[LETTERHEAD OF FORTRESS INTERNATIONAL GROUP, INC.]

February 28, 2010

Gerard J. Gallagher

5 Tydings Road

Severna Park, Maryland  21146

Re:            Conversion of Debt

Dear Jerry:

This letter agreement addresses the conversion of a portion of the principal balance of the indebtedness owed to you by Fortress International Group, Inc. (the “ Company ”) pursuant to that certain Convertible Promissory Note, dated January 19, 2007, as amended by that certain Agreement, dated August 26, 2008, and as further amended by that certain Amendment to Convertible Promissory Note, of even date herewith (collectively, the “ Note ”).  All capitalized terms not otherwise defined in this letter shall have the meanings assigned to them in the Note.

The Company hereby agrees to issue to you, as payment for certain principal amounts due under the Note, Six Hundred Twenty-Five Thousand (625,000) shares of the Company’s common stock (the “ Shares ”) for a per share price of Two Dollars ($2.00).  The Company and you agree that, upon delivery of the Shares, One Million Two Hundred Fifty Thousand Dollars ($1,250,000) of the principal balance due under the Note shall be deemed paid and discharged in full; provided, however, that the remaining principal balance due under the Note in the amount of Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000), and a portion of the accrued interest (which shall be treated as principal beginning January 1, 2011), shall remain outstanding and shall be paid by the Company pursuant to the terms and conditions of the Note.

Upon your acceptance of the terms and conditions set forth in this letter, and your confirmation of the representations and warranties herein, the Company will issue to you a certificate, duly executed by the authorized officers of the Company, for the Shares.

You represent and warrant to the Company that (i) you are an “Accredited Investor” as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the “ Securities Act ”); (ii) you are acquiring the Shares solely for investment, solely for your own account, not for the account of any other person, and not for distribution, assignment or resale to others, and no other person has a direct or indirect beneficial interest in any Shares so acquired; (iii) you will not take or cause to be taken any action that would cause you to be deemed an underwriter of the Shares as defined in Section 2(11) of the Securities Act; and (iv) you have made no contract, undertaking, agreement or arrangement, and you have no plan to enter into any contract, undertaking, agreement or arrangement, to sell, transfer or pledge the Shares to any other person or entity.

You acknowledge that the Shares have not been registered under the Securities Act, or under the securities laws of any state (the “ State Acts ”), and are being issued to you pursuant to exemptions therefrom for nonpublic offerings in reliance upon, among other things, the representations and warranties made by you herein, and a breach of such representations and warranties could cause the Company to not qualify for such exemptions.  Any assignment, sale, transfer, exchange, hypothecation or other disposition of the Shares (whether for consideration or otherwise), in whole or in part, may be made by you only if registered under the Securities Act and the State Acts, or, if in the opinion of counsel to the Company, an exemption from such registration is available.

 

The Company acknowledges that the Shares are considered “Registrable Securities” under and as defined in that certain Registration Rights Agreement, dated January 19, 2007, among the Company, you, Thomas P. Rosato, and Evergreen Capital LLC.

All questions concerning the construction, validity, and interpretation of this letter agreement and the performance of the obligations imposed by this letter agreement will be governed by the laws of the State governing the Note, without reference to any conflict of laws rules that would apply the laws of another jurisdiction.  This letter agreement may be executed in multiple counterparts, all of which taken together shall constitute one and the same agreement, and delivered by facsimile transmission or e-mail delivery of a .pdf format data file.

The parties hereby signify their assent to the terms of this letter agreement by signing below.

AMENDMENT

TO

CONVERTIBLE PROMISSORY NOTE

This AMENDMENT TO CONVERTIBLE PROMISSORY NOTE (this “ Amendment ”) is effective as of the 28 th day of February, 2010, by and between FORTRESS INTERNATIONAL GROUP, INC., a Delaware corporation (f/k/a Fortress America Acquisition Corporation) (“ Maker ”), and Gerard J. Gallagher (“ Holder ”).  Each of Maker and Holder are hereinafter individually referred to as a “ Party ,” and collectively as the “ Parties ”.

EXPLANATORY STATEMENTS

Maker has issued to Holder that certain Convertible Promissory Note, dated January 19, 2007, in the original principal amount of Five Million Dollars ($5,000,000), as amended by that certain Agreement, dated August 26, 2008, between the Parties (collectively, the “ Note ”).  The Parties have agreed, pursuant to that certain letter agreement of even date herewith, to convert One Million Two Hundred Fifty Thousand Dollars ($1,250,000) of the outstanding principal balance due under the Note to shares of common stock of Maker, with the remaining principal balance due under the Note in the amount of Two Million Seven Hundred Fifty Thousand Dollars ($2,750,000), and a portion of the accrued interest as of the date hereof (which shall be treated as principal beginning on January 1, 2011), to be paid under the Note as amended hereby.  The Parties desire to amend certain terms and conditions set forth in the Note, all as further described and set forth in this Amendment.

AGREEMENT

NOW, THEREFORE , in consideration of the foregoing and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

1.            Amendments to the Note .  The terms and conditions of the Note shall be amended as follows:

(a)            Payment of Principal Amount and Interest .  Section A.1 of the Note is hereby deleted in its entirety and the following is substituted in lieu thereof:

(b)            Acceleration of Payments .  The following provision is added to the end of Section A.3 of the Note:

2.            Life Insurance Policy .  In connection with the execution and delivery of this Amendment, Maker will use commercially reasonable efforts to obtain an insurance policy on the life of Holder in the amount of the principal balance due under the Note.  Maker will be designated as the beneficiary of all proceeds of such policy and shall pay when due all premiums charged under such policy through the Maturity Date (as defined in the Note) of the Note.  Upon the death of Holder and the acceleration of the amounts due under the Note in accordance with Section A.3 of the Note, Maker shall use and apply all proceeds actually received by Maker under such insurance policy toward the payment and satisfaction of the remaining amounts due under the Note.  In the event such policy is not obtained by Maker by March 31, 2010, Maker shall pay Holder the amount necessary to obtain such policy during the period that any amounts are due and payable under the Note, but in no event shall Maker be obligated to pay an amount in excess of Ten Thousand Dollars ($10,000) per year under this Section 2 .

3.            Effect of Amendment .  Except as otherwise expressly provided herein, all provisions of the Note shall remain in full force and effect.  This Amendment and the Note contain the entire understanding of the Parties with respect to the subject matter hereof and thereof, and supersede all prior oral or written communications, agreements and understandings between the Parties with respect to the subject matter hereof and thereof.  This Amendment is intended to modify the provisions of the Note; in the event that there is a conflict between the terms of this Amendment and the Note, the Parties intend that the provisions of this Amendment should govern their respective rights and obligations.

4.            Payment of Fees .  Maker hereby agrees to reimburse Holder for certain legal and accounting fees incurred by Holder in connection with the negotiation, execution, and delivery of this Amendment, the Amendment to Executive Employment Agreement of even date herewith, and that certain letter agreement of even date herewith, up to a maximum amount of Twenty Thousand Dollars ($20,000).

5.            Miscellaneous .  The Explanatory Statements set forth above form a material basis for this Amendment and are expressly incorporated herein and made a part hereof.  All capitalized terms not otherwise defined in this Amendment shall have the meanings assigned to them in the Note.  All questions concerning the construction, validity, and interpretation of this Amendment and the performance of the obligations imposed by this Amendment will be governed by the laws of the State governing the Note, without reference to any conflict of laws rules that would apply the laws of another jurisdiction.  This Amendment may be executed simultaneously in multiple counterparts, each of which will be deemed to be an original copy of this Amendment and all of which together will be deemed to constitute one and the same agreement.  The exchange of copies of this Amendment and of signature pages by facsimile transmission or e-mail delivery of a .pdf format data file shall constitute effective execution and delivery of this Amendment as to the Parties and may be used in lieu of the original Amendment and signature pages thereof for all purposes.

{Signatures appear on the following page}

 

IN WITNESS WHEREOF , the Parties have executed this Amendment as of the day and year first written above.

 

 

Signature page to Amendment to

Convertible Promissory Note

 

AMENDMENT

TO

EXECUTIVE EMPLOYMENT AGREEMENT

This AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT (this “ Amendment ”), is effective as of the 28 th day of February, 2010, by and between FORTRESS INTERNATIONAL GROUP, INC., a Delaware corporation (f/k/a Fortress America Acquisition Corporation) (the “ Company ”), and Gerard J. Gallagher (the “ Executive ”).  Each of the Company and Executive are hereinafter individually referred to as a “ Party ,” and collectively as the “ Parties ”.

EXPLANATORY STATEMENTS

The Parties are all of the parties to that certain Executive Employment Agreement, effective as of January 19, 2007 (the “ Employment Agreement ”).  The Parties desire to amend certain terms and conditions set forth in the Employment Agreement, all as further described and set forth in this Amendment.

AGREEMENT

NOW, THEREFORE , in consideration of the foregoing and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, hereby agree as follows:

1.            Amendments to Employment Agreement .  The terms and conditions of the Employment Agreement are hereby amended as follows:

(a)            Duties .  Section 2.2 is hereby deleted in its entirety and the following is substituted in lieu thereof:

2.2.            Duties .  During the Employment Period, and subject to the provisions of this Agreement, the Executive shall devote the Executive’s full working time and attention and use the Executive’s best efforts and skill to further the interests of the Company.  The Executive shall, to the best of his ability, execute the strategic plan of the Company as approved by the Board, perform his duties, adhere to the Company’s published policies and procedures, promote the Company’s interests, reputation, business and welfare, and work actively with the Board and other senior managers to help augment the existing business base, increase the corporate contract backlog, and indentify and develop new business opportunities.  The Executive shall perform such services for the Company as is consistent with the Executive’s position (subject to the power and authority of the Board to expand or limit such services and to overrule actions of officers of the Company) and as lawfully directed, from time to time, by the Board.  During the Employment Period, the Executive’s title shall be President and Chief Operating Officer of the Company.  During the Employment Period, the Executive shall also serve as the President and Chief Executive Officer of VTC, L.L.C., a Maryland limited liability company (d/b/a/ “Total Site Solutions”), a subsidiary of the Company.  During the Employment Period, the Executive shall report to the Board, and the Executive may use such additional titles as assigned and approved by the Board.  The Executive shall not, during the Employment Period, be employed or involved in any other business activity for gain, profit or other pecuniary advantage.  Notwithstanding the immediately foregoing sentence, the Executive may (a) volunteer services for or on behalf of such religious, educational, non-profit and/or charitable organizations as the Executive may wish to serve; (b) manage his personal, financial and legal affairs; and (c) participate as a director of, or own less than fifty percent   (50%) of the equity interest or voting rights in, any other business entity that does not directly or indirectly compete with the business of the Company, so long as (1) the Executive provides the Audit Committee of the Board prior written notice of such activities that describes such activities in reasonable detail (provided, however, that such notice shall not be required for any investment by the Executive that would result in the Executive owning not more than five percent (5%) of the outstanding stock or voting power of a business entity listed on a national securities exchange); (2) such activities do not interfere, or could not reasonably be expected to interfere, with his duties and responsibilities to the Company as provided hereunder, (3) the Executive is not actively involved in the management of such business entity, except to the extent the Executive serves on such business entity’s board of directors or similar governing body; (4) such activities do not violate any of the terms of this Agreement or any other agreement entered into with the Company (including, but not limited to, Sections 2.4 and 7 hereof), and (5) such activities would not be the types of activities required, in the sole discretion of the Audit Committee, to be disclosed under Item 404 of Regulation S-K promulgated by the Securities and Exchange Commission regardless of whether the Company is subject to such disclosure requirements.  The Executive acknowledges that the Executive may be required to travel on business in connection with the Executive’s performance of the Executive’s duties hereunder, but that the Executive’s base will be the location of the Company’s headquarters in Columbia, Maryland or such other location as determined by the Board.

 

(b)            Base Salary .  Section 3.1 is hereby deleted in its entirety and the following is substituted in lieu thereof:

3.1.             Base Salary.   The Executive’s current annual base salary is One Hundred Fifty Thousand Dollars ($150,000) (“ Base Salary ”), paid in approximately equal installments bi-weekly.  Effective September 1, 2010, the Executive’s Base Salary shall be adjusted to Two Hundred Thousand Dollars ($200,000) per year, paid in approximately equal installments bi-weekly.  The Company will review the Executive’s Base Salary on December 31 of each year of the Employment Period in order to determine, in the sole discretion of the Board or the Compensation Committee of the Board, whether   any   adjustments to the Base Salary need to be made based on factors approved by the Board, which may include the Executive’s individual performance, the financial results and condition of the Company as of and for the recent fiscal year, and the Company’s projected financial performance and profitability.  In no event shall the Executive’s Base Salary be reduced below the amount paid in the preceding year.

(c)            Termination .  Section 5.2 is hereby deleted in its entirety and the following is substituted in lieu thereof:

5.2.            Termination by the Company Other Than for Death, Disability, or Cause or by Executive for a Good Reason .  In addition to the payment to Executive of the Executive’s Base Salary and reimbursement of any applicable expenses pursuant to Section 4.2 through the Date of Termination, if (a) the Employment Period is terminated (i) by the Company for reasons other than death, Disability, or Cause, or (ii) by the Executive for a Good Reason, or (iii) by reason of non-renewal or termination of employment in accordance with the terms of Section 2.1.2 hereof (provided the Company provides the requisite notice to the Executive to terminate prior to any Expiration Date); and (b) the Executive executes a general release in the form attached hereto as Exhibit C (the “ Release ”) on or before the effective Date of Termination; and (c) the Executive has not breached the terms of the “Assignment Agreement” (as defined below); then the Company shall pay the Executive an amount equal to the Executive’s Base Salary (at the rate in effect at the Date of Termination) for a period of twelve (12) months following the Date of Termination.  Any payment under this Section 5.2 shall be made over time as though the Executive continued to be employed by the Company.  If the Executive elects and remains eligible for health coverage pursuant to Section 4980B of the Internal Revenue Code of 1986, as amended (“ COBRA ”) (and subject to withholding pursuant to Section 3. 4 above), then commencing within fifteen (15) business days following the date on which the Release become effective pursuant to its terms, the Company will, for a period commencing on the Date of Termination and continuing for twelve (12) months after the Date of Termination, pay a percentage of the premium for such COBRA health coverage equal to the percentage of the premium for health insurance coverage paid by the Company on the Date of Termination.  The Executive shall not be entitled to any other salary or compensation after termination of the Employment Period (other than as set forth in this Section 5.2 and Section 5.3 ) and no Person shall be entitled hereunder to participate in any employee benefit plan after the Date of Termination if the Employment Period is terminated in connection with this Section 5.2 , except as otherwise specifically provided hereunder or as required by applicable law (i.e., COBRA) and provided that nothing herein shall be interpreted to limit the Executive’s conversion rights, if any, under any of the Company’s employee benefit plans.  In furtherance of and not in limitation of the foregoing, the Executive may only be terminated by the affirmative vote of a majority of the whole Board (excluding the Executive if he is a member of the Board).

2.            Effect of Amendment .  Except as otherwise expressly provided herein, all provisions of the Employment Agreement shall remain in full force and effect.  This Amendment and the Employment Agreement contain the entire understanding of the Parties with respect to the subject matter hereof and thereof, and supersede all prior oral or written communications, agreements and understandings between the Parties with respect to the subject matter hereof and thereof.  This Amendment is intended to modify the provisions of the Employment Agreement; in the event that there is a conflict between the terms of this Amendment and the Employment Agreement, the Parties intend that the provisions of this Amendment should govern their respective rights and obligations.

3.            Miscellaneous .  The Explanatory Statements form a material basis for this Amendment and are expressly incorporated herein and made a part hereof.  All capitalized terms not otherwise defined in this Amendment shall have the meanings assigned to them in the Employment Agreement.  All questions concerning the construction, validity, and interpretation of this Amendment and the performance of the obligations imposed by this Amendment will be governed by the laws of the State governing the Employment Agreement, without reference to any conflict of laws rules that would apply the laws of another jurisdiction.  This Amendment may be executed simultaneously in multiple counterparts, each of which will be deemed to be an original copy of this Amendment and all of which together will be deemed to constitute one and the same agreement.  The exchange of copies of this Amendment and of signature pages by facsimile transmission or e-mail delivery of a .pdf format data file shall constitute effective execution and delivery of this Amendment as to the Parties and may be used in lieu of the original Amendment and signature pages thereof for all purposes.

{Signatures appear on the following page}

 

IN WITNESS WHEREOF , the Parties have executed this Amendment as of the day and year first written above.

Signature page to Amendment to

Executive Employment Agreement

 

 

 

Fortress International Group Announces Restructuring of Original Seller’s Note

 

Restructuring of this long-term debt reduces cash outlay for principal and interest by $2.46 million in 2010, extends maturity to 2014

 

COLUMBIA, MD, March 1, 2010 Fortress International Group, Inc. (NASDAQ: FIGI) ("Fortress," or the "Company"), a leading provider of consulting and engineering, construction management and 24/7/365 site services for mission-critical facilities, today announced it has restructured the  seller’s note due to Fortress International Group President Jerry Gallagher thus reducing the relevant principal and interest payments in 2010 from $2.78 to $0.32 million and extending the terms to 2014.

 

The terms of the restructuring call for $1.25 million of the $4.0 million note to be converted to 625,000 shares of common stock ($2.00 per share). The interest rate is reduced from 6% to 4%, and $1.0 million of the remaining $2.75 million will be paid in 8 quarterly installments of $125,000 beginning in April 2012. The final payment of all remaining amounts of principal and interest is due April 1, 2014.

 

Mr. John Morton, Fortress Chairman, said “This favorable restructuring is a continuing strong endorsement by Jerry Gallagher about the Company’s future. Jerry had converted $1M in 2008 at $7.50 at the same time that Tom Rosato had converted the last $2.5M of his seller’s note at $7.50.”

Chief Executive Officer Mr. Tom Rosato, added, “We have taken aggressive steps over the past 12 months to preserve cash and lower the operating costs of the Company to counter the negative impact of the weakened economy on our operations. This restructuring by Jerry will assist the Company in improving its working capital position as the upturn in demand we are experiencing materializes.”

Mr. Jerry Gallagher added “We continue to see new opportunities from outstanding clients and prospects who value our expertise from design to facility management. I am happy to restructure the note over four years to accommodate the Company’s cash management process.”

About Fortress International Group, Inc.

Fortress International Group, Inc. is leading mission-critical facilities into a new era of maximum uptime and efficiency. Fortress provides consulting and engineering, construction management and 24/7/365 site services for the world's most technology dependent organizations. Serving as a trusted advisor, Fortress delivers the strategic guidance and pre-planning that makes every stage of the critical facility lifecycle more efficient. For those who own, lease or manage mission-critical facilities, Fortress provides innovative end-to-end capital management, energy, IT strategy, procurement, design, construction, implementation and operations solutions that optimize performance and reduce cost.

Fortress International Group, Inc.

Setting a new standard for the optimized critical facility.

 

Fortress International Group, Inc. (NASDAQ: FIGI) is headquartered in Maryland, with offices throughout the U.S. For more information, visit: www.FortressInternationalGroup.com or call 888-321-4877.

 

FORWARD-LOOKING STATEMENTS

This press release may contain "forward-looking statements"-- that is, statements related to future -- not past -- events, plans, and prospects. In this context, forward-looking statements may address matters such as our expected future business and financial performance, and often contain words such as "guidance," "expects," "anticipates," "intends," "plans," "believes," "seeks," "should," or "will." Forward-looking statements by their nature involve risks and uncertainties.  For a more detailed discussions of the risks and uncertainties that may affect the Company’s operations and financial results, please review the “Risk Factors” sections in the Company’s reports filed with the Securities and Exchange Commission, including the Annual Report on Form 10-K for the fiscal year ended December 31, 2008, and the subsequent Quarterly Reports on Form 10-Q.

 

Company Contacts:

Thomas P. Rosato

Chief Executive Officer

Fortress International Group, Inc.

Phone: (410) 423-7438

Investor Relations:

Harvey L. Weiss

Vice Chairman

Fortress International Group, Inc

Phone: (410) 423-7425