EX-10 3 exhibit-10_1.txt STOCK PURCHASE AGREEMENT BETWEEN BCDP & FIC 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. - 1 - 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. - 2 - 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. - 3 - 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. - 4 - 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). - 5 - 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. - 6 - 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. - 7 - (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. - 8 - (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. - 9 - 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. - 10 - (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 -