-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OHyitpDHfgf9wxPSvwL81SoiE+WBXLFqwqy2VMz4UO0b9b+aTh7zQMCy7yRuUB0L E208oMP/Fer1hPePp1jdTg== 0000724024-03-000011.txt : 20030605 0000724024-03-000011.hdr.sgml : 20030605 20030605094627 ACCESSION NUMBER: 0000724024-03-000011 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030604 ITEM INFORMATION: Acquisition or disposition of assets FILED AS OF DATE: 20030605 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN PHYSICIANS SERVICE GROUP INC CENTRAL INDEX KEY: 0000724024 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MANAGEMENT SERVICES [8741] IRS NUMBER: 751458323 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-31434 FILM NUMBER: 03733359 BUSINESS ADDRESS: STREET 1: 1301 CAPITAL OF TEXAS HWY STREET 2: C-300 CITY: AUSTIN STATE: TX ZIP: 78746 BUSINESS PHONE: 5123280888 MAIL ADDRESS: STREET 1: 1301 CAPITAL OF TEXAS HIGHWAY CITY: AUTIN STATE: TX ZIP: 78746 8-K 1 cover.txt JUNE 4, 2003 ACQUISITION OF ASSETS SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: Date of Report (Date of earliest event reported:) June 4, 2003 (June 4, 2003) American Physicians Service Group, Inc. (Exact name of registrant as specified in its charter) Texas 0-11453 75-1458323 (State of (Commission File Number) (IRS Employer Incorporation) Identification No.) 1301 Capitol of Texas Highway Suite C-300 Austin, Texas 78746 (Address of principal executive offices) (Zip Code) (512) 328-0888 (Registrant's telephone number, including area code) Item 2. Acquistion of Assets Pursuant to the terms of that certain Stock Purchase Agreement dated June 4, 2003, between American Physicians Service Group, Inc. ("APS") and The Roy F. and Joann Cole Mitte Foundation, a Texas non-profit corporation (the "Foundation") and that Stock Purchase and Option Agreememnt dated June 4, 2003 between APS and Financial Industries Corporation ("FIC"), and an acquisition of approximately 340,000 shares of FIC's outstanding common stock was made by APS. This transaction, together with an earlier purchase of 45,000 shares of FIC common stock, brings the total number of shares of FIC common stock owned by APS to approximately 385,000. The purchase price was approximately $5.7 million and was sourced from the Company's surplus cash investments. Concurrent with FIC's implementation of a new marketing plan, which APS assisted in developing, Mr. Ken Shifrin, APS Chairman of the Board, will be appointed to the board of FIC. In addition, APS has been granted an option to purchase 323,000 FIC shares based on achievement of certain growth initiatives. FIC, through its various subsidiaries, owns real estate and an actuarial consulting firm, and markets and underwrites life insurance and annuity products. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. American Physicians Service Group, Inc. Date: June 4, 2003 By: /s/ W.H. Hayes ---------------------------------------------- Name: W.H. Hayes ---------------------------------------------- Title: Sr VP - Finance ---------------------------------------------- 2 EXHIBIT INDEX Exhibit Number Description - ------ ----------- Exhibit 10.1 Stock Purchase Agreement between American Physicians Service Group, Inc. and The Roy F. and Joann Cole Mitte Foundation. Exhibit 10.2 Stock Purchase and Option Agreement between American Physicians Service Group, Inc. and Financial Industries Corporation. Exhibit 10.3 Registration Rights Agreement between Financial Industries Corporation and American Physicians Service Group, Inc. EX-10 3 purchagr.txt STOCK PURCHASE AGREEMEMENT STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (this "Agreement") is made and entered into as of this 4th day of June, 2003, by and between The Roy F. and Joann Cole Mitte Foundation, a Texas nonprofit corporation (the "Foundation"), and American Physicians Service Group, Inc., a Texas corporation ("Purchaser"). RECITALS WHEREAS, Purchaser desires to purchase from the Foundation, and the Foundation desires to sell to Purchaser, 312,484 shares (the "Shares") of common stock, par value $.20 per share (the "Common Stock"), of Financial Industries Corporation, a Texas corporation (the "Company"), owned by the Foundation at a purchase price equal to $14.64 per share (the "Share Price") and under the other terms and conditions set forth herein; WHEREAS, the Foundation desires that the Purchase (as defined below) shall count towards the amounts of shares of Common Stock for which the Foundation must receive purchase offers as more fully described in Section 2.4 of that certain Compromise Settlement Agreement and Mutual Release, dated as of May 15, 2003, between the Company, Robert Bender, Roy F. Mitte, Joann Cole Mitte, Scott Mitte, Jan Mitte and the Foundation (the "Settlement Agreement"); WHEREAS, the Foundation intends that, at the time the Purchase is consummated pursuant to the terms hereof, the Shares will not be subject to the proxy described in Section 2.1 of the Settlement Agreement or any other terms of the Settlement Agreement. AGREEMENT For and 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: Section 1. SALE OF SHARES. 1.1 PURCHASE AND SALE; Closing. Subject to the terms and conditions of this Agreement, and in reliance on the respective representations and warranties of the Foundation and Purchaser, Purchaser hereby acquires from the Foundation, and the Foundation sells to Purchaser (the "Purchase"), the Shares. The aggregate purchase price for the Shares (the "Purchase Price") shall be $4,574,766. The Purchase Price shall be paid in cash, tendered by Purchaser by wire transfer of immediately available funds to the Foundation in accordance with the Foundation's wire transfer instructions set forth on Exhibit A attached hereto at the closing of the Purchase (the "Closing"). The Shares acquired in the Purchase shall be delivered to Purchaser at the Closing, free and clear of any and all liens, claims, security interests, pledges, mortgages, restrictions or encumbrances of any kind (the "Encumbrances"), other than those restrictions arising from applicable federal and state securities laws. The Closing shall occur concurrently with the execution of this Agreement and at such place and time as the parties may mutually agree. The date on which the Closing actually occurs is referred to herein as the "Closing Date". 1.2 CLOSING DELIVERIES. AT THE CLOSING: (a) THE FOUNDATION. The Foundation shall deliver, or cause to be delivered, to Purchaser the following: (i) a certificate or certificates representing the Shares registered in the Foundation's name, together with a duly executed stock power endorsed to Purchaser; (ii) a receipt for the payment of the Purchase Price received by the Foundation; and (iii) a copy of a unanimous consent of the Directors of the Foundation authorizing the Foundation to execute and deliver this Agreement and consummate the transactions contemplated hereby. (b) PURCHASER. Purchaser shall deliver, or cause to be delivered, to the Foundation the Purchase Price by wire transfer of immediately available funds. 1.3 SALES AND TRANSFER TAXES. Any taxes, fees and other charges of any kind imposed by any governmental or taxing authority and any transfer, recording or similar fees and charges arising out of or in connection with the transactions contemplated by this Agreement shall be borne by the party primarily responsible for such taxes and other fees and charges under applicable law. Section 2. REPRESENTATIONS AND WARRANTIES OF THE FOUNDATION. The Foundation hereby represents and warrants to Purchaser that: 2.1 AUTHORITY. The Foundation is a nonprofit corporation validly existing and in good standing under the laws of the State of Texas. The Foundation has full power and authority to execute, deliver and perform this Agreement and any other agreements, documents and instruments contemplated by this Agreement (collectively, the "Documents") to which it is a party. The execution, delivery 2 and performance of this Agreement and the Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the directors of the Foundation (the "Board") and no other proceedings or actions on the part of the Foundation are necessary to authorize this Agreement or any of the Documents to which it is a party or the consummation of the transactions contemplated hereby or thereby. This Agreement and such Documents have been and will be duly and validly executed and delivered by the Foundation, and, assuming this Agreement and such Documents constitute the valid and binding obligations of Purchaser, this Agreement and such Documents constitute valid and binding agreements of the Foundation, enforceable against the Foundation in accordance with their terms. 2.2 SHARE OWNERSHIP. The Foundation is the sole record owner and beneficial owner of the Shares. The Foundation has good and valid title to the Shares, free and clear of any Encumbrances except restrictions arising from applicable federal and state securities laws. No person or entity has a right to acquire or direct the disposition, or holds a proxy or other right to vote or direct the vote, of the Shares. Other than this Agreement, there is no option, warrant, right, call, proxy, agreement, commitment or understanding of any nature whatsoever, fixed or contingent, that directly or indirectly (a) calls for the sale, pledge or other transfer or disposition of any of the Shares, any interest therein or any rights with respect thereto, or relates to the voting, disposition, exercise, conversion or control of the Shares, or (b) obligates the Foundation to grant, offer or enter into any of the foregoing. 2.3 SHARES. The sale by the Foundation of the Shares and the delivery of the certificates representing the Shares to Purchaser against receipt of payment therefor pursuant hereto will transfer to Purchaser good and valid title to the Shares, free and clear of all Encumbrances (a) except restrictions arising from applicable federal and state securities laws, and (b) Encumbrances created by Purchaser. 2.4 NONCONTRAVENTION. The execution, delivery and performance of this Agreement and the Documents to which it is a party by the Foundation does not and will not (a) violate or conflict with or result in a breach of any provision of the organizational documents of the Foundation, (b) violate or conflict with any law or order, writ, judgment, injunction, decree, stipulation, determination, or award (a "Governmental Order") entered into by or with any federal, state, local, or any foreign government, governmental, regulatory, or administrative 3 authority, agency or commission or any court (a "Governmental Authority") applicable to the Foundation or any of its assets and properties, or (c) conflict with, result in any violation or breach of or constitute a default (or an event which, with the giving of notice or lapse of time, or both, would become a default) under, require any notice or consent under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in any loss of any benefit, the triggering of any payment by, or the increase in other obligation of, the Foundation or the creation of any Encumbrance on any assets or properties of the Foundation pursuant to any material contract, license, permit, franchise or other instrument or arrangement to which the Foundation is a party or by which it, or any of such assets or properties is bound or affected, except for, in the case of clauses (b) and (c), such conflicts, violations, breaches, defaults or other occurrences that would not (i) materially impair the ability of the Foundation to perform its obligations under this Agreement or (ii) prevent or materially delay the consummation of any of the transactions contemplated hereby. 2.5 CONSENTS AND APPROVALS. No consent from or filing with any person or entity (including, without limitation, any Governmental Authority) on the part of the Foundation is required in connection with the execution or delivery by the Foundation of this Agreement or any of the Documents to which it is a party or the consummation by the Foundation of the transactions contemplated hereby or thereby, other than (a) filings with the Securities and Exchange Commission (the "SEC") and state securities laws administrators and the National Association of Securities Dealers and (b) the filing of appropriate documents with, and to the extent necessary, approval of, the Commissioners of Insurance of the State of Washington and State of Texas and such notices and consents as may be required under the insurance laws of any jurisdiction in which the Company or its subsidiaries is domiciled or does business. 2.6 BROKER'S FEES. The Foundation has not entered into any agreement, arrangement or understanding with any person or entity that will result in the obligation of Purchaser or the Company to pay any finder's fees, brokerage or agent's commissions or other like payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby. 4 Section 3. REPRESENTATIONS OF PURCHASER. Purchaser represents and warrants to the Foundation that: 3.1 AUTHORITY. Purchaser is validly existing and in good standing under the laws of the State of Texas. Purchase has full power and authority to execute, deliver and perform this Agreement and any Documents to which it is a party. The execution, delivery and performance of this Agreement and the Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the Board of Directors of Purchaser and no other proceedings or actions on the part of Purchaser are necessary to authorize this Agreement or any of the Documents to which it is a party or the consummation of the transactions contemplated hereby or thereby. This Agreement and such Documents have been and will be duly and validly executed and delivered by Purchaser, and, assuming this Agreement and such Documents constitute the valid and binding obligations of the Foundation, this Agreement and such Documents constitute valid and binding agreements of Purchaser, enforceable against Purchaser in accordance with their terms. 3.2 NONCONTRAVENTION. The execution, delivery and performance of this Agreement and the Documents to which it is a party by Purchaser does not and will not (a) violate or conflict with or result in a breach of any provision of the organizational documents of Purchaser, (b) violate or conflict with any law or Governmental Order applicable to Purchaser or any of its assets and properties, or (c) conflict with, result in any violation or breach of or constitute a default (or an event which, with the giving of notice or lapse of time, or both, would become a default) under, require any notice or consent under, or give to others any rights of termination, amendment, acceleration or cancellation of, or result in any loss of any benefit, the triggering of any payment by, or the increase in other obligation of, Purchaser or the creation of any Encumbrance on any assets or properties of Purchaser pursuant to any material contract, license, permit, franchise or other instrument or arrangement to which Purchaser is a party or by which it, or any of its assets or properties is bound or affected, except for, in the case of clauses (b) and (c), such conflicts, violations, breaches, defaults or other occurrences that would not (i) materially impair the ability of Purchaser to perform its obligations under this Agreement or (ii) prevent or materially delay the consummation of any of the transactions contemplated hereby. 5 3.3 CONSENTS AND APPROVALS. No consent from or filing with any person or entity (including, without limitation, any Governmental Authority) on the part of Purchaser is required in connection with the execution or delivery by Purchaser of this Agreement or any of the Documents to which it is a party or the consummation by Purchaser of the transactions contemplated hereby or thereby, other than (a) filings with the SEC, state securities laws administrators and the National Association of Securities Dealers and (b) the filing of appropriate documents with, and to the extent necessary, approval of, the Commissioners of Insurance of the State of Washington and State of Texas and such notices and consents as may be required under the insurance laws of any jurisdiction in which the Company or its subsidiaries is domiciled or does business. 3.4 INVESTMENT REPRESENTATIONS. PURCHASER: (a) is an accredited investor, and has not retained or consulted with any purchaser representative, as such terms are defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the "Securities Act"), in connection with its execution of this Agreement and the Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby; (b) has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Company; (c) will acquire the Shares for its own account for investment and not with the view toward resale or redistribution in a manner that would require registration under the Securities Act; and (d) is able to bear the economic riskof an investment in the Shares. 3.5 BROKER'S FEES. Purchaser has not entered into any agreement, arrangement or understanding with any person or entity that will result in the obligation of the Foundation to pay any finder's fees, brokerage or agent's commissions or other like payments in connection with the negotiations leading to this Agreement or the consummation of the transactions contemplated hereby. Section 4. COVENANTS. 4.1 EXPENSES. All expenses incurred by the parties hereto shall be borne solely and entirely by the party that has incurred such expenses. 6 4.2 CONFIDENTIALITY; PUBLICITY. (a) CONFIDENTIALITY. Each party shall, and shall cause its officers, directors, employees, affiliates, agents and representatives to, not disclose to any other person or entity (other than its affiliates, agents and representatives bound by obligations of confidentiality) or use (other than to perform its obligations under this Agreement) any Confidential Information of the other party without the prior written consent of such other party. "Confidential Information" means, with respect to a party, information (i) that is designated as such orally or in writing by that party when or before it is disclosed to the other party or (ii) that the receiving party may reasonably be expected to know, based on the nature of the information or the circumstances of its disclosure, the disclosing party maintains in confidence. Without limiting the previous sentence, information regarding the transactions described in this Agreement and the Documents is Confidential Information of both parties. This Section 4.2(a) does not apply to any disclosure (i) required by any law, any rule or regulation of any Governmental Authority, or any Governmental Order; (ii) required to comply with the disclosure requirements of the Securities and Exchange Commission, the Nasdaq National Market, or other securities exchanges; or (iii) to employees, officers, directors, attorneys, and advisors of the disclosing party as necessary or desirable for the conduct of the business of the disclosing party, provided that prior to such disclosure, such persons shall be bound by an obligation of confidentiality substantially similar to the confidentiality obligations hereunder; provided, however, if a party is required under this Section 4.2(a) to disclose any Confidential Information of the other party, the disclosing party shall use reasonable commercial efforts, to the extent legally permissible, to (x) notify the other party in advance of such disclosure and (y) if requested, assist the other party in contesting such disclosure (at the expense of such other party). (b) PUBLICITY. Neither party nor any of their respective affiliates shall issue or cause the publication of any press release or other announcement with respect to this Agreement or the transactions contemplated hereby without a prior consultation of the other party, except as may be required by any law, any rule or regulation of any Governmental Authority, or any Governmental Order or by the disclosure requirements of the Securities and Exchange Commission, the Nasdaq National Market, or other securities exchanges, and will use reasonable efforts to provide copies of such release or other announcement to the other party, and give due consideration to such comments as the other party may have, prior to such release. 7 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. 5.2 INDEMNIFICATION BY THE FOUNDATION. The Foundation shall indemnify Purchaser 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, "Purchaser Indemnified Parties"), against and hold them harmless from any and all damage, claim, loss, reasonable liability and expense (including, without limitation, reasonable expenses of investigation and attorneys' fees and expenses) (collectively, "Damages") incurred or suffered by any Purchaser Indemnified Party arising out of or relating to any breach of any representation, warranty, covenant or other agreement of the Foundation contained herein or in any Document to which the Foundation is a party. Purchaser acknowledges that in connection with this Agreement and the transactions contemplated hereby, except for the representations, warranties, covenants and other agreements of the Foundation contained herein or in any Document to which the Foundation is a party, Purchaser has not relied in any respect on the Foundation to provide Purchaser information regarding the Company and the Foundation has provided no such information. Notwithstanding the provisions of this Section 5.2, the maximum liability (the "Maximum Liability") of the Foundation under this Agreement shall be the aggregate amount paid to the Foundation by Purchaser for the Shares. 5.3 INDEMNIFICATION BY PURCHASER. Purchaser shall indemnify the Foundation and its affiliates, partners, principals, officers, directors, employees, independent contractors, agents, representatives and other similarly situated parties, and the successors, heirs and personal representatives of any of them (collectively, the "Foundation Indemnified Parties"), against and hold them harmless from any and all Damages incurred or suffered by any Foundation Indemnified Party arising out of or relating to any breach of any representation, warranty, covenant or other agreement of Purchaser contained herein or in any Document. Notwithstanding the provisions of this Section 5.3, the maximum liability of Purchaser under this Agreement shall be the aggregate amount paid by Purchaser to the Foundation for the Shares acquired by Purchaser. 8 5.4 INDEMNIFICATION; NOTICE AND SETTLEMENTS. A party seeking indemnification pursuant to Section 5.2 or 5.3 (an "Indemnified Party") with respect to a claim, action or proceeding initiated by a person or entity that is not a Purchaser Indemnified Party or a Foundation 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 (a) the Indemnifying Party and the Indemnified Party have mutually agreed in writing to the retention of such counsel or (b) the named parties in any such action or proceeding (including impleaded parties) include the Indemnifying Party and the Indemnified Party, and the Indemnified Party shall have been advised in writing by such counsel that there may be one or more legal defenses available to it that are different from or additional to those available to the Indemnifying Party. Under such circumstances, the Indemnifying Party shall reimburse the Indemnified Party for the Indemnified Party's reasonable attorney's fees and expenses. The Indemnifying Party may settle any such action or claim at its own expense, provided that the Indemnifying Party shall not settle any such action or claim or consent to the entry of any judgment without the prior written consent of the Indemnified Party if such settlement or judgment (i) includes any admission of wrongdoing by the Indemnified Party or any of the Indemnified Party's officers, directors, employees or controlling persons (the "Indemnified Party's Representatives"), (ii) includes any consent to any type of injunctive relief affecting the Indemnified Party or any of the Indemnified Party's Representatives, (iii) excludes an unconditional release by the person or entity 9 asserting such action or claim of the Indemnified Party and the Indemnified Party's Representatives from all liability with respect to such action or claim, or (iv) requires the Indemnified Party or any of the Indemnified Party's Representatives to undertake any obligations or incur any costs that are not paid in advance by the Indemnifying Party. Section 6. MISCELLANEOUS. 6.1 SUCCESSORS AND ASSIGNS. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by operation of law or otherwise without the prior written consent of the parties hereto, which consent may be granted or withheld in the sole discretion of the parties. Subject to the preceding sentence, 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. 6.2 Entire Agreement. This Agreement, including the Documents and 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. 6.3 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. 6.4 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. 6.5 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 10 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 DOCUMENT ONLY IN THE FEDERAL OR STATE COURTS LOCATED WITHIN TRAVIS COUNTY, TEXAS. 6.6 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 6.6. 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 6.6. Foundation: The Roy F. and Joann Cole Mitte Foundation 6836 Bee Caves Road Suite 262 Austin, Texas 78746 Facsimile No.: (512) 617-6334 Purchaser: American Physicians Service Group, Inc. 1301 Capital of Texas Hwy., Suite C-300 Austin, Texas 78746 Attn: Chairman and Chief Executive Officer Facsimile No.: (512) 314-4398 6.7 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 Documents and the transactions contemplated hereby and thereby. Each party will use its good faith efforts to carry out and comply with the provisions of this Agreement. 6.8 No Third-Party Beneficiaries. Except as provided in Sections 5.2 and 5.3, this Agreement shall not confer any rights or remedies upon any person or entity other than the parties hereto and their respective successors and permitted assigns. 11 6.9 Amendments. This Agreement may not be amended or modified except by an instrument in writing signed by each of the parties. [Signature page follows] 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. FOUNDATION: THE ROY F. AND JOANN COLE MITTE FOUNDATION By: /s/ Roy F. Mitte --------------------------------- Name: Roy F. Mitte --------------------------------- Title: President --------------------------------- PURCHASER: AMERICAN PHYSICIANS SERVICE GROUP, INC. By: /s/ Kenneth S. Shifrin ------------------------------------ Name: Kenneth S. Shifrin ----------------------------------- Title: Chairman of the Board and Chief Executive Officer ------------------------------------------------------ EX-10 4 optioagr.txt STOCK PURCHASE AND OPTION AGREEMENT Execution Copy STOCK PURCHASE AND OPTION AGREEMENT This Stock Purchase and Option Agreement (this "Agreement") is made and entered into as of this 4th day of June, 2003, by and between Financial Industries Corporation, a Texas corporation (the "Company"), and American Physicians Service Group, Inc., a Texas corporation ("Purchaser"). RECITALS WHEREAS, the Company has acquired or entered into agreements to acquire a group of companies (the "New Era Marketing Companies"), which are expected to broaden the Company's premium base and transition the Company to a full range financial services company; WHEREAS, Purchaser brought the opportunity to acquire the New Era Marketing Companies to the Company and intends to actively assist the Company in promoting the Company's business plan, which includes the acquisition and integration of the New Era Marketing Companies (collectively, the "Services"); WHEREAS, in connection with the Services provided to the Company, the Company desires to grant to Purchaser an option to acquire Common Stock and other rights set forth herein in exchange for the consideration described herein; and WHEREAS, the Company desires to issue and sell to Purchaser, and Purchaser desires to acquire from the Company, 27,395 shares (the "Shares") of common stock, par value $.20 per share (the "Common Stock"), of the Company at a purchase price equal to $14.64 per share and under the other terms and conditions set forth herein. AGREEMENT For and 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: Section 1. Sale of Shares and Purchase Option. ---------------------------------- 1.1 Purchase and Sale; Closing. Subject to the terms and conditions of this Agreement, and in reliance on the respective representations and warranties of the Company and Purchaser, Purchaser hereby agrees to acquire from the Company, and the Company agrees to issue and sell to Purchaser (the "Purchase"), the Shares. The aggregate purchase price for the Shares (the "Purchase Price") shall be $401,063. The Purchase Price shall be paid in cash, tendered by Purchaser by wire transfer of immediately available funds to the Company in accordance with the Company's wire transfer instructions provided to Purchaser, at the closing of the Purchase (the "Closing"). The Shares acquired in the Purchase shall be delivered to Purchaser at the Closing, free and clear of any and all liens, claims, security interests, pledges, mortgages, restrictions or encumbrances of any kind (the "Encumbrances"), other than those restrictions arising from applicable federal and state securities laws and any Encumbrances created by Purchaser. The Closing shall occur concurrently with the execution of this Agreement and at such place and time as the parties may mutually agree. The date on which the Closing actually occurs is referred to herein as the "Closing Date." 1.2 OPTION TO PURCHASE SHARES. In consideration of the Services, the Company has agreed to grant Purchaser an option to purchase shares of Common Stock as provided in this Section 1.2. (a) QUALIFYING PREMIUMS. As used in this Agreement, (i) "Qualifying Premiums" means the aggregate amount of collected premiums for life insurance or annuity products issued by the Company or any insurance company affiliate of the Company as of the date hereof and any insurance company which becomes an affiliate of the Company after the date hereof, unless such future affiliate, at the time that the Company entered into a letter of intent or other expression of intent or purchase contract, whichever is earliest, (i) was engaged in the marketing and sale of life insurance policies, annuity contracts or other financial related products for the senior (over age 55) market (the "Senior Business") for at least 12 months (to include, without limitation, assumed reinsurance and direct written premiums by any such person) and (ii) derived more than fifty percent (50%) of its revenues from the Senior Business, that , in each case, are 2 marketed by or through Marketing Sub (as defined in Section 4.2), whether through a contact made by an employee or agent of Marketing Sub or a marketing relationship developed through any insurance company affiliate of the Company (except as provided above), Marketing Sub, Equita Financial and Insurance Services of Texas, Inc. ("Equita"), or any of their respective agents and (ii) "Determination Period" means the period beginning on July 1, 2003 and ending on December 31, 2005. Within ten (10) business days following the end of each calendar month within the Determination Period, the Company shall deliver to Purchaser a good-faith estimate of the Qualifying Premiums for that immediately preceding calendar month. Within ten (10) business days following the end of the Determination Period, the Company shall deliver to Purchaser a written calculation of Qualifying Premiums specifying in reasonable detail the basis for such calculation. Purchaser shall have the right, at reasonable times and upon reasonable notice, to inspect such books and records of the Company, Marketing Sub and the Insurance Companies as may be reasonably necessary to determine whether the calculation of Qualifying Premiums is correct. Purchaser may deliver to the Company, within twenty (20) business days following the end of the Determination Period, a written objection to the calculation of Qualifying Premiums and, if such objection is not resolved to the satisfaction of Purchaser within five (5) business days, then the disagreement shall be referred to a national accounting firm jointly selected by the Company and Purchaser (excluding firms which provide material services to the Company or Purchaser) (the "Arbitrator") who will determine the correct amount of Qualifying Premiums. In the event the parties cannot agree upon the selection of the Arbitrator within five (5) business days, each party shall select an Arbitrator (the fees and expenses of which will be borne by the selecting party) and such Arbitrators shall select within ten (10) days an Arbitrator that will determine the amount of Qualifying Premiums. The fees and expenses of the Arbitrator selected to determine the amount of Qualifying Premiums shall be borne by the Company and Purchaser in the same proportion that the dollar amount of the disputed Qualifying Premiums which are not resolved in favor of the Company or Purchaser (as applicable) bears to the total dollar amount of the disputed Qualifying Premiums resolved by the Arbitrator. For illustration purposes only, (A) if the total amount of the disputed Qualifying Premiums by Purchaser is $1,000,000, and Arbitrator resolved $500,000 of the disputed Qualifying Premiums in favor of 3 Purchaser, the Company and Purchaser shall bear the Arbitrator's fees and expenses equally; or (B) if the total amount of disputed Qualifying Premiums by Purchaser is $1,000,000 and Arbitrator resolved $250,000 of the disputed Qualifying Premiums in favor of the Purchaser, Purchaser shall bear 75 percent and the Company shall bear 25 percent of the Arbitrator's fees and expenses. Each of Purchaser and the Company shall bear the fees, costs and expenses of its own Arbitrator, if applicable, and all of its other expenses incurred in connection with matters contemplated by this Section 1.2(a). Any such determination by the Arbitrator shall be final, binding and conclusive upon the Company and Purchaser. If Purchaser does not object to the Company's calculation of Qualifying Premiums within the twenty (20) business day period specified above, then the Company's determination of Qualifying Premiums shall be final, binding and conclusive upon the Company and Purchaser. (b) Grant of Option. The Company hereby grants to Purchaser a conditional option to acquire, in the sole discretion of Purchaser, up to 323,000 shares of Common Stock from the Company at a per share exercise price equal to $16.42 per share (such price, the "Exercise Price"), but only if Qualifying Premiums for the Determination Period exceed $200,000,000 (the "Purchase Option"). The exercise of the Purchase Option shall be subject to the filing of appropriate documents with, and to the extent necessary, approval of, the Commissioner of Insurance of the State of Washington and such notices and consents as may be required under the insurance laws of any jurisdiction in which any of the Company or its subsidiaries is domiciled or does business. The Purchase Option may only be exercised once by delivery of written notice to the Company, signed by Purchaser, indicating that the Purchase Option is being exercised and specifying the number of shares of Common Stock it will acquire. Such notice may not be given until final determination of Qualifying Premiums pursuant to Section 1.2. Unless earlier exercised, the Purchase Option expires on December 31, 2006. The closing of the exercise of the Purchase Option pursuant to this Section 1.2(a) shall occur within ten (10) business days following delivery of the written exercise notice, the Exercise Price shall be paid in immediately available funds at the closing, and the acquired shares of Common Stock shall be delivered to Purchaser at the closing free and clear of any and all liens, claims and encumbrances (other than any such liens, claims and encumbrances created by Purchaser). 4 (c) CERTAIN ADJUSTMENT EVENTS. (i) In case the Company shall hereafter (A) pay a dividend or make a distribution on its capital stock in shares of Common Stock, (B) subdivide its outstanding shares of Common Stock into a greater number of shares, (C) combine its outstanding shares of Common Stock into a smaller number of shares or (D) issue by reclassification of its Common Stock other securities of the Company, the kind and amount of Common Stock and other securities shall be adjusted so that Purchaser upon the exercise of the Purchase Option shall be entitled to receive the number of shares of Common Stock or other securities of the Company that Purchaser would have owned immediately following such action had the Purchase Option been exercised immediately prior thereto. (ii) In case of any capital reorganization or reclassification, or any consolidation or merger to which the Company is a party other than a merger or consolidation in which the Company is the continuing corporation, or in case of any sale or conveyance to another entity of all or substantially all of the assets of the Company, or in the case of any statutory exchange of securities with another corporation (including any exchange effected in connection with a merger of a third corporation into the Company), Purchaser shall have the right thereafter to exercise the Purchase Option and receive the kind and amount of securities, cash or other property that Purchaser would have owned or have been entitled to receive immediately after such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance had the Purchase Option been exercised immediately prior to the effective date of such reorganization, reclassification, consolidation, merger, statutory exchange, sale or conveyance. The above provisions of this Section 1.2(c)(ii) shall similarly apply to successive reorganizations, reclassifications, consolidations, mergers, statutory exchanges, sales or conveyances. 5 (iii) Whenever the number of shares of Common Stock purchasable upon the exercise of the Purchase Option is adjusted, as herein provided, the Exercise Price shall be adjusted by multiplying such Exercise Price immediately prior to such adjustment by a fraction, the numerator of which shall be the number of shares of Common Stock purchasable upon exercise of the Purchase Option immediately prior to such adjustment, and the denominator of which shall be the number of the shares of Common Stock so purchasable immediately thereafter. (iv) Whenever the number of shares of Common Stock purchasable upon the exercise of the Purchase Option or the Exercise Price is adjusted, as herein provided, the Company shall promptly mail by first class mail, postage prepaid, to Purchaser notice of such adjustment setting forth a brief statement of the facts requiring such adjustment and the computation by which such adjustment was made. (v) In the event that the Company makes a distribution to its shareholders (other than cash dividends that in the aggregate do not exceed, in any calendar year, an annualized rate of 3% of the closing price for the Company's Common Stock as reported on the NASDAQ National Market or other exchange or quotation system on which the Common Stock is traded on the trading day prior to the date of declaration of any such cash dividend) or undertakes some other capital change or transaction that the Company's Board of Directors (the "Board") in its reasonable judgment determines is a distribution, change or transaction that warrants an adjustment similar to those provided in this Section 1.2(c) based upon the intent hereof but with respect to which the provisions hereof are not specifically applicable, adjustments to the number of shares of Common Stock purchasable upon exercise of the Purchase Option and the Exercise Price shall be made as a result of such distribution, change or transaction. 1.3 RESERVATION OF COMMON STOCK. The Company covenants that it will, at all times during which the Purchase Option remains exercisable, maintain a sufficient number of authorized and unissued shares of Common Stock (or shares of Common Stock held in treasury) to fully comply with the provisions of this Agreement. 6 Section 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby represents and warrants to Purchaser that: 2.1 ORGANIZATION AND STANDING. The Company is a corporation validly existing and in good standing under the laws of the State of Texas. The Company has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Company is duly qualified or registered as a foreign corporation to transact business under the laws of, and in each jurisdiction where, the character of its activities or the location of the properties owned or leased by it requires such qualification or registration, except where the failure to be so duly qualified or licensed and in good standing could not reasonably be expected to have a material adverse effect on the business, properties, results of operations or condition of the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). 2.2 AUTHORITY. The Company has full corporate power and authority to execute, deliver and perform this Agreement and any other agreements, documents, and instruments contemplated by this Agreement (collectively, the "Documents") to which it is a party. The execution, delivery and performance of this Agreement and the Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by the Board, do not require any further corporate proceedings on the part of the Company, and do not and will not violate or conflict with the Company's Articles of Incorporation or Bylaws. This Agreement and the Documents to which it is a party have been and will be duly and validly executed and delivered by the Company, and, assuming this Agreement and such Documents constitute the valid and binding obligations of Purchaser, this Agreement and such Documents constitute valid and binding agreements of the Company, enforceable against the Company in accordance with their terms, except that enforcement thereof may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors' rights and remedies generally and (b) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). 7 2.3 CONSENTS AND APPROVALS. No consent from or filing with any person or entity (including, without limitation, any governmental authority) on the part of the Company is required in connection with the execution or delivery by the Company of this Agreement or any of the Documents to which it is a party or the consummation by the Company of the transactions contemplated hereby or thereby, other than (a) filings with the Securities and Exchange Commission (the "SEC"), state securities laws administrators and the National Association of Securities Dealers, (b) the filing of appropriate documents with, and to the extent necessary, approval of, the Commissioner of Insurance of the State of Washington and such notices and consents as may be required under the insurance laws of any jurisdiction in which any of the Company or its subsidiaries does business and (c) consents which have been obtained on or prior to the date hereof. 2.4 CAPITALIZATION AND VOTING RIGHTS. The authorized capital stock of the Company as of the date hereof consists of 25,000,000 shares of common stock, par value $0.20, of which 9,605,939 shares are issued and outstanding and, prior to giving effect to the transactions contemplated by this Agreement, 2,252,457 shares were held as treasury shares by the Company or a subsidiary of the Company. There are no other authorized or outstanding classes or series of capital stock of the Company. The outstanding shares of Common Stock are all duly and validly authorized and issued, fully paid and nonassessable. Except as set forth on Schedule 2.4 attached hereto or pursuant to this Agreement, there are not outstanding any options, warrants, rights (including conversion or preemptive rights) or agreements for the purchase or acquisition (contingent or otherwise) from the Company of any shares of Common Stock. Except as set forth on Schedule 2.4 attached hereto or pursuant to this Agreement, the Company is not a party to any agreement, and, to the Company's knowledge, there is no agreement between any persons and/or entities, which affects or relates to the voting or giving of written consents with respect to any Common Stock, the election of the Company's directors, or the voting of the Company's directors. 2.5 ISSUANCE AND OWNERSHIP OF SHARES. The Shares and the shares of Common Stock purchased by Purchaser upon exercise of the Purchase Option, when issued, sold and delivered in accordance with the terms of this Agreement for the consideration set forth herein, will be duly and validly issued, fully paid, and 8 nonassessable, and will be issued free of any Encumbrances (other than Encumbrances created by Purchaser) and any restrictions on transfer other than restrictions under applicable state and federal securities laws. Except as set forth on Schedule 2.5 attached hereto, the Company has not directly or indirectly, since January 1, 2002, acquired or redeemed, or entered into any agreement providing for the acquisition or redemption of, any shares of Common Stock. 2.6 OFFERING. Subject to the truth and accuracy of Purchaser's representations and warranties set forth in Section 3 of this Agreement, the offer, issuance and sale of the Shares are, the grant of the Purchase Option is, and the issuance of the shares of Common Stock upon exercise of the Purchase Option will be, exempt from the registration requirements of any applicable state and federal securities laws (other than notice filings required under applicable law), and neither the Company nor any authorized agent acting on its behalf will take any action that would cause the loss of such exemption. 2.7 LITIGATION. Except as set forth in Schedule 2.7 attached hereto, there is no action, suit, proceeding or investigation pending or, to the Company's knowledge, threatened against the Company that questions the validity of this Agreement or the right of the Company to enter into this Agreement and to consummate the transactions contemplated hereby. 2.8 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and performance of this Agreement and the Documents to which the Company is a party, and the consummation of the transactions contemplated hereby and thereby, will not (with or without the passage of time and giving of notice) result in (a) any violation or default under, or be in conflict with the provisions of, any agreement, instrument, judgment, order, writ, decree or contract currently in effect and applicable to the Company, (b) the creation of any lien, charge or encumbrance upon any assets of the Company, or (c) the suspension, revocation, impairment, forfeiture, or nonrenewal of any material permit, license, authorization, or approval applicable to the Company, its business or operations or any of its assets or properties, except, in the case of each of the foregoing clauses (a) through (c), for breaches that, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 2.9 SECURITIES FILINGS. Since January 1, 1999, the Company has filed with the SEC all reports and forms required to be filed by it with the SEC pursuant to the Securities Act of 1933, as amended (the "Securities Act"), and the 9 Securities Exchange Act of 1934, as amended (the "Exchange Act") (all such reports, including all schedules thereto, are referred to collectively as the "Company Securities Filings"). As of their respective dates (or in the case of registration statements, at the time of effectiveness), or as of the date of the last amendment thereof, if amended after filing prior to the date hereof, or as modified by any subsequent Company Securities Filings prior to the date hereof, none of the Company Securities Filings contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of the Company Securities Filings at the time of filing (or in the case of registration statements, at the time of effectiveness), or as of the date of the last amendment thereof, if amended after filing prior to the date hereof, or as modified by any subsequent Company Securities Filings prior to the date hereof, complies in all material respects with the applicable requirements of the Exchange Act and the Securities Act, as applicable. 2.10 FINANCIAL STATEMENTS. Except as noted thereon, the audited consolidated and unaudited consolidated interim financial statements of the Company and its subsidiaries included in the Company Securities Filings (the "Company Financial Statements") were prepared in accordance with generally accepted accounting principles applicable to the business of the Company and its subsidiaries during the period involved, consistently applied in accordance with past accounting practices, and fairly present (subject to normal and recurring year-end adjustments and the exclusion of footnote disclosure in interim Company Financial Statements) the consolidated financial condition and the consolidated results of operations of the Company and its subsidiaries as of the dates and for the periods indicated (except as modified by any subsequent Company Securities Filings prior to the date hereof). Except as set forth on Schedule 2.10 attached hereto, for liabilities contemplated by this Agreement or as reflected in the Company Financial Statements, as of their respective dates (except as modified by any subsequent Company Securities Filings prior to the date hereof), neither the Company nor any of its subsidiaries had any debts, obligations, guaranties of obligations of another or liabilities (contingent or otherwise) that would be required in accordance with generally accepted accounting principles to be disclosed in the Company Financial Statements, except for such debts, obligations, guaranties or liabilities which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 10 2.11 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as set forth in the Company Securities Filings or set forth on Schedule 2.11 attached hereto, since March 31, 2003 through the date of this Agreement, there has not been any event or occurrence that could reasonably be expected to have a Material Adverse Effect. 2.12 NO UNDISCLOSED LIABILITIES. Except as set forth on Schedule 2.12 attached hereto, disclosed in the Company Securities Filings or Company Financial Statements, and except for such debts, obligations, guaranties or liabilities which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, the Company and its subsidiaries do not have any liabilities or obligations whatsoever, whether accrued, contingent or otherwise. The Company knows of no basis for any claim against the Company or any subsidiary of the Company for any liability or obligation, except (a) to the extent set forth or reflected in the Company Securities Filings or the Company Financial Statements, (b) to the extent expressly set forth on any Schedule attached hereto or otherwise as described in this paragraph, (c) liabilities and obligations incurred in the normal and ordinary course of business, consistent with past practices both as to amount and frequency, since March 31, 2003, (d) those incident to transactions previously disclosed to the public, or (e) those which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect. 2.13 NEW ERA TRANSACTIONS. Concurrently with the execution and delivery of this Agreement by the Company, the Company and FIC Financial Services, Inc. ("FIC Financial") have (a) consummated the transactions contemplated under each of those certain Stock Purchase Agreements of even date herewith listed on Schedule 2.13 of this Agreement, (b) entered into that certain Marketing Agreement of even date herewith among Investors Life Insurance Company of North America, Family Life Insurance Company and Equita and (c) entered into that certain Employment Agreement of even date herewith by and between the Company and Pat Tedrow (collectively, the "New Era Transactions"). 2.14 NO SEVERANCE BENEFITS; RIGHTS PLANS. Neither this Agreement, nor the Documents, nor any of the transactions contemplated hereby or thereby will result in any employee, former employee or other person being entitled to any severance benefit or change of control benefit. As of the date hereof, the Company is not a party to any shareholder rights plan or similar anti-takeover agreement or arrangement. 11 Section 3. REPRESENTATIONS OF PURCHASER. Purchaser represents and warrants to the Company that: 3.1 AUTHORITY. Purchaser (a) is duly incorporated, validly existing and in good standing under the laws of the State of Texas, (b) has full corporate power and authority to execute, deliver and perform this Agreement and any other Documents to which it is a party. This Agreement and the Documents to which it is a party have been and will be duly and validly executed and delivered by Purchaser, and, assuming this Agreement and such Documents constitute the valid and binding obligations of the Company, this Agreement and such Documents constitute valid and binding agreements of Purchaser, enforceable against Purchaser in accordance with their terms, except that enforcement thereof may be limited by (a) bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to creditors' rights and remedies generally and (b) general principles of equity (regardless of whether enforceability is considered in a proceeding at law or in equity). 3.2 CONSENTS AND APPROVALS. No consent from or filing with any person or entity (including, without limitation, any governmental authority) on the part of Purchaser is required in connection with the execution or delivery by Purchaser of this Agreement or any of the Documents to which it is a party or the consummation by Purchaser of the transactions contemplated hereby or thereby, other than (a) filings with the SEC, state securities laws administrators and the National Association of Securities Dealers and (b) the filing of appropriate documents with, and to the extent necessary, approval of, the Commissioner of Insurance of the State of Washington and such notices and consents as may be required under the insurance laws of any jurisdiction in which the Company or its subsidiaries is domiciled or does business. 3.3 LITIGATION. There is no action, suit, proceeding or investigation pending or, to Purchaser's knowledge, threatened against Purchaser that questions the validity of this Agreement or the right of Purchaser to enter into this Agreement and to consummate the transactions contemplated hereby. 12 3.4 INVESTMENT REPRESENTATIONS. Purchaser: (a) Is an accredited investor, and has not retained or consulted with any purchaser representative, as such terms are defined in Rule 501 of Regulation D promulgated under the Securities Act, in connection with its execution of this Agreement and the Documents to which it is a party and the consummation of the transactions contemplated hereby and thereby; (b) Has such knowledge and experience in financial and business matters that it is capable of evaluating the merits and risks of an investment in the Company; (c) Will acquire the Shares, the Purchase Option and any shares of Common Stock issuable upon exercise of the Purchase Option (to the extent such shares are not then covered by an effective registration statement) for its own account for investment and not with the view toward resale or redistribution in a manner which would require registration under the Securities Act, the Texas Securities Act, as amended, or the securities laws of any other state, and Purchaser does not have any reason to anticipate any change in its respective circumstances or other particular occasion or event which would cause Purchaser to sell the Shares, the Purchase Option or shares of Common Stock issuable upon exercise thereof, or any part thereof or interest therein, and Purchaser has no present intention of dividing the Shares, the Purchase Option or shares of Common Stock issuable upon exercise thereof with others or reselling or otherwise disposing of the Shares, the Purchase Option or the shares of Common Stock issuable upon exercise thereof or any part thereof or interest therein either currently or after the passage of a fixed or determinable amount of time or upon the occurrence or nonoccurrence of any predetermined event or circumstance; 13 (d) In connection with entering into this Agreement and the Documents to which it is a party, and in making the investment decisions associated therewith, has neither received nor relied on any representations or warranties from the Company, or the officers, directors, shareholders, employees, partners, managers, members, agents, consultants, personnel or similarly related parties of the Company, other than those representations and warranties expressly set forth in this Agreement; (e) Is able to bear the economic risk of an investment in the Shares and the shares of Common Stock upon exercise of the Purchase Option and has sufficient net worth to sustain a loss of its entire investment without material economic hardship if such a loss should occur; (f) Acknowledges that an investment in shares of Common Stock involves a high degree of risk, and that such Common Stock may be or become an illiquid investment; (g) Understands that the Shares are, the Purchase Option is, and the shares of Common Stock issuable upon exercise thereof will upon such issuance be, "restricted securities" as defined under Rule 144 of the Securities Act, and that such Shares, Purchase Option and shares of Common Stock may not be sold or offered for sale in the absence of an effective registration statement under the Securities Act and any state securities laws or pursuant to an exemption from registration; (h) Acknowledges that each certificate representing the Shares and the shares of the Common Stock upon exercise of the Purchase Option, to the extent not then covered by an effective registration statement, will be endorsed with substantially the following legend until such time as such shares of Common Stock have been registered: THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE APPLICABLE SECURITIES UNDER THE ACT AND ANY STATE SECURITIES LAWS OR PURSUANT TO AN EXEMPTION FROM REGISTRATION; and (i) Is domiciled in the jurisdiction and at the address set forth in Section 6.6. Section 4. Covenants. --------- 4.1 BOARD SEATS. As soon as practicable following the date hereof, the Company shall appoint Kenneth Shifrin (or any substitute designee of Purchaser 14 reasonably acceptable to the Company) (the "Purchaser Nominee") to serve on the Board. The Company further agrees, with respect to the 2003 annual shareholders meeting and 2004 annual shareholders meeting, (a) to propose as a nominee for election to the Board at such meeting the individual designated as the Purchaser Nominee, (b) to include the name of the Purchaser Nominee on the Company's proxy statement and proxy card for such meeting, (c) to recommend to its shareholders the election of the Purchaser Nominee of the Board, (d) to solicit proxies on behalf of the Purchaser Nominee to the same extent proxies are solicited on behalf of any other nominee for election to the Board and (e) to 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. Notwithstanding anything to the contrary herein, in the event that the attorneys-in-fact or proxies referenced in clause (e) of the preceding sentence utilize cumulative voting, such persons shall cumulate votes in favor of the Purchaser Nominee if such cumulative voting will result in the election of at least four directors. If the Purchaser Nominee is removed for cause or is otherwise unwilling or unable to serve as a director of the Company for any reason, Purchaser shall notify the Company in writing of a replacement Purchaser Nominee and the Company shall cause such replacement Purchaser Nominee to be appointed provided that such replacement Purchaser Nominee is reasonably acceptable to the Company. The Company represents and warrants that its Articles of Incorporation and Bylaws permit the actions set forth in this Section 4.1 without Company shareholder approval; provided that the Company does not make any representation as to the applicability or requirements of any provision of the Texas Business Corporation Act, as amended, with respect to such actions. 4.2 CREATION OF SUBSIDIARY. Promptly following the execution of this Agreement, the Company shall (a) create a wholly-owned subsidiary for the principal purpose of marketing and selling life and annuity insurance products ("Marketing Sub"), and (b) use its commercially reasonable efforts to hire Pat Tedrow (upon terms agreeable to the Company and Pat Tedrow) who will have primary responsibility for implementation of Marketing Sub's insurance and securities marketing plans and who will report directly to the most senior executive officer of the Company. The Company agrees to use all commercially reasonable efforts to facilitate the production and acceptance of life and annuity insurance products by Marketing Sub, including, without limitation, appropriately staffing and 15 structuring Marketing Sub to enable full implementation of its insurance and securities marketing plans, providing appropriate and legally approved policy forms which are competitive with similar products within the industry and marketplace, ensuring a customary underwriting process for issuance of products, and maintaining adequate reserves to enable full realization of Marketing Sub's insurance and securities marketing plans. Nothing contained in this Section 4.2 is intended to confer any right of employment and Pat Tedrow has no rights to enforce the provisions of this Section 4.2. 4.3 EXPENSES. Except as set forth in Section 1.2(a), all expenses incurred by the parties hereto shall be borne solely and entirely by the party that has incurred such expenses. 4.4 PUBLICITY. Neither party nor any of their respective affiliates shall issue or cause the publication of any press release or other announcement with respect to this Agreement or the transactions contemplated hereby without a prior consultation of the other party, except as may be required by law or by any listing agreement with a national securities exchange or quotation system, and will use reasonable efforts to provide copies of such release or other announcement to the other party, and give due consideration to such comments as the other party may have, prior to such release. 4.5 VOTING OF SHARES. With respect to the 312,484 shares of Common Stock acquired by Purchaser pursuant to a Stock Purchase Agreement dated as of the date hereof between Purchaser and The Roy F. and Joann Cole Mitte Foundation (the "Foundation"), notwithstanding anything to the contrary contained in that certain APS Acknowledgement and Agreement dated as of the date hereof between the Company and the Foundation, Purchaser hereby agrees that, solely for the benefit of the Company, the terms of the proxy granted to the Company with respect to such shares of Common Stock pursuant to Section 2.1(a) of that certain Compromise and Settlement Agreement and Mutual Release dated as of May 15, 2003 among the Company, the Foundation and the other parties thereto, shall continue solely with respect to the election of directors at the Company's 2003 annual shareholders' meeting, and following such 2003 annual shareholders' meeting, such proxy shall be of no further force or effect. Section 5. INDEMNIFICATION. 16 5.1 Survival. The representations and warranties of the parties contained herein or in any Document (unless otherwise provided in such Document) shall survive for a period of two (2) years following the date of this Agreement (the "Survival Period"). 5.2 Indemnification by the Company. (a) The Company shall indemnify Purchaser and its affiliates, and their respective partners, principals, officers, directors, managers, members, employees, independent contractors, agents, representatives, and other similarly situated parties, and the successors, heirs and personal representatives of any of them (collectively, "Purchaser Indemnified Parties"), against and hold them harmless from any and all damage, claim, loss, liability and expense (including, without limitation, reasonable expenses of investigation and attorneys' fees and expenses) (collectively, "Damages") incurred or suffered by any Purchaser Indemnified Party arising out of or relating to any breach of any representation, warranty, covenant or other agreement of the Company contained herein or in any Document that is asserted in writing to the Company prior to the expiration of the Survival Period. The Company acknowledges and agrees that Purchaser is also relying on, among other things, the representations, warranties, covenants and other agreements of the Company contained herein in acquiring shares of Common Stock from the Roy F. and Joann Cole Mitte Foundation pursuant to a stock purchase agreement of even date herewith (the "Purchase Agreement"). Accordingly, Damages of a Purchaser Indemnified Party under this Agreement shall include, but shall not be limited to, Damages associated with acquiring or holding shares of Common Stock arising out of or relating to any breach of any representation, warranty, covenant or other agreement of the Company contained in Section 2 of this Agreement subject to the limitations set forth in this Section 5. Notwithstanding the provisions of this Section 5.2, the maximum liability of the Company under this Agreement shall be $5,000,000 (the "Maximum Liability"). (b) Notwithstanding any provision herein to the contrary: (i) the Company shall indemnify the Purchaser Indemnified Parties against and hold them harmless from any and all Damages incurred or suffered by any 17 Purchaser Indemnified Party arising out of or relating to actions, claims or suits, pending or threatened, which may be brought against the Purchaser Indemnified Parties relating to the Compromise and Settlement Agreement, dated May 15, 2003, entered into among the Company and the other parties thereto (the "Settlement Agreement"); provided that the provisions of this Section 5.2(b) shall not apply to any breach or alleged breach by any Purchaser Indemnified Party of any provision of the Purchase Agreement; and (ii) the Maximum Liability shall not be applicable with respect to any claim for indemnity under this Section 5.2(b). 5.3 INDEMNIFICATION BY PURCHASER. Purchaser shall indemnify the Company and its affiliates, and their respective partners, principals, officers, directors, employees, independent contractors, agents, representatives and other similarly situated parties, and the successors, heirs and personal representatives of any of them (collectively, the "Company Indemnified Parties"), against and hold them harmless from any and all Damages incurred or suffered by any Company Indemnified Party arising out of or relating to any breach of any representation, warranty, covenant or other agreement of Purchaser contained herein or in any Document that is asserted in writing to Purchaser prior to the expiration of the Survival Period. Notwithstanding the provisions of this Section 5.3, the maximum liability of Purchaser under this Agreement shall be the Maximum Liability. 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 or entity who is not a Purchaser Indemnified Party or a Company 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 18 defense of any such action or proceeding at its expense, provided that no settlement shall be executed without the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld). 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. MISCELLANEOUS. 6.1 TRANSFERABILITY; SUCCESSORS AND ASSIGNS. Except in connection with the sale of all the outstanding capital stock of Purchaser, or the sale of all or substantially all of the assets of Purchaser, neither this Agreement nor any of the rights, interests or obligations hereunder (including, without limitation, the right to exercise the Purchase Option) shall be assigned, transferred or conveyed by Purchaser without the prior written consent of the Company, which consent may be granted or withheld in its sole discretion; provided that Purchaser shall be entitled to pledge the Purchase Option in connection with a bona fide loan, and, subject to compliance with the securities laws, the lender may foreclose on such pledge without the prior written consent of the Company. Subject to the preceding sentence, 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. 19 6.2 ENTIRE AGREEMENT. This Agreement, including the Documents and 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. 6.3 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. 6.4 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. 6.5 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 DOCUMENT ONLY IN THE FEDERAL OR STATE COURTS LOCATED WITHIN TRAVIS COUNTY, TEXAS. 20 6.6 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 6.6. 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 6.6. Company: Financial Industries Corporation 6500 River Place Blvd., Building One Austin, Texas 78730 Attn: Gene Payne and Ted Fleron Facsimile No.: (512) 404-5051 Purchaser: American Physicians Service Group, Inc. 1301 Capital of Texas Hwy., Suite C-300 Austin, Texas 78746 Attn: Chairman and Chief Executive Officer Facsimile No.: (512) 314-4398 6.7 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 Documents and the transactions contemplated hereby and thereby. Each party will use its good faith efforts to carry out and comply with the provisions of this Agreement. 6.8 NO THIRD-PARTY BENEFICIARIES. Except as provided in Sections 5.2 and 5.3, this Agreement shall not confer any rights or remedies upon any person other than the parties hereto and their respective successors and permitted assigns. 6.9 AMENDMENTS. This Agreement may not be amended or modified except by an instrument in writing signed by each of the parties. 21 SIGNATURE PAGE TO STOCK PURCHASE AND OPTION AGREEMENT IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase and Option Agreement as of the day and year first above written. COMPANY: FINANCIAL INDUSTRIES CORPORATION By: /s/ Eugene Payne -------------------------------------------- Name: Eugene Payne -------------------------------------------- Title: CEO, President and Chairman -------------------------------------------- PURCHASER: AMERICAN PHYSICIANS SERVICE GROUP, INC. By: /s/ Kenneth S. Shifrin ------------------------------------------------- Kenneth S. Shifrin, Chairman of the Board and Chief Executive Officer Schedule 2.4 Capitalization Options 1. Employee Stock Option Plans - there are outstanding options to purchase 180,036 shares, as of the date hereof. 2. Option Agreement of even date herewith between the Company and Equita Financial and Insurance Services of Texas, Inc. 3. Option Agreement of even date herewith between the Company and Pat Tedrow. 4. Options held by Investors Life Insurance Company of North America ("Investors Life")--500,411 shares are issuable upon exercise of an option held by Investors Life, as of the date hereof. Voting Agreements 1. Settlement Agreement (as defined in Section 5.2(b)(i)). Schedule 2.5 Issuance and Ownership of Shares 1. Settlement Agreement. Schedule 2.7 Litigation None. Schedule 2.10 Financial Statements 1. Settlement Agreement. Schedule 2.11 Absence of Certain Changes or Events None. Schedule 2.12 Undisclosed Liabilities 1. Settlement Agreement. 2. New Era Transactions. Schedule 2.13 Stock Purchase Agreements 1. Stock Purchase Agreement, dated as of June 4, 2003, among JNT Group, Inc., Earl W. Johnson, Total Compensation Group Consulting, Inc., Financial Industries Corporation and FIC Financial Services, Inc. 2. Stock Purchase Agreement, dated as of June 4, 2003, among Paragon Benefits, Inc., The Paragon Group, Inc., Paragon National, Inc., Scott A. Bell, Wayne C. Desselle, Chris Murphy, Financial Industries Corporation and FIC Financial Services, Inc. 3. Stock Purchase Agreement, dated as of June 4, 2003, among Total Compensation Consulting Group, Inc., John Pesce, Mike Cochran, Arthur A. Howard, Geoffrey Calaway, W.M. Hartman, Edward F. Harman, III, M.B. Donaldson, Teri Hoyt, Alycia Andrews, Charles Francis, Tom Cook, David Allen, Marcus Smith, Financial Industries Corporation and FIC Financial Services, Inc. EX-10 5 regisagr.txt REGISTRATION RIGHTS AGREEMENT Execution Copy REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (this "Agreement") is made and entered into as of this 4th day of June, 2003, by and among Financial Industries Corporation, a Texas corporation (the "Company"), American Physicians Service Group, Inc., a Texas corporation ("APS"), M&W Insurance Services, Inc., a Delaware corporation ("M&W"), Equita Financial and Insurance Services of Texas, Inc., a Texas corporation ("Equita" and, together with APS and M&W, the "Buyers"). recitals WHEREAS, pursuant to various purchase and option agreements, the Buyers acquired shares of common stock, par value $.20 per share (the "Common Stock"), of the Company and/or options to acquire shares of Common Stock; and WHEREAS, in connection with entering into such agreements, the Company has granted certain registration rights as described in this Agreement to the Buyers. agreement For and 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: Section 1. REGISTRATION OF SHARES. For purposes of this Agreement, "Holders" means the Buyers and (to the extent not prohibited by Section 8) any transferees of the Buyers, and "Registrable Shares" means any shares of Common Stock held by the Holders as of the date of this Agreement, all shares of Common Stock issuable upon exercise of options held by the Holders as of the date of this Agreement, and any and all shares of Common Stock issued as (or issuable upon the conversion or exercise of any warrant, right or other security that is issued as) a dividend or other distribution with respect to, or in exchange for, or in replacement of, shares of Common Stock held by a Holder on the date hereof or issued subsequent to the date hereof pursuant to an option to acquire shares of Common Stock held by the Holders on the date hereof until the date on which (a) the resale of such share of Common Stock by a Holder has been effectively registered under the Securities Act of 1933, as amended (the "Securities Act"), and disposed of in accordance with the Shelf Registration Statement (as defined below), (b) such share of Common Stock is distributed by a Holder to the public pursuant to Rule 144 under the Securities Act, or (c) such share of Common Stock may be sold or transferred by a Holder pursuant to Rule 144(k) under the Securities Act (or any similar provision then in effect). The Company shall (x) on or prior to October 1, 2003, file with the Securities and Exchange Commission ("SEC") a shelf registration statement pursuant to Rule 415 under the Securities Act (the "Shelf Registration Statement") on Form S-1 or Form S-3, if the use of such form is then available as determined by the Company, to cover resales of Registrable Shares by the Holders, and (y) use its commercially reasonable efforts to cause such Shelf Registration Statement to be declared effective as soon as reasonably practicable following its filing with the SEC, but in any event not later than the first anniversary of the date hereof; provided, however, that the Company will be deemed to be in compliance with this clause (y) if such Shelf Registration Statement is declared effective on or prior to the first anniversary of the date hereof (and, in such event, the Company shall not be liable to any Holder for failure to cause the Shelf Registration Statement to be declared effective prior to such date). None of the Company nor any of its securityholders (other than the Holders of Registrable Shares in such capacity or other shareholders having registration rights in effect as of the date of this Agreement permitting them to participate therein) shall have the right to include any of the Company's securities in the Shelf Registration Statement. The Company shall not be required to effect more than one registration pursuant to this Section 1. Section 2. EFFECTIVENESS OF REGISTRATION. The Company shall use its reasonable best efforts to keep the Shelf Registration Statement continuously effective for a period ending on March 31, 2007, or such shorter period that will terminate when each of the Registrable Shares covered by the Shelf Registration Statement shall cease to be a Registrable Share. Notwithstanding the foregoing, upon the occurrence of any event that would cause the Shelf Registration Statement to (a) contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances under which they were made, (b) not be effective and usable for resale of Registrable Shares during the period that such Shelf Registration Statement is required to be effective and usable or (c) contain financial information that no longer meets the requirements of any applicable rule of Regulation S-X, the Company shall as promptly as practicable 2 file an amendment to the Shelf Registration Statement, which in the case of clause (a), corrects any such misstatement or omission and, in the case of clause (c), updates such financial information. In the case of clause (a), (b) or (c), no offers or sales of Registrable Shares shall be made pursuant to the Shelf Registration Statement during the period that the Shelf Registration Statement is unusable and the Company shall use its reasonable best efforts to cause such amendment to be declared effective and such Shelf Registration Statement to become usable as soon as practicable thereafter. Section 3. SUSPENSION OF REGISTRATION. Notwithstanding anything to the contrary in this Agreement, the Company may prohibit offers and sales of Registrable Shares pursuant to the Shelf Registration Statement at any time if (a) (i) it is in possession of material non-public information, (ii) the Board of Directors of the Company (the "Board") believes in good faith that such prohibition is necessary in order to avoid a legal requirement to disclose such material non-public information and (iii) the Board believes in good faith that disclosure of such material non-public information would not be in the best interests of the Company and its shareholders or (b) (i) the Company has made a public announcement relating to an acquisition or business combination transaction including the Company and/or one or more of its subsidiaries that is material to the Company and its subsidiaries taken as a whole and (ii) the Board believes in good faith that it would be impracticable at the time to obtain any financial statements relating to such acquisition or business combination transaction that would be required to be set forth in the Shelf Registration Statement (the period during which any such prohibition of offers and sales of Registrable Shares pursuant to the Shelf Registration Statement is in effect pursuant to clause (a) or (b) of this Section 3 is referred to herein as a "Suspension Period"). A Suspension Period shall commence on and include the date on which the Holders of Registrable Shares covered by the Shelf Registration Statement receive written notice from the Company that offers and sales of Registrable Shares cannot be made thereunder in accordance with this Section 3 and shall, with respect to each Holder, end on the date on which that Holder either is advised in writing by the Company that offers and sales of Registrable Shares pursuant to the Shelf Registration Statement and use of the prospectus contained therein may be resumed (a "Resumption Notice") or receives a copy of a prospectus supplement; provided, however, that Suspension Periods in the aggregate shall in no event be longer than forty-five (45) days in any one (1) year period during which the Shelf Registration Statement is required to remain effective in accordance with this Agreement. The Company agrees that it must 3 promptly deliver a Resumption Notice to each Holder when none of the requisite conditions for the Suspension Period continue to exist or a prospectus supplement as soon as reasonably practicable. Section 4. DAMAGES. The Company recognizes and agrees that the Holders will not have an adequate remedy at law if the Company fails to comply with this Agreement and that damages may not be readily ascertainable, and the Company expressly agrees that, in the event of such failure, upon proper proof a Holder may be entitled to (a) specific performance of any and all provisions hereof or (b) enjoin the Company from continuing to commit any such breach of this Agreement. Section 5. FURTHER OBLIGATIONS OF THE COMPANY. In connection with the registration required under this Agreement, the Company agrees that it shall also do the following: (a) furnish to each Holder such copies of each preliminary and final prospectus and such other documents as said Holder may reasonably request to facilitate the public offering of its Registrable Shares pursuant to the Shelf Registration Statement; (b) use all reasonable efforts to register or qualify the Registrable Shares under the applicable securities or blue sky laws of such jurisdictions as any selling Holder may reasonably request; provided, however, that the Company shall not be obligated to qualify to do business in any jurisdictions where it is not then so qualified or to take any action which would subject it to the service of process in suits other than those arising out of the offer or sale of the securities covered by the Shelf Registration Statement in any jurisdiction where it is not then so subject; (c) permit each Holder or its counsel or other representatives to inspect and copy such corporate documents and records as may reasonably be requested by them related to the Shelf Registration Statement; (d) furnish to each Holder copies of all documents filed with and all correspondence from or to the SEC in connection with any such offering of securities; 4 (e) use all reasonable efforts to insure that all necessary approvals from the National Association of Securities Dealers, Inc. ("NASD"), if any, are obtained; and (f) use all reasonable efforts to list all Registrable Shares (to the extent necessary) on each securities exchange or automated interdealer quotation system on which the Common Stock is listed or quoted. Section 6. FURTHER OBLIGATIONS OF THE HOLDERS. In connection with the registration of Registrable Shares pursuant to this Agreement, each Holder agrees to timely provide to the Company, at its request, such information and materials as it may reasonably request in order to effect the registration of such Registrable Shares. Section 7. EXPENSES. The Company shall bear, on behalf of the Holders, all reasonable costs and expenses of the registration required under this Agreement, including, but not limited to, the Company's printing, legal and accounting fees and expenses, SEC and NASD filing fees, blue sky fees and expenses, and the reasonable fees and disbursements (such fees not to exceed $10,000) of one counsel for the Holders; provided, however, that the Company shall have no obligation to pay or otherwise bear the commissions or discounts attributable to the Registrable Shares being offered and sold by the Holders, or the fees and expenses of more than one counsel for the Holders. Section 8. TRANSFERABILITY OF REGISTRATION RIGHTS. The rights to register Registrable Shares granted by the Company under this Agreement may be assigned by a Holder, provided that (a) such assignment is only made in connection with an assignment by such Holder of not less than 100,000 of its Registrable Shares in a manner permitted by this Agreement and otherwise in accordance with applicable law; and (b) such assignee or transferee must agree in writing to be bound by all of the provisions of this Agreement. The rights to register Registrable Shares cannot be transferred in connection with a sale of Registrable Shares to the public pursuant to an effective registration statement or Rule 144. Section 9. MERGERS, ETC. The Company shall not, directly or indirectly, enter into any merger, consolidation or reorganization in which the Company shall not be the surviving corporation unless the proposed surviving corporation shall, prior to such merger, consolidation or reorganization, agree in writing to 5 assume the obligations of the Company under this Agreement, and for that purpose references hereunder to Registrable Shares shall be deemed to be references to the securities which the Holders would be entitled to receive in exchange for Registrable Shares under any such merger, consolidation or reorganization; provided, however, that the provisions of this Agreement shall not apply in the event of any merger, consolidation, or reorganization in which the Company is not the surviving corporation if all Holders are entitled to receive in exchange for their Registrable Shares consideration consisting solely of (i) cash, (ii) securities of the acquiring corporation which may be immediately sold to the public without registration under the Securities Act, or (iii) securities of the acquiring corporation which the acquiring corporation has agreed to register within forty-five (45) days of completion of the transaction for resale to the public pursuant to the Securities Act. Section 10. Indemnification of Holders of Registrable Shares. ------------------------------------------------ 10.1 RIGHT TO INDEMNIFICATION. In connection with the Company's registration of Registrable Shares pursuant to this Agreement, the Company will indemnify and hold harmless each Holder (which for purposes of only this Section 10 includes such Holder's respective affiliates, partners, principals, officers, directors, managers, members, employees, independent contractors, agents, underwriters, representatives, and other similarly situated parties, and the successors, heirs and personal representatives of any of them) (collectively, the "Holder Indemnified Parties") from and against any and all losses, claims, damages, expenses or liabilities, joint or several, to which such Holder becomes subject under the Securities Act, applicable state securities laws or under any other statute or at common law or otherwise, as incurred, and, except as hereinafter provided, will reimburse each such Holder, if any, for any legal or other expenses reasonably incurred by such Holder in connection with investigating or defending any actions whether or not resulting in any liability, as incurred, insofar as such losses, claims, damages, expenses, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement, in any preliminary or amended preliminary prospectus or in the final prospectus (or the registration statement or prospectus as from time to time amended or supplemented by the Company) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading, or any violation by the 6 Company of any rule or regulation promulgated under the Securities Act or any state securities laws applicable to the Company and relating to action or inaction required of the Company in connection with such registration, unless (a) such untrue statement or alleged untrue statement or omission or alleged omission was made in such registration statement, preliminary or amended preliminary prospectus or final prospectus in reliance upon and in conformity with information furnished in writing to the Company in connection therewith by such Holder expressly for use therein, or unless (b) in the case of a sale directly by such Holder, such untrue statement or alleged untrue statement or omission or alleged omission was contained in a preliminary prospectus and corrected in a final or amended prospectus copies of which were delivered to such Holder on a timely basis, and such Holder failed to deliver a copy of the final or amended prospectus at or prior to the confirmation for the sale of the Registrable Shares to the person asserting any such loss, claim, damage or liability in any case where such delivery is required by the Securities Act. 10.2 PROCEDURES GOVERNING INDEMNIFICATION CLAIMS. In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which any Holder seeks indemnification under this Section 10 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that this Section 10 provides for indemnification in such case, then the Company and such Holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and of the Holder seeking indemnification on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or by the Holder on the other, and each party's relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case, (a) no Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Shares offered by 7 such Holder pursuant to such registration statement; and (b) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Except as otherwise provided in this clause (b), the provisions of Section 10.3 shall govern the notice and other procedural aspects of any indemnification claim brought pursuant to this Section 10. 10.3 INDEMNIFICATION; NOTICE AND SETTLEMENTS. A party seeking indemnification pursuant to Sections 10.1 or 11.1 (an "Indemnified Party") with respect to a claim, action or proceeding initiated by a person or entity who is not a Holder Indemnified Party or a Company 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, provided that no settlement shall be executed without the prior written consent of the Indemnified Party. 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 10.3, 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 (a) the Indemnifying Party and the Indemnified Party have mutually agreed in writing to the retention of such counsel or (b) 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 8 applicable, for the Indemnified Party. An Indemnifying Party shall not be liable under Section 10.1 or 11.1 for any settlement effected without its written consent, of any claim, action or proceeding in respect of which indemnity may be sought hereunder. Section 11. INDEMNIFICATION OF COMPANY. 11.1 RIGHT TO INDEMNIFICATION. In the event that the Company registers any of the Registrable Shares under the Securities Act, each Holder of the Registrable Shares so registered will indemnify and hold harmless the Company, each of its directors, each of its officers who have signed or otherwise participated in the preparation of the registration statement, and each underwriter of the Registrable Shares so registered (including any broker or dealer through whom such of the shares may be sold) (collectively, the "Company Indemnified Parties") from and against any and all losses, claims, damages, expenses or liabilities, individually and not jointly and severally, to which such Holder may become subject under the Securities Act, applicable state securities laws or under any other statute or at common law or otherwise, and, except as hereinafter provided, will reimburse the Company and each such director, officer, underwriter or controlling person for any legal or other expenses reasonably incurred by them or any of them in connection with investigating or defending any actions whether or not resulting in any liability, insofar as such losses, claims, damages, expenses, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement, in any preliminary or amended preliminary prospectus or in the final prospectus (or in the registration statement or prospectus as from time to time amended or supplemented) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein not misleading, but only insofar as any such statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company in connection therewith by such Holder expressly for use therein; provided, however, that such Holder's obligations hereunder shall be limited to an amount equal to the proceeds received by such Holder from Registrable Shares sold in such registration. 9 11.2 In order to provide for just and equitable contribution to joint liability under the Securities Act in any case in which the Company seeks indemnification under this Section 11 but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding that this Section 11 provides for indemnification, in such case, then the Company and such Holder will contribute to the aggregate losses, claims, damages or liabilities to which they may be subject (after contribution from others) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and of such Holder on the other in connection with the statements or omissions which resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company on the one hand and of the Holder on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or by the Holder on the other, and each party's relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission; provided, however, that, in any such case, (a) no such Holder will be required to contribute any amount in excess of the public offering price of all such Registrable Shares offered by it pursuant to such registration statement; and (b) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) will be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Except as otherwise provided in this clause (b), the provisions of Section 10.3 shall govern the notice and other procedural aspects of any indemnification claim brought pursuant to this Section 11. Section 12. RULE 144. The Company agrees that, from and after the date of this Agreement until such time as the Holders do not own any of the Registrable Shares, the Company will (a) use its commercially reasonable efforts to ensure that the current public information requirements of subsection (c) of Rule 144 remain satisfied and (b) cooperate promptly in providing any information or documentation that it needs to provide to Holders to enable Holders to sell shares of Common Stock pursuant to a transaction otherwise permissible under Rule 144. The Company agrees that its cooperation pursuant to clause (b) of the immediately preceding sentence shall, with respect to any sale by a Holder of not less than twenty thousand (20,000) shares of Common Stock in any one 10 transaction, be at the Company's reasonable cost and expense and, to the extent the proposed sale can be effected under Rule 144, include a "Rule 144" opinion issued by counsel of the Company's choice. The Holders agree that the Company does not have any obligation under this Section 12 during any period in which the Holders are able to sell shares of Common Stock under an effective registration statement. Section 13. MISCELLANEOUS. 13.1 SUCCESSORS AND ASSIGNS. Except as provided in Section 8, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by operation of law or otherwise without the prior written consent of the parties hereto, which consent may be granted or withheld in the sole discretion of the parties. Subject to the preceding sentence, 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. 13.2 ENTIRE AGREEMENT. This Agreement embodies the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes all prior agreements and understandings relating to such subject matter. 13.3 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. 13.4 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. 13.5 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 ONLY IN THE FEDERAL OR STATE COURTS LOCATED WITHIN TRAVIS COUNTY, Texas. 13.6 Notices. Any notices or demands required or permitted to be given hereunder shall be deemed sufficiently given if in writing and delivered, transmitted or 11 mailed (with all postage and charges prepaid), addressed to the recipient at the address of such party as set forth on the signature page of this Agreement, 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 13.6. 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 13.6. 13.7 FURTHER ASSURANCES. Each party to 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 transactions contemplated hereby. Each party will use its good faith efforts to carry out and comply with the provisions of this Agreement. 13.8 NO THIRD-PARTY BENEFICIARIES. Except as provided in Sections 10.1 and 11.1, this Agreement shall not confer any rights or remedies upon any person or entity other than the parties hereto and their respective successors and permitted assigns. 13.9 AMENDMENTS. This Agreement may not be amended or modified except by an instrument in writing signed by each of the parties. [SIGNATURE PAGE FOLLOWS] 12 SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the day and year first above written. COMPANY: FINANCIAL INDUSTRIES CORPORATION By: Eugene Payne --------------------------------------------------- Name: /s/ Eugene Payne --------------------------------------------------- Title: CEO, President and Chairman --------------------------------------------------- Address: 6500 River Place Blvd., Building One Austin, Texas 78730 Attn: Gene Payne and Ted Fleron Facsimile No.: (512) 404-5210 BUYERS: AMERICAN PHYSICIANS SERVICE GROUP, INC. By: /s/ Kenneth S. Shifrin -------------------------------------- Kenneth S. Shifrin, Chairman of the Board and Chief Executive Officer Address: 1301 Capital of Texas Hwy., Suite C-300 Austin, Texas 78746 Attn: Chairman and Chief Executive Officer Facsimile No.: (512) 314-4398 EQUITA FINANCIAL AND INSURANCE SERVICES OF TEXAS, INC. By: /s/ Richard G. Wolfe ----------------------------------------------- Richard G. Wolfe President Address: 11551 Forest Central Drive Forest Central II, Second Floor Dallas, Texas 75243 Attn: Richard G. Wolfe, President Facsimile No.: (214) 553-5384 M&W INSURANCE SERVICES, INC. By: /s/ Richard G. Wolfe ------------------------------------------------ Richard G. Wolfe President Address: 11551 Forest Central Drive Forest Central II, Second Floor Dallas, Texas 75243 Attn: Richard G. Wolfe, President Facsimile No.: (214) 553-5384 -----END PRIVACY-ENHANCED MESSAGE-----