JAMES R. LEONE, P.A.
Attorney at Law
P.O. Box 755
New Smyrna Beach, FL 32170-0755
3188 Oak Lane
Edgewater FL 32132
Telephone (904) 478-1743
Fax (904) 478-1744
Mobile (407) 701-8550
E-mail: [email protected]
October 6, 2000
By Federal Express To:
_____________________________________
RE: Stock Cancellation Notice by
FDN, Inc.
Dear Sir or Madam:
1. YOUR STOCK HAS BEEN RESCINDED (CANCELLED) AND TRANSFER HAS BEEN STOPPED. FDN,
Inc. (a Colorado Corporation) has authorized me to notify you that your holdings
of its common stock shown above, near your name, and of all predecessors' stock,
have been rescinded and cancelled on the stock books, effective as of September
29, 2000. Further, a stop transfer order has been issued to the Transfer Agent
as to such cancelled shares. FDN, Inc. has made such rescission on its own
behalf, and as a successor in interest to Fon Digital Network, Inc. (a Florida
corporation), and/or Ultrafit Centers, Inc. (a Colorado corporation) and/or
Mercury Capital, Inc.
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2. YOU MUST RETURN YOUR STOCK CERTIFICATES (OR SALES PROCEEDS), AND YOU MAY PAY
FDN ATTORNEYS FEES AND TRIPLE PUNITIVE DAMAGES IF FDN SUES YOU. This letter is
to notify you that because your stock is hereby rescinded effective as of the
date of issuance, you are required to return to FDN, Inc. your share
certificate(s) or the proceeds from any sale of same. You also may be liable for
FDN, Inc.'s attorney's fees and expenses in the event that you fail to return
your certificates (or a Lost Certificate Affidavit with a surety bond) or if you
choose to contest this rescission and FDN, Inc. successfully sues you for a
Declaratory Judgment that such shares are properly rescinded and/or for damages
and other remedies awardable to FDN, Inc. If FDN, Inc. has grounds for a Civil
Theft, fraud, RICO, or similar claim, triple punitive damages may be requested.
3. YOU CAN AVOID THE LAWSUIT BY ACCEPTING THIS RESCISSION. However you may avoid
such lawsuit by signing the enclosed Rescission Response Form (ENCLOSURE 3A)
acknowledging that the shares have been properly rescinded and agreeing to
return the certificates (or file a Lost Certificate Affidavit). THE ENCLOSED
RESCISSION RESPONSE FORM MUST BE RECEIVED BY FDN, INC. OR ME BY FAX OR OTHERWISE
BY OCTOBER 16, 2000, WHICH IS TEN (10) CALENDAR DAYS AFTER THE DATE OF THIS
STOCK CANCELLATION (RESCISSION) NOTICE.
4. STATE ANY REASONS YOU SHOULD KEEP YOUR STOCK. If you disagree that this
Rescission Notice is correct as to the number of shares or any other important
fact, please state on the enclosed Form the reasons you are unsure whether, or
do not believe, the shares should be rescinded. If you state good reasons
supporting lawful retention of your stock, you will not be sued or you will be
dismissed. If you do not either consent to this Rescission or give persuasive
reasons, then you will be sued in order to obtain a judicial Declaratory
Judgment, which is a confirmation of FDN, Inc.'s right to rescission of your
stock, plus (if awarded) attorneys fees and triple punitive and/or compensatory
damages, and possibly injunctive court orders and other equitable remedies.
5. REASONS FOR RESCISSION (CANCELLATION).
5A. Your shares (which could be generally referred to as "watered stock")
are rescinded for one or more of the following reasons:
5A(1) Lack of or inadequate consideration (insufficient value paid
for the stock)
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5A(2) Waste of corporate assets, Civil Theft, RICO violations,
and/or breach of other fiduciary duties, including good faith fair
dealing. (These normally also would involve category 1, and also may
involve other wrongful acts or omissions by anyone legally construed to be
or to act as an officer, director, controlling person, underwriter or
other agent of the issuer or other seller involved in the sale.)
5A(3) General Fraud or state and federal Securities Fraud
(nondisclosure of material facts, or the making of known untrue statements
in order to promote the sale or purchase of the shares).
5A(4) Unjust enrichment by cumulative confiscatory dilution of the
stock interests of paying subscribers.
5B. In addition, persons who were or may be legally construed as former
officers, directors, controlling persons, underwriters, or other agents of FDN,
Inc. and its predecessors, are having their shares rescinded as part of FDN's
claims against them for breaching their fiduciary duties by participating in or
failing to stop the wrongful issuance of shares of FDN, Inc. or a predecessor
based upon the criteria set forth above or otherwise. Such acts or omissions
have harmed FDN, Inc. and created potential liabilities by it and by such
persons, to other shareholders who paid for their stock.
6. NEW BOARD OF DIRECTORS SEEKS BETTER STOCK PRICE BY FAIR TREATMENT OF
SHAREHOLDERS WHO PAID FOR THEIR STOCK. This rescission was authorized at the
September 29, 2000 FDN, Inc. Board of Directors Meeting. This action, plus the
lawsuit to obtain a Declaratory Judgment to confirm each shareholder's
rescission, if not consented to and to seek damages or other remedies, are part
of the new Board's mandate from the shareholders to reform FDN, Inc.'s business
in general, and its share distribution in particular, in order to serve the best
interests of the Company and all its shareholders. In order to achieve this, it
is necessary to restrict the ownership of the Company to those persons who have
paid for their stock with cash, or with goods or services that were lawfully
approved by the Board of Directors. This is expected to strengthen the stock
price ultimately by reducing sales of "free stock" and by reducing the number of
shares to be divided into any earnings (boosting any earnings per share).
7. NUMBER OF SHARES RESCINDED. The shares hereby rescinded total approximately
40,274,684 out of the previously outstanding 48,319,709 shares, or an 83%
reduction of shares.
<PAGE>
8. STATUTORY BASIS FOR RESCISSION. This rescission action is being taken
pursuant to the provisions of the federal Securities Act of 1933, the Securities
Exchange Act of 1934, the Florida Statutes and the Colorado Revised Statutes,
and other applicable laws, which require that stock sales be registered if not
exempt, and that sales not be made by fraudulent omissions or
misrepresentations, and that legal consideration be fully paid for the issuance
of stock. In addition, caselaw made by the courts has established that stock
cannot be given away by a corporation without either adequate consideration or
the consent of the shareholders who may be financially harmed, which consent
would be implied if the corporation had planned for such issuance and it was
disclosed to them prior to their purchase of stock.
9. FAX OR MAIL RESCISSION RESPONSE FORM TODAY TO FDN, INC. OR ME. Accordingly,
fax today to FDN, Inc. at (407) 702-2001, and to me at (904) 478-1744, the
enclosed Rescission Response Form, or mail it back to FDN, Inc. today in the
enclosed self addressed stamped envelope, to 2290 Lee Road, Winter Park FL
32789. Please DO NOT CALL FDN, INC., but you may fax any written questions to
FDN, Inc. at (407) 702-2001.
10. FAX OR MAIL ME YOUR GENERAL LEGAL QUESTIONS; YOUR ATTORNEY CAN WRITE OR
CALL. If you have any question of a general legal nature, please put it in
writing and forward it to me at my fax number, (904) 478-1744. I cannot give you
legal advice, only information of a general legal nature. If you have an
attorney, he or she may call me at (904) 478-1743. Please also fax me at (904)
478-1744) a copy of your completed Rescission Response Form, or you may mail a
copy of it to the above address, when sending the original to FDN, Inc. Thank
You!
Yours Very Truly,
JAMES R. LEONE
ENCLOSURES
3A Rescission Response Form w/SASE
