EXHIBIT 10.64
 
NOMINAL WARRANT
October 29, 2012

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT AND SUCH LAWS.
 
THE SALE, TRANSFER OR ENCUMBRANCE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A RIGHT OF FIRST REFUSAL
AGREEMENT, DATED AS OF OCTOBER 29, 2012 BY AND AMONG FUSION TELECOMMUNICATIONS
INTERNATIONAL, INC., PRAESIDIAN CAPITAL OPPORTUNITY FUND III, LP, PRAESIDIAN
CAPITAL OPPORTUNITY FUND III-A, LP AND PLEXUS FUND II, LP, AS SUCH AGREEMENT MAY
BE AMENDED. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF
FUSION TELECOMMUNICATIONS INTERNATIONAL, INC
 
 
 
 
 
 
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Warrant to Purchase 4,801,379.77 Shares (subject
to adjustment) of Common Stock

FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.

COMMON STOCK PURCHASE WARRANT

Void after October 29, 2022

Fusion Telecommunications International, Inc., a Delaware corporation (the
“Company”), hereby certifies that for value received, Praesidian Capital
Opportunity Fund III, LP, or its successors or assigns (the “Holder”), is
entitled to purchase, subject to the terms and conditions hereinafter set forth,
an aggregate of 4,801,379.77 fully paid and nonassessable shares of Common Stock
(as hereinafter defined) of the Company, at an Payment Obligation of $.01 per
share, subject to adjustment as provided herein (the “Purchase Price”), at any
time or from time to time prior to the Expiration Date (as hereinafter defined).
 
This Warrant is issued pursuant to the Securities Purchase Agreement and
Security Agreement (the “Purchase Agreement”), dated as of the date hereof,
among Fusion NBS Acquisition Corp., a Delaware corporation, as borrower (the
“Borrower”), the Company and each other direct or indirect subsidiary of Company
from time to time party thereto, Praesidian Capital Opportunity Fund III, LP, a
Delaware limited partnership (“Fund III”), Praesidian Capital Opportunity Fund
III-A, LP, a Delaware limited partnership (“Fund III-A”), Plexus Fund II, LP, a
Delaware limited partnership (“Plexus”), and Fund III, as Agent, and is subject
to the terms thereof.  Capitalized terms used herein and not otherwise defined
shall have the respective meanings assigned to such terms in the Purchase
Agreement.  The Holder is entitled to the rights and subject to the obligations
contained in the Purchase Agreement and the Right of First Refusal Agreement
relating to this Warrant and the shares of Common Stock issuable upon exercise
of this Warrant.
 
1. Definitions. For the purposes of this Warrant, the following terms shall have
the meanings indicated:
 
“Business Day” shall mean any day other than a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized or required by law
or executive order to close.
 
“Certificate of Incorporation” shall mean the Certificate of Incorporation of
the Company as may be amended or amended and restated from time to time.
 
“Closing Price” shall mean, with respect to each share of Common Stock for any
day, (a) the last reported sale price regular way or, in case no such sale takes
place on such day, the average of the closing bid and asked prices regular way,
in either case as reported on the principal national securities exchange on
which the Common Stock is listed or admitted for trading or (b) if the Common
Stock is not listed or admitted for trading on any national securities exchange,
the last reported sale price or, in case no such sale takes place on such day,
the average of the highest reported bid and the lowest reported asked quotation
for the Common Stock, in either case as reported on the OTC Markets or a similar
service if OTC Markets is no longer reporting such information.
 
 
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“Common Stock” means the common stock, par value $.01 per share, of the Company,
and any class of stock resulting from successive changes or reclassification of
such Common Stock.
 
“Company” has the meaning ascribed to such term in the first paragraph of this
Warrant.
 
“Current Market Price” shall be determined in accordance with Subsection 3(e).
 
“EBITDA Per Share” in respect of any date (the “Determination Date”) shall mean
an amount equal to:
 
(6.0 x EBITDA) – (I) + CE
CS
where:

 
EBITDA
equals EBITDA as calculated in the Purchase Agreement for the twelve consecutive
months ending on the last day of the month ending prior to the Determination
Date (the “Measurement Date”)

 
 
I
equals all Indebtedness of the Company and its Subsidiaries of the types
described in clauses (i) and (iv) of the definition of “Indebtedness” contained
in the Purchase Agreement, determined on a Consolidated Basis as at the
Measurement Date

 
 
CE
equals cash and cash equivalents of the Company and its Subsidiaries, determined
on a Consolidated Basis as at Measurement Date

 
 
CS
equals the number of shares of Common Stock issued and outstanding on the
Determination Date (assuming for this purpose that this Warrant and the Other
Warrants are exercised in full)

 
 
“Exercise Date” has the meaning ascribed to such term in Subsection 2(e).

 
 
“Expiration Date” shall mean 5:00 P.M., New York City time, on October 29, 2022.

 
“Holder” has the meaning ascribed to such term in the first paragraph and
Section 9 of this Warrant.
 
“Issuable Warrant Shares” shall mean the shares of Common Stock issuable at any
time upon exercise of the Warrant.
 
 
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“Issued Warrant Shares” shall mean any shares of Common Stock issued upon
exercise of the Warrant.
 
“Minimum Liquidity Requirement” means as of the date the Warrant Put Notice or
the Share Put Notice, as applicable, is delivered either (x) the average trading
volume of the Common Stock on the Principal Trading Market has been equal to or
greater than 150,000 shares (as appropriately adjusted for the types of events
contemplated by Section 3(a)) during the thirty (30) Trading Days preceding such
date, or (y) the aggregate Current Market Price on such date of the then
outstanding shares of Common Stock equals or exceeds $75,000,000.
 
“Other Warrants” shall mean all warrants issued pursuant to the Purchase
Agreement, other than this Warrant, to purchase capital stock of the Company and
any subsequent warrants issued pursuant to the terms of such warrants.
 
“Person” shall mean any individual, firm, corporation, limited liability
company, partnership, trust, incorporated or unincorporated association, joint
venture, joint stock company, government (or an agency or political subdivision
thereof) or other entity of any kind, and shall include any successor (by merger
or otherwise) of such entity.
 
“Principal Trading Market” means the Trading Market on which the Common Stock is
primarily listed on and quoted for trading.
 
“Purchase Agreement” has the meaning ascribed to such term in the second
paragraph of this Warrant.
 
“Purchase Price” has the meaning ascribed to such term in the first paragraph of
this Warrant.
 
“Put Period” shall mean the period (x) commencing on the earliest of (i) the
fifth anniversary of the date hereof, (ii) the occurrence of a Liquidity Event,
and (iii) the repayment in full of the Notes and (y) terminating on the
Expiration Date.
 
“Repurchase Price” in respect of a given date shall be equal to the Current
Market Price as at such date unless on such date the shares of Common Stock are
not listed or admitted for trading on a national securities exchange or quoted
on the OTC Bulletin Board or similar service, in which case the Repurchase Price
shall be the greater of (i) the Current Market Price as at such date or (ii)
EBITDA Per Share.
 
“Trading Day” means (i) a day on which the Common Stock is listed or quoted and
traded on its Principal Trading Market (other than the OTC Bulletin Board), or
(ii) if the Common Stock is not listed on a Trading Market (other than the OTC
Bulletin Board), a day on which the Common Stock is traded in the over the
counter market, as reported by the OTC Bulletin Board, or (iii) if the Common
Stock is not quoted on any Trading Market, a day on which the Common Stock is
quoted in the over the counter market as reported in the “pink sheets” by Pink
Sheets LLC (or any similar organization or agency succeeding to its functions of
reporting prices); provided, that in the event that the Common Stock is not
listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day
shall mean a Business Day.
 
 
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“Trading Market” means whichever of the New York Stock Exchange, the NYSE Amex
(formerly the American Stock Exchange), the NASDAQ Global Select Market, the
NASDAQ Global Market, the NASDAQ Capital Market, OTC Markets or the OTC Bulletin
Board on which the Common Stock is listed or quoted for trading on the date in
question.
 
“Warrant” shall mean this Warrant and any subsequent Warrant issued pursuant to
the terms of this Warrant.
 
“Warrant Register” has the meaning ascribed to such term in Subsection 9(b).
 
2. Exercise of Warrant.
 
(a) Exercise. This Warrant may be exercised, in whole or in part, at any time or
from time to time during the period beginning on the date hereof and ending on
the Expiration Date, by surrendering to the Company at its principal office this
Warrant, with the form of Election to Purchase Shares (the “Election to Purchase
Shares”) attached hereto as Exhibit A duly executed by the Holder and
accompanied by payment of the Purchase Price for the number of shares of Common
Stock specified in such form.  Upon any exercise of this Warrant, other than to
the extent payment of the Purchase Price is to be made pursuant to Section 2(c)
(the portion of the aggregate Purchase Price payable by Holder, the “Payment
Obligation”), the Company shall pay to Holder an amount (the “Cash Amount”)
equal to the Payment Obligation.  The Holder may offset against the Payment
Obligation the right to receive the Cash Amount.
 
(b) Delivery of Shares; Payment of Purchase Price. Upon exercise of this
Warrant, the Company shall promptly (but in no event later than five Trading
Days after the Exercise Date) issue or cause to be issued and cause to be
delivered to or upon the written order of the Holder and in such name or names
as may be designated by the Holder (along with a check for the amount of cash to
be paid in lieu of issuance of fractional shares, if any), (i) a certificate for
the Issued Warrant Shares issuable upon such exercise, free of restrictive
legends, or (ii) an electronic delivery of the Issued Warrant Shares to the
Holder’s account at the Depository Trust Company (“DTC”) or a similar
organization, unless in the case of clause (i) and (ii) a registration statement
covering the resale of the Issued Warrant Shares and naming the Holder as a
selling stockholder thereunder is not then effective or the Issued Warrant
Shares are not freely transferable without restriction under Rule 144 by Holders
who are not affiliates of the Company, in which case such Holder shall receive a
certificate for the Issued Warrant Shares issuable upon such exercise with
appropriate restrictive legends.  The Holder, or any Person permissibly so
designated by the Holder to receive Issued Warrant Shares, shall be deemed to
have become the holder of record of such Issued Warrant Shares as of the
Exercise Date.  If the Issued Warrant Shares are to be issued free of all
restrictive legends, the Company shall, upon the written request of the Holder,
use its reasonable best efforts to deliver, or cause to be delivered, Issued
Warrant Shares hereunder electronically through DTC or another established
clearing corporation performing similar functions, if available; provided, that,
the Company may, but will not be required to, change its transfer agent if its
current transfer agent cannot deliver Issued Warrant Shares electronically
through such a clearing corporation. Payment of the Purchase Price may be made
as follows (or by any combination of the following): (i) in United States
currency by cash or delivery of a certified check, bank draft or postal or
express money order payable to the order of the Company, (ii) by assigning to
the Company all or any part of the unpaid principal amount of the Notes held by
the Holder in a principal amount equal to the Purchase Price, or (iii) by
surrender of a number of shares of Common Stock held by the Holder equal to the
quotient obtained by dividing (A) the aggregate Purchase Price payable with
respect to the portion of this Warrant then being exercised by (B) the Current
Market Price per share of Common Stock on the Exercise Date.
 
 
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(c) Alternative Cashless Exercise. Notwithstanding any provision herein to the
contrary, in lieu of exercising this Warrant as set forth above, the Holder may
exercise this Warrant, in whole or in part, by electing to receive that number
of shares of Common Stock as determined below by surrendering to the Company at
its principal office this Warrant, with the applicable Election to Purchase
Shares duly executed by the Holder, in which event the Company shall issue to
the Holder the number of shares of Common Stock computed using the following
formula:
 
CS = WCS x (MP-PP)
MP

where:

 
CS
equals the number of shares of Common Stock to be issued to the Holder

 
 
WCS
equals the Issuable Warrant Shares with respect to which this Warrant is then
being exercised

 
 
MP
equals the Common Stock Current Market Price per share (at the date of such
calculation)

 
 
PP
equals the Purchase Price

 
Following the surrender of this Warrant pursuant to this Section 2(c), the
Company shall promptly issue and deliver to the Holder a certificate or
certificates for that number of shares of Common Stock, as calculated above in
such name or names as may be designated by the Holder.
 
(d) Partial Exercise.  If, pursuant to any provision hereof, this Warrant is
exercised for less than all of Issuable Warrant Shares, the Company shall cancel
this Warrant upon surrender hereof and shall execute and deliver to the Holder a
new Warrant of like tenor for the balance of the Issuable Warrant Shares.
 
(e) When Exercise Effective.  The exercise of this Warrant shall be deemed to
have been effective immediately prior to the close of business on the Business
Day on which this Warrant is surrendered to and the Purchase Price is received
by the Company as provided in this Section 2 (the “Exercise Date”) and the
Person in whose name any certificate for shares of Common Stock shall be
issuable upon such exercise, as provided in Subsection 2(b), shall be deemed to
be the record holder of such shares of Common Stock for all purposes on the
Exercise Date.
 
 
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(f) Issued Warrant Shares Fully Paid, Nonassessable.  The Company shall take all
actions necessary to ensure that following exercise of this Warrant in
accordance with the provisions of this Section 2, the Issued Warrant Shares
issued hereunder shall, without further action by the Holder, be fully paid and
nonassessable.
 
(g) Continued Validity.  A holder of shares of Common Stock issued upon the
exercise of this Warrant, in whole or in part, shall continue to be entitled to
all of the rights and subject to all of the obligations set forth in Section 9.
 
3. Adjustment of Purchase Price and Number of Shares. The Purchase Price and the
number of shares of Common Stock issuable upon exercise of this Warrant shall be
adjusted from time to time upon the occurrence of the following events:
 
(a) Dividend, Subdivision, Combination or Reclassification of Common Stock. If
the Company shall, at any time or from time to time, (i) declare a dividend on
the Common Stock payable in shares of its capital stock (including Common
Stock), (ii) subdivide the outstanding Common Stock into a larger number of
shares of Common Stock, (iii) combine the outstanding Common Stock into a
smaller number of shares of its Common Stock, or (iv) issue any shares of its
capital stock in a reclassification of the Common Stock (including any such
reclassification in connection with a consolidation or merger in which the
Company is the continuing corporation), then in each such case, the Purchase
Price in effect at the time of the record date for such dividend or of the
effective date of such subdivision, combination or reclassification, and the
number and kind of shares of capital stock issuable on such date shall be
proportionately adjusted so that the Holder of any Warrant exercised after such
date shall be entitled to receive, upon payment of the same aggregate amount as
would have been payable before such date, the aggregate number and kind of
shares of capital stock which, if such Warrant had been exercised immediately
prior to such date, such Holder would have owned upon such exercise and been
entitled to receive by virtue of such dividend, subdivision, combination or
reclassification. Any such adjustment shall become effective immediately after
the record date of such dividend or the effective date of such subdivision,
combination or reclassification. Such adjustment shall be made successively
whenever any event listed above shall occur. If a dividend is declared and such
dividend is not paid, the Purchase Price shall again be adjusted to be the
Purchase Price in effect immediately prior to such record date (giving effect to
all adjustments that otherwise would be required to be made pursuant to this
Section 3 from and after such record date).
 
(b) Certain Distributions. If the Company shall, at any time or from time to
time, fix a record date for any dividend or other distribution to all holders of
Common Stock (including any such dividend or other distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation) of subscription rights, options, warrants (excluding subscription
rights, options or warrants referred to in Subsection 3(b)), evidences of
indebtedness or other assets or other property (other than dividends payable in
capital stock for which adjustment is made under Subsection 3(a)), then the
Company shall, contemporaneously with such distribution, distribute to the
Holder such portion of such distribution as the Holder would have received if
the Holder had exercised the Warrant immediately prior thereto.
 
(c) Determination of Current Market Price. For purposes of this Warrant, the
Current Market Price per share of Common Stock on any date shall be deemed to be
the average of the daily Closing Prices per share of Common Stock for the 10
consecutive trading days commencing 15 trading days before such date. If on any
such date the shares of Common Stock are not listed or admitted for trading on
any national securities exchange or quoted on the OTC Markets or a similar
service, then the Board of Directors of the Company, acting in good faith shall
promptly determine the Current Market Price per share of Common Stock, which
shall be equal to the fair market value per share of Common Stock as of such
date, and shall provide prompt written notice of such determination, in
reasonable detail, to Holder, provided however, that if the Holder reasonably
disagrees with the Current Market Price so determined, then same shall be
disregarded, and in such case the Company, on the one hand, and the Holder, on
the other hand, shall each promptly appoint as an appraiser an individual who
shall be a member of a nationally recognized investment banking firm.  Each
appraiser shall be instructed to, within 30 days of appointment, determine the
Current Market Price per share of Common Stock, which shall be deemed to be
equal to the fair market value per share of Common Stock as of such date.  If
the two appraisers are unable to agree on the Current Market Price per share of
Common Stock within such 30 day period, then the two appraisers, within 10 days
after the end of such 30 day period shall jointly select a third appraiser.  The
third appraiser shall, within 30 days of its appointment, determine, in good
faith, the Current Market Price per share of Common Stock and such determination
shall be controlling.  If any party fails to appoint an appraiser or if one of
the two initial appraisers fails after appointment to submit its appraisal
within the required period, the appraisal submitted by the remaining appraiser
shall be controlling.  For purposes of Sections 14 and 15 hereof, Current Market
Price per share of Common Stock, whether determined by the Board of Directors of
the Company, or by the appraisers, shall be determined without regard to any
minority discount or illiquidity discount accorded to the shares of Common
Stock.  The cost of the foregoing appraisals shall be shared one-half by the
Company and one-half by the Holder, provided, however, in the event a third
appraiser is utilized and one of the two initial appraisals (but not the other
initial appraisal) is greater than or less than the appraisal by such third
appraiser by 10% or more, then the cost of all of the foregoing appraisals shall
be borne by the party who appointed the appraiser who made such initial
appraisal.
 
 
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(d) De Minimis Adjustments. No adjustment in the Purchase Price shall be made
under this Section 3 if the amount of such adjustment would result in a change
in the Purchase Price per share of less than one percent (1%), but in such case
any adjustment that would otherwise be required to be made shall be carried
forward and shall be made at the time of and together with the next subsequent
adjustment, which together with any adjustment so carried forward, would result
in a change in the Purchase Price of one percent (1%) or more. Notwithstanding
the provisions of the first sentence of this Subsection 3(f), any adjustment
postponed pursuant to this Subsection 3(f) shall be made no later than the
earlier of (i) three years from the date of the transaction that would, but for
the provisions of the first sentence of this Section 3(f), have required such
adjustment, (ii) an Exercise Date or (iii) the Expiration Date.
 
(e) Adjustments to Other Shares. In the event that at any time, as a result of
an adjustment made pursuant to Subsection 3(a), the Holder shall become entitled
to receive, upon exercise of this Warrant, any shares of capital stock of the
Company other than shares of Common Stock, the number of such other shares so
receivable upon exercise of this Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the shares of Common Stock contained in Section 3 and
all other provisions of this Warrant with respect to the shares of Common Stock
shall apply on like terms to any such other shares.
 
(f) Adjustment of Number of Shares Issuable Upon Exercise. Upon each adjustment
of the Purchase Price as a result of the calculations made in Subsections 3(a)
or (c), this Warrant shall thereafter evidence the right to receive, at the
adjusted Purchase Price, that number of shares of Common Stock (calculated to
the nearest one hundredth) obtained by dividing (x) the product of the aggregate
number of shares of Common Stock covered by this Warrant immediately prior to
such adjustment and the Purchase Price in effect immediately prior to such
adjustment of the Purchase Price by (y) the Purchase Price in effect immediately
after such adjustment of the Purchase Price.
 
(g) Reorganization, Reclassification, Merger and Sale of Assets. If there occurs
any capital reorganization or any reclassification of the Common Stock of the
Company, the consolidation or merger of the Company with or into another Person
(other than a merger or consolidation of the Company in which the Company is the
continuing corporation and which does not result in any reclassification or
change of outstanding shares of its Common Stock) or the sale or conveyance of
all or substantially all of the assets of the Company to another Person, then
the Holder will thereafter be entitled to receive, upon the exercise of this
Warrant in accordance with the terms hereof, the same kind and amounts of
securities (including shares of stock) or other assets, or both, which were
issuable or distributable to the holders of outstanding Common Stock of the
Company upon such reorganization, reclassification, consolidation, merger, sale
or conveyance, in respect of that number of shares of Common Stock then
deliverable upon the exercise of this Warrant if this Warrant had been exercised
immediately prior to such reorganization, reclassification, consolidation,
merger, sale or conveyance; and, in any such case, appropriate adjustments (as
determined in good faith by the Board of Directors of the Company) shall be made
to assure that the provisions hereof (including provisions with respect to
changes in, and other adjustments of, the Purchase Price) shall thereafter be
applicable, as nearly as reasonably may be practicable, in relation to any
securities or other assets thereafter deliverable upon exercise of this Warrant.
 
4. Certificate as to Adjustments.  Whenever the Purchase Price or the number of
shares of Common Stock issuable, or the securities or other property
deliverable, upon the exercise of this Warrant shall be adjusted pursuant to the
provisions hereof, the Company shall promptly give written notice thereof to the
Holder, in accordance with Section 12, in the form of a certificate signed by
the Chairman of the Board, President or one of the Vice Presidents of the
Company, and by the Chief Financial Officer, Treasurer or one of the Assistant
Treasurers of the Company, stating the adjusted Purchase Price, the number of
shares of Common Stock issuable, or the securities or other property
deliverable, upon exercise of the Warrant and setting forth in reasonable detail
the method of calculation and the facts requiring such adjustment and upon which
such calculation is based. Each adjustment shall remain in effect until a
subsequent adjustment is required.
 
 
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5. Fractional Shares. Notwithstanding an adjustment pursuant to Section 3(h) in
the number of Issuable Warrant Shares or any other provision of this Warrant,
the Company shall not be required to issue fractions of shares upon exercise of
this Warrant or to distribute certificates which evidence fractional shares. In
lieu of fractional shares, the Company may make payment to the Holder, at the
time of exercise of this Warrant as herein provided, of an amount in cash equal
to such fraction multiplied by the Current Market Price of a share of Common
Stock on the Exercise Date.
 
6. Notice of Proposed Actions. In case the Company shall propose at any time or
from time to time (a) to declare or pay any dividend payable in stock of any
class to the holders of Common Stock or to make any other distribution to the
holders of Common Stock, (b) to effect any reclassification of its Common Stock,
(c) to effect any consolidation, merger or sale, transfer or other disposition
of all or substantially all of the property, assets or business of the Company
which would, if consummated, adjust the Purchase Price or the securities
issuable upon exercise of the Warrant, or (d) to effect the liquidation,
dissolution or winding up of the Company, or (e) to take any other action that
would require a vote of the Company’s stockholders, then, in each case, the
Company shall give to the Holder, in accordance with Section 12, a written
notice of such proposed action, which shall specify (i) the record date for the
purposes of such dividend, distribution of rights or warrants or vote of the
stockholders of the Company, or if a record is not to be taken, the date as of
which the holders of shares of Common Stock of record to be entitled to such
dividend, distribution of rights or warrants, or vote is to be determined, or
(ii) the date on which such reclassification, consolidation, merger, sale,
transfer, disposition, liquidation, dissolution or winding up is expected to
become effective, and such notice shall be so given as promptly as possible but
in any event at least ten (10) Business Days prior to the applicable record,
determination or effective date specified in such notice.
 
7. No Dilution or Impairment. The Company will not, by amendment of its
Certificate of Incorporation or By-laws or through any reorganization, transfer
of assets, consolidation, merger, dissolution, issue or sale of securities or
any other action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of the Holder of this
Warrant against dilution or other impairment. Without limiting the generality of
the foregoing, the Company (a) will not increase the par value of any shares of
stock receivable on the exercise of this Warrant above the amount payable
therefor on such exercise, (b) will at all times reserve and keep available the
maximum number of its authorized shares of Common Stock, free from all
preemptive rights therein, which will be sufficient to permit the full exercise
of this Warrant, and (c) will take all such action as may be necessary or
appropriate in order that all shares of Common Stock as may be issued pursuant
to the exercise of this Warrant will, upon issuance, be duly and validly issued,
fully paid and nonassessable, and free from all taxes, liens and charges with
respect to the issue thereof.
 
8. Replacement of Warrant. On receipt by the Company of an affidavit of an
authorized representative of the Holder stating the circumstances of the loss,
theft, destruction or mutilation of this Warrant (and in the case of any such
mutilation, on surrender and cancellation of such Warrant), the Company at its
expense will promptly execute and deliver, in lieu thereof, a new Warrant of
like tenor which shall be exercisable for a like number of shares of Common
Stock.  If required by the Company, such Holder must provide an indemnity bond
or other indemnity sufficient in the judgment of the Company to protect the
Company from any loss which it may suffer if a lost, stolen or destroyed Warrant
is replaced.
 
 
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9. Restrictions on Transfer.
 
(a) Subject to the provisions of this Section 9 and the Right of First Refusal
Agreement, this Warrant may be transferred or assigned, in whole or in part, by
the Holder at any time, and from time to time, to any Person. The term “Holder”
as used herein shall also include any transferee of this Warrant whose name has
been recorded by the Company in the Warrant Register (as hereinafter defined).
Each transferee of the Warrant or the Common Stock issuable upon the exercise of
the Warrant acknowledges that the Warrant or the Common Stock issuable upon the
exercise of the Warrant has not been registered under the Securities Act and may
be transferred only pursuant to an effective registration under the Securities
Act or pursuant to an applicable exemption from the registration requirements of
the Securities Act.
 
(b) With respect to a transfer that should occur prior to the time that the
Warrant or the Common Stock issuable upon the exercise thereof is registered
under the Securities Act, such Holder shall request an opinion of counsel (which
shall be rendered by counsel reasonably acceptable to the Company in form and
substance reasonably acceptable to the Company) that the proposed transfer may
be effected without registration or qualification under any Federal or state
securities or blue sky law. Counsel shall, as promptly as practicable, notify
the Company and the Holder of such opinion and of the terms and conditions, if
any, to be observed in such transfer, whereupon the Holder shall be entitled to
transfer this Warrant or such shares of Common Stock (or portion thereof),
subject to any other provisions and limitations of this Warrant. In the event
this Warrant shall be exercised as an incident to such transfer, such exercise
shall relate back and for all purposes of this Warrant be deemed to have
occurred as of the date of such notice regardless of delays incurred by reason
of the provisions of this Section 9 which may result in the actual exercise on
any later date.
 
(c) The Company shall maintain a register (the “Warrant Register”) in its
principal office for the purpose of registering the Warrant and any transfer
thereof, which register shall reflect and identify, at all times, the ownership
of any interest in the Warrant. Upon the issuance of this Warrant, the Company
shall record the name of the initial purchaser of this Warrant in the Warrant
Register as the first Holder. Upon surrender for registration of transfer or
exchange of this Warrant together with a properly executed Form of Assignment
attached hereto as Exhibit B at the principal office of the Company, the Company
shall, at its expense, execute and deliver one or more new Warrants of like
tenor which shall be exercisable for a like aggregate number of shares of Common
Stock, registered in the name of the Holder or a transferee or transferees.
 
(d) Issuance of certificates for shares of Common Stock upon the exercise of
this Warrant shall be made without charge to the Holder hereof for any issue or
transfer tax, or other incidental expense, in respect of the issuance or
delivery of such certificates or the securities represented thereby, all of
which taxes and expenses shall be paid by the Company.
 
10. No Rights or Liability as a Stockholder. This Warrant does not entitle the
Holder hereof to any voting rights or other rights as a stockholder of the
Company. No provisions hereof, in the absence of affirmative action by the
Holder hereof to purchase Common Stock, and no enumeration herein of the rights
or privileges of the Holder shall give rise to any liability of such Holder as a
stockholder of the Company.
 
11. Amendment or Waiver. Subject to the terms of the Purchase Agreement, this
Warrant and any term hereof may be amended, waived, discharged or terminated
only by and with the written consent of the Company and the Holder.
 
 
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12. Notices. Any notice or other communication (or delivery) required or
permitted hereunder shall be made in writing and shall be by registered mail,
return receipt requested, telecopier, courier service or personal delivery to
the Company at its principal office as specified in Section 12.02 of the
Purchase Agreement and to the Holder at its address as it appears in the Warrant
Register. All such notices and communications (and deliveries) shall be deemed
to have been duly given: when delivered by hand, if personally delivered; when
delivered by courier, if delivered by commercial overnight courier service; five
Business Days after being deposited in the mail, postage prepaid, if mailed; and
when receipt is acknowledged, if telecopied.
 
13. Company’s Obligation to Repurchase the Warrant. In the event that (a) the
Holder notifies the Company in writing (the “Warrant Put Notice”) at any time
during the Put Period that the Holder wishes to sell the Issuable Warrant Shares
or the then outstanding Issued Warrant Shares and the Minimum Liquidity
Requirement is not satisfied, or (b) the Minimum Liquidity Requirement is
satisfied but (x) there is no effective registration statement covering the
resale of all Issuable Warrant Shares and then outstanding Issued Warrant
Shares, and (y) the Holder is not eligible to sell all Issuable Warrant Shares
and then outstanding Issued Warrant Shares pursuant to Rule 144 without regard
to manner of sale requirements or volume limits, so as to enable the Holder to
freely sell such shares, then, the Holder shall have the right exercisable at
any time, and from time to time, during the Put Period, to cause the Company,
subject to the terms and conditions hereof, to purchase from the Holder all, or
any portion, of this Warrant for the purchase price determined below.  The
Warrant Put Notice shall specify the date on which such repurchase shall occur,
which date shall not be less than thirty (30) days nor more than sixty (60) days
after the date of the Warrant Put Notice (the “Warrant Put Closing Date”).  The
purchase price under this Section 13 shall be determined by multiplying (x) the
Repurchase Price as of the date of such Warrant Put Notice less the Purchase
Price in effect on the date of such Warrant Put Notice, by (y) the number of
Issuable Warrant Shares specified in such Warrant Put Notice.  On the Warrant
Put Closing Date, the Holder shall surrender this Warrant to the Company against
(i) payment therefor by (at the option of the Holder) wire transfer to an
account in a bank located in the United States designated by the Holder for such
purposes, and, (ii) if the Holder has elected to have only a portion of the
Warrant repurchased, delivery of a new warrant duly executed by the Company, on
the same terms and conditions as this Warrant, except that such warrant shall be
exercisable for the remaining number of Issuable Warrant Shares.
 
14. Company’s Obligation to Repurchase the Issued Warrant Shares. In the event
that (a) the Holder notifies the Company in writing (the “Share Put Notice”) at
any time during the Put Period that the Holder wishes to sell the Issuable
Warrant Shares or the then outstanding Issued Warrant Shares and the Minimum
Liquidity Requirement is not satisfied, or (b) the Minimum Liquidity Requirement
is satisfied but (x) there is no effective registration statement covering the
resale of all Issuable Warrant Shares and then outstanding Issued Warrant
Shares, and (y) the Holder is not eligible to sell all Issuable Warrant Shares
and then outstanding Issued Warrant Shares pursuant to Rule 144 without regard
to manner of sale requirements or volume limits, so as to enable the Holder to
freely sell such shares, then, the Holder shall have the right exercisable at
any time, and from time to time, during the Put Period, to cause the Company,
subject to the terms and conditions hereof, to purchase from the Holder all, or
any portion, of the Issued Warrant Shares at the purchase price determined
below.  The Share Put Notice shall specify the date on which such repurchase
shall occur, which date shall not be less than thirty (30) days nor more than
sixty (60) days after the date of the Share Put Notice (the “Share Put Closing
Date”).  The purchase price under this Section 14 shall be determined by
multiplying (x) the Repurchase Price as of the date of such Share Put Notice by
(y) the number of Issued Warrant Shares specified in such Share Put Notice.  On
the Share Put Closing Date, the Holder of such Issued Warrant Shares shall
deliver to the Company one or more certificates representing the shares being
repurchased duly endorsed for transfer to the Company against payment therefor
by (at the option of the Holder) wire transfer to an account in a bank located
in the United States designated by the Holder for such purposes.
 
15. Additional Provisions Relating to Company’s Repurchase of the Warrant. If
the Company, for any reason, fails to pay the purchase price set forth under
Section 13 on the Warrant Put Closing Date or under Section 14 on the Share Put
Closing Date in connection with the exercise of the rights granted thereunder to
the Holder, then, in addition to and not in limitation of any other rights or
remedies that may be available to the Holder, such unpaid purchase price shall
bear interest, payable on demand in immediately available funds, for each day
from the date such purchase price was due to the date of actual payment, at a
rate equal to 14% per annum, and in the absence of good faith agreement between
the Company and the Holder on a mutually acceptable payment schedule, the Holder
shall be entitled to exercise all rights and remedies that may be available to
the Holder.
 
 
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16. Certain Remedies. The Holder shall be entitled to an injunction or
injunctions to prevent breaches of the provisions of this Warrant and to enforce
specifically the terms and provisions of this Warrant in any court of the United
States or any state thereof having jurisdiction, this being in addition to any
other remedy to which such Holder may be entitled at law or in equity.  The
Company acknowledges that its obligations under this Warrant are secured as
provided in the Purchase Agreement.
 
17. Governing Law.  THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED IN ACCORDANCE
WITH, AND ENFORCED UNDER, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS OR INSTRUMENTS ENTERED INTO AND PERFORMED ENTIRELY WITHIN SUCH STATE.
 
18. Headings.  The headings in this Warrant are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
 

 
 
 
 
[Remainder of Page Intentionally Left Blank]
 
 
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19. Survival.  The provisions of Section 9 and Sections 12 through and including
18 hereof shall survive the complete exercise or repurchase of this Warrant and
the issuance of all Issued Warrant Shares.
 

  FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.          
 
By:
        Name:       Title:          

 
 
 
 
 
[SIGNATURE PAGE TO COMMON STOCK WARRANT FUND III]
 
 
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Exhibit A to Common Stock
Purchase Warrant

ELECTION TO PURCHASE SHARES

The undersigned hereby irrevocably elects to exercise the Warrant to purchase
_____ shares of Common Stock, of Fusion Telecommunications International, Inc.
(the “Company”) and hereby [makes payment of $_______ therefor] [or] [makes
payment therefor by assignment to the Company pursuant to Section 2(b)(ii) of
the Warrant of $_____________ aggregate principal amount of the Notes (as
defined in the Warrant)] [or] [makes payment therefor by surrendering pursuant
to Section 2(b)(iii) _____ shares of Common Stock of the Company] [or] [makes
payment therefor by surrender pursuant to Section 2(c) of a portion of the
Warrant with respect to _________ shares of Common Stock]. The undersigned
hereby requests that certificates for such shares of Common Stock be issued and
delivered as follows:
 
ISSUE TO:
 

(NAME)
 

--------------------------------------------------------------------------------

(ADDRESS, INCLUDING ZIP CODE)
 

--------------------------------------------------------------------------------

(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
 

--------------------------------------------------------------------------------

 
DELIVER TO:
 

(NAME)

--------------------------------------------------------------------------------

(ADDRESS, INCLUDING ZIP CODE)

If the number of shares of Common Stock purchased hereby is less than the number
of shares of Common Stock covered by the Warrant, the undersigned requests that
a new Warrant representing the number of shares of Common Stock not purchased be
issued and delivered as follows:
 
ISSUE TO:
 

(NAME)

--------------------------------------------------------------------------------

(ADDRESS, INCLUDING ZIP CODE)
 
DELIVER TO:
 

(NAME)

--------------------------------------------------------------------------------

(ADDRESS, INCLUDING ZIP CODE)

Dated:_________________________    [NAME OF HOLDER]
 
 
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By:
        Name:       Title:          

________________________________
1           Name of Holder must conform in all respects to name of Holder as
specified on the face of the Warrant.
 
 
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Exhibit B to Common Stock
Purchase Warrant

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and transfers unto
the Assignee named below all of the rights of the undersigned to purchase shares
of Common Stock, of Fusion Telecommunications International, Inc. represented by
the Warrant, with respect to the number of shares of Common Stock set forth
below:

Name of Assignee                                Address                      No.
of Shares of Common Stock

and does hereby irrevocably constitute and appoint ____________________________
Attorney to make such transfer on the books of Fusion Telecommunications
International, Inc. maintained for that purpose, with full power of substitution
in the premises.

Dated:_________________________    [NAME OF HOLDER]

 
By:
        Name:       Title:          

________________________________
1           Name of Holder must conform in all respects to name of Holder as
specified on the face of the Warrant.
 
 
 
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