumbrance, easement, adverse claim, adverse
preferential arrangement, restriction or defect in title.
"Licensed Assets" shall mean the assets of FIC and FICFS currently located
at 6500 River Place Blvd., Building Four-Suite 201, Austin, Texas 78730
(including, without limitation, computers, including work stations, laptop
computers and file servers) that contain Software that is licensed to FIC and/or
FICFS under an enterprise license.
"Permitted Encumbrances" shall mean (a) Encumbrances for taxes and other
governmental charges and assessments which are not yet due and payable, (b)
Encumbrances of landlords and liens of carriers, warehousemen, mechanics and
materialmen and other like Encumbrances arising in the ordinary course of
business for sums not yet due and payable and (c) other Encumbrances or
imperfections on property which are not material in amount or do not materially
detract from the value of or materially impair the existing use of the property
affected by such Encumbrance or imperfection.
- 16 -
"Software" shall mean Microsoft Windows XP, Microsoft Office XP,
Papervision, McAfee Antivirus or Quickbooks Premier Network Edition.
SECTION 2. Assignment. FIC and FICFS do hereby convey, transfer and assign,
to Paragon all right, title and interest in and to the assets currently located
at 6500 River Place Blvd., Building Four-Suite 201, Austin, Texas 78730 (free
and clear of all Encumbrances, except for Permitted Encumbrances) which shall
include the assets set forth on Exhibit A attached hereto and exclude (i) the
assets set forth on Exhibit B attached hereto and (ii) the Licensed Assets.
Notwithstanding the foregoing, any asset that is a fixture or that is not
physically located at 6500 River Place Blvd., Building Four-Suite 201, Austin,
Texas 78730 as of the date hereof shall not be conveyed, transferred or assigned
to Paragon pursuant to this Agreement.
SECTION 3. Convent to Assign. FIC and FICFS shall convey, transfer and
assign to Paragon all right, title and interest in and to each Licensed Asset
upon the receipt by FIC or FICFS on or prior to February 15, 2004 of a
certificate executed by an authorized officer of Paragon certifying that such
Licensed Asset no longer contains Software that is licensed to FIC or FICFS
under an enterprise license, together with evidence reasonably satisfactory to
FIC and FICFS of the removal and/or replacement of such software. Any Licensed
Asset that contains software that is licensed to FIC and/or FICFS under an
enterprise license on February 15, 2004 shall be promptly delivered to FIC at
the sole expense of Paragon. FIC and FICFS agree to provide a list of each
Licensed Asset to Paragon on or before January 9, 2004 and the Software
contained therein.
SECTION 4. Disclaimer of Warranty. EXCEPT AS IS EXPRESSLY SET FORTH HEREIN,
NEITHER FIC NOR FICFS MAKES ANY REPRESENTATION OR WARRANTY AS TO ANY MATTER,
EXPRESS OR IMPLIED, INCLUDING ANY EXPRESS OR IMPLIED WARRANTY OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE, WARRANTY AGAINST INFRINGEMENT OR ANY OTHER
WARRANTY AS TO THE CONDITION OR OPERATION OF ANY OF THE ASSETS CONVEYED,
TRANSFERED AND ASSIGNED PURSUANT TO THIS AGREEMENT.
SECTION 5. Further Assurances. FIC and FICFS hereby each agree that it and
its successors shall execute, deliver, acknowledge, file and record, or cause to
be executed, delivered, acknowledged, filed and recorded, any and all such
further bills of sale, deeds, general conveyances, endorsements, assignments,
confirmations and other good and sufficient instruments of conveyance, transfer
and assignment as Paragon or its successors or assigns shall reasonably request
in order to complete, insure and perfect the conveyance, transfer and assignment
of any assets hereby conveyed, transferred and assigned.
- 17 -
SECTION 6. Parties in Interest. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
SECTION 7. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Texas, without regard to the
principles of conflicts of law thereof, except to the extent that mandatory
principles of conflicts of law require the application of the laws of another
jurisdiction wherein any of the properties, assets and interests hereby
conveyed, transferred, assigned and contributed or intended so to be are located
to determine the validity or effect of the conveyance, transfer, assignment and
contribution thereof.
SECTION 8. Severability. In the event any provision contained herein shall
be held to be invalid, illegal or unenforceable for any reason, the invalidity,
illegality or unenforceability thereof shall not affect any other provision
hereof, and, to the extent permitted by law, this Agreement shall be construed
as if such invalid, illegal or unenforceable provision had never been contained
herein.
SECTION 9. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
- 18 -
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
PARAGON NATIONAL, INC.
By:
Name:
Title:
FINANCIAL SERVICES CORPORATION
By:
Theodore A. Fleron
Vice President and Secretary
FIC FINANCIAL SERVICES, INC.
By:
Theodore A. Fleron
Secretary
- 19 -
EXHIBIT A
TO BILL OF SALE
River Place Point IV, Suite 201, 6500 River Place Blvd.
Note: to the extent there is any overlap between items in this inventory, only
one such item will be included in the inventory (e.g., Mike Cochran's office
shows a computer below, but is also listed in the inventory of computers)
Teresa Bly's office Spare office
1-Desk 2-Desk
1-Maroon Chair 1-Maroon Chair
2-Black Guest Chairs 1-Black Chair
1-Book Shelf 1-Vert. 4 Drawer File
1-2 Drawer Lat. File 1-Book Shelf
1-Computer 1-Computer Desk
1-Telephone/Paragon 3-Monitor
2-Prints 3-Towers
4-Plants 3-Keyboards
1-Stamp Machine 1-2 Drawer Lat. File
1-Fax Machine
1-Binding Maching
JEM File Room Open Room
1-Maroon Chair 1-4 Draw. Vert. File
1-Pink Chair 1-Black Book Shelf
7-Black 4 Draw. Lat File 1-Work Station (DA)
1-Computer Table
Hallway In Front of Chris Murphy's Office Chris Murphy's Office
1-Dray Erase Board 1-Desk
1-Print 1-Maroon Chair
3-Black Guest Chairs
2-Telephones (JEM/Para)
1-2 Draw. Lat. File
1-Bookshelf
5-Prints
4-Plants
1-Plant Table
1-Round Guest Table
- 20 -
EXHIBIT A
TO BILL OF SALE
River Place Point IV, Suite 201, 6500 River Place Blvd.
Note: to the extent there is any overlap between items in this inventory, only
one such item will be included in the inventory (e.g., Mike Cochran's office
shows a computer below, but is also listed in the inventory of computers)
Lane's Office Paragon/TCG File Room
1-Desk 10-Black 4 Draw. Lat File
1-Maroon Chair 1-Cream 4 Drw Lat File
1-2 Draw. Lat File 1-Cream 4 Drw Vert File
1-Bookshelf 1-(2) Step Stool/Ladder
1-Black Guest Chair
1-Blue Leather Guest Chair
Jamie Barraza Office Sharon Schweihs Office
1-Black 4 Drw Vert File 2-Black Guest Chairs
1-Credenza 1-Bookshelf
1-Desk 1-Desk
1-Maroon Chair 1-Phone (JEM)
2-Blue/Leather Guest Chair 1-Adding Machine
1-Phone (JEM) 1-Credenza
1-Dry Erase Board 1-Maroon Chair
1-Book Shelf 1-Gray Chair
Hallway in Front of Formerly Rylee
Jamie Barraza's Office Wegmann's Office
1-Laser Printer 1-Bookshelf
1-Fax Machine/TCG 1-Desk
1-Fax Machine/JEM 1-Credenza
1-Computer
2-Black Guest Chairs
1-Black 4 Drawer Lateral File
1-Paper Shredder
1-Dry Erase Board
1-Fax/Printer
2-Black Leather Desk Chair
(From Pat's Conf. Room)
1-Plastic Storage Bin
1-Cream Metal Cab
1-Bulletin Board
1-Telephone (JEM)
Side Reception Area Scott Bell Office
1-Maroon Chair 1-Desk
1-Gray Chair 1-Credenza with Hutch
1-Telephone (JEM) 2-Black Guest Chairs
2-Computers 1-Executive Leather Chair
1-Computer
1-Round Guest Table
3-Black Guest Chairs
1-2 Drawer Lateral File (Black)
1-2 Drawer Later File
3-Plants
1-Printer
1-Telephone (Paragon)
1-Tall Standing Lamp
1-Laptop
- 21 -
EXHIBIT A
TO BILL OF SALE
River Place Point IV, Suite 201, 6500 River Place Blvd.
Note: to the extent there is any overlap between items in this inventory, only
one such item will be included in the inventory (e.g., Mike Cochran's office
shows a computer below, but is also listed in the inventory of computers)
Office Across From Scott Bell Micah Trexler's Office
1-Desk 1-Desk
1-Credenza 1-Credenza
1-Black Guest Chair 1-Bookshelf
1-Bookshelf 1-Dry Erase Board
1-TX Wall Map 1-Computer
1-Maroon Chair 1-Telephone (TCG)
1-Telephone (TCG) 1-Maroon Chair
2-Black Guest Chairs
Scott Bell Hallway John Pesce's Conference Room
2 Prints 1-TV with Stand
1-Board Room Table
9-Black Leather Chairs
1-Mini Fridge
1-Red Leather Executive Chair
1 Plant
John Pesce's Office Mike Cochran's Office
1-Desk 1-Desk
1-Black Leather Chair From Conf. Room 1-Credenza With Hutch
2-Blue Leather Guest Chairs 1-Computer
1-Plasma Flat Screen 1-2 Drawer Later File
1-Telephone (TCG) 1-Round Guest Table
1-Plant 2-Blue Leather Guest Chairs
1-Executive Leather Chair
1-Telephone (TCG)
Teri Hoyt Hallway Front Reception Area
2-Prints 1-Red Leather Chair
1-Sofa Couch
7-Plants
1-Bookshelf
1-Desk
1-Computer
1-Phone (TCG)
1-Black Chair
1-Printer
5-Wall Prints
Copier Room Training Room
1-Copy Machine 5 Small Training Tables
1-Dry Erase Board 3 Gray Chairs
1-2 Drw Vert. File
- 22 -
EXHIBIT A
TO BILL OF SALE
River Place Point IV, Suite 201, 6500 River Place Blvd.
Note: to the extent there is any overlap between items in this inventory, only
one such item will be included in the inventory (e.g., Mike Cochran's office
shows a computer below, but is also listed in the inventory of computers)
Kitchen David Allen's Office
4-Chairs 2-Black Guest Chairs
1-Fridge 1-Desk
1-Microwave 1-Credenza
1-Water Machine 1-Maroon Chair
1-Clock 1-Bookshelf
1-Bulletin Board 2-Telephones/TCG/JEM
3-Pictures 1-Monitor
1-TV (DA owns)
1-Printer (DA owns)
Teri Hoyt's Office TCG Cube 1
1-Desk 1-Maroon Chair
1-Credenza with Hutch 1-2 Drw. Vert. File
1-Maroon Chair 1-Telephone
2-Black Guest Chairs 1-Postage Machine
1-End Table (TH owns) 1-Large Cube
1-2 Drw Black Lat File
2-4 Drw Vert File
1-Bookshelf
1-Standing Lamp (TH)
1-Standing Fan (TH)
1-Printer
1-Telephone (TCG)
TCG Cube 2 TCG Cube 3
1-Black Metal Book Shelf 1-Computer
1-Maroon Chair 1-Scanner
1-File/Info Bin 1-Phone
1-Computer 1-Printer
1-Drw Vert File 1-Drw Vert. File
1-Large Cube 1-Black Chair
1-Wicker Chair
1-Large Cube
TCG Cube 4 Formerly Pat Tedrow's Conf Room
1-Maroon Chair 8-Leather Chairs
1-Monitor 1-Maroon Chair
1-Copier 1-Easel
1-Binding Machine 1-Conference Table
3-Phones 1-TCG Phone
1-Scanner
1-Large Cube
- 23 -
EXHIBIT A
TO BILL OF SALE
River Place Point IV, Suite 201, 6500 River Place Blvd.
Note: to the extent there is any overlap between items in this inventory, only
one such item will be included in the inventory (e.g., Mike Cochran's office
shows a computer below, but is also listed in the inventory of computers)
Front Conference Room Hallway to Pat Tedrow's Office
4-Maroon Chairs 3-Prints
4-Red Leather Chairs
1-Painting
1-Plant
Call Center Phone Room
5-JEM Computers 2-Servers
2 Paragon Computers 3-Phone Systems
10 Paragon Phones 3-Network Switches
3 JEM Phones 2-Dell Power Connect #3248
10 Big Cubes 1 Dell Power Connect #5224
12 Little Cubes 3 Levitron 48 Part Extreme 6
1 Black Chair Universal Patch Panel
3 Little Black Chairs 5 Levitron 5e Extreme Universal
9 Red Chairs 48 Part Patch Panel
7 Gray Chairs
Items Taken Out Of Office
Wireless Router
TCG's Original Server
TCG and Paragon Computer Equipment
Equipment Make Model
Copier Xerox 5328
Docking Station Toshiba PA3082U2PRP
Fax Brother Intellifax 2800
Fax Xerox Work Centre 385
Keyboard Laboratory HK 900-1
Keyboard HP 5181
Keyboard Dell RT7020
Keyboard Dell Quiet Key
Keyboard Dell Optiplex GN270-Accompanying
Keyboard Dell Optiplex GX270-Accompanying
Keyboard Logitech CE0682
Laptop Toshiba Satellite Pro 6100
Laptop Satellite 1110-5153
Laptop Toshiba Satellite L35S125
Laptop HP PavilionN5270
Laptop currently used by Mike Cochran
- 24 -
EXHIBIT A
TO BILL OF SALE
River Place Point IV, Suite 201, 6500 River Place Blvd.
Note: to the extent there is any overlap between items in this inventory, only
one such item will be included in the inventory (e.g., Mike Cochran's office
shows a computer below, but is also listed in the inventory of computers)
Laptop currently used by Jamie Barraza
Laptop currently used by Lisa Tritz
Laptop currently used by Scott Bell
Laptop currently used by Wayne Desselle
Laptop currently used by John Pesce
Equipment Make Model
Monitor Elements 723B
Monitor HP Pavilion MX50
Monitor Dell 1B00FP
Monitor Compaq 1024
Monitor HP Pavilion
Monitor Dell Optiplex GN270-Accompanying
Monitor Dell Opitiplex GX270-Accompanying
Monitor ADC 5VLR
Monitor HP Pavilion MX50
Mouse Laboratory P918M
Mouse Generic Generic
Mouse Dell
Mouse Belkin Wheel Mouse
Mouse Dell Optiplex GN270-Accompanying
Mouse Dell Optiplex GX270-Accompanying
Mouse Logitech CE0682
Printer Compaq IJ650
Printer HP Laserjet 4
Printer HP Deskjet 960c
Printer HP Deskjet 6127
Printer HP 4600DN
Scanner HP C8500A
Scanner Visioneer Onetouch 8650
Switch Dell Power Connect 3248
Switch Dell Power Connect 3248
Switch Dell Power Connect 5224
Tower Laboratory Custom Built
Tower HP Pavilion XG836
Tower Dell Optiplex GN270
Tower Compaq Deskpro XL5100
Tower HP Pavilion
Tower Dell Optiplex GN270
Tower Dell Optiplex GX270
Phone System Sprint Protege CTX KSU 431700
Phone System ATT Partner 103F
- 25 -
EXHIBIT A
TO BILL OF SALE
River Place Point IV, Suite 201, 6500 River Place Blvd.
Note: to the extent there is any overlap between items in this inventory, only
one such item will be included in the inventory (e.g., Mike Cochran's office
shows a computer below, but is also listed in the inventory of computers)
JEM COMPUTER EQUIPMENT
Post Post
Move Move
Equipment Make Model Serial No. Location User
Fax
Fax
Keyboard Dell RT7D20 TH-04N454-35E-6452 Austin Rylee Wegmann
Keyboard Hp KB-9970 2C05106935B Austin
Keyboard Dell RT7D20 TH-04N454-37171-358-A838 Austin
Keyboard HP 5181 BD11708898 Austin
Keyboard Dell SK-8110 CN-07N242-38842-2C3-OU88 Houston Chris Duke
Keyboard Dell SK-8110 CN-07N242-38842-2C1-2F39 Houston Bryan Smith
Keyboard Compaq KB-0133 CF32704669 Austin
Keyboard Sharon Schweihs
Keyboard
Keyboard HP 5302 N02702114 Houston
Keyboard HP E06333KUS221-C N/A Austin
Monitor View Sonic VLCDS22034-1B A0A014900260 Austin Rylee Wegmann
Monitor Impression Impression 7SP D991007945 Austin
Monitor Radius Radius L-1 592033536 Austin
Monitor View Sonic A70-VCDTS21543-3R CZ01701979 Austin
Monitor US LOGIC V-1710 171003042116.00 Houston Chris Duke
Monitor Envision EN-1700s T7KF25AG03176 Houston Bryan Smith
Monitor View Sonic VCDTS21543-3R CZ03501360 Austin
Monitor Sharon Schweihs
Monitor
Monitor View Sonic VCDTS21654-2R 216004703032 Houston
Monitor View Sonic VCDTS21543-3R CZ03501356 Austin
Mouse Dell M-UVDEL1 LNB33154721 Austin Rylee Wegmann
Mouse HP M-S34 LZB11670536 Austin
Mouse Dell M-UVDEL1 LNA33518926 Austin
Mouse Logitech 830386-0000 LZC03804267 Austin
Mouse HP M-UR69 LNA15223477 Houston Chris Duke
Mouse HP P8131-0 K024105108 Houston Bryan Smith
-26-
EXHIBIT A
TO BILL OF SALE
River Place Point IV, Suite 201, 6500 River Place Blvd.
Note: to the extent there is any overlap between items in this inventory, only
one such item will be included in the inventory (e.g., Mike Cochran's office
shows a computer below, but is also listed in the inventory of computers)
Post Post
Move Move
Equipment Make Model Serial No. Location User
Mouse HP N3+Optical 30831348 Austin
Mouse Sharon Schweihs
Mouse
Mouse HP P8131 4304453 Houston
Mouse HP M-S34 LZE00250021 Austin
Phone System Lucent Partner 103H
Postage Meter Pitney Bowes DM200 PB3519832 Austin Public
Postage Scale Austin Public
Printer HP Laster Jet 4050 C4251A USBB040327 Houston Paragon Benefits
Printer HP Laster Jet4050TNC4254A USCF045742 Austin Public
Printer HP 8100 Austin Public
Printer HP
Chris Duke, Bryan
Router/Modem Netopia Caymon 3500 Series 881228 Houston Smith
Scanner HP Scanjet ADF 3882H151 Houston Chris Duke
Speakers Polk Audio Houston Chris Duke
Chris Duke, Bryan
Smith
Switch Houston Smith
Switch D-Link DSS 24 HIL297000138
Tower Dell DHM 6JCXG31 Austin Ryee Wegmann
Tower HP e-pc 42 US2200613 Austin
Tower Dell DHM FJCXG31 Houston Bryan Smith
Tower HP Pavilion 7915 MX139A4841 Austin
Tower HP Pavilion A250N MXK3200VZN Houston Chris Duke
Tower Compaq Presario S5200NX MXK33710MM Austin
Tower HP Pavilion 7850 MX10204198 Austin
Tower Sharon Schweihs
Tower
Tower HP Pavilion 763n MX25100717 Houston
Tower HP LC2000 P1798A US03641712 Austin
UPC APC Backup XS 1500 JB0250012376
UPC Omnismart 850PNP
- 27 -
EXHIBIT A
TO BILL OF SALE
River Place Point IV, Suite 201, 6500 River Place Blvd.
Note: to the extent there is any overlap between items in this inventory, only
one such item will be included in the inventory (e.g., Mike Cochran's office
shows a computer below, but is also listed in the inventory of computers)
Other
All software on any of the computers of any of the companies will be transferred
to the Buyers (other than Microsoft Windows XP, Microsoft Office XP,
Papervision, McAfee Antivirus and Quickbooks Premier Network Edition)
All application software of any kind purchased or developed by the companies
prior to June 1, 2003 or after June 1, 2003 will be part of the sale of the
companies to the Buyers. Upon completion of the sale of the companies to the
Buyer, the Seller will promptly (within 3 business days) provide all passwords,
boxes, receipts or other knowledge or items needed to Buyer so that they will be
enabled to take complete and total control of all computer equipment and
software in this inventory.
Any furniture or equipment of any kind at the JEM office at 1022 Hercules,
Houston, TX 77058 not listed above shall become the property of the Buyers upon
the sale of the companies.
Any furniture or equipment of any kind at the Paragon office at 16815 Royal
Crest Dr., Houston, TX 77058 not listed above shall become the property of the
Buyers upon the sale of the companies.
All files or other material removed from the JEM office in Houston and moved to
any location owned or used by FIC.
- 28 -
EXHIBIT B
STOCK PURCHASE AGREEMENT
River Place Point IV, Suite 201, 6500 River Place Blvd.
Teresa Bly's Office Side Reception Area Formerly Pat Tedrow's Office
1-Sofa Table 1-Typewriter 1-Desk
1-Round Guest Table
4-Leather Chairs
1-Leather Couch
1-Computer
3-Monitors
1-Exec. Leather Chair
Phone Room
3-Racks
TCG and Paragon Computer Equipment
Equipment Make Model
Patch Panel Leviton Cat 6 eXtreme Universal 48 port
Patch Panel Leviton Cat 6 eXtreme Universal 48 port
Patch Panel Leviton Cat 6 eXtreme Universal 48 port
Patch Panel Leviton Cat 5e Gigamax Universal 48 port
Patch Panel Leviton Cat 5e Gigamax Universal 48 port
Patch Panel Leviton Cat 5e Gigamax Universal 48 port
Patch Panel Leviton Cat 5e Gigamax Universal 48 port
Patch Panel Leviton Cat 5e Gigamax Universal 48 port
- 29 -
EXHIBIT B
Financials
JEM BALANCE SHEET
AS OF NOVEMBER 30, 2003
ASSETS
Cash Note 1 50,161
Accounts Receivable Note 2 157,704
________
207,865
Property & Equipment
Equipment Note 3 78,546
Furniture & Fixtures Note 3 1,732
Software Note 3 373,257
Less: Accum Deprec Note 3 (49,773)
________
403,762
Other Assets
Security Deposit Note 4 1,746
Receivable from FICFS Note 5 76,837
_______
78,583
TOTAL ASSETS 690,211
LIABILITIES
Current Liabilities
Accounts Payable Note 6 126,552
Tax Liabilities Note 4 9,497
FIT Liabilities (67,462)
Intercompany Payable - ILINA 401,573
Intercompany Payable - FICFS 12,494
________
482,654
Long-term Liabilities
Note Payable Note 7 76,837
0
________
TOTAL LIABILITIES 559,491
- 30 -
STOCKHOLDERS EQUITY
Capital Stock Note 4 152,549
Retained Earnings Note 4 103,455
Net Income (Loss) (125,285)
_________
130,719
_________
TOTAL LIAB & STOCKHOLDERS EQUITY 690,211
Note 1: See spreadsheet "JEM-BANK-RECS-11-30-03".
Note 2: See spreadsheet "JEM-outstanding receivables-113003". Billings
for September - November are estimated at 37,306 per month
(average of June - August).
Note 3: See spreadsheet "JEM-Fixed-Asset-Detail-113003".
Note 4: Number from acquisition Balance Sheet.
Note 5: Equal to Prosperity Bank note since FICFS must retire the debt
as part of the JEM purchase.
Note 6: See spreadsheet "JEM-accounts payable - 113003".
Note 7: Amount per Mark Humphrey at Prosperity Bank.
- 31 -
EXHIBIT B
JEM INCOME STATEMENT
FOR THE PERIOD ENDING NOVEMBER 30, 2003
Revenues Note 1 221,217
General Expenses 413,964
Net Income before Federal _________
Income Taxes (192,747)
Federal Income Tax Expense (67,462)
_________
Net Income (Loss) (125,285)
Note 1: Billings for September - November are estimated at 37,306 per
month or 111,918.
- 32 -
EXHIBIT B
PARAGON BALANCE SHEET
AS OF NOVEMBER 30, 2003
ASSETS
Current Assets
Cash Note 1 151,810
Accounts Receivable Note 2 9,496
________
161,306
Property & Equipment
Equipment Note 3 7,524
Furniture & Fixtures Note 3 7,159
Software Note 3 0
Less: Accum Deprec Note 3 (793)
________
13,891
Other Assets
Other Assets Note 2 903
_______
903
TOTAL ASSETS 176,099
LILABILITIES
Current Liabilities
Accounts Payable Note 4 155,530
Commission Advances Note 5 207,155
FIT Liabilities (81,601)
Intercompany Payable - ILINA 147,941
________
429,024
Long-term Liabilities 0
________
0
________
TOTAL LIABILITIES 429,024
- 33 -
STOCKHOLDERS EQUITY
Capital Stock Note 2 2,000
Retained Earnings Note 2 (103,379)
Net Income (Loss) (151,546)
_________
(252,925)
TOTAL LIAB & STOCKHOLDERS EQUITY 176,099
Note 1: See spreadsheet "PARAGON-BANK-RECS-11-30-03".
Note 2: Number from acquisition Balance Sheet
Note 3: See spreadsheet "Paragon-Fixed-Asset-Detail-113003".
Note 4: See spreadsheet "PARAGON-accounts payable - 113003".
Note 5: Per Valerie Yakelashek of Industrial Alliance Pacific Insurance
(IAP).
- 34 -
EXHIBIT B
PARAGON INCOME STATEMENT
FOR THE PERIOD ENDING NOVEMBER 30, 2003
Revenues Note 1 445,230
General Expenses Note 2 678,377
Net Income before Federal _________
Income Taxes (233,147)
Federal Income Tax Expense (81,601)
_________
Net Income (Loss) (151,546
Note 1: An adjustment was made to establish an advance commission
liability of 207,155 as of November 30. The liability as of the
acquisition date was 31,331. Therefore, the net effect was a
reduction in revenues of 175,824.
Note 2: Includes 24,375 for building 4 rent (September - November); an
accrual of 44,523 for expense to TCG; and an accrual of 58,432
for expense to JEM.
- 35 -
EXHIBIT B
TCG BALANCE SHEET
AS OF NOVEMBER 30, 2003
ASSETS
Current Assets
Cash Note 1 52,191
Accounts Receivable Note 2 68,516
________
120,707
Property & Equipment
Fixed Assets - General Note 3 15,984
Equipment Note 3 40,739
Furniture & Fixtures Note 3 10,607
Software Note 3 11,123
Less: Accum Deprec Note 3 (42,879)
________
35,574
Other Assets
Intercompany Paragon Note 4 59,601
Security Deposit Note 5 7,215
Other Assets Note 5 4,255
Prepaid Rent Note 5 14,430
Prepaid Expense Note 6 14,656
______
100,157
TOTAL ASSETS 256,438
LILABILITIES
Current Liabilities
Accounts Payable Note 7 81,582
Deferred Revenue Note 8 111,430
Deferred Rent Note 9 24,375
FIT Liability (117,866)
Intercompany Payable - ILINA 305,745
Intercompany Payable - FICFS 67,108
________
472,375
Long-term Liabilities 0
________
0
________
TOTAL LIABILITIES 472,375
- 36 -
STOCKHOLDERS EQUITY
Capital Stock Note 5 881,260
Retained Earnings Note 5 (878,304)
Net Income (Loss) (218,893)
_________
(215,937)
TOTAL LIAB & STOCKHOLDERS EQUITY 256,438
Note 1: See spreadsheet "TCG-BANK-RECS-11-30-03".
Note 2: See spreadsheet "TCG-outstanding receivables-113003".
Note 3: See spreadsheet "TCG-Fixed-Asset-Detail-113003".
Note 4: 10% of Paragon revenue (44,523) plus rent (15,078).
Note 5: Number from acquisition Balance Sheet.
Note 6: 457 promotional material - 21 months to be expensed (698 per
month).
Note 7: See spreadsheet "TCG-accounts payable - 113003".
Note 8: See spreadsheet "TCG-CONSULTING-CONTRACTS-REV-BY-MONTH-113003".
Note 9: September - November rent in bulding 4 at 8,125 per month.
- 37 -
EXHIBIT B
TCG INCOME STATEMENT
FOR THE PERIOD ENDING NOVEMBER 30, 2003
Revenues Note 1 293,839
General Expenses Note 2 630,598
Net Income before Federal _________
Income Taxes (336,759)
Federal Income Tax Expense (117,866)
_________
Net Income (Loss) (218,893
Note 1: Includes 10% of Paragon revenue (44,523). Consulting contract
revenue is recognized as it is earned; as of November 30,
111,430 of contract revenue has been deferred.
Note 2: Includes 24,375 for building 4 rent (September - November); and
an accrual of 50,000 for legal expenses to Arty Howard.
- 38 -
EXHIBIT C
JNT Transition Plan
Item Description Status
457 Overdeposits Error made in crediting deduction Will be
twice; based on this credit, claims Completed
were overpaid; Letter sent from JEM
threatening Legal Action Decision
made to eat difference of approx $3500
and apology letter to be sent
DCA Audit and Identified that MBI does not reflect Open
Claim Checks individual payroll deductions for some Target
participants so claims checks are on Completion
hold on system; audit is in progress 12/24/03
to correct MBI and determine claims
checks to be generated. Priority due
to reimburse as deduction received
FLEX Spending Related to DCA Audit but for Flex Open
Audit Spending Accounts. May be the same Target
problem but less exposure since Completion
participants are paid in advance 12/31/03
of deduction being credited
MBI-All Claims Claims paid through MBI for Flex Target
Audit Cards have not been properly audited Completion
since September. Audit needs to be 1/31/04
completed to find any improper or
questionable claims, contact partic-
ipants for receipts if needed, make
any corrections, and do appropriate
1099 forms
Invoices for JEM All payments since September to JEM Target
Services Included need to be audited to determine if funds Completion
With Prayroll deposited in 125 claims account or 403(b) 1/31/04
Deductions or 457 accounts included payments for
JEM services in addition to payroll
deductions. These payments need to be
accounted for in JEM's statements
Invoices for JEM All JEM fee schedules need to be Target
Services Directly compared to invoices sent to clients Completion
Billed (it does not appear that any have been 1/31/04
done since August and if clients have
not been billed, invoices need to be
sent and followed up on by phone.
QuickBooks files on JEM server as well
as the Invoice Files (Roberta has these)
can be used to do this.
- 39 -
Movement of JEM, 457 FIC IT personnel will facilitate access Target
and 125 Solution to the existing websites by the new Completion
Websites ASP for the New Era Companies and other- 1/31/04
wise support transfer of these websites
by the new ASP to its own hosting
environment.
Balancing of 125 No reconciliation of 125 bank accounts Target
accounts to the MBI system have been done since Completion
September, per Roberta. This needs to 1/31/04
be completed and any amounts owed to
schools or vice versa needs to be handled.
Control of JEM Bank FIC personnel will facilitate the transfer Target
Accounts of control of JNT bank accounts to JNT- Completion
designated manager immediately following 1/9/04
Closing.
125 Statements to It does not appear that any accounting Target
Clients of 125 accounts and activity has been Completion
provided to clients since September. 1/31/04
These need to be produced and sent out
with explanations
FIC Transition FIC, at its expense, will commit to JNT
Personnel Robert Mitchell, as well as up to 3 of
the current FIC employees assigned to JNT
(other than Kala Heide), as agreed to by
Buyer, during January 2004 for the sole
purpose of completing the items set forth
on this JNT Transition Plan. It is the
reasonable expectation of the parties as of
December 31, 2003 that completing the items
set forth on this JNT Transition Plan will
require Roberta Mitchell to commit a maximum
of 80% of her time during the first week of
January, a maximum of 60% of her time during
the second week of January, 40% of her time
during the third week of January and 20% of
her time during the fourth week of January.
Notwithstanding the foregoing, FIC will not
be obligated to commit Roberta Mitchell, or
any other designee of FIC, to JNT any more
than is necessary to complete the items set
forth on this JNT Transition Plan. FIC is
not obligated to make any further staffing
commitment than as is set forth herein.
- 40 -