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EXHIBIT 7
FORTUNE FINANCIAL, INC.
SECURITIES PURCHASE AGREEMENT
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THIS SECURITIES PURCHASE AGREEMENT ("Agreement") is made, executed
and dated November 15, 2000, by and among Fortune Financial, Inc., a Florida
corporation (the "Company"), and Hawkeye, Inc., a Florida corporation
("Hawkeye") and Mid-Ohio Securities Corp., FBO R. Lee Smith (Acct. 15051)
("Smith", together with Hawkeye being the "Purchaser").
RECITALS
WHEREAS, the Company proposes that the Company issue to the Purchaser
and the Purchaser agrees to purchase Promissory Notes in the form of Exhibit F
(the "Notes") and Warrants in the form of Exhibit G (the "Warrants," together
with the Notes being the "Securities"), upon the terms and subject to the
conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
1. AUTHORIZATION OF STOCK. The Company will authorize the issuance and
sale of 200,000 shares (the "Shares," including any such shares issued in
substitution therefor pursuant to Section 8) of its Series A Convertible
Preferred Stock, $.001 par value, to be designated as its "Series A Convertible
Preferred Stock" (the "Stock"). The relative rights, preferences and limitations
of the Stock, including, without limitation, the right to convert Shares into
shares of the Company's common stock, par value $.025 per share (the "Common
Stock"), will be as set forth in the form of the Articles of Amendment of the
Articles of Incorporation of the Company attached as EXHIBIT A hereto, as
modified to provide provisions concerning adjustment of the conversion price
substantially equivalent to those contained in the Warrants with respect to the
exercise price thereof or to include such other terms selected by the Purchaser
contained in any preferred stock acquired after the date hereof by The Crown
Group, Inc. or any other third party (the "Articles of Amendment"). Certain
capitalized terms used in this Agreement are defined in Section 9; references to
a "Schedule" or an "Exhibit" are, unless otherwise specified, to a Schedule or
an Exhibit attached to this Agreement and references to a "Section" are, unless
otherwise specified, to one of the Sections of this Agreement.
2. SALE AND PURCHASE OF SECURITIES. Subject to the terms and conditions
herein set forth, the Company agrees that it will issue to the Purchaser, and
the Purchaser agrees that it will acquire from the Company, at the Closing, the
following:
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2.1 Hawkeye will acquire a Note in the original principal amount of
$1,200,000 and a Warrant to purchase 495,868 shares of Common Stock
for an aggregate consideration of $1,200,000.
2.2 Smith will acquire a Note in the original principal amount of
$800,000 and a Warrant to purchase 330,579 shares of Common Stock
for an aggregate consideration of $800,000.
2.3 Notwithstanding any other provision of this Agreement the obligations
of Smith and Hawkeye herein are several, not joint, and the portion of
the consideration paid by each allocable to the Warrant acquired by
each is one cent ($.01) per share of Common Stock subject to their
respective Warrants.
3. CLOSING; PAYMENT OF PURCHASE PRICE.
3.1 The sale of the Securities to be purchased by the Purchaser
shall take place at the offices of Akerman, Senterfitt & Eidson, P.A., 50 North
Laura Street, Suite 2750, Jacksonville, Florida 32202, at 2:00 p.m., local time,
at a closing ("Closing") on Wednesday, November 15, 2000, provided the
conditions to Closing set forth in Section 4 have been satisfied or waived by
the party entitled to waive such condition or on such other date as may be
agreed upon by the Company and the Purchaser.
3.2 The Company will issue the Notes to, and register the
Warrants in the name of, each Purchaser at Closing, and will deliver the Notes
and Warrants to each Purchaser dated the date of the Closing and each Purchaser
shall deliver to the Company in immediately available funds the Purchase Price
to an account designated by the Company. If at Closing, (i) each Purchaser shall
fail to tender to the Company the Purchase Price for the Securities, as provided
above in this Section 3, other than on account of any of the conditions
specified in Section 4 not having been fulfilled or on account of a breach by
the Company of any of its obligations under this Agreement, or (ii) if the
representations and warranties of a Purchaser contained in Section 6 shall not
be true and correct, then the Company shall, at its election, be relieved of all
further obligations under this Agreement, without thereby waiving any other
rights the Company may have by reason of such failure.
4. CONDITIONS TO CLOSING. Each Purchaser's obligation to purchase and
pay for the Securities to be sold to the Purchaser at Closing is subject to the
fulfillment, prior to or concurrently with such Closing (or, if so stated,
within the period set forth), of the following conditions.
4.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the Company contained in this Agreement shall be true and correct
when made and at the time of the Closing, except as affected by the consummation
of the transactions contemplated by this Agreement, and except where the failure
of such representations and warranties to be so true and correct would not
individually or in the aggregate have a Material Adverse Effect.
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4.2 PERFORMANCE. The Company shall have performed and complied
with all agreements and conditions contained in this Agreement required to be
performed or complied with by it prior to or at the Closing.
4.3 OPINION OF COUNSEL. The Purchaser shall receive within 15
days after the date hereof the favorable opinion of Akerman, Senterfitt &
Eidson, P.A., counsel for the Company, substantially in the form set forth in
EXHIBIT B or as reasonably acceptable to Purchaser's counsel and dated the date
of the Closing.
4.4 ARTICLES OF AMENDMENT. The Articles of Amendment shall
have been duly approved by the Company's Board of Directors.
4.5 REGISTRATION RIGHTS AGREEMENT. Each Purchaser shall have
received a fully executed counterpart of the Registration Rights Agreement
substantially in the form set out in EXHIBIT C (the "Registration Rights
Agreement"), such agreement shall be in full force and effect and no term or
condition thereof shall have been amended, modified or waived.
4.6 NO ACTIONS PENDING. There shall be no suit or formal
action by any Governmental Authority or any other Person or any other legal or
administrative proceeding pending or to the knowledge of the Company threatened
which questions the validity or legality of the transactions contemplated by
this Agreement, or seeks damages in connection therewith.
4.7 COMPLIANCE WITH SECURITIES LAWS. The offering and sale by
the Company, at or prior to the Closing, of the Securities pursuant to this
Agreement shall have been made in compliance with all applicable requirements of
federal and state securities laws.
4.8 DOCUMENTS. All documents and instruments incident to the
transactions contemplated by this Agreement shall be reasonably satisfactory to
each Purchaser, and each Purchaser shall have received all such counterpart
originals or certified or other copies of such documents as the Purchaser may
reasonably request.
4.9 RESERVATION OF COMMON STOCK. The shares of Common Stock
initially issuable upon conversion of the Shares shall have been duly authorized
and reserved for issuance upon conversion of the Shares.
4.10 SHAREHOLDERS' AGREEMENT. Persons holding a majority of
the outstanding shares of Common Stock as of the date hereof and at Closing
shall have executed and delivered to Purchaser a Shareholders' Agreement in the
form of EXHIBIT D attached hereto (Shareholders' Agreement") and such agreements
shall not have been rescinded, amended or modified and shall be in full force
and effect.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants that:
5.1 ORGANIZATION; STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Florida and has all requisite
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corporate power and authority to own and operate its properties, to carry on
its business, to enter into and perform all of its obligations under this
Agreement, the Securities and the Registration Rights Agreement, to issue and
sell the Securities to be issued and sold at Closing and to carry out the
transactions contemplated hereby or thereby.
5.2 SUBSIDIARIES. SCHEDULE 5.2 lists as to each Subsidiary of
the Company on the date of this Agreement (a) its name, (b) the jurisdiction of
its incorporation or organization and (c) the percentage of its issued and
outstanding shares or other ownership interests owned by the Company or by
another Subsidiary of the Company (specifying such other Subsidiary), as the
case may be. Each Subsidiary of the Company is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has all requisite corporate power and authority to own and
operate its properties and to carry on its business as now conducted and as
proposed to be conducted. All the outstanding shares of capital stock of each
Subsidiary of the Company are validly issued, fully paid and nonassessable, and
all such shares indicated in SCHEDULE 5.2 as owned by the Company or by a
Subsidiary of the Company are so owned beneficially and of record by the Company
or by such Subsidiary, as the case may be, free and clear of any Lien except as
indicated in SCHEDULE 5.2.
5.3 QUALIFICATION. Each of the Company and its Subsidiaries is
duly qualified and in good standing and is authorized to do business in each
jurisdiction in which the nature of its activities or the character of the
properties it owns or leases makes such qualification necessary and in which the
failure to qualify would have a Material Adverse Effect.
5.4 BUSINESS; FINANCIAL STATEMENTS. The Company has delivered
to the Purchaser complete and correct copies of the audited consolidated balance
sheets of the Company and its Subsidiaries as of December 31, 1999 and December
31, 1998, and the related audited consolidated statements of income,
stockholders' equity and cash flows of the Company and its Subsidiaries for the
years ended December 31, 1999 and December 31, 1998. Such audited financial
statements are hereinafter referred to as the "Financial Statements." The
Financial Statements are accompanied by the report of Cherry, Bekaert & Holland,
L.L.P., which states that the Financial Statements present fairly, in all
material respects, the consolidated financial position of the Company and its
Subsidiaries as of December 31, 1999 and 1998, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1999 in conformity with GAAP, and that the audit by such
accountants of the Financial Statements has been made in accordance with
generally accepted auditing standards. The Company has also delivered to the
Purchaser complete and correct copies of the unaudited consolidated balance
sheet of the Company and its Subsidiaries as of June 30, 2000, and the related
unaudited consolidated statement of income, stockholders' equity and cash flows
of the Company and its Subsidiaries for the three month period ended on such
date. Such unaudited financial statements are hereinafter referred to as the
"Unaudited Statements." The Financial Statements and the Unaudited Statements
have been prepared in accordance with GAAP consistently applied throughout the
periods involved (except as otherwise specified therein) and present fairly the
financial position of the Company and its Subsidiaries as of the respective
dates specified, and the results of their operations and their cash flows for
the respective periods specified.
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5.5 CHANGES. Since December 31, 1999, except as disclosed in
Commission Documents, neither the Company nor any of the Subsidiaries has
sustained any loss or interference with its business from fire, explosion, flood
or other calamity, whether or not covered by insurance which would be material
to the Company and the Subsidiaries taken as a whole, other than as reserved for
or as disclosed in the Company's financials statements; and there has not been
any material change in the capital stock of the Company or increase in the
long-term debt (other than accretion or scheduled repayments thereof) of the
Company and the Subsidiaries taken as a whole, or any change relating thereto
which has had a Material Adverse Effect.
5.6 CAPITAL STOCK AND RELATED MATTERS. The authorized capital
stock of the Company consists of 18,000,000 shares of Common Stock and 500,000
shares of Preferred Stock, $.10 par value per share (the "Preferred Stock"). As
of the date hereof, there are (i) no shares of Preferred Stock issued and
outstanding, (ii) 7,467,542 shares of Common Stock issued and outstanding, (iii)
565,428 shares of Common Stock issuable upon the exercise of outstanding stock
options and warrants and upon the conversion or exchange of outstanding
convertible or exchangeable securities, (iv) an aggregate of 1,045,000 shares of
Common Stock reserved for issuance under the Company's Incentive Plan, and (v)
476,872 shares of capital stock of the Company held in the treasury of the
Company. All issued and outstanding shares of Common Stock have been duly
authorized and are validly issued, fully paid, nonassessable and free of
preemptive rights. The Securities, when issued to the Purchaser in accordance
with this Agreement, will be duly authorized and validly issued, fully paid,
nonassessable and free of preemptive rights. Except as set forth above and on
SCHEDULE 5.6, as of the date hereof, there are no outstanding securities
convertible into or exchangeable for any shares of capital stock of the Company
or any of its Subsidiaries, or any outstanding rights (either preemptive or
other) to subscribe for or to purchase any capital stock of the Company or any
of its Subsidiaries or any stock or securities convertible into or exchangeable
for any capital stock of the Company or any of its Subsidiaries. Except as set
forth on SCHEDULE 5.6, as of the date hereof, neither the Company nor any of its
Subsidiaries is subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire any shares of its capital stock or any
convertible securities, rights or options. Neither the Company nor any of its
Subsidiaries is a party to, or has knowledge of, any agreement (except as set
forth on SCHEDULE 5.6) restricting the transfer of any Securities being
purchased hereunder which would affect the transferability of the Common Stock.
Except as set forth on SCHEDULE 5.6, as of the date hereof, the Company is not a
party to or bound by any agreement or commitment pursuant to which the Company
is or could be required to register any securities under the Securities Act of
1933.
5.7 TAX RETURNS AND PAYMENTS. The Company and each of the
Subsidiaries have filed all material federal, state, local and foreign income,
payroll, franchise and other tax returns required to be filed (after giving
effect to extensions) and have paid all taxes shown as due thereon, all such tax
returns are true, complete and accurate in all material respects, and there is
no tax deficiency that has been, or to the knowledge of the Company is likely to
be, asserted against the Company, any of the Subsidiaries or any of their
properties or assets that would result in a Material Adverse Effect, except for
taxes that are being contested in good faith by appropriate proceedings.
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5.8 INDEBTEDNESS OF THE COMPANY. SCHEDULE 5.8 correctly
describes all secured and unsecured Indebtedness of the Company and its
Subsidiaries (other than intercompany items) outstanding which is individually
in excess of $1,000,000 ("Significant Indebtedness") (excluding operating
leases), as of October 24, 2000. Neither the Company nor any of its Subsidiaries
is in default with respect to any Indebtedness or any instrument or agreement
relating thereto, nor to the best of the knowledge of the Company has any event
occurred that with the giving of notice or the lapse of time or both would
constitute a default thereunder.
5.9 TITLE TO PROPERTIES; LIENS. The Company and each of the
Subsidiaries have good and marketable title to all real and personal property
(other than property which is leased) material to the conduct of the business of
the Company and the Subsidiaries, taken as a whole free and clear of all Liens
except such as are described on SCHEDULE 5.9 or such as do not in the aggregate
have a Material Adverse Effect. Attached to SCHEDULE 5.9 is a copy of the
Company's lease for the premises located at 10475 Fortune Parkway, Jacksonville,
Florida 32256.
5.10 LITIGATION. There is no action or proceeding pending or
(to the knowledge of the Company) threatened which questions the validity of
this Agreement, the Securities or any action taken or to be taken pursuant to
this Agreement, the Securities or the Registration Rights Agreement. Other than
as set forth on SCHEDULE 5.10 and as disclosed in Commission Documents, there
are no legal or governmental proceedings pending to which the Company or any of
the Subsidiaries is a party or of which any property of the Company or the
Subsidiaries is the subject, which if determined adversely to the Company or any
of the Subsidiaries, would individually or in the aggregate have a Material
Adverse Effect; and, to the Company's knowledge, no such proceedings which would
in the aggregate have a Material Adverse Effect are threatened.
5.11 COMPLIANCE WITH OTHER INSTRUMENTS. To the best of the
Company's knowledge, neither the Company nor any of its Subsidiaries is in
violation of its articles of incorporation or by-laws, and neither the Company
nor any of its Subsidiaries is in violation of any term of any agreement or
instrument to which it is a party or by which it is bound or of any applicable
law, ordinance, rule or regulation of any Governmental Authority or any term of
any applicable order, judgment or decree of any court, arbitrator or
Governmental Authority, the consequences of which violation could reasonably be
expected to have a Material Adverse Effect. The compliance by the Company with
all of the provisions of this Agreement, the Securities and the Registration
Rights Agreement, the execution, delivery and performance by the Company of this
Agreement, the Securities and the Registration Rights Agreement, the issuance by
the Company of the Shares upon conversion of the Notes, issuance of the Common
Stock upon the exercise of the Warrants and conversion of the Shares, and the
compliance with the terms of the Articles of Amendment will not conflict with or
result in a breach or violation of any of the terms and provisions of or require
any consent, approval or authorization under any material agreement or
instrument to which the Company or any of the Subsidiaries is a party or by
which the Company or any of the Subsidiaries is bound or to which any of the
property or assets of the Company or any of the Subsidiaries is subject, except
shareholder approval of the
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Articles of Amendment and in each case as would not, individually or in the
aggregate, have a Material Adverse Effect.
5.12 GOVERNMENTAL CONSENTS. Except with respect to any
filings, approvals or authorizations required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the regulations thereunder,
16 C.F.R. Parts 801-803 (the "HSR Act") or by the Florida Department of
Insurance, no consent, approval or authorization of, or declaration or filing
with, any Governmental Authority on the part of the Company is required for the
valid execution and delivery of this Agreement.
5.13 CERTAIN FEES. Except as set forth on SCHEDULE 5.13, no
broker's or finder's fees or commissions will be payable by the Company with
respect to the transactions contemplated by this Agreement and the Registration
Rights Agreement, and the Company hereby agrees to indemnify the Purchaser
against and agrees that it will hold the Purchaser harmless from any claim,
demand or liability for broker's or finder's fees alleged to have been incurred
at the instance of the Company or any Person acting on behalf of or at the
request of the Company or any agent of the Company in connection with any of the
transactions contemplated by this Agreement and the Registration Rights
Agreement, and from any expenses, including reasonable legal fees, arising in
connection with any such claim, demand or liability.
5.14 ENFORCEABILITY. This Agreement, the Securities, the
Shareholders' Agreement and the Registration Rights Agreement have been duly
authorized and when validly executed and delivered by the Company (assuming the
due authorization, execution and delivery thereof by the Purchaser) will
constitute the valid and binding obligations of the Company, enforceable in
accordance with their respective terms, except as the enforcement thereof may be
limited by bankruptcy, insolvency (including, without limitation, all laws
relating to fraudulent transfers), reorganization, moratorium or other similar
laws relating to or affecting enforcement of creditors' rights generally, or by
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law).
5.15 INTEGRATION. Neither the Company nor any Affiliate has,
directly or through any agent, sold, offered for sale, solicited offers to buy
or otherwise negotiated in respect of, any security (as defined in the
Securities Act) which is or will be integrated with the sale of the Securities,
in a manner that would require the registration of the Securities under the
Securities Act.
5.16 GOVERNMENT LICENSES. The Company and the Subsidiaries
possess such permits, licenses, approvals, consents and other authorizations
(collectively, "Governmental Licenses") issued by the appropriate federal,
state, local or foreign regulatory agencies or bodies necessary to conduct the
business now operated by them, except where the failure to so possess such
Government Licenses would not, singly or in the aggregate, have a Material
Adverse Effect; the Company and the Subsidiaries are in compliance with the
terms and conditions of all such Governmental Licenses, except where the failure
so to comply would not, singly or in the aggregate, have a Material Adverse
Effect; all of the Governmental Licenses are valid and in full force and effect,
except when the invalidity of such Governmental Licenses or the failure of such
Governmental Licenses to be in full force and effect would not have, singly or
in the aggregate, a
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Material Adverse Effect; and neither the Company nor any of the Subsidiaries
has received any notice of proceedings relating to the revocation or
modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding,
would result in a Material Adverse Effect.
5.17 ENVIRONMENTAL LAWS. Except as described on SCHEDULE 5.17
or except as would not, singly or in the aggregate, result in a Material Adverse
Effect: (a) neither the Company nor any of the Subsidiaries is in violation of
any federal, state, local or foreign statute, law, rule, regulation, or
ordinance relating to the release or threatened release of chemicals,
pollutants, contaminants, wastes, toxic substances, hazardous substances,
petroleum or petroleum products (collectively, "Hazardous Materials") or to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials (collectively, "Environmental
Laws"), (b) neither the Company nor any of the Subsidiaries is lacking any
permits, authorizations and approvals required under any applicable
Environmental Laws or are in violation of the requirements of such Environmental
Laws, (c) there are no pending or, to the best knowledge of the Company,
threatened administrative, regulatory or judicial actions or notices of
violation of any Environmental Law against the Company or any of the
Subsidiaries and (d) to the knowledge of the Company there are no events or
circumstances that might reasonably be expected to form the basis of an order
for clean-up or remediation, or an action, suit or proceeding by any private
party or governmental body or agency, against or affecting the Company or any of
the Subsidiaries relating to Hazardous Materials or any Environmental Laws.
5.18 ERISA. Neither the Company nor any of the Subsidiaries
has violated any provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), or the rules and regulations promulgated thereunder,
except for such violations which, singly or in the aggregate, would not have a
Material Adverse Effect. If any plan subject to ERISA is adopted, the execution
and delivery of this Agreement and the sale of the Shares will not involve any
non-exempt prohibited transaction within the meaning of Section 406 of ERISA or
Section 4975 of the Internal Revenue Code of 1986, as amended.
5.19 NO LIABILITIES. Neither the Company nor any of its
Subsidiaries has any material liabilities or obligations ("Liabilities"), except
(i) as reflected in the notes to the Financial Statements for the year ended
December 31, 1999 and not heretofore discharged, (ii) as reflected or reserved
against in the unaudited balance sheet of the Company at June 30, 2000 included
in the Company's Form 10-Q for the quarter ended June 30, 2000 and not
heretofore discharged, (iii) Liabilities incurred in the ordinary course of
business since June 30, 2000, (iv) contractual liabilities incurred in the
ordinary course of business, (v) Liabilities incurred in connection with any
acquisition of another business entity made by the Company after the date
hereof, (vi) other Liabilities that do not, singly or in the aggregate, have a
Material Adverse Effect or (vii) as disclosed in Commission Documents.
6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. Each Purchaser, as
to itself only, hereby represents and warrants as follows:
6.1 INVESTMENT REPRESENTATIONS.
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(a) Each Purchaser understands that none of the Securities,
Shares nor any Common Stock issuable upon exercise of the Warrants or
conversion of the Shares have been registered under the Securities Act
and that the certificates for the Securities, Shares and such Common
Stock will bear a legend to that effect.
(b) Each Purchaser is acquiring the Shares for its account
and/or for the account of its Affiliates not with a view toward
distribution in a manner which would violate the Securities Act.
Neither the Purchaser nor any Person acting on their behalf has taken
or will take any action in connection with the transactions
contemplated by this Agreement or the offering, sale or issuance of any
equity interests in Purchaser which would subject the offering,
issuance or sale of the Shares to the provisions of Section 5 of the
Securities Act.
(c) Each Purchaser represents that is an "accredited investor"
as such term is defined in Rule 501(a) of Regulation D under the
Securities Act (a copy of which is attached hereto as EXHIBIT E) and by
reason of its and its Affiliates' business or financial experience, and
the business or financial experience of each of the other investors who
have or may acquire equity interest in the Purchaser, the Purchaser and
its shareholders have the capacity to protect their own interest in
connection with the transaction contemplated in this Agreement.
(d) Each Purchaser has been given access to all Company
documents, records, and other information, and has had adequate
opportunity to ask questions of, and receive answers from, the
Company's officers, employees, agents, accountants, and
representatives, concerning the Company's business, operations,
financial condition, assets, liabilities, and other matters considered
by the Purchaser as relevant to its investment in the Securities.
6.2 NO BROKERS. The Purchaser represents and warrants to the
Company that no broker's or finder's fees or commissions will be payable by the
Purchaser with respect to the transactions contemplated by this Agreement and
the Registration Rights Agreement, and the Purchaser hereby agrees to indemnify
and hold the Company harmless from any claim, demand or liability for broker's
or finder's fees alleged to have been incurred at the instance of the Purchaser,
its Affiliates or agents or any Person acting on behalf of or at the request of
the Purchaser, its Affiliates or agents.
6.3 COMPLIANCE WITH LAWS. The Purchaser and its transferees
will comply with all filing and other reporting obligations under all
Requirements of Law which shall be applicable to the Purchaser with respect to
the Securities, the Shares and to the Common Stock issuable or issued on
exercise of the Warrants or conversion of the Shares.
6.4 POWER AND AUTHORITY; ENFORCEABILITY. Each Purchaser has
all requisite power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. The Purchaser has taken all actions necessary to authorize
its execution and delivery of this Agreement, the performance of its obligations
hereunder and the consummation of the transactions contemplated hereby. This
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Agreement has been duly executed and delivered by the Purchaser and constitutes
a legal, valid and binding obligation of it, enforceable against it in
accordance with its terms (except as enforceability may be limited by applicable
bankruptcy, insolvency or similar laws). The Purchaser has sufficient financial
means and ability to deliver the Purchase Price for the Securities at Closing.
6.5 NO OTHER REPRESENTATIONS. Each Purchaser acknowledges
that, in connection with the acquisition of the Shares, no representations or
warranties of any type or description have been made to any Purchaser by any
Person with regard to the Company, any of its subsidiaries, any of their
respective businesses, properties or prospects or the acquisition of the
Securities contemplated herein, other than the representations and warranties
set forth in Section 5.
7. AFFIRMATIVE COVENANTS. The Company covenants that from and
after the date of Closing:
7.1 RESERVATION OF COMMON STOCK. The Company will at all times
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrants and conversion of the Stock, the number of shares of Common Stock
from time to time issuable upon conversion of all of the Stock at the time
outstanding. All shares of Common Stock issuable upon exercise of the Warrants
and conversion of the Stock shall be duly authorized and, when issued upon such
exercise or conversion, shall be validly issued, fully paid and non-assessable.
7.2 AVAILABILITY OF INFORMATION. The Company will comply with
the reporting requirements of Sections 13 and 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") and will comply with all other
public information reporting requirements of the Securities and Exchange
Commission (including Rule 144 promulgated by the Securities and Exchange
Commission under the Securities Act) from time to time in effect and relating to
the availability of an exemption from the Securities Act for the sale of any
Restricted Securities. The Company will also reasonably cooperate with each
holder of any Restricted Securities in supplying such information as may be
necessary for such holder to complete and file any information reporting forms
presently or hereafter required by the Securities and Exchange Commission as a
condition to the availability of an exemption from the Securities Act for the
sale of any Restricted Securities.
7.4 STOCKHOLDER APPROVAL. As soon as practicable following the
date hereof in preparation for the Company's next annual meeting of
stockholders, the Company will take all action necessary in accordance with the
Exchange Act, Florida law and its certificate of incorporation and by-laws to
obtain the approval of its stockholders of the Articles of Amendment and the
transactions contemplated hereby (the "Stockholder Approval"). The Purchaser
covenants that it shall cooperate and assist the Company as reasonably required
to obtain such Stockholder Approval.
7.5 PARTICIPATION RIGHTS. Except with respect to the
transactions contemplated by the draft Preferred Stock Purchase Agreement
dated as of
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November 14, 2000, between the Company and The Crown Group, Inc. (the "Crown
Transaction"), the Company shall offer each Purchaser the opportunity to
purchase its pro rata share, determined on a fully diluted basis, of all
equity securities that the Company may, from time to time, propose to sell.
7.6 COLLATERAL. Contemporaneously with the payment in full of
the Company's loan from SouthTrust Bank (the "SouthTrust Loan") or such other
event as will permit the Company to comply with its obligations under this
Section, the Company shall secure the Notes issued hereunder and any other
indebtedness to the Purchaser with such collateral as the Company has available
to be encumbered to secure such Notes without causing a default under the
SouthTrust Loan.
7.7 FURTHER ASSURANCES. The Company shall at its expense
cooperate with the Purchaser and take all such actions and execute and deliver
all such documents, agreements, applications, certificates and requests as
Purchasers shall request in order to fulfill the intent of this Agreement and
vest in Purchaser the rights and benefits granted hereby and by the Securities
including, without limitation, granting collateral to Purchaser and enabling
Purchaser to convert the Notes into Stock, convert the Stock into Common Stock,
exercise the Warrants and register and sell the Common Stock pursuant to the
Registration Rights Agreement.
8. REGISTRATION, TRANSFER AND SUBSTITUTION OF CERTIFICATES FOR
STOCK.
8.1 STOCK REGISTER; OWNERSHIP OF STOCK.
(a) The Company will keep at its principal office a register
in which the Company will provide for the registration of the
Securities and the Stock and the registration of transfers or
conversions or exercises of the Securities and the Stock. The Company
may treat the Person in whose name any of the Securities or shares
issued upon conversion of any of the Stock are registered on such
register as the owner thereof and the Company shall not be affected by
any notice to the contrary. All references in this Agreement to a
"holder" of any Securities or shares issued upon conversion of any of
the Stock or exercises of the Warrants shall mean the Person in whose
name such Securities or shares issued upon conversion of any of the
Stock are at the time registered on such register.
(b) Upon the surrender of any certificate for Stock, properly
endorsed, for registration of transfer or for conversion at the office
of the Company maintained pursuant to subsection (a) of this Section
8.1, the Company at its expense will (subject to compliance with
Section 8.2 hereof, if applicable) execute and deliver to or upon the
order of the holder thereof (i) a new certificate or certificates for
the same aggregate number of Shares of Stock less the number of Shares
of Stock being converted or transferred, if any, in the name of such
holder or as such holder (upon payment by such holder of any applicable
transfer taxes) may direct, (ii) a certificate or certificates for the
number of shares of Common Stock to be issued upon conversion of the
Shares of Stock so surrendered, if applicable, in the name of such
holder or as such holder (upon payment
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by such holder of any applicable transfer taxes) may direct, and (iii)
a new certificate or certificates for the number of Shares of Stock
transferred, if applicable, in the name of the transferee (upon payment
by such holder of any applicable transfer taxes).
8.2 REPLACEMENT OF CERTIFICATES. Upon receipt of evidence
reasonably satisfactory to the Company of the loss, theft, destruction or
mutilation of any certificate representing Shares of Stock or shares of Common
Stock issued upon the conversion of Shares of Stock and, in the case of any such
loss, theft or destruction of any certificate representing Shares of Stock or
shares of Common Stock issued upon the conversion of Shares of Stock held by a
Person other than the Purchaser, upon delivery of indemnity reasonably
satisfactory to the Company in form and amount or, in the case of any such
mutilation, upon surrender of such certificate representing Shares of Stock or
shares of Common Stock issued upon the conversion of Shares of Stock for
cancellation at the office of the Company maintained pursuant to subdivision (a)
of Section 8.1 hereof, the Company at its expense will execute and deliver, in
lieu thereof, a new certificate representing shares of Stock or Common Stock of
like tenor.
8.3 RESTRICTIVE LEGENDS. Except as otherwise permitted by this
Section 8, each certificate for Securities or Stock (including each certificate
for Stock issued upon the transfer of any certificate for Stock) shall be
stamped or otherwise imprinted with a legend in substantially the following
form:
"The shares represented by this Certificate and any shares of
Common Stock issuable upon conversion of any such shares have
not been registered under the Securities Act of 1933 and may
not be transferred in the absence of such registration or an
exemption therefrom under such Act. Such shares and any such
shares of Common Stock may be transferred only in compliance
with the conditions specified in the Preferred Stock Purchase
Agreement dated November 14, 2000 between Fortune Financial,
Inc. (the "Company") and the purchaser identified therein. A
complete and correct copy of such Agreement is available for
inspection at the principal office of the Company and will be
furnished without charge to the holder of such shares upon
written request."
Except as otherwise permitted by this Section 8, each certificate for Common
Stock issued upon the conversion of any of the Stock, and each certificate
issued upon the transfer of any such Common Stock, shall be stamped or otherwise
imprinted with a legend in substantially the following form:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933 and may not be
transferred in the absence of such registration or an
exemption therefrom under such Act. Such shares may be
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transferred only in compliance with the conditions specified
in the Preferred Stock Purchase Agreement dated November 14,
2000 between Fortune Financial, Inc. (the "Company") and the
purchaser identified therein. A complete and correct copy of
such Agreement is available for inspection at the principal
office of the Company and will be furnished without charge to
the holder of such shares upon written request."
8.4 NOTICE OF PROPOSED TRANSFER; OPINIONS OF COUNSEL. Prior
to any transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act, the holder thereof
will give written notice to the Company of such holder's intention to effect
such transfer and to comply in all other respects with this Section 8.4. Each
such notice shall describe the manner and circumstances of the proposed transfer
and shall be accompanied by an opinion of counsel for such holder, which counsel
and opinion shall each be reasonably satisfactory to the Company, that the
proposed transfer may be effected without registration of such shares of
Restricted Securities under the Securities Act. Such holder shall thereupon be
entitled to transfer such shares in accordance with the terms of the notice
delivered by such holder to the Company. Each certificate representing such
shares issued upon or in connection with such transfer shall bear the
restrictive legends required by Section 8.3, unless the related restrictions on
transfer shall have ceased and terminated as to such shares pursuant to Section
8.5 hereof.
8.5 TERMINATION OF RESTRICTIONS. The restrictions imposed by
this Section 8 upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities when such restrictions are
no longer required in order to insure compliance with the Securities Act.
Whenever such restrictions shall cease and terminate as to any Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense (other than applicable transfer taxes, if any), new certificates
for such securities of like tenor not bearing the applicable legends required by
Section 8.3 hereof.
9. DEFINITIONS.
9.1 CERTAIN DEFINED TERMS. As used in this Agreement the
following terms have the following respective meanings:
Affiliate: Shall have the meaning attributed thereto under
Rule 12b-2 under the Exchange Act.
Articles of Amendment: As defined in Section 1 of this
Agreement.
Closing: As defined in Section 3 of this Agreement.
Code: The Internal Revenue Code of 1986, as amended from
time to time.
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Commission Document: All registration statements, proxy
statements, reports and other documents (and all amendments thereto) filed by
the Company under the Securities Act or the Exchange Act.
Common Stock: As defined in Section 1 of this Agreement.
Company: As defined in the introduction to this Agreement.
Determination Date: The date upon which all adjustments to
the per Share "conversion price" of the Stock as specified in EXHIBIT A
have been concluded.
Exchange Act: At any time, the Securities Exchange Act of
1934, as amended.
Financial Statements: As defined in Section 5.4 of this
Agreement.
GAAP: Generally accepted accounting principles set forth in
the Opinions of the Accounting Principles Board of the American Institute of
Certified Public Accountants and in statements by the Financial Accounting
Standards Board or in such other statement by such other entity as may be
approved by a significant segment of the accounting profession; and the
requisite that such principles be applied on a consistent basis shall mean that
the accounting principles observed in a current period are comparable in all
material respects to those applied in a preceding period.
Governmental Authority: Any nation or government, any state or
other political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
HSR Act: As defined in Section 5.12 of this Agreement.
Incentive Plan: The Company' stock option incentive plan
adopted by the Company in 1995, as amended.
Indebtedness: With respect to any Person, at a particular time
(a) all indebtedness of such Person for borrowed money or for the deferred
purchase price of property, (b) the face amount of all letters of credit issued
for the account of such Person and, without duplication, all drafts drawn
thereunder, (c) all liabilities secured by any Lien on any property owned by
such Person, to the extent attributable to such Person's interest in such
property, even though such Person has not assumed or become liable for the
payment thereof, (d) lease obligations of such Person which, in accordance with
GAAP, should be capitalized, and (e) all guarantees by such Person of any such
indebtedness, letters of credit, drafts,
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<PAGE>
liabilities or lease obligations of any other Person; but excluding trade and
other accounts payable in the ordinary course of business in accordance with
customary trade terms and which are not overdue for a period of more than 60
days or, if overdue for more than 60 days, as to which a dispute exists and
adequate reserves in conformity with GAAP have been established on the books
of such Person. The term "Indebtedness" shall not include amounts which have
not been drawn under credit facilities, notwithstanding that such amounts
when drawn will automatically be secured by an existing Lien.
Lien: Any mortgage, pledge, hypothecation, assignment,
security interest, lien, charge or encumbrance, or preference, priority or other
security agreement or preferential arrangement of any kind or nature whatsoever
(including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effects as
any of the foregoing, and the filing of, or agreement to give, any financing
statement under the Uniform Commercial Code or comparable law of any
jurisdiction).
Majority in Interest: At any time, the holders of a majority,
by number of shares, of the outstanding Shares and the outstanding shares of
Common Stock, if any, issued upon conversion of any Shares, such majority to be
determined by reference to the number of shares of Common Stock into which all
outstanding Shares are at the time convertible.
Majority Holders: The holder of a majority, by number of
shares, of the outstanding shares of Common Stock, such majority determined as
if all shares of Common Stock issuable, upon the exercise of outstanding stock
options and warrants and upon the conversion or exchange of outstanding
convertible or exchangeable securities, were so issued.
Material Adverse Effect: Any effect that is or is reasonably
likely to be materially adverse to the properties, business, results of
operations or financial condition of the Company and its Subsidiaries taken as a
whole.
Person: An individual, a partnership, a joint venture,
a corporation, a limited liability company, a trust, an unincorporated
organization or a government or any department or agency thereof.
Registration Rights Agreement: As defined in Section 4.5 of
this Agreement.
Requirement of Law: As to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of
such Person, and any law, treaty, rule or regulation, or determination of an
arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such
16
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Person or any of its property or to which such Person or any of its property
is subject.
Restricted Securities: All of the following: (a) any
certificates for Stock bearing the applicable legend or legends referred to in
Section 8.3 hereof, (b) any shares of Common Stock which have been issued upon
the conversion of any of the Stock and which are evidenced by a certificate or
certificates bearing the applicable legend or legends referred to in such
Section and (c) unless the context otherwise requires, any shares of Common
Stock which are at the time issuable upon the conversion of Stock and which,
when so issued, will be evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such Section.
Securities Act: At any time, the Securities Act of 1933 as
then in effect or any similar federal statute then in effect, and any reference
to a particular Section of such Act shall be deemed to include a reference to
the comparable Section, if any, in any such similar federal statute.
Securities and Exchange Commission: The U.S. Securities and
Exchange Commission, or any other federal agency at the time administering the
Securities Act or the Exchange Act, whichever is the relevant statute for the
particular purpose.
Shares: As defined in Section 1 of this Agreement.
Stock: As defined in Section 1 of this Agreement.
Subsidiaries: With respect to any Person, any corporation with
respect to which more than 50% of the combined voting power of each class having
ordinary voting power (other than stock having such power only by reason of the
happening of a contingency) is at the time owned by such Person or by one or
more Subsidiaries of such Person or by such Person and one or more Subsidiaries
of such Person.
Any of the above-defined terms may, unless the context
otherwise requires, be used in the singular or plural depending on the
reference.
9.2 ACCOUNTING TERMS. As used in this Agreement, and in any
certificate, report or other document made or delivered pursuant to this
Agreement, accounting terms not defined in Section 9.1 and accounting terms
partly defined in said Section 9.1 to the extent not defined, shall have the
respective meanings given to them under United States GAAP.
9.3 OTHER PROVISIONS REGARDING DEFINITIONS: Unless otherwise
defined therein, all terms defined in this Agreement shall have the defined
meanings when used in any certificate, report or other document made or
delivered pursuant to this Agreement. The words
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<PAGE>
"hereof," "herein," and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement.
10. EXPENSES. Whether or not the transactions contemplated by this
Agreement shall be consummated, the Company will pay all of its and the
Purchasers' expenses in connection with such transactions and in connection with
any amendments or waivers (whether or not the same become effective) under or in
respect of this Agreement or the Securities purchased by the Purchaser
hereunder, including, without limitation: (a) the cost and expenses of
reproducing this Agreement and the Securities purchased by each Purchaser, of
furnishing all opinions of counsel for the Company and all certificates on
behalf of the Company, and of the Purchaser's and Company's performance of and
compliance with all agreements and conditions contained herein to be performed
or complied with by them and it; (b) payment of attorneys' and financial
advisors' fees, hourly or otherwise; and (c) the cost of delivering to their
principal office, insured to their satisfaction, the Securities sold to the
Purchaser hereunder and any Shares delivered to the Purchaser upon any
substitution of Shares pursuant to Section 8 and of the Purchaser delivering any
Shares, insured to their satisfaction, upon any such substitution. Reference is
made to Section 5 of this Agreement for certain agreements among the parties
regarding the fees, if any, of brokers and finders.
11. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION;
CERTAIN LIMITATIONS. The Company's indemnification obligations and all
representations and warranties contained in this Agreement shall survive the
execution and delivery of this Agreement, any investigation at any time made by
the Purchaser or on its behalf, and the purchase of the Securities by the
Purchaser under this Agreement and any exercise of the Warrants or conversion of
any of the Stock or any disposition of any shares of Common Stock issued upon
exercise of the Warrants or conversion of any of the Stock; provided that all
such representations and warranties (and the indemnities in respect thereof with
respect to claims not made prior to such date) shall expire 30 days after the
date the Company's audited financial statements for the fiscal year ending
December 31, 2000 are publicly filed with the Commission or delivered to the
Purchaser. No written (except as explicitly stated therein) or oral statements
made by or on behalf of the Company, other than in this Agreement, the
Registration Rights Agreement and the exhibits hereto and thereto, shall
constitute representations or warranties within the meaning of this Agreement.
In no event shall the Purchaser be entitled to the remedy of rescission.
12. AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended
or modified and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively) only with the written consent of the Company and (a) in the case
of any such action prior to the Closing, the Purchaser; and (b) in the case of
any other such action, the Majority Holders.
13. NOTICES. Except as otherwise provided in this Agreement, notices
and other communications under this Agreement shall be in writing and shall be
delivered, or mailed by first-class mail, postage pre-paid, addressed, (a) if to
the Purchaser or any other holder of Shares or shares of Common Stock into which
the Shares have been converted, at the address set forth below, or at such other
address as the Purchaser or such other holder shall have furnished to the
Company in writing, and (b) if to the Company at the address of the Company set
forth below, to
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<PAGE>
the attention of its Chief Executive Officer, or at such other address, or to
the attention of such other officer, as the Company shall have furnished to
the Purchaser and each such other holder in writing.
If to a Purchaser: Hawkeye, Inc.
C/o Arthur L. Cahoon or R. Lee Smith
Rock Creek Capital
1200 Riverplace Blvd., Suite 902
Jacksonville, Florida 32207
Facsimile: (904) 393-9003
If to the Company: Fortune Financial, Inc.
10475 Fortune Parkway, Suite 103
Jacksonville, Florida 32256
Attention: J. John Wortman, President
Facsimile: (904) 363-3856
14. INDEMNIFICATION.
14.1 GENERALLY. The Company, on the one hand, and each
Purchaser, severally, not jointly, on the other hand (each an "Indemnifying
Party"), shall indemnify the other from and against any and all losses, damages,
liabilities, claims, charges, actions, proceedings, demands, judgments,
settlement costs and expenses of any nature whatsoever (including, without
limitation, reasonable attorneys' fees and expenses) or deficiencies resulting
from any breach of a representation and warranty, covenant or agreement by the
Indemnifying Party and all claims, charges, actions or proceedings incident to
or arising out of the foregoing.
14.2 PROCEDURE. Each party entitled to indemnification under
this Section 14 (an "Indemnified Party") shall give notice as promptly as
reasonably practicable to each party required to provide indemnification under
this Section 14 (an "Indemnifying Party") of any action commenced against or by
it in respect of which indemnity may be sought hereunder, but failure to so
notify an Indemnifying Party shall not relieve such Indemnifying Party from any
liability that it may have otherwise than on account of this indemnity agreement
so long as such failure shall not have materially prejudiced the position of the
Indemnifying Party. Upon such notification, the Indemnifying Party shall assume
the defense of such action if it is a claim brought by a third party, if and
after such assumption the Indemnifying Party shall not be entitled to
reimbursement of any expenses incurred by it in connection with such action
except as described below. In any such action, any Indemnified Party shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (i) the Indemnifying
Party and the Indemnified Party shall have mutually agreed to the contrary or
(ii) the named parties in any such action (including any impleaded parties)
include both the Indemnifying Party and the Indemnified Party and representation
of both parties
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<PAGE>
by the same counsel would be inappropriate due to actual or potential
differing or conflicting interests between them. The Indemnifying Party shall
not be liable for any settlement of any proceeding effected without its
written consent (which shall not be unreasonably withheld or delayed by such
Indemnifying Party), but if settled with such consent or if there be final
judgment for the plaintiff, the Indemnifying Party shall indemnify the
Indemnified Party from and against any loss, damage or liability by reason of
such settlement or judgment. This Section 14 shall survive Closing, except as
otherwise provided in Section 11 hereof.
15. TERMINATION. This Agreement may be terminated (a) by the mutual
written consent of the Purchaser and the Company at any time, (b) by either
party if any representation or warranty of the other party contained herein
proves not to have been true and correct in any material respect when made, or
(c) by either party if the other party materially breaches any covenant
hereunder.
16. PUBLIC ANNOUNCEMENTS. The initial press release or releases
concerning the transactions contemplated hereby shall be in the form agreed to
by the Company and the Purchaser. Prior to Closing, neither party will issue any
other press release or make any other public announcement concerning this
Agreement or the transactions contemplated hereby without the prior consent of
the other, except that either party may make such public disclosure as may be
required by law or a court of competent jurisdiction (in which event such party
will notify the other party as long in advance as practicable prior to making
such disclosure and will, unless not practicable under the circumstances, give
the other party the opportunity to comment on the language of the disclosure
prior to making such disclosure) or by any national securities exchange on which
the Common Stock is listed.
17. MISCELLANEOUS. This Agreement shall inure to the benefit of and be
binding upon the successors and assigns of each the parties hereto. This
Agreement embodies the entire agreement and understanding between the Purchaser
and the Company and supersedes all prior agreements and understandings relating
to the subject matter hereof. This Agreement shall be construed and enforced in
accordance with and governed by the law of the State of Florida without regard
to the principles regarding conflicts of laws. The headings in this Agreement
are for purposes of reference only and shall not limit or otherwise affect the
meaning hereof. This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered by their respective representatives hereunto duly
authorized as of the date first above written.
FORTUNE FINANCIAL, INC., a Florida
corporation
By:
-------------------------------------
J. John Wortman,
President and Chief Executive Officer
HAWKEYE, INC., a Florida corporation
By:
-------------------------------------
Arthur L. Cahoon
President
MID-OHIO SECURITIES CORP., FBO R. LEE
SMITH (Acct. 15051)
By:
-------------------------------------
R. Lee Smith
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<PAGE>
LIST OF EXHIBITS AND SCHEDULES
Exhibit A Form of Articles of Amendment
Exhibit B Form of Opinion of Akerman, Senterfitt & Eidson, P.A.
Exhibit C Form of Registration Rights Agreement
Exhibit D Form of Shareholders' Agreement
Exhibit E Copy of Rule 501(a) of Regulation of D under the
Securities Act
Exhibit F Form of Promissory Note
Exhibit G Form of Warrant
Schedule 5.2 Subsidiaries
Schedule 5.6 Capital Stock and Related Matters
Schedule 5.8 Indebtedness
Schedule 5.9 Liens and Lease Agreement
Schedule 5.10 Litigation
Schedule 5.13 Certain Fees
Schedule 5.17 Environmental Matters
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<PAGE>
EXHIBIT A
FORM OF
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
FORTUNE FINANCIAL, INC.
----------------
PURSUANT TO FLORIDA STATUTES
SECTIONS 607.1002, 607.1005 AND 607.0602
----------------
Fortune Financial, Inc., a Florida corporation (the "Corporation"),
certifies that pursuant to the authority contained in Article III, Section 2 of
its Articles of Incorporation, as amended (the "Articles of Incorporation"), and
in accordance with the provisions of Sections 607.1002, 607.1005 and 607.0602 of
the Florida Statutes, the Board of Directors of the Corporation on November 9,
2000 (the "Adoption Date"), duly approved and adopted, and does hereby file the
following Articles of Amendment:
1. That the name of the Corporation is Fortune Financial, Inc. The
corporation was assigned document number 333831 by the Florida Secretary of
State.
2. That Article III, Section 1 of the Articles of Incorporation of the
Corporation is hereby amended to read as follows:
"ARTICLE III - CAPITAL STOCK
1. The maximum number of shares of stock which the
Corporation is authorized to have outstanding at any one time is:
(a) 18,000,000 shares of common stock, par value $.025
per share; and
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<PAGE>
(b) 500,000 shares of preferred stock, par value $.001
per share."
3. That the Articles of Incorporation of the Corporation be
amended to add a new Section 5 to Article III that reads as follows:
"5. Pursuant to Article III, Section 2 of these Articles of
Incorporation, the Board of Directors does hereby designate, create,
authorize and provide for the issuance of a series of preferred stock having
a par value of $.001 per share, with a liquidation preference of $75 per
share (the "Liquidation Preference"), which shall be designated as Series A
Convertible Preferred Stock (the "Preferred Stock"), consisting of 500,000
shares having the following powers, designations, preferences and relative,
participating, optional and other special rights, and qualifications,
limitations and restrictions:
(a) RANKING. The Preferred Stock shall, with respect to distributions
upon the liquidation, winding-up and dissolution of the Corporation, rank (i)
senior to all classes of Common Stock of the Corporation and to each other class
of capital stock or series of preferred stock established after the Adoption
Date, by the Board of Directors, the terms of which do not expressly provide
that it ranks senior to or on a parity with the Preferred Stock as to dividend
distributions and distributions upon the liquidation, winding-up and dissolution
of the Corporation (collectively referred to with the Common Stock of the
Corporation as "Junior Securities"); (ii) on parity with any additional shares
of Preferred Stock issued by the Corporation in the future and any other class
of capital stock or series of preferred stock issued by the Corporation
established after the Adoption Date by the Board of Directors, the terms of
which expressly provide that such class or series will rank on a parity with the
Preferred Stock as to dividend distributions and distributions upon the
liquidation, winding-up and dissolution of the Corporation (collectively
referred to as "Parity Securities"); and (iii) junior to each class of capital
stock or series of preferred stock issued by the Corporation established after
the Adoption Date, by the Board of Directors, the terms of which expressly
provide that such class or series will rank senior to the Preferred Stock as to
dividend distributions and/or distributions upon the liquidation, winding-up and
dissolution of the Corporation (collectively referred to as "Senior
Securities"). Notwithstanding the foregoing, a security shall not be deemed to
be a "Senior Security" solely because such security has a stated dividend or
interest coupon.
(b) DIVIDENDS.
(i) In the event that the Corporation declares, makes or pays any
dividends or other distributions upon the Common Stock (whether payable in
cash, securities, rights or other property) other than dividends and
distributions referred to in paragraph (c)(vi) of this Section 5 of Article
III (hereinafter in this Section 5 of
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<PAGE>
Article III, references to Section 5 or subsections of Section 5 of Article
II shall be referred to as "Section 5(_)"), the Corporation shall also
declare and pay to the holders of the Preferred Stock, in addition to any
dividends payable to them pursuant to the other provisions of this Section 5,
at the same time that it declares and pays such dividends or other
distributions to the holders of the Common Stock (and with the same record
date), the dividends or distributions which would have been declared and paid
with respect to the Common Stock issuable upon conversion of the Preferred
Stock had all of the outstanding Preferred Stock been converted immediately
prior to the record date for such dividend or distribution, or if no record
date is fixed, the date as of which the record holders of Common Stock
entitled to such dividends or distributions are determined.
(ii) From and after the Dividend Commencement Date, the holders of
shares of Preferred Stock shall be entitled to receive on each Dividend Payment
Date in respect of the Dividend Period ending on such Dividend Payment Date (but
excluding such Dividend Payment Date), cumulative dividends payable in shares of
Preferred Stock at a rate per annum equal to 9% of the Liquidation Preference of
each share of the then outstanding Preferred Stock.
(iii) So long as any shares of Preferred Stock are outstanding, the
Corporation shall not pay or set apart for payment any full dividend on any of
the Parity Securities or any dividend on any of the Junior Securities (other
than dividends in Parity Securities to the holders of Parity Securities or
dividends in Junior Securities to the holders of Junior Securities), or make any
payment on account of, or set apart for payment money for a sinking or other
similar fund for, the purchase, redemption or other retirement of any of the
Parity Securities or any of the Junior Securities or any warrants, rights, calls
or options exercisable for or convertible into any of the Parity Securities or
any of the Junior Securities, and shall not permit any Person directly or
indirectly controlled by the Corporation to purchase or redeem any of the Parity
Securities or any of the Junior Securities or any such warrants, rights, calls
or options, unless the Accrued Dividends on the Preferred Stock for all Dividend
Periods ended on or prior to the date of such payment in respect of Parity
Securities or Junior Securities have been or contemporaneously are paid in full.
(iv) If the Corporation desires to make a partial dividend payment with
respect to any Parity Securities at a time when any Accrued Dividends on the
Preferred Stock have not been paid, it may do so as long as dividends upon
shares of the Preferred Stock and upon such Parity Securities are paid pro rata
so that the amount of dividends paid per share on the Preferred Stock and such
Parity Securities shall in all cases bear to each other the same ratio that the
Accrued Dividends per share on the Preferred Stock and the accrued dividends on
such Parity Securities bear to each other.
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<PAGE>
(c) CONVERSION RIGHTS.
(i) After approval or ratification by the shareholders of the Company
of the rights contained in this Section 5(c), to the extent required by NASD
Rule, a holder of shares of Preferred Stock may convert such shares into Common
Stock at any time on or before the third anniversary of the Preferred Stock
Issue Date at the option of the holder thereof. Except as set forth in the next
sentence, for the purposes of conversion, each share of Preferred Stock shall be
valued at the Liquidation Preference which shall be divided by the Conversion
Price in effect on the Conversion Date (defined below) to determine the number
of shares issuable upon conversion. If a holder of shares of Preferred Stock
gives written notice (a "Dividend Conversion Notice") to the Corporation at
least two Business Days but not more than 60 days prior to giving a notice of
conversion pursuant to Section 5(c)(ii)(B) that it will be electing to convert a
specified number of shares of Preferred Stock and that it elects to have any
Accrued Dividends thereon that are payable prior to the Conversion Date but
remain unpaid as of the Conversion Date converted into Common Stock on the
Conversion Date (thereby affording the Corporation the opportunity to pay such
Accrued Dividends in cash prior to the Conversion Date so that they will not be
converted into Common Stock), then for the purposes of conversion, each share of
Preferred Stock shall be valued at the Liquidation Preference plus the amount of
Accrued Dividends thereon that are payable prior to the Conversion Date but
remain unpaid as of the Conversion Date, if any, which shall be divided by the
Conversion Price in effect on the Conversion Date to determine the number of
shares issuable upon conversion. Immediately following any such conversion, the
rights of the holders of converted Preferred Stock shall cease and the persons
entitled to receive the Common Stock upon the conversion of Preferred Stock
shall be treated for all purposes as having become the owners of such Common
Stock.
(ii) To convert Preferred Stock, a holder must (A) surrender the
certificate or certificates evidencing the shares of Preferred Stock to be
converted, duly endorsed in a form satisfactory to the Corporation, at the
office of the Corporation or transfer agent for the Preferred Stock, (B) notify
the Corporation at such office that he elects to convert Preferred Stock and the
number of shares he wishes to convert, (C) state in writing the name or names in
which he wishes the certificate or certificates for shares of Common Stock to be
issued, and (D) pay any transfer or similar tax if required by clause (iv)
below. In the event that a holder fails to notify the Corporation of the number
of shares of Preferred Stock which he wishes to convert, he shall be deemed to
have elected to convert all shares represented by the certificate or
certificates surrendered for conversion. The date on which the holder satisfies
all those requirements is the "Conversion Date." As soon as practical following
the Conversion Date, the Corporation shall deliver a certificate representing
the number of full shares of Common Stock issuable upon the conversion, and a
new certificate representing the unconverted portion, if any, of
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the shares of Preferred Stock represented by the certificate or certificates
surrendered for conversion. The person in whose name the Common Stock
certificate is registered shall be treated as the stockholder of record on
and after the Conversion Date. Except as expressly set forth in Section
5(c)(i) or in the following provisions of this Section 5(c)(ii), no
adjustment will be made for accrued and unpaid dividends on shares of
Preferred Stock which have been converted. The holder of record of a share of
Preferred Stock at the close of business on a record date with respect to the
payment of dividends on the Preferred Stock in accordance with Section
5(b)(i) hereof will be entitled to receive such dividends with respect to
such share of Preferred Stock on the corresponding dividend payment date,
notwithstanding the conversion of such share after such record date and prior
to such dividend payment date. If a holder of Preferred Stock converts more
than one share at a time, the number of full shares of Common Stock issuable
upon conversion shall be based on the total Liquidation Preference of all
shares of Preferred Stock converted.
(iii) The Corporation shall not issue any fractional shares of Common
Stock upon conversion of Preferred Stock. Instead the Corporation shall pay a
cash adjustment based upon the Closing Price of the Common Stock on the
principal securities market or exchange on which the Common Stock is then listed
on the Business Day prior to the Conversion Date.
(iv) If a holder converts shares of Preferred Stock, the Corporation
shall pay any documentary stamp or similar issue or transfer tax due on the
issue of shares of Common Stock upon the conversion. However, the holder shall
pay any such tax that is due because the shares are issued in a name other than
the holder's name.
(v) The Corporation has reserved and shall continue to reserve out of
its authorized but unissued Common Stock or its Common Stock held in treasury
enough shares of Common Stock to permit the conversion of the Preferred Stock in
full. The Corporation shall endeavor to list and keep listed on the Nasdaq Stock
Market, so long as the Common Stock shall be listed on the Nasdaq Stock Market,
all Common Stock issuable upon conversion of the Preferred Stock. All shares of
Common Stock that may be issued upon conversion of Preferred Stock shall be
fully paid and nonassessable. The Corporation shall endeavor to comply with all
securities laws regulating the offer and delivery of shares of Common Stock upon
conversion of Preferred Stock.
(vi) In case the Corporation shall pay or make a dividend or other
distribution on any class of capital stock of the Corporation in Common Stock,
the Conversion Price in effect at the opening of business on the day following
the date fixed for the determination of stockholders entitled to receive such
dividend or other distribution shall be reduced by multiplying such Conversion
Price by a fraction the
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numerator of which shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination and the
denominator of which shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution, such
reduction to become effective immediately after the opening of business on
the day following the date fixed for the determination of the holders
entitled to such dividends and distributions. For the purposes of this
Section 5(c)(vi), the number of shares of Common Stock at any time
outstanding shall not include shares held in the treasury of the Corporation.
The Corporation will not pay any dividend or make any distribution on shares
of Common Stock held in the treasury of the Corporation.
(vii) In case the outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the Conversion Price
in effect at the opening of business on the day following the day upon which
such subdivision becomes effective shall be reduced, and, conversely, in case
the outstanding shares of Common Stock shall each be combined into a smaller
number of shares of Common Stock, the Conversion Price in effect at the opening
of business on the day following the day upon which such combination becomes
effective shall be increased, in either case to equal the product of the
Conversion Price in effect on such date and a fraction the numerator of which
shall be the number of shares of Common Stock outstanding immediately prior to
such subdivision or combination, as the case may be, and the denominator of
which shall be the number of shares of Common Stock outstanding immediately
after such subdivision or combination, as the case may be. Such reduction or
increase, as the case may be, shall become effective immediately after the
opening of business on the day following the day upon which such subdivision or
combination becomes effective.
(viii) The capital reorganization, reclassification, conversion or
exchange of Common Stock into securities, including securities other than Common
Stock (other than a reclassification, conversion or exchange in connection with
a business combination to which Section 5(c)(xiv) below shall apply), shall be
deemed to involve (A) a distribution of such securities other than Common Stock
to all holders of Common Stock, and (B) a subdivision or combination, as the
case may be, of the number of shares of Common Stock outstanding immediately
prior to such reclassification, conversion or exchange into the number of shares
of Common Stock outstanding immediately thereafter (and the effective date of
such reclassification, conversion or exchange shall be deemed to be "the day
upon which such subdivision becomes effective" or "the day upon which such
combination becomes effective," as the case may be, and "the day upon which such
subdivision or combination becomes effective" within the meaning of Section
5(c)(vii) above).
(ix) No adjustment in the Conversion Price need be made until all
cumulative adjustments amount to 1% or more of the Conversion Price as last
adjusted. Any adjustments that are not made shall be carried forward and taken
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into account in any subsequent adjustment. Any adjustment to the Conversion
Price carried forward and not theretofore made shall be made immediately
prior to the conversion of any shares of Preferred Stock pursuant hereto.
(x) For purposes of this Section 5(c), "Common Stock" includes any
stock of any class of the Corporation which has no preference in respect of
dividends or of amounts payable in the event of any voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation and which is not
subject to redemption by the Corporation. However, subject to the provisions of
Section 5(c)(xiv) below, shares issuable on conversion of shares of Preferred
Stock shall include only shares of the class designated as Common Stock of the
Corporation on the Preferred Stock Issue Date or shares of any class or classes
resulting from any reclassification, conversion or exchange thereof and which
have no preferences in respect of dividends or amounts payable in the event of
any voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation and which are not subject to redemption by the Corporation, provided
that, if at any time there shall be more than one such resulting class, the
shares of each such class then so issuable shall be substantially in the
proportion which the total number of shares of such class resulting from all
such reclassifications, conversions or exchanges bears to the total number of
shares of all such classes resulting from all such reclassifications,
conversions or exchanges.
(xi) Whenever the Conversion Price is adjusted, the Corporation shall
promptly mail to holders of Preferred Stock, first class, postage prepaid, a
notice of the adjustment. The Corporation shall file with the transfer agent for
the Preferred Stock, if any, a certificate from the Corporation's chief
financial officer briefly stating the facts requiring the adjustment and the
manner of computing it. In the event of any dispute thereon, the opinion of the
Corporation's independent public accountants, if accepted by the Board of
Directors of the Corporation, shall be conclusive and binding on the holders of
the Preferred Stock absent manifest error.
(xii) Upon a determination by the Board of Directors of the
Corporation, the Corporation from time to time may reduce the Conversion Price
if the Board of Directors of the Corporation considers such reductions to be
advisable in order that any event treated for federal income tax purposes as a
dividend of stock or stock rights will not be taxable to the holders of Common
Stock by any amount.
(xiii) If:
(A) the Corporation enters an agreement to consolidate or
merge with, or transfer all or substantially all of its assets to,
another Person, and stockholders of the Corporation must approve the
transaction; or
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(B) the Corporation adopts a plan of dissolution or
liquidation of the Corporation;
the Corporation shall mail to holders of the Preferred Stock, first class,
postage prepaid, a notice stating the proposed record or effective date, as the
case may be. The Corporation shall mail the notice at least 10 days before such
date. However, failure to mail the notice or any defect in it shall not affect
the validity of any transaction referred to in clause (A) or (B) of this Section
5(c)(xiii).
(xiv) In the case of any
(A) consolidation or merger of the Corporation with or into
any other Person in which the Common Stock is converted into securities
of another Person, or the right to receive cash or assets,
(B) transaction consisting of a sale or transfer of all or
substantially all the assets of the Corporation in exchange for
securities of another Person, cash or assets followed by a liquidation,
or
(C) capital reorganization or reclassification, conversion or
exchange of outstanding shares of Common Stock other than in connection
with a business combination,
then, upon consummation of such transaction, each share of Preferred Stock shall
automatically become convertible into the kind and amount of securities, or the
right to receive cash or other assets, receivable upon the consolidation,
merger, liquidation, capital reorganization, conversion, reclassification or
exchange by a holder of the number of shares of Common Stock into which such
share of Preferred Stock might have been converted immediately prior to such
consolidation, merger, liquidation, capital reorganization, conversion,
reclassification or exchange (assuming such holder of Common Stock failed to
exercise any rights of election and received per share the kind and amount of
consideration receivable per share by a plurality of non-electing shares).
Appropriate adjustment (as determined by the Board of Directors of the
Corporation) shall be made in the application of the provisions herein set forth
with respect to the rights and interests thereafter of the holders of Preferred
Stock, to the end that the provisions set forth herein (including provisions
with respect to changes in and other adjustment of the Conversion Price) shall
thereafter be applicable, as nearly as reasonably may be, in relation to any
shares of stock or other securities or property thereafter deliverable upon the
conversion of Preferred Stock. If this Section 5(c)(xiv) applies, Sections
5(c)(vi), (vii) and (viii) shall be deemed not to apply. Notwithstanding
anything contained herein to the contrary, the Corporation will not effect any
transaction of the type referred to in clause (A), (B) or (C) of this Section
5(c)(xiv) unless, prior to the consummation thereof, the Surviving Person (as
defined in Section 5(o) thereof, if it is not the
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Corporation, shall assume, by written instrument mailed to each record holder
of Preferred Stock, at such holder's address as it appears on the transfer
books of the Corporation, the obligation to deliver to such holder such
securities, cash or assets to which, in accordance with the foregoing
provisions, such holder is entitled upon conversion. Nothing contained in
this Section 5(c)(xiv) shall limit the rights of holders of the Preferred
Stock to convert the Preferred Stock in connection with the transaction.
(xv) In any case in which this Section 5(c) shall require that an
adjustment as a result of any event become effective from and after a record
date, the Corporation may elect to defer until after the occurrence of such
event the issuance to the holder of any shares of Preferred Stock converted
after such record date and before the occurrence of such event of the additional
shares of Common Stock issuable upon such conversion over and above the shares
issuable on the basis of the Conversion Price in effect immediately prior to
adjustment; provided, however, that if such event shall not have occurred and
authorization of such event shall be rescinded by the Corporation, the
Conversion Price shall be recomputed immediately upon such rescission to the
price that would have been in effect had such event not been authorized,
provided that such rescission is permitted by and effective under applicable
laws.
(xvi) By action of the Board of Directors of the Corporation, the
Corporation may from time to time on or before the second anniversary of the
Preferred Stock Issue Date, on the advice of the Corporation's independent
public accountants, adjust the Conversion Price by reducing or increasing the
Conversion Price for the effect of the following on the Corporation's net income
as of the Preferred Stock Issue Date: (A) any positive or negative financial
impact of any reinsurance arbitration proceedings pending on the Preferred Stock
Issue Date, and (2) any redundancy or deficiency in current loss reserves which
appear upon examination as determined by independent actuarial opinions.
(d) LIQUIDATION PREFERENCE. Upon any voluntary or involuntary
liquidation, dissolution or winding-up of the Corporation, each holder of shares
of the Preferred Stock will be entitled to payment out of the assets of the
Corporation available for distribution of an amount equal to the Liquidation
Preference per share of Preferred Stock held by such holder, plus Accrued
Dividends, if any, to the date fixed for liquidation, dissolution or winding-up,
before any distribution is made on any Junior Securities, including, without
limitation, Common Stock of the Corporation. After payment in full of the
Liquidation Preference and all Accrued Dividends, if any, to which holders of
Preferred Stock are entitled, such holders will not be entitled to any further
participation in any distribution of assets of the Corporation. If, upon any
voluntary or involuntary liquidation, dissolution or winding-up of the
Corporation, the amounts payable with respect to the Preferred Stock and all
other Parity Securities are not paid in full, the holders of the
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Preferred Stock and the Parity Securities will share equally and ratably in
any distribution of assets of the Corporation in proportion to the full
liquidation preference and accrued dividends, if any, to which each is
entitled. However, neither the voluntary sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration) of
all or substantially all of the property or assets of the Corporation nor the
consolidation or merger of the Corporation with or into one or more Persons
will be deemed to be a voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, unless such sale, conveyance, exchange or
transfer shall be in connection with a liquidation, dissolution or winding-up
of the business of the Corporation.
(e) REDEMPTION AT THE OPTION OF THE CORPORATION. At any time after the
third anniversary of the Preferred Stock Issue Date, the Corporation may, at its
election, redeem, in whole but not in part, any or all of the shares of the then
outstanding Preferred Stock at a per share purchase price equal to the
Liquidation Preference of each share of Preferred Stock to be redeemed, plus
Accrued Dividends per share, if any, to the date of redemption. The Corporation
will mail or cause to be delivered to each holder of the Preferred Stock a
written notice of the Corporation's election to redeem shares of Preferred Stock
not less than thirty (30) days prior to the date set for the redemption. The
notice will state (i) the total number of shares of the Preferred Stock being
redeemed; (ii) the number of shares of the Preferred Stock held by the holder
that the Corporation intends to redeem; (iii) the aggregate purchase price for
the shares of Preferred Stock being redeemed; (iv) the redemption date; and (v)
that the holder is to surrender to the Corporation, at the office of the
Corporation or the transfer agent for the Preferred Stock, the certificate or
certificates representing the Preferred Stock to be redeemed. Such notice shall
be accompanied by a representation by the Corporation to the effect that the
consummation of the redemption will not render the Corporation insolvent or
unable to pay its debts as they become due, as well as an opinion of counsel to
the Corporation in form and substance reasonably satisfactory to the holders of
the Preferred Stock to the effect that the consummation of the redemption will
not conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default (or an event that with the giving of
notice or the lapse of time or both would constitute a default) under, or give
rise to a right of termination, amendment, cancellation or acceleration of any
right or obligation of the Corporation or any of its subsidiaries under, or give
rise to a loss of any material benefit to which the Corporation or any of its
subsidiaries is entitled under, or require any consent, approval or
authorization under, any indenture, credit agreement or other material agreement
to which the Corporation or any of the subsidiaries is a party or by which any
of them are bound or to which any of their property is subject, or give the
holder of any note, debenture or other evidence of indebtedness the right to
require the repurchase, redemption or repayment of all or a portion of such
indebtedness by the Corporation or any of its subsidiaries. As soon as practical
following the redemption date and receipt of the certificate or
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certificates representing the shares of Preferred Stock so redeemed, the
Corporation shall deliver to the holder the aggregate price payable in
respect of the redeemed shares and a new certificate representing the
unredeemed portion of the shares, if any. At the effective date of the
redemption the redeemed shares shall no longer be deemed outstanding shares
of Preferred Stock for any purpose and shall thereafter only be deemed to
entitle the holder to receive the redemption price upon surrender of the
certificates formerly representing such shares of Preferred Stock.
(f) VOTING RIGHTS.
(i) The holders of Preferred Stock shall be entitled to notice of all
stockholders meetings in accordance with the Corporation's bylaws and the
Florida Business Corporation Act, and except as otherwise required by applicable
law, the holders of the Preferred Stock shall not be entitled to vote (or act by
written consent) on any matters submitted to the stockholders for a vote (or for
action).
(ii) In the case of any vote otherwise required by law, the affirmative
vote or consent of the holders of at least a majority of the shares of Preferred
Stock then outstanding voting or consenting as the case may be, as one class,
shall be required to constitute the vote or consent as the case may be in favor
of the matter under consideration.
(iii) Notwithstanding any other provision hereof, the Corporation in
its sole discretion may in accordance with the provisions of applicable law
without the vote or consent of any holders of the Preferred Stock amend or
supplement this Article III, Section 5 of the Articles of Incorporation:
(A) to cure any ambiguity, defect or inconsistency in any
manner that does not adversely affect the holders of Preferred Stock;
(B) to provide for uncertificated Preferred Stock in addition
to or in place of certificated Preferred Stock; or
(C) to make any change that would provide any additional
rights or benefits to the holders of the Preferred Stock or that does
not adversely affect the rights under this Certificate of Designation
of any such holder.
(g) MERGER, CONSOLIDATION AND SALE OF ASSETS. Without the vote or
consent of the holders of a majority of the then outstanding shares of Preferred
Stock, the Corporation may not consolidate or merge with or into, or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its assets to, any person unless, if the Corporation is not the Surviving
Person, the Preferred Stock is converted into or exchanged for and becomes
shares of such Surviving Person, having in respect of such Surviving Person the
same (or more favorable) powers,
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preferences and relative, participating, optional or other special rights
thereof that the Preferred Stock had immediately prior to such transaction.
The Surviving Person of such transaction shall thereafter be deemed to be the
"Corporation" for all purposes of this Article III, Section 5 of these
Articles of Incorporation.
(h) REPORTS. The Corporation will deliver to the holders of the
Preferred Stock, promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
generally by the Corporation to its security holders in their capacity as such
or by any subsidiary of the Corporation to the Corporation's security holders.
(i) AMENDMENT. Except as specifically set forth herein, amendments to
this Article III, Section 5 of the Articles of Incorporation may be made by the
Corporation with the consent of the holders of a majority of the outstanding
shares of Preferred Stock and any other approvals required by Florida law.
(j) EXCLUSION OF OTHER RIGHTS. Except as may otherwise be required by
law, the shares of Preferred Stock shall not have any voting powers, preferences
and relative, participating, optional or other special rights, other than those
specifically set forth in this Article III, Section 5 of the Articles of
Incorporation (as may be amended from time to time) and in the Articles of
Incorporation, generally. The shares of Preferred Stock shall have no preemptive
or subscription rights.
(k) HEADINGS OF SUBDIVISIONS. The headings of the various subdivisions
hereof are for convenience of reference only and shall not affect the
interpretation of any of the provisions hereof.
(l) SEVERABILITY OF PROVISIONS. If any powers, preferences and
relative, participating, optional and other special rights of the Preferred
Stock and qualifications, limitations and restrictions thereof set forth in
this Article III, Section 5 of these Articles of Incorporation (as may be
amended from time to time) is invalid, unlawful or incapable of being
enforced by reason of any rule of law or public policy, all other powers,
preferences and relative, participating, optional and other special rights of
Preferred Stock and qualifications, limitations and restrictions thereof set
forth in this Article III, Section 5 of these Articles of Incorporation (as
so amended) which can be given effect without the invalid, unlawful or
unenforceable powers, preferences and relative, participating, optional or
other special rights of Preferred Stock and qualifications, limitations and
restrictions thereof shall, nevertheless, remain in full force and effect and
no powers, preferences and relative, participating, optional or other special
rights of Preferred Stock and qualifications, limitations and restrictions
thereof herein set forth shall be deemed dependent upon any other such
powers, preferences and relative, participating, optional or other special
rights of Preferred Stock and qualifications, limitations and restrictions
thereof unless so expressed herein.
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(m) RE-ISSUANCE OF PREFERRED STOCK. Shares of Preferred Stock that have
been issued and reacquired in any manner, including shares purchased or redeemed
or exchanged or converted, shall (upon compliance with any applicable provisions
of the laws of Florida) have the status of authorized but unissued shares of
preferred stock of the Corporation undesignated as to series and may be
designated or re-designated and issued or reissued, as the case may be, as part
of any series of preferred stock of the Corporation, provided that any issuance
of such shares as Preferred Stock must be in compliance with the terms hereof.
(n) MUTILATED OR MISSING PREFERRED STOCK CERTIFICATES. If any of the
Preferred Stock certificates shall be mutilated, lost, stolen or destroyed, the
Corporation shall issue, in exchange and in substitution for and upon
cancellation of the mutilated Preferred Stock certificate, or in lieu of and
substitution for the Preferred Stock certificate lost, stolen or destroyed, a
new Preferred Stock certificate of like tenor and representing an equivalent
amount of shares of Preferred Stock, but only upon receipt of evidence of such
loss, theft or destruction of such Preferred Stock certificate and indemnity, if
requested, satisfactory to the Corporation and the transfer agent (if other than
the Corporation).
(o) CERTAIN DEFINITIONS. As used in this Article III, Section 5 of the
Articles of Incorporation, the following terms shall have the following meanings
(with terms defined in the singular having comparable meanings when used in the
plural and vice versa), unless the context otherwise requires:
"Accrued Dividends" to a particular date (the "Applicable Date") means
(i) all dividends accrued but not paid on the Preferred Stock pursuant to
Section 5(b)(ii), whether or not declared, prior to the Applicable Date, plus
(ii) all dividends or distributions payable pursuant to Section 5(b)(i) which
were not paid or made, and the record date for which occurred, on or prior to
the Applicable Date.
"Adoption Date" means November 9, 2000.
"Business Day" means any day except a Saturday, a Sunday, or any day on
which banking institutions in Jacksonville, Florida are required or authorized
by law or other governmental action to be closed.
"Closing Price" shall mean the closing price of a share of Common
Stock, as reported in the Wall Street Journal, on the Nasdaq Stock Market or
other national quotation system or other national securities exchange on which
the Common Stock is then traded or quoted.
"Common Stock" means the Common Stock, par value $.025 per share, of
the Corporation as presently constituted.
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"Conversion Price" shall initially mean $2.42 per share and thereafter
shall be subject to adjustment from time to time pursuant to the terms of
Section 5(c) hereof.
"Dividend Commencement Date" means, as to each share of Preferred
Stock, means the date on which the Preferred Stock is originally issued by the
Corporation under this Article III, Section 5 of the Articles of Incorporation.
"Dividend Payment Date" means each November 1.
"Dividend Period" means each annual period from a Dividend Payment Date
to the next following Dividend Payment Date (but without including such later
Dividend Payment Date), provided that the first Dividend Period shall be the
period from the Dividend Commencement Date to the next following Dividend
Payment Date (but without including such later Dividend Payment Date).
"Market Value" means the closing bid price of a share of Common Stock
on the Nasdaq Stock Market.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint stock company, trust,
unincorporated organization, government or any Agency or political subdivision
thereof or any other entity.
"Preferred Stock Issue Date" means the date on which any of the
Preferred Stock is originally issued by the Corporation under this Article III,
Section 5 of the Articles of Incorporation.
"Surviving Person" shall mean the continuing or surviving Person of a
merger, consolidation or other corporate combination, the Person receiving a
transfer of all or substantially all of the assets of the Corporation, or the
Person consolidating with or merging into the Corporation in a merger,
consolidation or other corporate combination in which the Corporation is the
continuing or surviving Person, in connection with which the Common Stock of the
Corporation is exchanged, converted or reinstated into the securities of any
other Person or cash or any other property; provided, however, if such Surviving
Person is a direct or indirect subsidiary of a Person, the parent entity also
shall be deemed to be a Surviving Person.
4. That the foregoing amendment was adopted by all members of the Board of
Directors of this Corporation, without shareholder approval, on November 9,
2000,
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pursuant to Sections 607.1002, 607.1005 and 607.0602, Florida Statutes.
Shareholder action was not required.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
duly executed by J. John Wortman, President and Chief Executive Officer of the
Corporation, on this 14th day of November, 2000.
FORTUNE FINANCIAL, INC.
By:
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J. John Wortman
PRESIDENT AND CHIEF EXECUTIVE OFFICER
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CUSIP No. 607235504
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2
