DEBT PAYMENT AND STOCK CONVERSION AGREEMENT

THIS AGREEMENT (“Agreement”) is entered into as of this 11th day of December,
2008, by and between Fortune Industries, Inc., an Indiana corporation (“FII”),
Carter M. Fortune (“Fortune”) and John F. Fisbeck (“Fisbeck”).

PREAMBLE

1.           Fortune holds a Term Loan Note ("Note") from FII that currently has
an outstanding balance of Thirty-One Million Seven Hundred Thousand Dollars
($31,700,000.00);

2.           Concurrently with the execution of this Agreement, FII is making a
non-cash payment on the Note in the amount of Ten Million Dollars
($10,000,000.00) leaving an outstanding balance of Twenty-One Million Seven
Hundred Thousand Dollars ($21,700,000.00);

3.           Fortune currently owns 79,180 shares of FII’s Series B Preferred
Stock;

4.           FII desires to issue a new series of Preferred Stock (Series C);

5.           FII desires to pay in full all of the debt outstanding after the
payment described in 2 above by the issuance of shares of FII’s  Series C
Preferred Stock;

6.           Upon payment in full of the Note, FII desires to cease paying the
guarantee fees that relate to the Note.

7.           The parties desire to convert all of the outstanding shares of
Series B Preferred Stock to shares of Series C Preferred Stock; and

8.           The parties desire to issue a Common Stock Purchase Warrant to
Fortune.
 
AGREEMENT

NOW, THEREFORE, in consideration of the premises and the mutual agreements,
provisions and conditions contained herein, and for other good and valuable
consideration, the adequacy and receipt of which are hereby acknowledged, the
parties hereto agree as follows:

ARTICLE I
PAYMENT OF NOTE AND CONVERSION OF PREFERRED STOCK

1.1           Payment of Note.  At the Closing, FII shall make a $10,000,000.00
non-cash payment on the Note and shall issue two hundred seventeen thousand
(217,000) shares of Series C Preferred Stock to Fortune.  Upon the payment and
the issuance of the shares, the Note shall be paid in full and canceled.  At the
Closing, FII shall issue a certificate evidencing the shares of Series C
Preferred Stock to Fortune.  The attached Exhibit A, entitled “Consent to
Setoff”, contains a more detailed description of the non-cash payment.
 

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1.2           Conversion of Preferred Stock.  At the Closing, the 79,180 shares
of Series B Preferred Stock shall be converted to 79,180 shares of Series C
Preferred Stock.  Upon the conversion, the Series B Preferred Stock shall no
longer be outstanding and shall automatically be cancelled and retired.  At the
Closing, FII shall issue a certificate evidencing the shares of Series C
Preferred Stock to Fortune.
 
1.3           Restrictive Legend.  The Series C Preferred Stock certificate
shall bear the usual restrictive legend pertaining to the General Rules and
Regulations promulgated under the Securities Act of 1933 (the “Securities
Act”).  Subject to the Securities Act restrictions, Fortune may however sell or
transfer the Series C Preferred Stock at any time.
 
1.4           Termination of Guarantee Fees.  Upon the Closing, FII shall no
longer have any liability to pay any guarantee fees to Fisbeck relating to the
Note.  Prior to the Closing, FII had been paying $50,000.00 per month in
guarantee fees.
 
ARTICLE II
SUMMARY OF TERMS - SERIES C PREFERRED STOCK

The Series C Preferred Stock shall:  (i) be issued at a price of $100.00 per
share; (ii) be non-voting; (iii) be callable, in whole or in part, by FII at any
time at an amount equal to $100.00 per share plus any accrued but unpaid
dividends thereon; (iv) pay dividends that are cumulative; and (v) pay dividends
of $5.00 per share per annum during the period January 1, 2009 to December 31,
2010, $6.00 per share per annum during the period January 1, 2011 to December
31, 2011, and $7.00 per share per annum thereafter.  The attached Exhibit B,
entitled “Certificate of Designation”, contains a more detailed description of
the terms of the Series C Preferred Stock.

ARTICLE III
COMMON STOCK PURCHASE WARRANT

At the Closing, FII shall issue to Fortune a Common Stock Purchase Warrant, a
copy of which is attached as Exhibit C, entitled “Common Stock Purchase
Warrant”.

ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FORTUNE

The following representations and warranties are hereby made by Fortune to FII:

4.1           Authorization.  Fortune has full power and authority to enter into
this Agreement and to carry out the transaction contemplated herein.  This
Agreement constitutes the valid and legally binding obligation of Fortune,
enforceable in accordance with its terms and conditions.

4.2           Noncontravention.    Neither the execution and the delivery of
this Agreement, nor the consummation of the transaction contemplated hereby,
will (a) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge or other restriction of any government,
governmental entity, or court to which Fortune is subject or (b) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice under any agreement, contract, lease, license, instrument or
other arrangement to which Fortune is a party.
 
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4.3           Lack of Restrictions.  Fortune holds the Note and Series B
Preferred Stock free and clear of any restrictions on transfer, encumbrances,
security interests, options, warrants, purchase rights, contracts, commitments
and/or equities.  Fortune is not a party to any option, warrant, purchase right
or other contract or commitment that could require Fortune to sell, transfer or
otherwise dispose of the Note or Series B Preferred Stock (other than this
Agreement).

4.4           Investor Representations.

(a)         Fortune understands that the Series C Preferred Stock will not be
registered under the Securities Act or any state securities laws on the grounds
that the issuance of the Series C Preferred Stock is exempt from registration
pursuant to Section 4(2) of the Securities Act or Regulation D promulgated under
the Securities Act and applicable state securities laws, and that the reliance
of FII on such exemptions is predicated in part on Fortune’s representations,
warranties, covenants and acknowledgments set forth in this Section 4.4.

(b)         Fortune represents and warrants that the Series C Preferred Stock to
be acquired by him upon consummation of the transaction contemplated herein will
be acquired by him for his own account, not as a nominee or agent, and without a
view to resale or other distribution within the meaning of the Securities Act
and the rules and regulations thereunder other than as contemplated by this
Agreement, and that he will not distribute all or any portion of the Series C
Preferred Stock in violation of the Securities Act.

(c)         Fortune acknowledges that the shares of Series C Preferred Stock are
characterized as "restricted securities" under the federal securities laws
inasmuch as they are being acquired in a transaction not involving a public
offering and that under such laws and applicable regulations such securities may
be resold without registration under the Securities Act, only in certain limited
circumstances.

(d)         Fortune is an “accredited investor” as that term is defined in
Regulation D of the Securities Act and he has sufficient knowledge and
experience in financial and business matters that he is capable of evaluating
the merits and risks of the transaction contemplated by this Agreement.

(e)         Fortune is in a financial position to afford to hold the Series C
Preferred Stock indefinitely and Fortune’s financial condition is such that he
is not presently under (and does not contemplate any future) necessity or
constraint to dispose of the Series C Preferred Stock to satisfy any existing or
contemplated debt or undertaking.  Fortune recognizes that it may not be
possible for him to liquidate his investment in the Series C Preferred Stock
and, accordingly, he may have to hold the Series C Preferred Stock, and bear the
economic risk of this investment, indefinitely.

(f)         Fortune understands that neither the Securities and Exchange
Commission nor any other federal or state agency has recommended, approved or
endorsed the purchase of the Series C Preferred Stock as an investment.

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(g)         Fortune confirms that the Series C Preferred Stock was not offered
to him by any means of general solicitation or general advertising, and that he
has received no representations or warranties with respect to the Series C
Preferred Stock other than those contained or described in this Agreement or in
FII’s public filings.

(h)         Fortune acknowledges that he has been provided or that FII has made
available to him copies of FII’s most recent Form 10-K, Form 10-Q and any Form
8-Ks and Form 4s filed since the most recent Form 10-Q was filed.

(i)         Fortune acknowledges that he is a director of FII and, as such, he
is very familiar with FII’s operations and its current financial condition.

(j)         Fortune acknowledges that FII has given him a reasonable opportunity
to ask questions and receive answers concerning his receipt of the Series C
Preferred Stock and to obtain any additional information which FII possesses or
can acquire without unreasonable effort or expense that is necessary to verify
the accuracy of information.

4.5           No Brokerage Fees.  No agent, broker, investment banker, person or
firm acting on behalf of Fortune to the best of his knowledge, is or will be
entitled to any broker's or finder's fee or any other commission or fee,
directly or indirectly, in connection with the transaction contemplated hereby.

4.6           Accuracy of Representations.  No representation or warranty
contained herein, nor any statement or certificate furnished hereunder or in
connection herewith, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.

ARTICLE V
REPRESENTATIONS AND WARRANTIES OF FII

The following representations and warranties are hereby made by FII to Fortune:

5.1           Organization; Authorization.  FII is a corporation duly organized,
validly existing and in good standing under the laws of its state of
incorporation and has full power and authority to enter into this Agreement and
to carry out the transaction contemplated herein.  This Agreement constitutes
the valid and legally binding obligation of FII, enforceable in accordance with
the terms and conditions.

5.2           Noncontravention.    Neither the execution and the delivery of
this Agreement, nor the consummation of the transaction contemplated hereby will
(a) violate any constitution, statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge or other restriction of any government,
governmental entity, or court to which FII is subject or (b) conflict with,
result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify or cancel, or
require any notice under any agreement, contract, lease, license, instrument or
other arrangement to which FII is a party.

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5.3           Capital Stock.  FII’s authorized capital stock consists of
150,000,000 shares of Common Stock, $.10 par value, and 1,000,000 shares of
Preferred Stock, $0.10 par value. FII has full right and authority to issue to
Fortune, upon the terms and conditions set forth in this Agreement, the Series C
Preferred Stock and, subject to the receipt of the consideration therefor
pursuant to the terms and conditions hereof, the shares will be duly and validly
issued as fully paid and nonassessable shares of preferred stock.

5.4           No Brokerage Fees.  No agent, broker, investment banker, person or
firm acting on behalf of it to the best of its knowledge, is or will be entitled
to any broker's or finder's fee or any other commission or fee, directly or
indirectly, in connection with the transaction contemplated hereby.

5.5           Accuracy of Representations.  No representation or warranty
contained herein, nor any statement or certificate furnished hereunder or in
connection herewith, contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.

ARTICLE VI
MISCELLANEOUS

6.1           Tax Consequences.  Each party represents that it/he has consulted
with its/his own tax advisors and has made has made its/his own independent
conclusion regarding the tax consequences of the intended transaction.

6.2           Survival.  All agreements, representations and warranties made
hereunder or in connection with the transactions contemplated hereby shall
survive the Closing and remain effective in accordance with the terms hereof
regardless of any investigation at any time made by or on behalf of any of the
parties.

6.3           Assignment.  This Agreement may not be assigned without the prior
written consent of all parties nor may any of the performances hereunder be
delegated by operation of law or otherwise by any party hereto, and any
purported assignment or delegation shall be void.

6.4           Binding Effect.  This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, successors, legal
representatives, assigns and transferors.

6.5           Entire Agreement. This Agreement constitutes the entire agreement
of the parties hereto with respect to the subject matter hereof.  There are no
representations, warranties, conditions or other obligations except as
specifically provided.  Any waiver, amendment or modification hereof must be in
writing. A waiver in one instance shall not be deemed to be a continuing waiver
or waiver in any other instance.

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6.6           Arbitration.  Any and all disputes, claims and controversies
arising under or by reason of this agreement shall be settled by arbitration in
accordance with the rules of the American Arbitration Association and any award
rendered in such arbitration shall be binding and conclusive upon the
parties.  The arbitrators may decree specific performance or grant injunctions
or any other equitable relief deemed proper by the arbitrators under the
circumstances.  Such arbitration shall be held in Indianapolis,
Indiana.  Judgment on any award may be entered and enforced in any court located
in Indianapolis, Indiana.

6.7           Governing Law.  This Agreement shall be construed and interpreted
in accordance with the laws of the State of Indiana.

6.8           Closing.  “Closing” shall mean the consummation of this Agreement
in accordance with the provisions hereof to be held on or before November 30,
2008 unless changed by the mutual agreement of the parties hereto.

6.9           Counterparts.  This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.  This Agreement may be
deemed executed upon receipt of a facsimile copy bearing signatures of the
parties, provided that a complete document bearing original signatures is
assembled within five business days of such execution.

6.10           Effective Date.  The Closing shall be effective as of
November 30, 2008.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day
and year first above written.

FORTUNE INDUSTRIES, INC.

By:
/s/ John F. Fisbeck
      /s/ Carter M. Fortune  
John F. Fisbeck, CEO
 
Carter M. Fortune, Individually
                  /s/ John F. Fisbeck      
John F. Fisbeck, Individually

 
[SIGNATURE PAGE FOR DEBT/STOCK RETIREMENT AGREEMENT BETWEEN FORTUNE INDUSTRIES,
INC., CARTER M. FORTUNE AND JOHN F. FISBECK]

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