Document:

EXHIBIT 10.2

 

AMENDMENT TO

PURCHASE AND SALE AGREEMENT

 

This Amendment to Purchase and Sale Agreement (“Amendment”) is made as of December 22, 2005, by and between CORPORATE REALTY INCOME FUND I, L.P., a Delaware limited partnership (“Seller”), and MERCURY CASUALTY COMPANY, a California corporation (“Purchaser”).

 

A.         Seller and Purchaser are parties to that certain Purchase and Sale Agreement dated as of November 11, 2005 (“Agreement”), relating to the purchase and sale of certain real property located at 7301 Northwest Highway Oklahoma City, Oklahoma  73132.  All capitalized terms used but not defined in this Amendment shall be as defined in the Agreement.

 

B.         Seller and Purchaser desire to amend the Agreement as hereinafter set forth.

 

NOW THEREFORE, in consideration of the mutual covenants contained herein, Seller and Purchaser agree as follows:

 

1.          Credit for Inspection Items.  Purchaser shall be entitled to a credit against the Purchase Price at Closing in the aggregate amount of One Hundred Thousand Dollars ($100,000.00), on account of certain inspection items objected to by Purchaser.

2.          Tenant Improvements.  Seller represents and warrants that it has retained Cobb Manufacturing Co. (“Cobb”) to complete the tenant improvements to be performed pursuant to Amendment No. 5 to the Lease with Marathon Oil Company  (“Marathon Improvements”) and that Cobb has agreed to complete the Marathon Improvements for the sum of $62,000.  Seller shall pay to Cobb at Closing the sum of Sixty-Two Thousand Dollars ($62,000.00),  provided, however, that if such amount is insufficient to complete the Marathon Improvements as currently contemplated in said Amendment No. 5 and as provided for in the plans which have previously been agreed to between Cobb and Marathon Oil Company, Seller shall pay any additional amount required to so complete such Marathon Improvements
(including the cost of releasing any mechanics liens filed by Cobb).  Seller shall indemnify, defend and hold harmless Purchaser from any claims made by Cobb or Marathon Oil against Purchaser regarding the construction of such Marathon Improvements within ninety (90) days following the substantial completion thereof, provided that such indemnity obligation shall not extend to any claims arising from the acts or omissions of Purchaser.  Purchaser shall permit Cobb (in addition to any person retained by Seller to coordinate such work) to enter the Property during regular business hours for the purpose of completing such work.

3.          Closing.  The Closing shall occur on December 29, 2005 (“Closing Date”); provided, however, that each of Seller and Purchaser shall be entitled to one (1) extension of the Closing Date for a period not to exceed ten (10) days upon prior written notice thereof to the other party.

4.          Ratification.  By their execution hereof, the parties hereby ratify, adopt and agree to be bound by the terms of the Agreement, as amended hereby.

5.          Integration.  This Amendment supersedes any and all other agreements, written or oral, between the parties pertaining to the subject matter hereof.

6.          Successors and Assigns.  This Amendment shall be binding on and shall inure to the benefit of the parties, their respective heirs, successors and assigns.

 

1

 

 

 

7.          Amendments.  This Amendment may be altered or amended only with the written consent of the parties hereto.

8.          Counterparts.  This Amendment may be executed in one or more counterparts, each of which will be deemed an original, and the counterparts taken together shall constitute a single agreement.  Facsimile signatures of this Amendment shall be deemed valid as original signatures.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.

 

	
            SELLER:
 

 

	
            CORPORATE REALTY INCOME FUND I, L.P.
 

 

 

	
            By:
 	
            /s/ Robert F. Gossett, Jr.
 	
             

	
             
	
            Robert F. Gossett, Jr.
 
	
             
	
            General Partner
 	
             

					

 

	
            By:
 	
            1345 Realty Corporation,
 
	
             
	
            General Partner
 	
             

 

 

	
            By:
 	
            /s/ Robert F. Gossett, Jr.
 	
             

	
             
	
            Robert F. Gossett, Jr.
 
	
             
	
            President
 	
             

					

 

 

[Signatures continue on following pages]

 

2

 

 

 

 

	
            PURCHASER:
 

 

MERCURY CASUALTY COMPANY, a 

California corporation

 

	
            By:
 	
            /s/ John E. Sutton
 	
             

	
            Name:
 	
            John E. Sutton
 	
             

	
            Title:
 	
            Assistant to Chairman/CEO
 
				

 

 

 

[Signatures continue on following page]

 

3

 

 

 

ESCROW HOLDER:

 

CHICAGO TITLE INSURANCE COMPANY

 

 

	
            By:
 	
            __________________________________
 
	
            Its:
 	
            __________________________________
 

 

 

4FIRST AMENDMENT TO

 

CERTIFICATE OF DESIGNATIONS,

 

PREFERENCES, AND RIGHTS OF

 

SERIES A CONVERTIBLE PREFERRED STOCK OF

 

SOMERSET INTERNATIONAL GROUP, INC.

 

Somerset International Group, Inc., a corporation organized and existing under and by virtue of the laws of the State of Delaware (hereinafter the “Corporation”), DOES HEREBY CERTIFY as follows:

 

Pursuant to authority conferred upon the Board of Directors by the express terms of a duly filed Certificate of Designations setting forth the preferences and rights of the Series A Convertible Preferred Stock of the Corporation; and

 

The Corporation having received the written consents of the record owners of not less than fifty-one (51%) percent of the outstanding shares of Series A Redeemable Convertible Preferred Stock authorizing the changes to the Certificate of Designations as set forth in the a resolution which was duly adopted and made effective as of January 15, 2006, as follows:

 

RESOLVED:  That pursuant to the authority vested in the Board of Directors of the Corporation by the Corporation’s Certificate of Incorporation and in accordance with Paragraph 6 of the Certificate of Designations filed in the Office of the Delaware Secretary of State on March 11, 2005 (the “Certificate of Designations”), the following paragraphs of the said Certificate of Designations are amended to read as follows:

 

2. Dividends.  Holders of shares of Series A Preferred Stock are entitled to receive, out of the assets or authorized capital stock of the Corporation legally available for the payment of dividends, dividends payable in cash or in kind. Dividends shall accrue at a rate equal to (a) at the rate of twelve cents ($.12) per share per annum. Accrued dividends shall be payable on each of the First Redemption Date and the Second Redemption Date defined in Section 5.1 below or on any Conditional Redemption Date defined in Section 5.2 below. Dividends upon the Series A Convertible Preferred Stock are cumulative and accrue from the date of original issue. Dividends shall cease to accrue upon the Conversion Date with respect to any shares of Series A Preferred Stock converted pursuant to Section 4 hereof, and all dividends
accrued on such shares prior to the Conversion Date shall be payable at the times specified in the third sentence of this Section 2.  No cash dividend may be declared and paid or set apart for payment upon the Corporation’s Common Stock until any accrued dividend on any outstanding shares of Series A Preferred Stock has been fully paid or declared and set apart for payment. Election by the Board of Directors to make payment in kind shall be 

 

 

deemed sufficient authorization for the issuance of such additional shares of Series A Preferred Stock as may be necessary to satisfy the dividend.

 

4.1              Conversion Rate and Other Definitions. The number of shares of Common Stock issuable upon conversion of each share of Series A Preferred Stock shall be determined according to the following formula (the “Conversion Rate”):

 

	
            Conversion Amount
 
	
            Conversion Price
 	
             

 

For purposes of this Certificate of Designations, the following terms shall have the following meanings:

 

 “Conversion Amount” means, as to each share of Series A Preferred Stock, One Dollar ($1.00). 

 

 “Conversion Price” means ninety ($.90) cents, as adjusted from time to time in accordance with Section 4.5.

 

5.1        Scheduled Redemption.  On January 15, 2007 (the “First Redemption Date”) the Corporation shall redeem 50% of the shares of Series A Preferred Stock then held by each Registered Holder. On July 15, 2007 (the “Second Redemption Date”), the Corporation shall redeem all shares of Series A Preferred Stock then outstanding. 

 

FURTHER RESOLVED:  In all other respects, the terms of the preferences, powers, designations and other special rights granted to the Series A Preferred Stock as set forth in the Certificate of Designations filed on March 11, 2005 shall remain unchanged and as then stated.

 

IN WITNESS WHEREOF, John X. Adiletta, President and Chief Executive Officer of the Corporation, under penalties of perjury, does hereby declare and certify that this is the act and deed of the Corporation and the facts stated herein are true and accordingly has signed this Amendment to Certificate of Designations as of this 15th  day of January, 2006.

 

 

	
            _______________________________
 
	
            John X. Adiletta, CEO
 	
             

 

 

 

2Exhibit  4.1

THIS  WARRANT  AND THE COMMON SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE
NOT  BEEN  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT
AND  THE  COMMON  SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT MAY NOT BE SOLD,
OFFERED  FOR  SALE,  PLEDGED  OR  HYPOTHECATED  IN  THE  ABSENCE OF AN EFFECTIVE
REGISTRATION  STATEMENT  UNDER  SAID  ACT  OR  AN  OPINION OF COUNSEL REASONABLY
SATISFACTORY  TO  FTS  GROUP  INC.  THAT  SUCH  REGISTRATION  IS  NOT  REQUIRED.

     Right  to  Purchase  ________  shares  of  Common  Stock  of FTS Group Inc.
(subject  to  adjustment  as  provided  herein)

                      CLASS A COMMON STOCK PURCHASE WARRANT
No.  2005-A-001                              Issue  Date:  December  ___,  2005

     FTS  GROUP  INC.,  a  corporation  organized under the laws of the State of
Nevada (the "Company"), hereby certifies that, for value received, ALPHA CAPITAL
AKTIENGESELLSCHAFT,  Pradafant  7,  9490  Furstentums, Vaduz, Lichtenstein, Fax:
011-42-32323196,  or  its  assigns  (the  "Holder"), is entitled, subject to the
terms  set forth below, to purchase from the Company at any time after the Issue
Date  until  5:00  p.m.,  E.S.T  on the date that the Registration Statement (as
defined  in  the Subscription Agreement) has been effective for the unrestricted
public  resale of the Warrant Shares for four (4) years (the "Expiration Date"),
up  to  ________  fully  paid  and nonassessable shares of Common Stock at a per
share  purchase  price  of  $______  [120% OF THE AVERAGE OF THE VOLUME WEIGHTED
AVERAGE PRICE (VWAP) OF THE COMMON STOCK AS REPORTED BY BLOOMBERG LP FOR THE OTC
BULLETIN  BOARD  ("BULLETIN  BOARD")  FOR  THE  FIVE  TRADING DAYS PRECEDING THE
CLOSING  DATE].  The  aforedescribed  purchase price per share, as adjusted from
time  to time as herein provided, is referred to herein as the "Purchase Price."
The  number  and character of such shares of Common Stock and the Purchase Price
are  subject  to  adjustment  as  provided  herein.  The  Company may reduce the
Purchase  Price  without  the consent of the Holder.  Capitalized terms used and
not  otherwise  defined herein shall have the meanings set forth in that certain
Subscription  Agreement (the "SUBSCRIPTION AGREEMENT"), dated December 29, 2005,
entered  into  by  the  Company  and  Holders  of  the  Class  A  Warrants.

     As  used herein the following terms, unless the context otherwise requires,
have  the  following  respective  meanings:
(a)     The  term  "Company"  shall  include  FTS Group Inc. and any corporation
which  shall  succeed  or  assume  the  obligations of FTS Group Inc. hereunder.
(b)     The  term  "Common Stock" includes (a) the Company's Common Stock, $.001
par  value  per  share, as authorized on the date of the Subscription Agreement,
and  (b)  any  other  securities  into  which or for which any of the securities
described  in  (a)  may  be  converted  or  exchanged  pursuant  to  a  plan  of
recapitalization,  reorganization,  merger,  sale  of  assets  or  otherwise.
(c)     The  term  "Other  Securities"  refers  to  any stock (other than Common
Stock)  and  other  securities  of the Company or any other person (corporate or
otherwise)  which  the  holder  of  the Warrant at any time shall be entitled to
receive,  or  shall have received, on the exercise of the Warrant, in lieu of or
in  addition  to  Common  Stock, or which at any time shall be issuable or shall
have  been  issued  in  exchange  for or in replacement of Common Stock or Other
Securities  pursuant  to  Section  5  or  otherwise.
(d)     The  term  "Warrant  Shares"  shall  mean the Common Stock issuable upon
exercise  of  this  Warrant.

                                       1

<PAGE>
1.     Exercise  of  Warrant.
       ---------------------
     1.1.     Number of Shares Issuable upon Exercise.  From and after the Issue
              ---------------------------------------
Date  through  and  including  the  Expiration  Date, the Holder hereof shall be
entitled  to  receive, upon exercise of this Warrant in whole in accordance with
the  terms  of  subsection  1.2  or  upon  exercise  of  this Warrant in part in
accordance  with  subsection 1.3, shares of Common Stock of the Company, subject
to  adjustment  pursuant  to  Section  4.
1.2.     Full  Exercise.  This  Warrant  may  be exercised in full by the Holder
         --------------
hereof  by delivery of an original or facsimile copy of the form of subscription
attached  as  Exhibit  A  hereto (the "Subscription Form") duly executed by such
Holder  and  surrender of the original Warrant within four (4) days of exercise,
to the Company at its principal office or at the office of its Warrant Agent (as
provided  hereinafter),  accompanied  by  payment,  in cash, wire transfer or by
certified  or  official  bank  check payable to the order of the Company, in the
amount  obtained  by  multiplying the number of shares of Common Stock for which
this  Warrant  is  then  exercisable  by  the  Purchase  Price  then  in effect.
1.3.     Partial Exercise.  This Warrant may be exercised in part (but not for a
         ----------------
fractional  share)  by  surrender of this Warrant in the manner and at the place
provided  in subsection 1.2 except that the amount payable by the Holder on such
partial  exercise  shall be the amount obtained by multiplying (a) the number of
whole  shares  of Common Stock designated by the Holder in the Subscription Form
by  (b)  the  Purchase  Price then in effect.  On any such partial exercise, the
Company,  at  its expense, will forthwith issue and deliver to or upon the order
of  the  Holder  hereof  a  new Warrant of like tenor, in the name of the Holder
hereof or as such Holder (upon payment by such Holder of any applicable transfer
taxes)  may  request,  the whole number of shares of Common Stock for which such
Warrant  may  still  be  exercised.
1.4.     Fair Market Value. Fair Market Value of a share of Common Stock as of a
         -----------------
particular  date  (the  "Determination  Date")  shall  mean:
     (a)     If the Company's Common Stock is traded on an exchange or is quoted
on  the  National  Association  of  Securities Dealers, Inc. Automated Quotation
("NASDAQ"),  National  Market System, the NASDAQ SmallCap Market or the American
Stock Exchange, LLC, then the closing or last sale price, respectively, reported
for  the  last  business  day  immediately  preceding  the  Determination  Date;
(b)     If  the  Company's  Common  Stock is not traded on an exchange or on the
NASDAQ  National Market System, the NASDAQ SmallCap Market or the American Stock
Exchange,  Inc.,  but is traded in the over-the-counter market, then the average
of the closing bid and ask prices reported for the last business day immediately
preceding  the  Determination  Date;
(c)     Except as provided in clause (d) below, if the Company's Common Stock is
not publicly traded, then as the Holder and the Company agree, or in the absence
of  such an agreement, by arbitration in accordance with the rules then standing
of the American Arbitration Association, before a single arbitrator to be chosen
from  a  panel  of  persons  qualified  by education and training to pass on the
matter  to  be  decided;  or
(d)     If  the  Determination Date is the date of a liquidation, dissolution or
winding  up,  or any event deemed to be a liquidation, dissolution or winding up
pursuant  to  the Company's charter, then all amounts to be payable per share to
holders  of  the  Common  Stock  pursuant  to  the  charter in the event of such
liquidation, dissolution or winding up, plus all other amounts to be payable per
share  in respect of the Common Stock in liquidation under the charter, assuming
for  the purposes of this clause (d) that all of the shares of Common Stock then
issuable  upon  exercise  of  all  of  the  Warrants  are  outstanding  at  the
Determination  Date.

                                       2
<PAGE>
     1.5.     Company  Acknowledgment.  The  Company  will,  at  the time of the
              -----------------------
exercise  of  the  Warrant, upon the request of the Holder hereof acknowledge in
writing  its  continuing obligation to afford to such Holder any rights to which
such Holder shall continue to be entitled after such exercise in accordance with
the  provisions  of  this  Warrant.  If  the  Holder shall fail to make any such
request,  such failure shall not affect the continuing obligation of the Company
to  afford  to  such  Holder  any  such  rights.
1.6.     Trustee  for Warrant Holders. In the event that a bank or trust company
         ----------------------------
shall  have been appointed as trustee for the Holder of the Warrants pursuant to
Subsection  3.2, such bank or trust company shall have all the powers and duties
of  a warrant agent (as hereinafter described) and shall accept, in its own name
for  the  account  of  the  Company  or such successor person as may be entitled
thereto,  all amounts otherwise payable to the Company or such successor, as the
case  may  be,  on  exercise  of  this  Warrant  pursuant  to  this  Section  1.
          1.7     Delivery  of Stock Certificates, etc. on Exercise. The Company
                  -------------------------------------------------
agrees  that  the shares of Common Stock purchased upon exercise of this Warrant
shall  be  deemed  to be issued to the Holder hereof as the record owner of such
shares  as of the close of business on the date on which this Warrant shall have
been  surrendered  and  payment  made  for  such shares as aforesaid. As soon as
practicable  after  the  exercise of this Warrant in full or in part, and in any
event  within  four  (4)  business  days  thereafter, the Company at its expense
(including  the  payment  by  it of any applicable issue taxes) will cause to be
issued  in  the  name  of  and delivered to the Holder hereof, or as such Holder
(upon  payment  by  such  Holder of any applicable transfer taxes) may direct in
compliance  with  applicable  securities laws, a certificate or certificates for
the  number  of  duly and validly issued, fully paid and nonassessable shares of
Common  Stock  (or  Other  Securities) to which such Holder shall be entitled on
such  exercise, plus, in lieu of any fractional share to which such Holder would
otherwise  be  entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share of Common Stock, together with any other stock or
other  securities  and property (including cash, where applicable) to which such
Holder  is  entitled  upon  such  exercise  pursuant  to Section 1 or otherwise.
 2.     Cashless  Exercise.
        ------------------
     (a)     Payment  upon  exercise  may  be  made  at the option of the Holder
either in (i) cash, wire transfer or by certified or official bank check payable
to  the  order  of the Company equal to the applicable aggregate Purchase Price,
(ii)  by  delivery  of  Common  Stock  issuable upon exercise of the Warrants in
accordance  with  Section  (b)  below  or  (iii)  by a combination of any of the
foregoing  methods,  for  the  number of Common Stock specified in such form (as
such  exercise  number  shall be adjusted to reflect any adjustment in the total
number  of  shares  of Common Stock issuable to the holder per the terms of this
Warrant)  and  the  holder  shall thereupon be entitled to receive the number of
duly  authorized, validly issued, fully-paid and non-assessable shares of Common
Stock  (or  Other  Securities)  determined  as  provided  herein.

                                       3
<PAGE>
(b)     If  the  Fair  Market Value of one share of Common Stock is greater than
the  Purchase  Price (at the date of calculation as set forth below), in lieu of
exercising  this  Warrant for cash, the holder may elect to receive shares equal
to the value (as determined below) of this Warrant (or the portion thereof being
cancelled)  by  surrender of this Warrant at the principal office of the Company
together with the properly endorsed Subscription Form in which event the Company
shall  issue to the holder a number of shares of Common Stock computed using the
following  formula:

               X=Y  (A-B)
                    -----
                      C

          Where     X=     the  number of shares of Common Stock to be issued to
the  holder

Y=     the number of shares of Common Stock purchasable under the Warrant or, if
only  a  portion  of  the Warrant is being exercised, the portion of the Warrant
being  exercised  (at  the  date  of  such  calculation)
A=     the  highest Fair Market Value of one share of the Company's Common Stock
during  the  five  trading  days  preceding  the  date  of  exercise
B=     Purchase  Price  (as  adjusted  to  the  date  of  such  calculation)
C=     lowest  Fair  Market  Value  of  one  share of the Company's Common Stock
during  the  five  trading  days  preceding  the  Closing  Date
(c)     The Holder may employ the cashless exercise feature described in Section
     (b) above only during the pendency of a Non-Registration Event as described
in  Section  11  of  the  Subscription  Agreement.
     For  purposes  of  Rule 144 promulgated under the 1933 Act, it is intended,
understood  and  acknowledged  that  the  Warrant  Shares  issued  in a cashless
exercise  transaction  shall  be deemed to have been acquired by the Holder, and
the  holding period for the Warrant Shares shall be deemed to have commenced, on
the  date  this  Warrant  was  originally  issued  pursuant  to the Subscription
Agreement.
3.     Adjustment  for  Reorganization,  Consolidation,  Merger,  etc.
       ---------------------------------------------------------------
     3.1.     Reorganization,  Consolidation,  Merger, etc.  In case at any time
              --------------------------------------------
or  from  time  to  time,  the  Company  shall  (a) effect a reorganization, (b)
consolidate  with  or  merge  into  any  other  person  or  (c)  transfer all or
substantially all of its properties or assets to any other person under any plan
or  arrangement contemplating the dissolution of the Company, then, in each such
case,  as  a  condition  to  the  consummation of such a transaction, proper and
adequate  provision  shall  be  made  by  the Company whereby the Holder of this
Warrant,  on the exercise hereof as provided in Section 1, at any time after the
consummation  of  such  reorganization, consolidation or merger or the effective
date  of  such  dissolution,  as  the case may be, shall receive, in lieu of the
Common  Stock  (or  Other  Securities)  issuable  on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including  cash)  to  which  such  Holder  would  have  been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder  had so exercised this Warrant, immediately prior thereto, all subject to
further  adjustment  thereafter  as  provided  in  Section  4.
3.2.     Dissolution.  In  the event of any dissolution of the Company following
         -----------
the  transfer  of  all  or  substantially  all  of its properties or assets, the
Company,  prior to such dissolution, shall at its expense deliver or cause to be
delivered  the  stock  and  other securities and property (including cash, where
applicable) receivable by the Holder of the Warrants after the effective date of
such  dissolution  pursuant  to  this  Section  3  to a bank or trust company (a
"Trustee")  having  its  principal  office  in  New York, NY, as trustee for the
Holder  of  the  Warrants.
3.3.     Continuation  of Terms.  Upon any reorganization, consolidation, merger
         ----------------------
or  transfer  (and  any  dissolution following any transfer) referred to in this
Section  3,  this  Warrant shall continue in full force and effect and the terms
hereof  shall  be  applicable to the Other Securities and property receivable on
the  exercise  of  this  Warrant  after the consummation of such reorganization,
consolidation  or merger or the effective date of dissolution following any such
transfer,  as the case may be, and shall be binding upon the issuer of any Other
Securities,  including,  in  the case of any such transfer, the person acquiring
all  or substantially all of the properties or assets of the Company, whether or
not  such  person  shall  have  expressly  assumed  the terms of this Warrant as
provided  in  Section  4.  In  the  event this Warrant does not continue in full
force  and  effect  after  the consummation of the transaction described in this
Section  3,  then  only in such event will the Company's securities and property
(including  cash,  where applicable) receivable by the Holder of the Warrants be
delivered  to  the  Trustee  as  contemplated  by  Section  3.2.

                                       4
<PAGE>
     3.4     Share  Issuance.  Until  the  Expiration Date, if the Company shall
             ---------------
issue  any  Common  Stock  except  for the Excepted Issuances (as defined in the
Subscription  Agreement),  prior  to the complete exercise of this Warrant for a
consideration  less  than the Purchase Price that would be in effect at the time
of  such  issue,  then,  and  thereafter  successively upon each such issue, the
Purchase  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
Company  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  Purchase  Price  upon  the  issuance of the
above-described  security,  debt instrument, warrant, right, or option and again
at  any  time  upon  any  subsequent  issuances  of  shares of Common Stock upon
exercise  of  such  conversion or purchase rights if such issuance is at a price
lower  than  the  Purchase Price in effect upon such issuance.  The reduction of
the  Purchase  Price  described  in this Section 3.4 is in addition to the other
rights  of  the  Holder  described  in  the  Subscription  Agreement.
     4.     Extraordinary  Events Regarding Common Stock.  In the event that the
            --------------------------------------------
Company  shall  (a) issue additional shares of the Common Stock as a dividend or
other  distribution  on  outstanding Common Stock, (b) subdivide its outstanding
shares  of  Common  Stock,  or  (c) combine its outstanding shares of the Common
Stock  into  a  smaller number of shares of the Common Stock, then, in each such
event,  the  Purchase  Price  shall,  simultaneously  with the happening of such
event,  be  adjusted  by  multiplying the then Purchase Price by a fraction, the
numerator  of  which  shall  be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be the number
of  shares  of  Common  Stock  outstanding immediately after such event, and the
product  so  obtained shall thereafter be the Purchase Price then in effect. The
Purchase  Price, as so adjusted, shall be readjusted in the same manner upon the
happening  of any successive event or events described herein in this Section 4.
The  number  of  shares  of  Common  Stock that the Holder of this Warrant shall
thereafter,  on  the  exercise  hereof  as provided in Section 1, be entitled to
receive  shall  be  adjusted to a number determined by multiplying the number of
shares  of  Common  Stock  that  would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the numerator
is  the  Purchase  Price  that  would  otherwise (but for the provisions of this
Section 4) be in effect, and (b) the denominator is the Purchase Price in effect
on  the  date  of  such  exercise.
5.     Certificate  as  to  Adjustments.  In  each  case  of  any  adjustment or
       --------------------------------
readjustment in the shares of Common Stock (or Other Securities) issuable on the
exercise  of  the  Warrants,  the Company at its expense will promptly cause its
Chief Financial Officer or other appropriate designee to compute such adjustment
or  readjustment  in  accordance  with  the  terms  of the Warrant and prepare a
certificate  setting forth such adjustment or readjustment and showing in detail
the  facts  upon  which  such  adjustment  or readjustment is based, including a
statement of (a) the consideration received or receivable by the Company for any
additional shares of Common Stock (or Other Securities) issued or sold or deemed
to  have been issued or sold, (b) the number of shares of Common Stock (or Other
Securities)  outstanding or deemed to be outstanding, and (c) the Purchase Price
and  the  number  of shares of Common Stock to be received upon exercise of this
Warrant,  in  effect immediately prior to such adjustment or readjustment and as
adjusted  or  readjusted as provided in this Warrant. The Company will forthwith
mail  a  copy  of  each  such  certificate  to the Holder of the Warrant and any
Warrant  Agent  of  the  Company  (appointed  pursuant  to  Section  11 hereof).
6.     Reservation  of  Stock,  etc.  Issuable on Exercise of Warrant; Financial
       -------------------------------------------------------------------------
Statements.   The  Company  will at all times reserve and keep available, solely
   -------
for  issuance and delivery on the exercise of the Warrants, all shares of Common
Stock  (or  Other  Securities) from time to time issuable on the exercise of the
Warrant  subject  to  Section  9(r) of the Subscription Agreement.  This Warrant
entitles  the  Holder  hereof  to  receive  copies  of  all  financial and other
information  distributed  or  required  to  be distributed to the holders of the
Company's  Common  Stock.

                                       5
<PAGE>
7.     Assignment;  Exchange  of Warrant.  Subject to compliance with applicable
       ---------------------------------
securities  laws,  this  Warrant,  and  the  rights  evidenced  hereby,  may  be
transferred  by  any registered holder hereof (a "Transferor"). On the surrender
for  exchange  of this Warrant, with the Transferor's endorsement in the form of
Exhibit  B attached hereto (the "Transferor Endorsement Form") and together with
an  opinion  of counsel reasonably satisfactory to the Company that the transfer
of  this  Warrant  will  be  in  compliance with applicable securities laws, the
Company  at  its expense, twice, only, but with payment by the Transferor of any
applicable  transfer  taxes,  will  issue  and deliver to or on the order of the
Transferor  thereof  a new Warrant or Warrants of like tenor, in the name of the
Transferor  and/or  the  transferee(s)  specified in such Transferor Endorsement
Form  (each  a  "Transferee"),  calling  in  the  aggregate on the face or faces
thereof for the number of shares of Common Stock called for on the face or faces
of the Warrant so surrendered by the Transferor.  No such transfers shall result
in  a  public  distribution  of  the  Warrant.
8.     Replacement  of  Warrant.  On receipt of evidence reasonably satisfactory
       ------------------------
to  the  Company  of  the loss, theft, destruction or mutilation of this Warrant
and,  in  the  case  of  any such loss, theft or destruction of this Warrant, on
delivery  of  an indemnity agreement or security reasonably satisfactory in form
and  amount  to the Company or, in the case of any such mutilation, on surrender
and  cancellation  of this Warrant, the Company at its expense, twice only, will
execute  and  deliver,  in  lieu  thereof,  a  new  Warrant  of  like  tenor.
9.     Registration Rights.  The Holder of this Warrant has been granted certain
       -------------------
registration  rights by the Company.  These registration rights are set forth in
the  Subscription  Agreement.  The  terms  of  the  Subscription  Agreement  are
incorporated  herein  by  this  reference.
10.     Maximum  Exercise.  The  Holder  shall  not be entitled to exercise this
        -----------------
Warrant  on an exercise date, in connection with that number of shares of Common
Stock  which would be in excess of the sum of (i) the number of shares of Common
Stock  beneficially  owned by the Holder and its affiliates on an exercise date,
and (ii) the number of shares of Common Stock issuable upon the exercise of this
Warrant with respect to which the determination of this limitation is being made
on  an  exercise  date, which would result in beneficial ownership by the Holder
and  its affiliates of more than 4.99% of the outstanding shares of Common Stock
on  such  date.  For  the  purposes  of  the  immediately  preceding  sentence,
beneficial ownership shall be determined in accordance with Section 13(d) of the
Securities  Exchange  Act  of 1934, as amended, and Regulation 13d-3 thereunder.
Subject to the foregoing, the Holder shall not be limited to aggregate exercises
which  would  result  in  the  issuance  of  more  than  4.99%.  The restriction
described  in  this paragraph may be waived, in whole or in part, upon sixty-one
(61)  days prior notice from the Holder to the Company.  The Holder may allocate
which  of  the equity of the Company deemed beneficially owned by the Subscriber
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.
11.     Call.   The  Company shall have the option to "call" the exercise of the
        ----
shares issuable upon exercise of this Warrant (the "Warrant Call") in accordance
with  and  governed  by  the  following:
     (a)     The  Company  shall  exercise  the  Warrant  Call  by giving to the
Warrant Holder a written notice of call (the "Call Notice") during the period in
which the Warrant Call may be exercised.  The effective date of each Call Notice
(the  "Call  Date")  is  the  date on which notice is effective under the notice
provision  of  Section  14  of  this  Warrant.
(b)     The  Company's  right to exercise the Warrant Call shall commence thirty
trading  days  after  the  actual  effective  date  of  a Registration Statement
described  in  Section  11.1(iv)  of  the  Subscription Agreement and end thirty
trading  days  prior  to  the  Expiration  Date.
     (c)     The  number of shares of Common Stock to be issued upon exercise of
the  Warrant  which  are  subject  to  a  Call  Notice  must  be registered in a
Registration Statement effective from twenty (20) trading days prior to the Call
Date and through the date such Common Stock is actually delivered to the Warrant
Holder  ("Delivery  Date").

                                       6
<PAGE>
     (d)     A  Call  Notice  may  be given not sooner than fifteen trading days
after  the  prior  Call  Date.

          (e)     A  Call  Notice may be given by the Company in connection with
shares  of  Common  Stock  issuable upon exercise of the Warrant only within ten
days  after  the  Common  Stock  has  had  a  closing  price as reported for the
Principal Market (as defined in the Subscription Agreement) of $0.08 or more for
thirty  (30)  consecutive  trading  days  ("Lookback  Period").

     (f)     The  Common  Stock  must  be listed on the Principal Market for the
Lookback  Period  and  through  the  Delivery  Date.
(g)     The  Company  shall not have received a notice from the Principal Market
during  the  ninety calendar days prior to the Call Date that the Company or its
Common  Stock does not meet the requirements for continued quotation, listing or
trading  on  the  Principal  Market.
(h)     The  Company  and  the  Common  Stock  shall  meet  the requirements for
continued quotation, listing or trading on the Principal Market for the Lookback
Period  and  through  the  Delivery  Date.
(i)     Unless  otherwise agreed to by the Holder of this Warrant, a Call Notice
must  be  given  to  all  Warrant  Holders  who receive Warrants similar to this
Warrant  (in  terms  of  exercise  price and other principal terms) issued on or
about  the  same  Issue  Date  as  this Warrant, in proportion to the amounts of
Common  Stock  which  may  be  purchased  by  the  respective Warrant Holders in
accordance  with  the  respective  Warrants  held  by  each.
(j)     The  Warrant  Holder  shall exercise his Warrant rights and purchase the
Called  Warrant  Shares  and pay for same within fourteen trading days after the
Call Date.  If the Warrant Holder fails to timely pay the amount required by the
Warrant  Call,  the  Company's  sole  remedy  shall be to cancel a corresponding
amount  of  this  Warrant.
          (k)     The  Company  may  not exercise the right to Call this Warrant
after  the  occurrence  of  a  default by the Company of a material term of this
Warrant  or  the  Subscription  Agreement  or  the  Notes  referred  to  in  the
Subscription  Agreement.
12.     Warrant  Agent.  The Company may, by written notice to the Holder of the
        --------------
Warrant,  appoint an agent (a "Warrant Agent") for the purpose of issuing Common
Stock  (or Other Securities) on the exercise of this Warrant pursuant to Section
1,  exchanging  this  Warrant  pursuant to Section 7, and replacing this Warrant
pursuant  to  Section  8,  or  any  of  the  foregoing,  and thereafter any such
issuance,  exchange  or  replacement,  as the case may be, shall be made at such
office  by  such  Warrant  Agent.
13.     Transfer  on  the Company's Books.  Until this Warrant is transferred on
        ---------------------------------
the  books of the Company, the Company may treat the registered holder hereof as
the  absolute  owner  hereof for all purposes, notwithstanding any notice to the
contrary.
     14.     Notices.   All notices, demands, requests, consents, approvals, and
             -------
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 Company to: FTS Group Inc., 7610
West  Hillsborough  Avenue,  Tampa,  FL  33615,  Attn:  Scott  Gallagher,  CEO,
telecopier:  (813)  878-2337,  with  a  copy by telecopier only to: Amy Trombly,
Esq.,  Trombly  Business  Law,  1320 Centre Street, Suite 202, Newton Center, MA
02459,  Fax:  (617)  243-0066,  and  (ii)  if  to the Holder, to the address and
telecopier  number  listed  on  the  first  paragraph  of  this Warrant, with an
additional  copy  by  telecopier  only  to:  Grushko  & Mittman, P.C., 551 Fifth
Avenue, Suite 1601, New York, New York 10176, telecopier number: (212) 697-3575.

                                       7
<PAGE>
     15.     Miscellaneous.  This  Warrant  and  any term hereof may be changed,
             -------------
waived,  discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is  sought.  This Warrant shall be construed and enforced in accordance with and
governed by the laws of New York.  Any dispute relating to this Warrant shall be
adjudicated  in  New York County in the State of New York.  The headings in this
Warrant  are  for  purposes  of reference only, and shall not limit or otherwise
affect  any  of  the  terms  hereof.  The  invalidity or unenforceability of any
provision  hereof  shall  in no way affect the validity or enforceability of any
other  provision.

                                       8

<PAGE>
IN  WITNESS  WHEREOF, the Company has executed this Warrant as of the date first
written  above.
     FTS  GROUP  INC.

     By:_______________
     Name:
     Title:

Witness:_______________

                                       9
<PAGE>
                                    EXHIBIT A

                              FORM OF SUBSCRIPTION
                   (to be signed only on exercise of Warrant)
TO:  FTS  GROUP  INC.
The  undersigned,  pursuant  to the provisions set forth in the attached Warrant
(No.____),  hereby  irrevocably  elects  to  purchase  (check  applicable  box):

___     ________  shares  of  the  Common  Stock  covered  by  such  Warrant; or
___     the  maximum  number  of  shares of Common Stock covered by such Warrant
pursuant  to  the  cashless  exercise  procedure  set  forth  in  Section  2.

The  undersigned  herewith  makes  payment  of  the full purchase price for such
shares  at  the  price  per  share  provided  for  in  such  Warrant,  which  is
$___________.  Such  payment  takes the form of (check applicable box or boxes):

___     $__________  in  lawful  money  of  the  United  States;  and/or
___     the  cancellation  of  such  portion  of  the  attached  Warrant  as  is
exercisable  for  a total of _______ shares of Common Stock (using a Fair Market
Value  of  $_______  per  share  for  purposes  of  this  calculation);  and/or

___     the  cancellation  of  such  number  of  shares  of  Common  Stock as is
necessary,  in  accordance  with the formula set forth in Section 2, to exercise
this  Warrant  with  respect  to  the  maximum  number of shares of Common Stock
purchasable  pursuant to the cashless exercise procedure set forth in Section 2.

The  undersigned requests that the certificates for such shares be issued in the
name  of, and delivered to _____________________________________________________
whose  address  is
________________________________________________________________________________

Number  of  Shares  of  Common Stock Beneficially Owned on the date of exercise:
Less  than  five  percent (5%) of the outstanding Common Stock of FTS Group Inc

The  undersigned  represents  and  warrants  that  all  offers  and sales by the
undersigned of the securities issuable upon exercise of the within Warrant shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933,  as  amended  (the  "Securities  Act"),  or  pursuant to an exemption from
registration  under  the  Securities  Act.

Dated:___________________
                            ____________________________________________
                            (Signature  must  conform to name of holder
                            as specified on the face of the Warrant)

                            ____________________________________________
                                              (Address)

                                       10

<PAGE>
                                    EXHIBIT B

                         FORM OF TRANSFEROR ENDORSEMENT
                   (To be signed only on transfer of Warrant)
     For  value  received,  the undersigned hereby sells, assigns, and transfers
unto  the  person(s)  named  below  under  the  heading  "Transferees" the right
represented  by  the  within  Warrant  to  purchase the percentage and number of
shares  of  Common  Stock  of FTS GROUP INC. to which the within Warrant relates
specified  under the headings "Percentage Transferred" and "Number Transferred,"
respectively,  opposite  the  name(s)  of  such person(s) and appoints each such
person  Attorney to transfer its respective right on the books of FTS GROUP INC.
with  full  power  of  substitution  in  the  premises.

Transferees     Percentage  Transferred     Number  Transferred
-----------     -----------------------     -------------------

Dated:  ______________,  _______________________________________________________
                                    (Signature  must  conform to name of holder
                                    as specified on the face of the warrant)

Signed  in  the  presence  of:

_______________________                          _______________________________
        (Name)                                              (address)

ACCEPTED  AND  AGREED:
[TRANSFEREE]

_______________________                          _______________________________
        (Name)                                              (address)

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