EXHIBIT 99.1
DEBT RETIREMENT AGREEMENT
THIS AGREEMENT ("Agreement") is entered into as of this 30th day of
November, 2005, by and between Fortune Diversified Industries, Inc., an Indiana
corporation ("FDI") and Xxxxxx X. Xxxxxxx ("Fortune").
PREAMBLE
1. Fortune holds a line of credit promissory note ("Debt") from FDI in the
total principal amount of Seven Million Dollars, with outstanding borrowings
under the note of Six Million Six Hundred Eighteen Thousand Dollars
($6,618,000);
2. Fortune has agreed to exchange all of the Debt, for the FDI preferred
shares as described below; and
3. The Board of Directors of FDI has approved this Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the mutual agreements,
provisions and conditions contained herein, and for other good and valuable
consideration, the adequacy and receipt of which are hereby acknowledged, the
parties hereto agree as follows:
ARTICLE I
DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings, unless the context shall otherwise require:
(a) "Debt" shall mean the FDI line of credit promissory note, dated May
25, 2005, held by Fortune in the total principal amount of Seven
Million Dollars ($7,000,000) with outstanding borrowings under the
note of Six Million Six Hundred Eighteen Thousand Dollars
($6,618,000).
(b) "FDI Preferred Stock" shall mean the 66,180 shares of Preferred Stock
issued by FDI, $0.10 par value, to be issued to Fortune in accordance
with this Agreement at the price of $100.00 per share. The FDI
Preferred Stock shall be non-voting, shall be of one class and shall
not be convertible into Common Stock.
(c) "Closing" shall mean the consummation of this Agreement in accordance
with the provisions hereof to be held on or before November 30, 2005
unless changed by the mutual agreement of the parties hereto.
ARTICLE II
EXCHANGE OF DEBT AND PREFERRED STOCK
2.1 Exchange. At the Closing, the Debt shall be exchanged for the FDI
Preferred Stock. Upon the exchange, the Debt shall no longer be outstanding and
shall automatically be canceled and retired and shall cease to exist. Fortune as
holder of the Debt shall cease to have any rights with respect to the Debt. At
the Closing, FDI shall issue a certificate evidencing the FDI Preferred Stock to
Fortune.
2.2 Restrictive Legend. The FDI Preferred Stock certificate shall bear the
usual restrictive legend pertaining to Rule 144 of the General Rules and
Regulations promulgated under the Securities Act of 1933 (the "Securities Act").
Subject to the Securities Act restrictions, Fortune may however sell or transfer
the FDI Preferred Stock at any time.
ARTICLE III
PAYMENT OF DIVIDEND
FDI shall pay an annual cash dividend to Fortune arising from his ownership
of the FDI Preferred Stock in an amount equal to seven and 50/100 dollars
($7.50) per share. The dividend shall be paid monthly on the first day of each
month, commencing on January 1, 2006. The amount of the monthly cash dividend
per share of the FDI Preferred Stock shall be 63/100 dollars ($.63).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FORTUNE
The following representations and warranties are hereby made by Fortune to
FDI:
4.1 Authorization. Fortune has full power and authority to enter into this
Agreement and to carry out the transaction contemplated herein. This Agreement
constitutes the valid and legally binding obligation of Fortune, enforceable in
accordance with its terms and conditions.
4.2 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transaction contemplated hereby, will (a)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any government,
governmental entity, or court to which Fortune is subject or (b) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice under any agreement, contract, lease, license, instrument or
other arrangement to which Fortune is a party.
4.3 Lack of Restrictions. Fortune holds the Debt free and clear of any
restrictions on transfer, encumbrances, security interests, options, warrants,
purchase rights, contracts, commitments and/or equities. Fortune is not a party
to any option, warrant, purchase right or other contract or commitment that
could require Fortune to sell, transfer or otherwise dispose of the Debt (other
than this Agreement).
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4.4 Investor Representations.
(a) Fortune understands that the FDI Preferred Stock will not be
registered under the Securities Act or any state securities laws on the grounds
that the issuance of the Preferred Stock is exempt from registration pursuant to
Section 4(2) of the Securities Act or Regulation D promulgated under the
Securities Act and applicable state securities laws, and that the reliance of
FDI on such exemptions is predicated in part on Fortune's representations,
warranties, covenants and acknowledgments set forth in this Section 4.4.
(b) Fortune represents and warrants that the FDI Preferred Stock to be
acquired by him upon consummation of the transaction contemplated herein will be
acquired by him for his own account, not as a nominee or agent, and without a
view to resale or other distribution within the meaning of the Securities Act
and the rules and regulations thereunder other than as contemplated by this
Agreement, and that he will not distribute all or any portion of the FDI
Preferred Stock in violation of the Securities Act.
(c) Fortune acknowledges that the shares of FDI Preferred Stock are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired in a transaction not involving a public
offering and that under such laws and applicable regulations such securities may
be resold without registration under the Securities Act, only in certain limited
circumstances.
(d) Fortune is an "accredited investor" as that term is defined in
Regulation D of the Securities Act and he has sufficient knowledge and
experience in financial and business matters that he is capable of evaluating
the merits and risks of the transaction contemplated by this Agreement.
(e) Fortune is in a financial position to afford to hold the FDI
Preferred Stock indefinitely and Fortune's financial condition is such that he
is not presently under (and does not contemplate any future) necessity or
constraint to dispose of the FDI Preferred Stock to satisfy any existing or
contemplated debt or undertaking. Fortune recognizes that it may not be possible
for him to liquidate his investment in the FDI Preferred Stock and, accordingly,
he may have to hold the FDI Preferred Stock, and bear the economic risk of this
investment, indefinitely.
(f) Fortune understands that neither the Securities and Exchange
Commission nor any other federal or state agency has recommended, approved or
endorsed the purchase of the FDI Preferred Stock as an investment.
(g) Fortune confirms that the FDI Preferred Stock was not offered to
him by any means of general solicitation or general advertising, and that he has
received no representations or warranties with respect to the FDI Preferred
Stock other than those contained or described in this Agreement or in FDI's
public filings.
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(h) Fortune acknowledges that he has been provided or that FDI has
made available to him copies of FDI's most recent Form 10-KSB, Form 10-QSB and
any Form 8-KS and Form 4s filed since the most recent Form 10-QSB was filed.
(i) Fortune acknowledges that FDI has given him a reasonable
opportunity to ask questions and receive answers concerning his receipt of FDI
Preferred Stock and to obtain any additional information which FDI possesses or
can acquire without unreasonable effort or expense that is necessary to verify
the accuracy of information.
4.5 No Brokerage Fees. No agent, broker, investment banker, person or firm
acting on behalf of Fortune to the best of his knowledge, is or will be entitled
to any broker's or finder's fee or any other commission or fee, directly or
indirectly, in connection with the transaction contemplated hereby.
4.6 Accuracy of Representations. No representation or warranty contained
herein, nor any statement or certificate furnished hereunder or in connection
herewith, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FDI
The following representations and warranties are hereby made by FDI to
Fortune:
5.1 Organization; Authorization. FDI is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation and has full power and authority to enter into this Agreement and
to carry out the transaction contemplated herein. This Agreement constitutes the
valid and legally binding obligation of FDI, enforceable in accordance with the
terms and conditions.
5.2 Noncontravention. Neither the execution and the delivery of this
Agreement, nor the consummation of the transaction contemplated hereby will (a)
violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any government,
governmental entity, or court to which FDI is subject or (b) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice under any agreement, contract, lease, license, instrument or
other arrangement to which FDI is a party.
5.3 Capital Stock. FDI's authorized capital stock consists of 150,000,000
shares of Common Stock, $.10 par value, and 1,000,000 shares of Preferred Stock,
$0.10 par value. FDI has full right and authority to issue to Fortune, upon the
terms and conditions set forth in this Agreement, the shares specified by this
Agreement and, subject to the receipt of the consideration therefor pursuant to
the terms and conditions hereof, the shares will be duly and validly issued as
fully paid and nonassessable shares of FDI Preferred Stock.
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5.4 No Brokerage Fees. No agent, broker, investment banker, person or firm
acting on behalf of it to the best of its knowledge, is or will be entitled to
any broker's or finder's fee or any other commission or fee, directly or
indirectly, in connection with the transaction contemplated hereby.
5.5 Accuracy of Representations. No representation or warranty contained
herein, nor any statement or certificate furnished hereunder or in connection
herewith, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary to make the statements
contained herein or therein not misleading.
ARTICLE VI
MISCELLANEOUS
6.1 Tax Consequences. Each party represents that it/he has consulted with
its/his own tax advisors and has made has made its/his own independent
conclusion regarding the tax consequences of the intended transaction.
6.2 Survival. All agreements, representations and warranties made
hereunder or in connection with the transactions contemplated hereby shall
survive the Closing and remain effective in accordance with the terms hereof
regardless of any investigation at any time made by or on behalf of any of the
parties.
6.3 Assignment. This Agreement may not be assigned without the prior
written consent of all parties nor may any of the performances hereunder be
delegated by operation of law or otherwise by any party hereto, and any
purported assignment or delegation shall be void.
6.4 Binding Effect. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, successors, legal
representatives, assigns and transferors.
6.5 Entire Agreement. This Agreement constitutes the entire agreement of
the parties hereto with respect to the subject matter hereof. There are no
representations, warranties, conditions or other obligations except as
specifically provided. Any waiver, amendment or modification hereof must be in
writing. A waiver in one instance shall not be deemed to be a continuing waiver
or waiver in any other instance.
6.6 Arbitration. Any and all disputes, claims and controversies arising
under or by reason of this agreement shall be settled by arbitration in
accordance with the rules of the American Arbitration Association and any award
rendered in such arbitration shall be binding and conclusive upon the parties.
The arbitrators may decree specific performance or grant injunctions or any
other equitable relief deemed proper by the arbitrators under the circumstances.
Such arbitration shall be held in Indianapolis, Indiana. Judgment on any award
may be entered and enforced in any court located in Indianapolis, Indiana.
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6.7 Governing Law. This Agreement shall be construed and interpreted in
accordance with the laws of the State of Indiana.
6.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. This Agreement may be
deemed executed upon receipt of a facsimile copy bearing signatures of the
parties, provided that a complete document bearing original signatures is
assembled within five business days of such execution.
6.9 Effective Date. The Effective date of the Closing shall be
November 30, 2005.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.
FORTUNE DIVERSIFIED INDUSTRIES, INC.
By:
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Xxxx X. Xxxxxxx, CEO Xxxxxx X. Xxxxxxx, Individually
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