EXHIBIT 10.47
CAUSE NO. GN302072
OTTER CREEK PARTNERS I, L.P. IN THE DISTRICT COURT
Plaintiff,
v.
TRAVIS COUNTY, TEXAS
FINANCIAL INDUSTRIES CORPORATION
Defendant
200TH JUDICIAL DISTRICT
COMPROMISE SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Compromise Settlement Agreement and Mutual Release (this "Agreement")
is made as of the 16th day of December, 2003, by and among Otter Creek Partners
I, L.P. ("Otter Creek I"), Otter Creek Management, Inc. ("Otter Creek
Management"), and Otter Creek International, Ltd. ("Otter Creek International"),
(Otter Creek I, Otter Creek Management, and Otter Creek International are
sometimes collectively referred to hereinafter as "Otter Creek") and Defendant
Financial Industries Corporation ("FIC"), as follows:
1.0. RECITALS.
1.1. Otter Creek I is a limited partnership organized under the laws of the
State of Delaware. Otter Creek International is an investment corporation
organized under the laws of the British Virgin Islands. Otter Creek Management
is a corporation organized under the laws of the State of Delaware.
1.2. FIC is a corporation organized under the laws of the State of Texas,
with its principal offices at 6500 River Place Blvd., Building 1, Austin, Texas
78730.
1.3. Otter Creek I and Otter Creek International own shares of FIC common
stock. Otter Creek and FIC have been involved in disputes and controversies
between them, as is reflected in part in the pleadings filed and orders entered
in the above-entitled and numbered cause (this "Litigation"). In particular,
Otter Creek has claimed that FIC and/or its officers and/or directors (1)
improperly manipulated the date of the 2002 shareholders' meeting to gain an
advantage for the then Board of Directors' nominated slate of director
candidates and (2) improperly obtained a proxy from the Roy F. and Joann Cole
Mitte Foundation (the "Mitte Proxy") and then improperly voted the shares
subject to the Mitte Proxy for the Board's nominated slate of directors, instead
of abstaining from voting such shares or, alternatively, voting the shares
proportionally for all director nominees (collectively, "the Litigation
Claims"). In addition, Otter Creek proposed a slate of candidates for election
to FIC's Board of Directors at FIC's 2003 Annual Meeting, and FIC and Otter
Creek engaged in a proxy contest in connection with such Annual Meeting (the
"Proxy Contest").
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1.4. Otter Creek has informed FIC that Otter Creek incurred legal fees and
other expenses in excess of $535,000.00 (the "Proxy Contest Expenses") in
connection with the Proxy Contest, and that Otter Creek has incurred legal fees,
costs, and other expenses in the amount of $190,000.00 (the "Litigation
Expenses") in connection with its filing and prosecution of this Litigation. In
its Proxy Statement, Otter Creek stated that it would seek reimbursement of
expenses incurred in the Proxy Contest if Otter Creek was successful in causing
the election of at least one director to the Board of Directors of FIC. Otter
Creek has now requested that FIC reimburse Otter Creek for the Proxy Contest
Expenses and the Litigation Expenses.
1.5. Otter Creek and FIC have now reached a compromise settlement pursuant
to which this Litigation will be dismissed and the disputes and controversies
between them will be resolved on the terms set out below.
2.0. PARTIAL PAYMENT; SUBMISSION TO SHAREHOLDERS.
2.1. FIC will pay to Otter Creek, by company check made payable to Otter
Creek Management, Inc., the sum of $250,000.00 in partial payment of the Proxy
Contest Expenses. Such payment will be delivered to Otter Creek's Litigation
counsel within five (5) business days after the receipt by FIC's Litigation
counsel of a copy of this Agreement executed on behalf of Otter Creek.
2.2. FIC will reimburse Otter Creek an additional $475,000 for Proxy
Contest and Litigation Expenses only if the holders of a majority of the FIC
shares entitled to vote, present, or in person or represented by proxy at FIC's
Annual Meeting of Shareholders in the year 2004 or, if earlier and with Otter
Creek's consent, the next special meeting of shareholders (the "Reimbursement
Proposal Meeting") (it being understood that abstentions and broker non-votes
shall not be counted as being present and entitled to vote at the meeting and
shall have no effect on the outcome of this matter) (a "Majority of Votes"),
vote in favor of such reimbursement. The question of FIC's reimbursement of
Otter Creek for such additional $475,000 for Proxy Contest and Litigation
Expenses will be submitted to the shareholders of FIC for vote (the
"Reimbursement Proposal") at the Reimbursement Proposal Meeting, with a
recommendation by the Board of Directors that the shareholders vote to approve
the Reimbursement Proposal. In that regard, the Board will (a) solicit proxies
in favor of the Reimbursement Proposal to the same extent proxies are solicited
on behalf of any other matter recommended by the Board for consideration at such
meeting and (b) cause the attorneys-in-fact or proxies named in the applicable
proxy cards to vote the shares with respect to which proxies are given in the
manner directed by such proxy cards. Such recommendation will also advise
shareholders of potential conflicts of interest of various members of the Board
of Directors with respect to such recommendation. In the event that a Majority
of Votes are voted to approve the Reimbursement Proposal, FIC will pay to Otter
Creek such additional $475,000 for Proxy Contest and Litigation Expenses by
company check made payable to Otter Creek Management, Inc., delivered as
directed by Keith Long to FIC's General Counsel, within five (5) business days
after such direction is given.
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3.0. MUTUAL RELEASES.
3.1. General Release of FIC by Otter Creek. Otter Creek I, Otter Creek
Management, and Otter Creek International, for and on behalf of themselves and
each of their current and former principals, general or limited partners,
directors, officers, shareholders, employees, parent companies, subsidiaries,
affiliates, member firms, predecessors, successors, assigns, and trustees, if
any (collectively, the "Otter Creek Releasing Parties"), hereby covenant not to
sue and fully, finally, and forever generally RELEASE, SURRENDER, REMISE,
ACQUIT, AND FOREVER DISCHARGE FIC and its current and former principals, general
or limited partners, directors, officers, shareholders, employees, parent
companies, subsidiaries, affiliates, member firms, predecessors, successors,
assigns, trustees, agents, attorneys, accountants, insurers, and representatives
of any kind, if any (collectively, the "FIC Released Parties"), jointly and
severally, from any and all claims, disputes, demands, actions, liabilities,
damages, suits (whether at law or in equity), promises, accounts, costs,
expenses, setoffs, contributions, attorneys' fees and/or causes of action of
whatever kind or character, whether past, present, KNOWN OR UNKNOWN, liquidated
or unliquidated, contingent or non-contingent, accrued or unaccrued, or which
may hereinafter arise as a result of the discovery of new and/or additional
facts , which the Otter Creek Releasing Parties have had, may now have or might
claim to have, or may have in the future against the FIC Released Parties to the
extent arising out of the matters alleged in this Litigation, FIC's 2003 Annual
Meeting and/or the Proxy Contest, INCLUDING, WITHOUT LIMITATION, TO THE EXTENT
COVERED ABOVE, ANY AND ALL STATUTORY AND COMMON LAW CLAIMS FOR VIOLATION OF
SHAREHOLDERS' RIGHTS, DECLARATORY JUDGMENT, COPYRIGHT INFRINGEMENT, UNJUST
ENRICHMENT, BREACH OF EXPRESS OR IMPLIED CONTRACT, TORTIOUS INTERFERENCE WITH
CONTRACT, PROMISSORY ESTOPPEL, BREACH OF IMPLIED COVENANTS, SPECIFIC
PERFORMANCE, BREACH OF FIDUCIARY DUTY, INTENTIONAL INFLICTION OF EMOTIONAL
DISTRESS, NEGLIGENCE, AN ACCOUNTING, FRAUD, NEGLIGENT MISREPRESENTATION,
FRAUDULENT INDUCEMENT (INCLUDING FRAUDULENT INDUCEMENT TO ENTER INTO THIS
AGREEMENT), CONVERSION OR ANY CLAIM THAT ARISES PRIOR TO THE EFFECTIVE DATE OF
THIS AGREEMENT, except for the obligations contained in this Agreement. This
release, however, does not include derivative claims that do not arise out of
this Litigation, FIC's 2003 Annual Meeting and/or the Proxy Contest.
3.2. General Release of Otter Creek by FIC. FIC, for and on behalf of
itself and each of its current and former principals, general or limited
partners, directors, officers, shareholders, employees, parent companies,
subsidiaries, affiliates, member firms, predecessors, successors, assigns, and
trustees, if any (collectively, the "FIC Releasing Parties"), hereby covenants
not to sue and fully, finally, and forever generally RELEASES, SURRENDERS,
REMISES, ACQUITS, AND FOREVER DISCHARGES Otter Creek I, Otter Creek Management
and Otter Creek International and their current and former principals, general
or limited partners, directors, officers, shareholders, employees, parent
companies, subsidiaries, affiliates, member firms, predecessors, successors,
assigns, trustees, agents, attorneys, accountants, insurers, and representatives
of any kind, if any, (collectively, the "Otter Creek Released Parties"), jointly
and severally, from any and all claims, disputes, demands, actions, liabilities,
damages, suits (whether at law or in equity), promises, accounts, costs,
expenses, setoffs, contributions, attorneys' fees and/or causes of action of
whatever kind or character, whether past, present, KNOWN OR UNKNOWN, liquidated
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or unliquidated, contingent or non-contingent, accrued or unaccrued, or which
may hereinafter arise as a result of the discovery of new and/or additional
facts which the FIC Releasing Parties have had, may now have or might claim to
have, or may have in the future against the Otter Creek Released Parties to the
extent arising out of the matters alleged in this Litigation, FIC's 2003 Annual
Meeting and/or the Proxy Contest, INCLUDING, WITHOUT LIMITATION, TO THE EXTENT
COVERED ABOVE, ANY AND ALL STATUTORY AND COMMON LAW CLAIMS FOR VIOLATION OF
SHAREHOLDERS' RIGHTS, DECLARATORY JUDGMENT, UNJUST ENRICHMENT, BREACH OF EXPRESS
OR IMPLIED CONTRACT, TORTIOUS INTERFERENCE WITH CONTRACT, PROMISSORY ESTOPPEL,
BREACH OF IMPLIED COVENANTS, SPECIFIC PERFORMANCE, BREACH OF FIDUCIARY DUTY,
INTENTIONAL INFLICTION OF EMOTIONAL DISTRESS, NEGLIGENCE, AN ACCOUNTING, FRAUD,
NEGLIGENT MISREPRESENTATION, FRAUDULENT INDUCEMENT (INCLUDING FRAUDULENT
INDUCEMENT TO ENTER INTO THIS AGREEMENT), CONVERSION, OR ANY CLAIM THAT ARISES
PRIOR TO THE EFFECTIVE DATE OF THIS AGREEMENT, except for the obligations
contained in this Agreement.
3.3. Authority to Release and Settle. Each Party hereby expressly warrants
and represents that: (i) it is the lawful owner of all Claims herein released;
(ii) it has full power and express authority to settle and release the Claims as
set forth in this Agreement; (iii) it has not made any assignment or transfer of
those Claims, including but not limited to assignment or transfer by subrogation
or by operation of law; (iv) it knows of no person or entity that intends to
assert a claim by, through, under, or on behalf of such Party; (v) it is not
relying upon any statements, understandings, representations, expectations, or
agreements other than those expressly set forth in this Agreement; (vi) it is
represented and has been advised by counsel in connection with this Agreement,
which such Party executes wholly voluntarily and of its own choice, volition,
judgment, belief and knowledge, after consultation with such counsel and not
under coercion or duress; (vii) it has made its own investigation of the facts
and is relying solely upon its own knowledge and the advice of its counsel;
(viii) it has no expectation that the other Party will disclose to it facts
material to this Agreement and (ix) it knowingly waives any claim that this
Agreement was induced by any misrepresentation or nondisclosure and any right to
rescind or avoid this Agreement based upon presently existing facts, known or
unknown. The Parties agree and stipulate that each Party is relying upon these
representations and warranties in entering into this Agreement. These
representations and warranties shall survive the execution of this Agreement.
4.0. DISMISSAL.
4.1. Otter Creek I and FIC, through their respective attorneys of record,
will execute and deliver to the Court for entry the Agreed Judgment of Dismissal
attached hereto as Exhibit "A".
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5.0. MISCELLANEOUS.
5.1. Severability and Savings Clause. Should any clause, sentence,
provision, paragraph or part of this Agreement for any reason whatsoever, be
adjudged by any court of competent jurisdiction, or be held by any other
competent governmental authority having jurisdiction, to be invalid,
unenforceable, or illegal, such judgment or holding shall not affect, impair or
invalidate the remainder of this Agreement, but shall be confined in its
operation to the specific clause, sentence, provision, paragraph or part of this
Agreement directly involved, and the remainder of this Agreement, wherever
practicable, shall remain it full force and effect.
5.2. GOVERNING LAW AND VENUE. THIS AGREEMENT SHALL BE EXCLUSIVELY GOVERNED
BY AND CONSTRUED ACCORDING TO THE LAWS OF THE STATE OF TEXAS EXCEPT THAT ANY
CONFLICTS OF LAW RULE REQUIRING REFERENCE TO THE LAWS OF ANOTHER JURISDICTION
SHALL BE DISREGARDED. EXCLUSIVE VENUE SHALL LIE IN THE UNITED STATES DISTRICT
COURT FOR THE WESTERN DISTRICT OF TEXAS, AUSTIN DIVISION, AND/OR IN THE TEXAS
STATE DISTRICT COURT IN AND FOR TRAVIS COUNTY, TEXAS. ANY LAWSUIT COMMENCED BY
OR BETWEEN THE PARTIES TO THIS AGREEMENT SHALL BE BROUGHT IN THE UNITED STATES
DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS, AUSTIN DIVISION, AND/OR THE
TEXAS STATE DISTRICT COURT IN AND FOR TRAVIS COUNTY, TEXAS, AND ALL PARTIES TO
THIS AGREEMENT HEREBY CONSENT TO THE VENUE AND JURISDICTION OF THAT COURT. THIS
CONSENT IS FOR PURPOSES OF THIS AGREEMENT ONLY AND DOES NOT CONSTITUTE A GENERAL
CONSENT TO THE JURISDICTION OF THE STATE OR FEDERAL COURTS SITTING IN TEXAS.
5.3. Further Assurances. The Parties agree that they shall, from time to
time, execute, acknowledge, and deliver, or cause to be executed, acknowledged,
and delivered to the other Parties instruments, agreements, board resolutions,
proxy materials, lien waivers, and other documents as each Party shall
reasonably request in order to further evidence the releases and other covenants
described in this Agreement, including, but not limited to, the Agreed Judgment
of Dismissal in conformance with Section 4.1.
5.4. Entire Agreement Clause. This Agreement contains and constitutes the
entire agreement and understandings of the Parties and supersedes as of the
execution date all prior negotiations and discussions with respect to the
subject matter of this Agreement, whether oral or written, or any claims that
might have ever been made by one Party against any opposing Party. There are no
representations, agreements, or inducements except as set forth expressly and
specifically in this Agreement.
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5.5. Amendments in Writing. This Agreement may only be amended or modified
by a written instrument that has been executed by the Parties and that
unequivocally indicates the Parties' intention to modify this Agreement. No
waiver of any breach of this Agreement shall be construed as an implied
amendment or agreement to amend or modify any provision of this Agreement.
5.6. No Author. All terms and provisions of this Agreement, and the
drafting of this Agreement, have been negotiated by the Parties at arm's length
and to mutual agreement, with consideration by and participation of each, and no
party shall be deemed the scrivener of this Agreement.
5.7. Construction. Words used in the Agreement of any gender or neuter
shall be construed to include any other gender or neuter where appropriate.
Words used in this Agreement that are either singular or plural shall be
construed to include the other where appropriate.
5.8. Captions and Headings. The Parties agree that the captions and
headings contained in this Agreement are for convenience only and shall not be
deemed to constitute a part of this Agreement.
5.9. Multiple Counterparts. This Agreement may be executed in multiple
counterparts, any and all of which may contain the signatures of less than all
the Parties and all of which shall be construed together as a single document.
Each counterpart shall be fully effective as an original when all of the Parties
have executed this Agreement. Such counterparts may also be executed by
telefaxed signature.
5.10. No Admission of Fault. Neither the execution of this Agreement nor
compliance with its terms, nor the consideration provided for herein, shall
constitute or be construed as an admission of any fault, wrongdoing or liability
whatsoever on the part of any of the Parties, or any of their agents, attorneys,
representatives, or employees, but is in full settlement of disputed issues, and
all such liability is expressly denied.
5.11. No Waiver. The failure by any of the Parties to this Agreement to
enforce at any time, or for any period of time, any one or more of the terms or
conditions of this Agreement or a course of dealing between the Parties, shall
not be a waiver of such terms or conditions or of such Party's right thereafter
to enforce each and every term and condition of this Agreement.
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SIGNED on the dates set forth below, to be effective as of the date set
forth on the first page of this Agreement.
FINANCIAL INDUSTRIES CORPORATION, INC.
By___________________________________ Date: December ________, 2003
Name: _____________________________
Title: _______________________________
OTTER CREEK MANAGEMENT, INC.
By___________________________________ Date: December ______, 2003
Roger Keith Long
President
OTTER CREEK PARTNERS I, L.P.
By: Otter Creek Management, Inc.,
its General Partner
By___________________________________ Date: December________, 2003
Roger Keith Long
President
OTTER CREEK INTERNATIONAL, LTD.
By___________________________________ Date: December_____, 2003
Roger Keith Long
Director
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