Exhibit 10.1
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE
COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO FTS GROUP INC. THAT SUCH REGISTRATION IS NOT REQUIRED.
Principal $_______________ Issue Date: December ___, 2005
SECURED CONVERTIBLE PROMISSORY NOTE
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FOR VALUE RECEIVED, FTS GROUP INC., a Nevada corporation (hereinafter
called "Borrower"), hereby promises to pay to ALPHA CAPITAL AKTIENGESELLSCHAFT,
▇▇▇▇▇▇▇▇▇ ▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇, Fax: ▇▇▇-▇▇-▇▇▇▇▇▇▇▇ (the
"Holder") or its registered assigns or successors in interest or order, without
demand, the sum of ________________________ Dollars ($__________) ("Principal
Amount"), with unpaid interest thereon, on March ___, 2007 (the "Maturity
Date"), if not sooner paid.
This Note has been entered into pursuant to the terms of a subscription
agreement between the Borrower and the Holder, dated of even date herewith (the
"Subscription Agreement"), and shall be governed by the terms of such
Subscription Agreement. Unless otherwise separately defined herein, all
capitalized terms used in this Note shall have the same meaning as is set forth
in the Subscription Agreement. The following terms shall apply to this Note:
ARTICLE I
INTEREST; AMORTIZATION
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1.1. Minimum Monthly Principal Payments. Amortizing payments of the
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outstanding Principal Amount and interest of this Note shall commence on the
earlier of the Actual Effective Date (as defined in Section 11.1(iv) of the
Subscription Agreement), or the ninety-first (91st) day after the Issue Date and
on the same day of each month thereafter (each a "Repayment Date") until the
Principal Amount has been repaid in full, whether by the payment of cash or by
the conversion of such principal into Common Stock pursuant to the terms hereof.
Subject to Section 2.1 and Article 3 below, on each Repayment Date, the Borrower
shall make payments to the Holder equal to the initial Principal Amount the
quotient of the number of days from the first Repayment Date until the Maturity
Date divided by 30, together with any other amounts which are then owing under
this Note that have not been paid (collectively, the "Monthly Amount"). In
addition to the regular payment of the Monthly Amount, additional payments (each
an "Interim Payment") will be required to be made at the written election of the
Holder (a form of which is annexed hereto) for each and every day (each a
"Determination Date") the total reported dollar volume of the Common Stock
exceeds $100,000 ("Liquidity Benchmark"). The amount of each Interim Payment
will be determined by multiplying the Fixed Principal Portion by a fraction the
numerator of which is the total reported dollar volume of the Common Stock on a
Determination Date and the denominator of which is the Liquidity Benchmark. The
Holder must give written notice to the Borrower within two business days after a
Determination Date of ▇▇▇▇▇▇'s election to receive an Interim Payment. If such
notice is given, the Holder may elect to receive and the Borrower must pay or
deliver either (i) cash on the third business day following the date notice is
given, or (ii) Common Stock valued at eighty-five percent (85%) of the weighted
average volume price of the Common Stock using the AQR function as reported by
Bloomberg L.P. ("VWAP") for the five (5) trading days preceding the date notice
is given by the Holder of the demand for an Interim Payment. If the Holder
elects to receive Common Stock in satisfaction of an Interim Payment, then the
date of the Holder's notice shall be deemed a Conversion Date and the Common
Stock must be delivered in the same manner and under the same conditions as
required in connection with a Notice of Conversion. All payments of cash or
amounts converted into Common Stock pursuant to this Note by the Holder or
Borrower shall be applied first against outstanding fees and damages, then
accrued interest on the Principal Amount and then to Principal Amounts of not
yet due Monthly Amounts, commencing with the Monthly Amount next payable and
then Monthly Amounts thereafter in reverse chronological order. Any Principal
Amount, interest and any other sum arising under the Transaction Documents that
remains outstanding on the Maturity Date shall be due and payable on the
Maturity Date.
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1.2. Default Interest Rate. Following the occurrence and during the
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pendency of an Event of Default, which, if susceptible to cure is not cured
within twenty (20) days, otherwise then from the first date of such occurrence,
the annual interest rate on this Note shall (subject to Section 6.7)
automatically be fifteen percent (15%) compound interest, and all outstanding
obligations under this Note shall accrue interest from the date of such Event of
Default at such interest rate applicable to such obligations until such Event of
Default is cured or waived.
ARTICLE II
CONVERSION REPAYMENT
2.1. Payment of Monthly Amount in Cash or CommonStock. Subject to
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Section 3.2 hereof, the Borrower, at the Borrower's election, shall pay the
Monthly Amount (i) in cash within three (3) business days after the applicable
Repayment Date, or (ii) in registered Common Stock at an applied conversion rate
equal to the lesser of (A) the Fixed Conversion Price (as defined in Section 3.1
hereof), or (B) eighty-five percent (85%) of the weighted average volume price
of the Common Stock using the AQR function as reported by Bloomberg, L.P. for
the Principal Market ("VWAP") for the five (5) trading days preceding such
Repayment Date ("Alternate Price") (as such amount may be adjusted as described
herein). The Borrower must send notice to the Holder by confirmed telecopier
not later than 3:00 PM, New York City time on the eleventh Trading Day preceding
a Repayment Date notifying Holder of Borrower's election to pay the Monthly
Redemption Amount in cash or stock. The Notice must state the amount of the
Monthly Redemption Amount and include supporting calculations. Elections by the
Borrower must be made to all Holders of Notes similar to this Note in proportion
to the relative Note principal held by such Note Holders. If such notice is not
timely sent or if the Monthly Redemption Amount is not timely delivered or if
the Borrower elects to pay the Monthly Redemption Amount with Common Stock, then
Holder shall have the right, instead of the Company, to elect in writing within
three trading days prior to the applicable Repayment Date or required Delivery
Date, as the case may be whether to be paid in cash or Common Stock or defer the
cash payment of the relevant Monthly Redemption Amount until three business days
after demand therefore by the Holder. Such Holder's election shall not be
construed to be a waiver of any default by Borrower relating to non-timely
compliance by Borrower with any of its obligations under this Note. Shares of
Common Stock must be delivered to the Holder not later than three (3) business
days after the applicable Repayment Date. If the Company elects to pay the
Monthly Amount in cash or if the payment of an Interim Payment is required to be
made with cash, then such payment must include an additional amount equal to 3%
of the principal portion of the Monthly Amount. Whichever of the Principal
Market or such other principal market or exchange where the Common Stock is
listed or traded is the principal trading exchange or market for the Common
Stock is the Principal Market.
2.2. No Effective Registration. Notwithstanding anything to the
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contrary herein, no amount payable hereunder may be paid in shares ofCommon
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Stock by the Borrower without the Holder's consent unless (a) either (i) an
effective current Registration Statement covering the shares of Common Stock to
be issued in satisfaction of such obligations exists, or (ii) an exemption from
registration of the Common Stock is available pursuant to Rule 144(k) of the
Securities Act, and (b) an Event of Default (or an event that with the passage
of time or the giving of notice could become an Event of Default) is not
continuing or was not extant during the prior twenty business days, then
commencing after the date the Registration Statement described in Section
11.1(iv) of the Subscription Agreement has been declared effective ("Actual
Effective Date") is not extent or waived in writing by the Holder in whole or
in part at the Holder's option.
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ARTICLE III
CONVERSION RIGHTS
3.1. Holder's Conversion Rights. Subject to Section 3.2 and the
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mandatory conversion provisions therein, the Holder shall have the right, but
not the obligation, to convert all or any portion of the then aggregate
outstanding Principal Amount of this Note, together with interest and fees due
hereon, and any sum arising under the Transaction Documents, including but not
limited to Liquidated Damages, into shares of Common Stock, subject to the terms
and conditions set forth in this Article III at the rate equal to $0.04 ("Fixed
Conversion Price") as same may be adjusted pursuant to this Note and the
Subscription Agreement. The Holder may exercise such right by delivery to the
Borrower of a written Notice of Conversion pursuant to Section 3.3.
3.2. Conversion Limitation. Notwithstanding anything contained herein
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to the contrary, the Holder shall not be entitled to convert pursuant to the
terms of this Note nor may this Note be converted in whole or in part into an
amount of Common Stock that would be convertible into that number of Common
Stock which would exceed the difference between the number of shares of Common
Stock beneficially owned by such Holder and 4.99% of the outstanding shares of
Common Stock. For the purposes of the immediately preceding sentence, beneficial
ownership shall be determined in accordance with Section 13(d) of the Exchange
Act and Regulation 13d-3 thereunder. The foregoing limitation shall be
calculated as of each Conversion Date. Aggregate conversions over time shall
not be limited to 4.99%. The Holder may waive the Conversion Share limitation
described in this Section 3.2, in whole or in part, upon 61 days prior notice to
the Borrower. The Holder may allocate which of the equity of the Borrower
deemed beneficially owned by the Holder shall be included in the 4.99% amount
described above and which shall be allocated to the excess above 4.99%. The
Holder is solely responsible for determining its beneficial ownership.
3.3. Mechanics of ▇▇▇▇▇▇'s Conversion.
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(a) In the event that the Holder elects to convert any amounts
outstanding under this Note into Common Stock, the Holder shall give notice of
such election by delivering an executed and completed notice of conversion (a
"Notice of Conversion") to the Borrower, which Notice of Conversion shall
provide a breakdown in reasonable detail of the Principal Amount, accrued
interest and amounts being converted. The original Note is not required to be
surrendered to the Borrower until all sums due under the Note have been paid.
On each Conversion Date (as hereinafter defined) and in accordance with its
Notice of Conversion, the Holder shall make the appropriate reduction to the
Principal Amount, accrued interest and fees as entered in its records. Each
date on which a Notice of Conversion is delivered or telecopied to the Borrower
in accordance with the provisions hereof shall be deemed a "Conversion Date." A
form of Notice of Conversion to be employed by the Holder is annexed hereto as
Exhibit A.
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(b) Pursuant to the terms of a Notice of Conversion, the Borrower
will issue instructions to the transfer agent accompanied by an opinion of
counsel, if so required by the Borrower's transfer agent, within two (2)
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business days after the date of the delivery to Borrower of the Notice of
====
Conversion and shall cause the transfer agent to transmit the certificates
representing the Conversion Shares to the Holder by crediting the account of the
Holder's designated broker with the Depository Trust Corporation ("DTC") through
its Deposit Withdrawal Agent Commission ("DWAC") system within three (3)
business days after receipt by the Borrower of the Notice of Conversion (the
"Delivery Date"). In the case of the exercise of the conversion rights set forth
herein the conversion privilege shall be deemed to have been exercised and the
Conversion Shares issuable upon such conversion shall be deemed to have been
issued upon the date of receipt by the Borrower of the Notice of Conversion. The
Holder shall be treated for all purposes as the record holder of such shares of
Common Stock, unless the Holder provides the Borrower written instructions to
the contrary.Notwithstanding the foregoing to the contrary, the Borrower or its
transfer agent shall only be obligated to issue and deliver the shares to the
DTC on the Holder's behalf via DWAC (or certificates free of restrictive
legends) if the registration statement providing for the resale of the shares of
Common Stock issuable upon the conversion of this Note is effective and the
Holder has complied with all applicable securities laws in connection with the
sale of the Common Stock, including, without limitation, the prospectus delivery
requirements. In the event that Conversion Shares cannot be delivered to the
Holder via DWAC, the Borrower shall deliver physical certificates representing
the Conversion Shares by the Delivery Date.
3.4. Conversion Calculations and Adjustments.
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(a) The number of shares of Common Stock to be issued upon each
conversion of this Note pursuant to this Article III shall be determined by
dividing that portion of the Principal Amount and interest and fees to be
converted, if any, by the then applicable Fixed Conversion Price.
(b) The Fixed Conversion Price and number and kind of shares or other
securities to be issued upon conversion shall be subject to adjustment from time
to time upon the happening of certain events while this conversion right remains
outstanding, as follows:
▇. ▇▇▇▇▇▇, Sale of Assets, etc. If the Borrower at any time shall
consolidate with or merge into or sell or convey all or substantially all its
assets to any other corporation, this Note, as to the unpaid principal portion
thereof and accrued interest thereon, shall thereafter be deemed to evidence the
right to purchase such number and kind of shares or other securities and
property as would have been issuable or distributable on account of such
consolidation, merger, sale or conveyance, upon or with respect to the
securities subject to the conversion or purchase right immediately prior to such
consolidation, merger, sale or conveyance. The foregoing provision shall
similarly apply to successive transactions of a similar nature by any such
successor or purchaser. Without limiting the generality of the foregoing, the
anti-dilution provisions of this Section shall apply to such securities of such
successor or purchaser after any such consolidation, merger, sale or conveyance.
B. Reclassification, etc. If the Borrower at any time shall, by
reclassification or otherwise, change the Common Stock into the same or a
different number of securities of any class or classes, this Note, as to the
unpaid principal portion thereof and accrued interest thereon, shall thereafter
be deemed to evidence the right to purchase an adjusted number of such
securities and kind of securities as would have been issuable as the result of
such change with respect to the Common Stock immediately prior to such
reclassification or other change.
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C. Stock Splits, Combinations and Dividends. If the shares of Common Stock
are subdivided or combined into a greater or smaller number of shares of Common
Stock, or if a dividend is paid on the Common Stock in shares of Common Stock,
the Conversion Price shall be proportionately reduced in case of subdivision of
shares or stock dividend or proportionately increased in the case of combination
of shares, in each such case by the ratio which the total number of shares of
Common Stock outstanding immediately after such event bears to the total number
of shares of Common Stock outstanding immediately prior to such event.
D. Share Issuance. So long as this Note is outstanding, if
the Borrower shall issue any Common Stock except for the Excepted Issuances (as
defined in the Subscription Agreement), prior to the complete conversion or
payment of this Note, for a consideration less than the Fixed Conversion Price
that would be in effect at the time of such issue, then, and thereafter
successively upon each such issuance, the Fixed Conversion Price shall be
reduced to such other lower issue price. For purposes of this adjustment, the
issuance of any security or debt instrument of the Borrower carrying the right
to convert such security or debt instrument into Common Stock or of any warrant,
right or option to purchase Common Stock shall result in an adjustment to the
Fixed Conversion Price upon the issuance of the above-described security, debt
instrument, warrant, right, or option and again upon the issuance of shares of
Common Stock upon exercise of such conversion or purchase rights if such
issuance is at a price lower than the then applicable Conversion Price. The
reduction of the Fixed Conversion Price described in this paragraph is in
addition to the other rights of the Holder described in the Subscription
Agreement.
(c) Whenever the Conversion Price is adjusted pursuant to Section 3.4(b) or
any Transaction Document, the Borrower shall promptly deliver to the Holder a
notice setting forth the Conversion Price after such adjustment and setting
forth a statement of the facts requiring such adjustment.
3.5. Reservation. Borrower will reserve from its authorized and
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unissued Common Stock not less than the number of shares to provide for the
issuance of Common Stock upon the full conversion of thisNote as further
described in the Subscription Agreement. Borrower represents that upon
issuance, such shares will be duly and validly issued, fully paid and
non-assessable. ▇▇▇▇▇▇▇▇ agrees that its issuance of this Note shall constitute
full authority to its officers, agents, and transfer agents who are charged with
the duty of executing and issuing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon the conversion of this
Note.
3.6 Issuance of Replacement Note. Upon any partial conversion of this
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Note, a replacement Note containing the same date and provisions of this Note
shall, at the written request of the Holder, be issued by the Borrower to the
Holder for the outstanding Principal Amount of this Note and accrued interest
which shall not have been converted or paid, provided Holder has surrendered an
original Note to the Company. In the event that the Holder elects not to
surrender a Note for reissuance upon partial payment or conversion, the Holder
hereby indemnifies the Borrower against any and all loss or damage attributable
to a third-party claim in an amount in excess of the actual amount then due
under the Note.
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ARTICLE IV
SECURITY INTEREST
4. Security Interest/Waiver of Automatic Stay. This Note is secured
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by a security interest granted to the Collateral Agent for the benefit of the
Holder pursuant to a Security Agreement, as delivered by Borrower to Holder.
ARTICLE V
EVENTS OF DEFAULT
The occurrence of any of the following events of default ("Event of
Default") shall, at the option of the Holder hereof, make all sums of principal
and interest then remaining unpaid hereon and all other amounts payable
hereunder immediately due and payable, upon demand, without presentment, or
grace period, all of which hereby are expressly waived, except as set forth
below:
5.1 Failure to Pay Principal or Interest. The Borrower fails to pay
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any installment of Principal Amount, interest or other sum due under this Note
or any Transaction Document when due and such failure continues for a period of
five (5) business days after the due date.
5.2 Breach of Covenant. The Borrower breaches any material covenant or
------------------
other term or condition of the Subscription Agreement, this Note or Transaction
Document in any material respect and such breach, if subject to cure, continues
for a period of ten (10) business days after written notice to the Borrower from
the Holder.
5.3 Breach of Representations and Warranties. Any material
--------------------------------------------
representation or warranty of the Borrower made herein, in the Subscription
Agreement, Transaction Document or in any agreement, statement or certificate
given in writing pursuant hereto or in connection herewith or therewith shall be
false or misleading in any material respect as of the date made and as of each
Closing Date.
5.4 Receiver or Trustee. The Borrower or any Subsidiary of Borrower
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shall make an assignment for the benefit of creditors, or apply for or consent
to the appointment of a receiver or trustee for them or for a substantial part
of their property or business; or such a receiver or trustee shall otherwise be
appointed.
5.5 Judgments. Any money judgment, writ or similar final process shall
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be entered or filed against Borrower or any subsidiary of Borrower or any of
their property or other assets for more than $50,000, and shall remain
unvacated, unbonded or unstayed for a period of forty-five (45) days.
5.6 Non-Payment. The Borrower shall have received a notice of
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default, which remains uncured for a period of more than twenty (20) days, on
the payment of any one or more debts or obligations aggregating in excess of
Fifty Thousand Dollars (US $50,000.00) beyond any applicable grace period;
5.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation
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proceedings or other proceedings or relief under any bankruptcy law or any law,
or the issuance of any notice in relation to such event, for the relief of
debtors shall be instituted by or against the Borrower or any Subsidiary of
Borrower and if instituted against them are not dismissed within forty-five (45)
days of initiation.
5.8 Delisting. Delisting of the Common Stock from any Principal Market;
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failure to comply with the requirements for continued listing on a Principal
Market for a period of seven consecutive trading days; or notification from a
Principal Market that the Borrower is not in compliance with the conditions for
such continued listing on such Principal Market.
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5.9 Stop Trade. An SEC or judicial stop trade order or Principal
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Market trading suspension with respect to Borrower's Common Stock that lasts for
five or more consecutive trading days.
5.10 Failure to Deliver Common Stock or Replacement Note. Borrower's
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failure to timely deliver Common Stock to the Holder pursuant to and in the form
required by this Note or the Subscription Agreement, and, if requested by
Borrower, a replacement Note.
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5.11 Non-Registration Event. The occurrence of a Non-Registration
-----------------------
Event as described in the Subscription Agreement.
5.12 Reverse Splits. The Borrower effectuates a reverse split of its
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Common Stock without ten business days prior written notice to the Holder.
5.13 Cross Default. A default by the Borrower of a material term,
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covenant, warranty or undertaking of any Transaction Document or other agreement
to which the Borrower and Holder are parties, or the occurrence of a material
event of default under any such other agreement which is not cured after any
required notice and/or cure period.
5.14 Reservation Default. The occurrence of Reservation Default as
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described in the Subscription Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 Failure or Indulgence Not Waiver. No failure or delay on the part
---------------------------------
of Holder hereof in the exercise of any power, right or privilege hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such power, right or privilege preclude other or further exercise thereof or
of any other right, power or privilege. All rights and remedies existing
hereunder are cumulative to, and not exclusive of, any rights or remedies
otherwise available.
6.2 Notices. All notices, demands, requests, consents, approvals, and
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other communications required or permitted hereunder shall be in writing and,
unless otherwise specified herein, shall be (i) personally served, (ii)
deposited in the mail, registered or certified, return receipt requested,
postage prepaid, (iii) delivered by reputable air courier service with charges
prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed
as set forth below or to such other address as such party shall have specified
most recently by written notice. Any notice or other communication required or
permitted to be given hereunder shall be deemed effective (a) upon hand delivery
or delivery by facsimile, with accurate confirmation generated by the
transmitting facsimile machine, at the address or number designated below (if
delivered on a business day during normal business hours where such notice is to
be received), or the first business day following such delivery (if delivered
other than on a business day during normal business hours where such notice is
to be received) or (b) on the second business day following the date of mailing
by express courier service, fully prepaid, addressed to such address, or upon
actual receipt of such mailing, whichever shall first occur. The addresses for
such communications shall be: (i) if to the Borrower to: FTS Group Inc., ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, CEO,
telecopier: (▇▇▇) ▇▇▇-▇▇▇▇, with a copy by telecopier only to: ▇▇▇ ▇▇▇▇▇▇▇,
Esq., ▇▇▇▇▇▇▇ Business Law, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇
▇▇▇▇▇, Fax: (▇▇▇) ▇▇▇-▇▇▇▇, and (ii) if to the Holder, to the name, address and
telecopy number set forth on the front page of this Note, with a copy by
telecopier only to Grushko & ▇▇▇▇▇▇▇, P.C., ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, telecopier number: (▇▇▇) ▇▇▇-▇▇▇▇.
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6.3 Amendment Provision. The term "Note" and all reference thereto, as
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used throughout this instrument, shall mean this instrument as originally
executed, or if later amended or supplemented, then as so amended or
supplemented.
6.4 Assignability. This Note shall be binding upon the Borrower and
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its successors and assigns, and shall inure to the benefit of the Holder and its
successors and assigns.
6.5 Cost of Collection. If default is made in the payment of this
--------------------
Note, Borrower shall pay the Holder hereof reasonable costs of collection,
including reasonable attorneys' fees.
6.6 Governing Law. This Note shall be governed by and construed in
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accordance with the laws of the State of New York, without regard to conflicts
of laws principles that would result in the application of the substantive laws
of another jurisdiction. Any action brought by either party against the other
concerning the transactions contemplated by this Agreement shall be brought only
in the state courts of New York or in the federal courts located in the state of
New York. Both parties and the individual signing this Note on behalf of the
Borrower agree to submit to the jurisdiction of such courts. The prevailing
party shall be entitled to recover from the other party its reasonable
attorney's fees and costs. In the event that any provision of this Note is
invalid or unenforceable under any applicable statute or rule of law, then such
provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or unenforceability of any other provision of this
Note. Nothing contained herein shall be deemed or operate to preclude the Holder
from bringing suit or taking other legal action against the Borrower in any
other jurisdiction to collect on the Borrower's obligations to Holder, to
realize on any collateral or any other security for such obligations, or to
enforce a judgment or other court in favor of the Holder.
6.7 Maximum Payments. Nothing contained herein shall be deemed to
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establish or require the payment of a rate of interest or other charges in
excess of the maximum permitted by applicable law. In the event that the rate
of interest required to be paid or other charges hereunder exceed the maximum
permitted by such law, any payments in excess of such maximum shall be credited
against amounts owed by the Borrower to the Holder and thus refunded to the
Borrower.
6.8. Construction. Each party acknowledges that its legal counsel
------------
participated in the preparation of this Note and, therefore, stipulates that the
rule of construction that ambiguities are to be resolved against the drafting
party shall not be applied in the interpretation of this Note to favor any party
against the other.
6.9 Redemption. This Note may not be redeemed or called without the
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consent of the Holder except as described in this Note.
6.10 Shareholder Status. The Holder shall not have rights as a
-------------------
shareholder of the Borrower with respect to unconverted portions of this Note.
However, the Holder will have the rights of a shareholder of the Borrower with
respect to the Shares of Common Stock to be received after delivery by the
Holder of a Conversion Notice to the Borrower.
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IN WITNESS WHEREOF, ▇▇▇▇▇▇▇▇ has caused this Note to be signed in its name by an
authorized officer as of the ____ day of December, 2005.
FTS GROUP INC.
By:________________________________
Name:
Title:
WITNESS:
______________________________________
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NOTICE OF CONVERSION
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(To be executed by the Registered Holder in order to convert the Note)
The undersigned hereby elects to convert $_________ of the principal and
$_________ of the interest due on the Note issued by FTS Group Inc. on December
____, 2005 into Shares of Common Stock of FTS Group Inc. (the "Borrower")
according to the conditions set forth in such Note, as of the date written
below.
Date of
Conversion:____________________________________________________________________
Conversion
Price:______________________________________________________________________
Number of Shares of Common Stock Beneficially Owned on the Conversion Date: Less
than 5% of the outstanding Common Stock of FTS Group Inc.
Shares To Be
Delivered:_________________________________________________________________
Signature:_____________________________________________________________________
Print Name:____________________________________________________________________
Address:_______________________________________________________________________
____________________________________________________________________________
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DEMAND FOR INTERIM PAYMENT
--------------------------
The undersigned holder of a Note issued by FTS Group Inc. on December ___,
2005 hereby demands the payment of an Interim Payment pursuant to the following:
____________ Determination Date (the date dollar-volume trading exceeded the
Liquidity Benchmark)
$___________ Total dollar-volume trading on the Determination Date.
$___________ Liquidity Multiple (Total dollar-volume trading on
Determination Date divided by Liquidity Benchmark).
$___________ Fixed Principal Portion payable on each Repayment Date.
$___________ Interim Payment Amount (103% of Fixed Principal Portion
multiplied by Liquidity Multiple).
[ ] Demand is made for the Interim Payment to be paid in cash.
[ ]Demand is made that _________ shares of Common Stock be delivered in
satisfaction of the Interim Payment Amount with such shares valued at 85% of the
VWAP for the 15 trading days preceding the date of this Demand For Interim
Payment is given to the Company.
Number of Shares of Common Stock Beneficially Owned on the Conversion Date: Less
than 5% of the outstanding Common Stock of FTS Group Inc.
Shares To Be
Delivered:_________________________________________________________________
Signature:_____________________________________________________________________
Print Name:____________________________________________________________________
Address:_______________________________________________________________________
____________________________________________________________________________
Delivery Instructions:_________________________________________________________