No.:
 
 
Name: 
 
 
Number of Units Subscribed for:
 

 

FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.
SUBSCRIPTION AND RIGHTS AGREEMENT

November 17, 2006

 
 
 

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OFFERING INFORMATION, LEGENDS, AND NOTICES
 
THE SECURITIES OFFERED HEREBY, HAVE NOT BEEN FILED OR REGISTERED WITH OR
APPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE “COMMISSION”), NOR HAS
THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THE OFFERING MATERIALS.
NO STATE SECURITIES LAW ADMINISTRATOR HAS PASSED ON OR ENDORSED THE MERITS OF
THIS OFFERING OR THE ACCURACY OR THE ADEQUACY OF THE OFFERING MATERIALS. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
 
IT IS INTENDED THAT THE SECURITIES OFFERED HEREBY WILL BE MADE AVAILABLE TO
ACCREDITED INVESTORS, AS DEFINED IN REGULATION D AND RULE 501 PROMULGATED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”). THE SECURITIES OFFERED
HEREBY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE ACT AND APPLICABLE STATE SECURITIES LAWS FOR NONPUBLIC
OFFERINGS. SUCH EXEMPTIONS LIMIT THE NUMBER AND TYPES OF INVESTORS TO WHICH THE
OFFERING WILL BE MADE AND RESTRICT SUBSEQUENT TRANSFERS OF THE INTERESTS.
 
THE SECURITIES OFFERED HEREBY SHOULD BE CONSIDERED ONLY BY PERSONS WHO CAN
AFFORD TO SUSTAIN A LOSS OF THEIR ENTIRE INVESTMENT. INVESTORS WILL BE REQUIRED
TO REPRESENT THAT THEY ARE FAMILIAR WITH AND UNDERSTAND THE TERMS OF THIS
OFFERING.
 
NO SECURITIES MAY BE RESOLD OR OTHERWISE DISPOSED OF BY AN INVESTOR UNLESS, IN
THE OPINION OF COUNSEL SATISFACTORY TO THE COMPANY, REGISTRATION UNDER THE
APPLICABLE FEDERAL OR STATE SECURITIES LAWS IS NOT REQUIRED OR COMPLIANCE IS
MADE WITH SUCH REGISTRATION REQUIREMENTS.
 
THE OFFEREE, BY ACCEPTING DELIVERY OF THE OFFERING MATERIALS, AGREES TO RETURN
THE OFFERING MATERIALS AND ALL ACCOMPANYING OR RELATED DOCUMENTS TO THE COMPANY
UPON REQUEST IF THE OFFEREE DOES NOT AGREE TO PURCHASE ANY OF THE SECURITIES
OFFERED HEREBY.
 
ANY OFFERING MATERIALS SUBMITTED IN CONNECTION WITH THE PRIVATE PLACEMENT OF THE
SECURITIES DO NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED. ANY
REPRODUCTION OR DISTRIBUTION OF ANY OFFERING MATERIALS IN WHOLE OR IN PART, OR
THE DIVULGENCE OF ANY OF THEIR CONTENTS, WITHOUT THE PRIOR WRITTEN CONSENT OF
THE COMPANY, IS PROHIBITED. ANY PERSON ACTING CONTRARY TO THE FOREGOING
RESTRICTIONS MAY PLACE HIM/HERSELF AND THE COMPANY IN VIOLATION OF FEDERAL OR
STATE SECURITIES LAWS.
 
 
 

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NASAA UNIFORM LEGEND

IN MAKING AN INVESTMENT DECISION INVESTORS MUST RELY ON THEIR OWN EXAMINATION OF
THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS
INVOLVED. THESE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE
SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING
AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS
DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THESE
SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT
BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT, AND THE APPLICABLE
STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.
INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS
OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

FOR RESIDENTS OF PENNSYLVANIA

THE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE PENNSYLVANIA SECURITIES ACT
AND MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF
WITHIN 12 MONTHS AFTER THE DATE OF PURCHASE, UNLESS SUBSEQUENTLY REGISTERED
UNDER THE PENNSYLVANIA SECURITIES ACT OR UNDER THE SECURITIES ACT OF 1933, AS
AMENDED.

EACH PERSON WHO ACCEPTS AN OFFER TO PURCHASE SECURITIES EXEMPTED FROM
REGISTRATION BY SECTION 203(d), DIRECTLY FROM THE ISSUER OR AFFILIATE OF THE
ISSUER, SHALL HAVE THE RIGHT TO WITHDRAW HIS ACCEPTANCE WITHOUT INCURRING ANY
LIABILITY TO THE SELLER, UNDERWRITER (IF ANY) OR ANY OTHER PERSON WITHIN 2
BUSINESS DAYS FROM THE DATE OF RECEIPT BY THE ISSUER OF HIS WRITTEN BINDING
CONTRACT OF PURCHASE OR, IN THE CASE OF A TRANSACTION IN WHICH THERE IS NO
BINDING CONTRACT OF PURCHASE, WITHIN 2 BUSINESS DAYS AFTER HE MAKES THE INITIAL
PAYMENT FOR THE SECURITIES BEING OFFERED.

FOR RESIDENTS OF GEORGIA

THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH THIRTEEN (13)
OF CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND MAY NOT BE
SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR
PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT.

 
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FOR RESIDENTS OF FLORIDA

PURSUANT TO THE LAWS OF THE STATE OF FLORIDA, IF SALES ARE MADE TO FIVE (5) OR
MORE INVESTORS IN FLORIDA, ANY FLORIDA INVESTOR MAY, AT ITS OPTION, WITHDRAW,
UPON WRITTEN (OR TELEGRAPHIC) NOTICE, ANY PURCHASE HEREUNDER WITHIN A PERIOD OF
THREE (3) DAYS AFTER (A) THE INVESTOR FIRST TENDERS OR PAYS TO THE COMPANY AN
AGENT OF THE COMPANY OR AN ESCROW AGENT THE CONSIDERATION REQUIRED HEREUNDER,
(B) THE INVESTOR DELIVERS ITS EXECUTED SUBSCRIPTION AGREEMENT, OR (C) THE
AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED TO SUCH INVESTOR, WHICHEVER
OCCURS LATER.

 
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SUBSCRIPTION AND RIGHTS AGREEMENT

FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.

Subscription and Rights Agreement (this “Subscription Agreement”) with respect
to the offering (the “Offering”) of up to 70 units (the “Units”) of FUSION
TELECOMMUNICATIONS INTERNATIONAL, INC., a Delaware corporation (the “Company”),
each such Unit consisting of 100 shares of Series A-1 Cumulative Convertible
Preferred Stock (“Convertible Preferred Stock”) and accompanying Warrants to
purchase shares of the Company’s common stock, par value $.01 per share1 (the
“Common Stock”). The conversion shares and the warrant shares underlying each
Unit may not be separately transferred. The Units together with the Convertible
Preferred Stock, the Warrants and the securities underlying each Unit are
sometimes collectively referred to as “Securities”). The Certificate of Rights
and Designations of the Convertible Preferred Stock and the form of Warrant are
included in the Booklet, which accompanies this Subscription Agreement.

For purposes of this Offering, the minimum offering shall mean thirty (30) Units
(the “Minimum Offering”) and a minimum gross amount raised of $3,000,000 (the
“Minimum Amount”). The maximum offering shall mean seventy (70) Units (the
“Maximum Offering”) and a maximum gross amount raised of $7,000,000 (the
“Maximum Amount”). The minimum investor subscription amount is $100,000 to
purchase one (1) Unit (“Minimum Investor Subscription Amount”); the Company
reserves the right to accept subscriptions for lesser amounts.

The Company, on notice to the purchasers of Units, may, within 30 days of the
last closing with respect to the Maximum, exercise its option to sell an
additional $3,000,000 of Units (30 Units), upon the same terms and conditions as
set forth herein (the “Over Allotment Option”). If the Company exercises its
Over Allotment Option, then the Offering Period defined below may be extended
for a period not to exceed an additional 30 days.

The Units are being offered by the Company. The Company, however, reserves the
right to retain registered broker-dealers, “finders”, and other individuals and
entities authorized by federal and applicable state securities laws to assist
with the distribution of the Securities offered hereby. In such event, the
Company shall pay a selling commission or finders fees to registered
broker-dealers, “finders”, individuals and entities legally authorized to
receive such commissions or fees, as applicable (collectively, the “Selling
Agents”) of a sum ordinarily not to exceed ten percent (10%) of the investor
subscription amount received, provided that such payments are permitted under
federal and applicable state securities laws. Such broker’s compensation may
include warrants as well.

Subscriptions to purchase Units will be solicited until the earliest of: (i)
November 30, 2006, unless extended by the Company in its sole discretion without
notice for a period of up to an additional 90 days, (ii) the sale of the entire
Offering, or (iii) if the Company elects to exercise its Over Allotment Option,
for a period of up to an additional 30 days (the “Offering Period”).

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150% of the number of shares of Common Stock into which Holder's Preferred Stock
is convertible.

 
 

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A.    General.

(1) The undersigned hereby subscribes for and agrees to purchase from the
Company, and the Company agrees to sell to the undersigned, such number of Units
as is set forth on the signature page hereof at a price per Unit of $100,000.

(2) The undersigned herewith tenders to the Company the entire amount of the
purchase price by check made payable to the order of “JP Morgan Chase f/b/o
Fusion Telecommunications International, Inc.” or by wire transfer of
immediately available funds to:

Bank Name:  JP Morgan Chase Bank Address:  1166 Avenue of the Americas - 15th
Floor    New York, New York 10036 ABA Number  021000021 Account Name:  Fusion
Money Market - Escrow Account Account Number:  777-763281

 
(3) The undersigned herewith delivers the completed and signed Subscription
Agreement and completed and signed Qualified Prospective Purchaser Questionnaire
for Units of Fusion Telecommunications International, Inc. (“Qualified Purchaser
Questionnaire”) to the Company at:

Fusion Telecommunications International, Inc.
420 Lexington Avenue, Suite 1718
New York, NY 10170
Attn: Matthew D. Rosen, President and CEO

B.    Securities offered will not be registered under the Securities Act of
1933, as amended

The undersigned acknowledges that (i) the Securities will not be registered
under the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the “1933 Act”), or the securities laws of any state;
(ii) absent an exemption, any transfer of the Securities would require
registration; (iii) the Securities are being offered for sale in reliance upon
exemptions from registration contained in the 1933 Act and applicable state
laws; and (iv) the Company's reliance upon such exemption is based in part upon
the undersigned's representations, warranties and agreements contained in this
Subscription Agreement and in the Qualified Purchaser Questionnaire that the
undersigned is also delivering to the Company.

 
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C.    Representations, Warranties, Acknowledgements and Agreements

In order to induce the Company to accept this Subscription Agreement, the
undersigned represents, warrants, acknowledges and covenants to the Company as
follows:

(1) The undersigned understands that (i) this Subscription Agreement may be
accepted or rejected in whole or in part by the Company in its sole and absolute
discretion, and (ii) this Subscription Agreement shall survive the undersigned's
death, disability or insolvency, except that the undersigned shall have no
obligation in the event that this Subscription Agreement is rejected by the
Company. In the event that the Company does not accept the undersigned's
subscription, or if the Offering is terminated for any reason, the undersigned's
subscription payment (or portion thereof, as the case may be) will be returned
to the undersigned without interest or deduction.

(2) The undersigned has carefully read this Subscription Agreement (including,
without limitation, the Appendix A entitled “Risk Factors”), the Qualified
Purchaser Questionnaire, the Outline of Proposed Terms, the Company’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2005 (including,
without limitation, the risks set forth under the heading “Risk Factors”), and
the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2006, its exhibits attached hereto and thereto, as well as such
other materials as the Company deems necessary to the Offering (collectively,
the “Offering Materials”). In making the decision to invest in the Securities,
the undersigned has relied solely upon the information provided by the Company
in the Offering Materials. To the extent necessary, the undersigned has
discussed with his, her or its counsel the representations, warranties and
agreements which the undersigned makes by signing this Subscription Agreement,
the applicable limitations upon the undersigned's resale of the Securities, and
the investment, tax and legal consequences of this Subscription Agreement. The
undersigned disclaims reliance on any statements made or information provided by
any person or entity in the course of the undersigned’s consideration of an
investment in the Securities other than the Offering Materials.

(3) The undersigned understands that no federal or state agency has made any
finding or determination regarding the fairness of the Offering, or any
recommendation or endorsement of the Offering.

(4) The undersigned is purchasing the Securities for the undersigned's own
account, with the intention of holding the Securities for investment purposes,
with no present intention of dividing or allowing others to participate in this
investment or of reselling or otherwise participating, directly or indirectly,
in a distribution of the Securities; and shall not make any sale, transfer or
other disposition of the Securities without registration under the 1933 Act and
applicable state securities laws unless an exemption from registration is
available under those laws. The undersigned is not acquiring any portion of the
Securities, or any interest therein, on behalf of another person. No person
other than the undersigned has any direct or indirect beneficial interest in the
Securities subscribed for hereunder by the undersigned. The undersigned, if an
entity, was not formed for the purpose of purchasing the Securities.

 
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(5) The undersigned's overall commitment to investments which are not readily
marketable is not disproportionate to the undersigned's net worth, and the
undersigned's investment in the Securities will not cause such overall
commitment to become excessive.

(6) The undersigned, if an individual, has adequate means of providing for his
or her current needs and personal and family contingencies and has no need for
liquidity in his or her investment in the Securities.

(7) The undersigned is an “accredited investor” as that term is defined in Rule
501(a) under Regulation D promulgated by the Securities and Exchange Commission
(the “SEC”) under the 1933 Act. The undersigned is financially able to bear the
economic risk of this investment, including the ability to afford holding the
Securities for an indefinite period or to afford a complete loss of this
investment.

(8) The address shown under the undersigned's signature at the end of this
Subscription Agreement is the undersigned's principal residence if he or she is
an individual, or its principal business address if a corporation or other
entity.

(9) The undersigned, together with any offeree representatives of the
undersigned (as identified in the Qualified Purchaser Questionnaire) has such
knowledge and experience in financial business matters as to be capable of
evaluating the merits and risks of an investment in the Securities. The
undersigned acknowledges that the Offering Materials may not contain all
information that is necessary to make an investment decision with respect to the
Company and the Securities and that the undersigned must rely on his, her or its
own examination of the Company and the terms and conditions of the Offering
prior to making any investment decision with respect to the Securities.

(10) The undersigned has been given the opportunity to ask questions of and
receive answers from the Company and its executive officers concerning the
business and operations of the Company and the terms, provisions, and conditions
of the Offering and to obtain any such additional information that the
undersigned deems necessary or advisable to verify the accuracy of the
information contained in the Memorandum, or such other information as the
undersigned desired in order to evaluate an investment in the Company; and the
undersigned availed himself, herself or itself of such opportunity to the extent
considered appropriate in order to evaluate the merits and risks of the proposed
investment.

(11) The undersigned has made an independent evaluation of the merits of the
investment and acknowledges the high risk nature of the investment including,
without limitation, the Risk Factors set forth in Appendix A.

(12) The undersigned has accurately completed the Qualified Purchaser
Questionnaire provided herewith and has executed such Qualified Purchaser
Questionnaire and any applicable exhibits thereto.

 
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(13) 

(i) The undersigned understands that none of the Securities have been registered
under the 1933 Act or any state securities laws in reliance on exemptions for
private offerings; the Securities cannot be resold or otherwise disposed of
unless they are subsequently registered under the 1933 Act and applicable state
securities laws or an exemption from registration is available. The
certificate(s) representing the Securities will bear a legend substantially
similar to the legend set forth immediately below until (i) such Securities
shall have been registered under the 1933 Act and effectively disposed of in
accordance with a registration statement, or (ii) in the opinion of counsel
reasonably satisfactory to the Company such securities may be sold without
registration under the 1933 Act:

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "1933 ACT"), OR THE "BLUE SKY" OR SECURITIES LAWS OF ANY STATE AND
MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED OR TRANSFERRED EXCEPT
(i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE 1933 ACT WHICH HAS BECOME
EFFECTIVE AND IS CURRENT WITH RESPECT TO THESE SECURITIES, OR (ii) PURSUANT TO A
SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT BUT ONLY UPON A HOLDER
THEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY, THAT THE PROPOSED DISPOSITION IS CONSISTENT WITH
ALL APPLICABLE PROVISIONS OF THE 1933 ACT AS WELL AS ANY APPLICABLE "BLUE SKY"
OR SIMILAR SECURITIES LAWS."

(ii) The undersigned understands that in the absence of registration by the
Company, the Securities will not be, and, except as set forth in Section D of
this Subscription Agreement, the undersigned will have no rights to require that
the Securities shall be, registered under the 1933 Act or any state securities
laws; the undersigned may have to hold the Securities indefinitely and it may
not be possible for the undersigned to liquidate his, her or its investment in
the Company; and the undersigned should not purchase any Securities unless he,
she or it can afford a complete loss of his, her or its investment and bear the
burden of such loss for an indefinite period of time.

(iii) The undersigned understands there is no public market for the Securities
and that no public market may develop for any such Securities. The undersigned
understands that the provisions of Rule 144 promulgated under the 1933 Act to
permit resales of the Securities are not available for at least one (1) year
after the same class of securities is registered under the 1933 Act and the
Securities Exchange Act of 1934, as amended (the “1934 Act”), and there can be
no assurances that any such class of securities will ever be registered under
the 1933 Act or the 1934 Act, or even if such class of securities is registered
under the 1933 Act and the 1934 Act, that the conditions necessary thereafter to
permit routine sales of the Securities under Rule 144 will ever be satisfied,
and, if Rule 144 should become available, routine sales made in reliance on its
provisions could be made only in limited amounts and in accordance with the
terms and conditions of Rule 144. The undersigned further understands that in
connection with the sale of securities for which Rule 144 is not available,
compliance with some other exemption from registration will be required. The
undersigned understands, subject to the provisions of Section D of this
Subscription Agreement, that the Company is under no obligation to the
undersigned to register any such class of securities or to comply with the
conditions of Rule 144 or take any other action necessary in order to make
available any exemption for the resale of the Securities without registration.

 
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(14) The undersigned, if an individual, is at least 21 years of age.

(15) If at any time prior to issuance of the Securities to the undersigned, any
representation or warranty of the undersigned shall no longer be true, the
undersigned promptly shall give written notice thereof to the Company specifying
which representations and warranties are not true and the reason therefore,
whereupon the undersigned's subscription may be rejected by the Company in whole
or in part.

(16) Notwithstanding the place where this Subscription Agreement may be executed
by any of the parties hereto, all of the terms, provisions, and conditions
hereof shall be construed in accordance with and governed by the laws of the
State of New York, without giving effect to its conflict of laws principles. Any
dispute that may arise out of or in connection with this Subscription Agreement
shall be adjudicated before a court located in New York City and the parties
hereto submit to the exclusive jurisdiction and venue of the state and local
courts of the State of New York located in New York City and of the federal
courts in the Southern District of New York with respect to any action or legal
proceeding commenced by any party, and irrevocably waive any objection they now
or hereafter may have respecting the venue of any action or proceeding brought
in such a court or respecting the fact that such court is an inconvenient forum,
relating to or arising out of this Subscription Agreement or any acts or
omissions relating to the sale of the Securities, and the undersigned consents
to the service of process in any such action or legal proceeding by means of
registered or certified mail, return receipt requested, in care of the address
set forth below or such other address as the undersigned shall furnish in
writing to the Company.

(17) THE UNDERSIGNED HEREBY WAIVES TRIAL BY JURY IN ANY ACTION OR PROCEEDING
INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER (WHETHER SOUNDING IN TORT,
CONTRACT, FRAUD OR OTHERWISE) IN ANY WAY ARISING OUT OF OR IN CONNECTION WITH
THIS SUBSCRIPTION AGREEMENT OR THE UNDERSIGNED'S PURCHASE OF THE SECURITIES.

(18) The undersigned acknowledges that he, she or it understands the meaning and
legal consequences of the representations, warranties and acknowledgments
contained in this Subscription Agreement and in the Qualified Purchaser
Questionnaire, and hereby agrees to indemnify and hold harmless the Company, and
each of its stockholders, officers, directors, affiliates, controlling persons,
agents and representatives, from and against any and all loss, damage, expense,
claim, action, suit or proceeding (including the reasonable fees and expenses of
legal counsel) as incurred arising out of or in any manner whatsoever connected
with (i) a breach of any representation or warranty of the undersigned contained
in this Subscription Agreement or in the Qualified Purchaser Questionnaire (ii)
any sale or distribution by the undersigned in violation of the 1933 Act or any
applicable state securities laws or (iii) any untrue statement of a material
fact made by the undersigned and contained herein or in the Qualified Purchaser
Questionnaire, or omission to state herein or in the Qualified Purchaser
Questionnaire, a material fact necessary in order to make the statements
contained herein or in the Qualified Purchaser Questionnaire, in light of the
circumstances under which they were made, not misleading. The undersigned
acknowledges that such damage could be substantial since (a) the Securities are
being offered without registration under the 1933 Act in reliance upon the
exemption pursuant to Section 4(2) and/or Regulation D of the 1933 Act for
transactions by an issuer not involving a public offering and, in various
states, pursuant to exemptions from registration, (b) the availability of such
exemptions is, in part, dependent upon the truthfulness and accuracy of the
representations made by the undersigned herein and in its Qualified Purchaser
Questionnaire, and (c) the Company will rely on such representations in
accepting the undersigned's Subscription Agreement.

 
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(19) The undersigned is not subscribing for the Securities as a result of or
subsequent to any advertisement, article, notice or other communication
published in any newspaper, magazine or similar media or broadcast over
television or radio, any seminar or meeting, or any solicitation of a
subscription by a person not previously known to the undersigned in connection
with investments in securities generally.

(20) Unless otherwise indicated on a separate sheet of paper that details any
such affiliation submitted by the undersigned to the Company along with this
completed Subscription Agreement, the undersigned is not affiliated directly or
indirectly with a member broker-dealer firm of the National Association of
Securities Dealers, Inc. as an employee, officer, director, partner or
shareholder or as a relative or member of the same household of an employee,
director, partner or shareholder of an NASD member broker-dealer firm.

(21) Except as expressly provided herein, this Subscription Agreement contains
the entire agreement between the parties with respect to the transactions
contemplated hereunder and may be amended only by a writing executed by all of
the parties hereto. The undersigned represents that he, she or it has full power
and authority (corporate, statutory or otherwise) to execute and deliver this
Subscription Agreement and the other Offering Materials to which the undersigned
is a party and to purchase the Securities. The execution, delivery and
performance of this Subscription Agreement and the Qualified Purchaser
Questionnaire will not: (i) violate, conflict with or result in a default under
any provision of the Certificate or By-Laws (or analogous organizational
documents), if any, of the undersigned; or (ii) violate or result in a violation
of, or constitute a default (whether after the giving of notice, lapse of time
or both) under, any provision of any law, regulation or rule, or any order of,
or any restriction imposed by any court or other governmental agency applicable
to the undersigned, except for those which do not, or are not reasonably likely
to, adversely affect the undersigned’s ability to perform its obligations under
this Subscription Agreement and the Qualified Purchaser Questionnaire and to
consummate the transactions contemplated hereby and thereby. This Subscription
Agreement constitutes the legal, valid and binding obligation of the
undersigned, enforceable against the undersigned in accordance with its terms.
This Subscription Agreement supersedes all prior arrangements or understandings
with respect thereto, whether oral or written. The terms and conditions of this
Subscription Agreement shall inure to the benefit of and be binding upon the
parties and their respective successors, heirs and assigns.

 
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(22) The undersigned understands that the Company intends to use the net
proceeds from the Offering for working capital and general corporate purposes.

In order to induce the undersigned to execute and deliver this Subscription
Agreement, the Company represents, warrants, and covenants to the undersigned as
follows:

(1) The Company is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and is duly authorized to
transact business as a foreign corporation in the State of New York. The
Corporation has full power and authority to own its properties and to carry on
its business as currently conducted.
 
(2) The execution, delivery and performance by the Company of this Subscription
Agreement and the Offering and sale of Units to accredited investors
contemplated hereby shall, assuming the representations and warranties of the
undersigned are correct, be in compliance with the exemptions from registration
set forth in Regulation D and/or Section 4(2) of the 1933 Act and applicable
state securities “blue sky” laws, and the Company, in reliance on the
representations and warranties of the undersigned, shall make all filings
required to qualify for such exemptions. No additional permit, license,
exemption, consent, authorization or approval of, or the giving of any notice by
the Company to, any governmental or regulatory body, agency or authority is
required in order for the Company to execute, deliver and perform its
obligations hereunder, which has not been made, or will not when required be
made, by the Company. No notice by the Company to any third party, and no
consent or approval of any third party, of the Company’s execution, delivery and
performance of this Subscription Agreement is required which has not been given
or obtained.

(3) The Company has the requisite power and authority to execute and deliver
this Subscription Agreement, and perform its obligations herein, and consummate
the transactions contemplated hereby. Upon the acceptance of the undersigned’s
subscription by the Company and the execution of this Subscription Agreement by
the Company, this Subscription Agreement will be a valid, legal and binding
obligation of the Company enforceable against the Company in accordance with its
terms, except to the extent that enforceability may be limited by applicable
bankruptcy, insolvency or similar laws affecting the enforcement of creditors’
rights generally and subject to general principles of equity (regardless of
whether such enforcement is considered in a proceeding at law or at equity).
 
(4) The Company has reserved sufficient conversion shares and warrant shares for
conversion of the Preferred Stock and exercise of the Warrants, respectively.

 
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(5) The Units and the conversion shares and warrant shares underlying the Units
to be issued to the undersigned pursuant to this Subscription Agreement, when
issued and delivered in accordance with the terms of this Subscription
Agreement, in each case, shall be duly authorized, validly issued, fully paid
and non-assessable.

D.    Registration Rights

The undersigned shall have the registration rights set forth in this Section D.

(1) The Company shall use its best efforts to file a registration statement with
the SEC within ninety (90) days of the initial closing date in order to register
the resale of the conversion shares and the warrant shares (are hereinafter
collectively referred to in this Section D as the “Registrable Securities”)
under the 1933 Act. In addition, the Company shall use its best efforts to cause
such registration statement to become effective as soon as practicable after the
date of such initial filing.

The obligation of the Company under this Section D(1) shall be limited to the
above described demand registration statement; provided, however, that any
registration shall not count as a demand registration under this Section D(1)
until a registration statement including all of the Registrable Securities
requested to be included thereon has been declared effective by the Staff of the
SEC, and such registration statement has remained continuously effective for as
long as required by Section D(2)(i) below.

(2) In addition to the covenants set forth in Section D(1), the Company shall:

(i) cause registration statement with respect to the Registrable Securities to
remain effective for the earliest of (A) the second anniversary of the date the
registration statement has been declared effective, (B) such time as all of the
Registrable Securities issued or issuable hereunder can be sold by the
Participating Holders, herein defined, immediately without compliance with the
registration requirements of the Securities Act pursuant to Rule 144(k) under
the Securities Act ("Rule 144”) and (C) the date all of the Registrable
Securities issued shall have been sold by the Participating Holders (such
period, the "Registration Period”);

(ii) prepare and file with the SEC such amendments to such registration
statement and supplements to the prospectus contained therein as may be
necessary to keep such registration statement effective for the applicable
period in accordance with the provisions of Section D(2)(i) above;

(iii) furnish to any holder participating in such registration (a “Participating
Holder”) such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as such holder
may reasonably request in order to facilitate the public offering of the
Participating Holder’s securities;

(iv) use its best efforts to register or qualify the Registrable Securities
covered by such registration statement under such state securities or blue sky
laws of such jurisdictions as such Participating Holders may reasonably request
in writing within twenty (20) days following the original filing of such
registration statement, except that the Company shall not for any purpose be
required to execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified;

 
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(v) notify the Participating Holders, promptly after it shall receive notice
thereof, of the time when such registration statement or a supplement to any
prospectus forming a part of such registration statement has become effective;

(vi) notify the Participating Holders promptly of any request by the Staff of
the SEC for the amending or supplementing of such registration statement or
prospectus or for additional information;

(vii) prepare and file with the SEC any amendments or supplements to such
registration statement or prospectus which is required under the 1933 Act or the
rules and regulations promulgated thereunder in connection with the distribution
of the Registrable Securities by the Participating Holders;

(viii) prepare and promptly file with the SEC and promptly notify the
Participating Holders of the filing of such amendment or supplement to such
registration statement or prospectus as may be necessary to correct any
statements or omissions if, at the time when a prospectus relating to such
Registrable Securities is required to be delivered under the 1933 Act, any event
shall have occurred as the result of which any such prospectus or any other
prospectuses then in effect would include an untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in
the light of the circumstances in which they were made, not misleading;

(ix) advise the Participating Holders promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the Division of
Enforcement of the SEC suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that purpose
and promptly use its best efforts to prevent the issuance of any stop order or
to obtain its withdrawal if such stop order should be issued;

(x) indemnify and hold harmless each Participating Holder against any and all
losses, claims, damages or liabilities to which such Participating Holder shall
become subject, under the 1933 Act or otherwise, that arise out of or are based
upon any untrue statement or alleged untrue statement of any material fact
contained in the effective registration statement or any prospectus that forms a
part thereof or any amendment or supplement thereto, or arise out of or are
based upon any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements there in not
misleading; provided, however, that no such indemnification shall be available
to any Participating Holder (and the Participating Holder shall indemnify and
hold harmless the Company) with respect to, and to the extent there is liability
attributable to, written information provided by a Participating Holder to the
Company for use in such registration statement or prospectus thereunder or any
amendment or supplement thereto, or any related preliminary prospectus; and

 
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(xi) cause its executive officers to cooperate in good faith with any managing
underwriter in connection with taking all actions reasonably necessary to
successfully consummate the public offering, including but not limited to,
active participation at so-called “road shows” to the extent requested by the
managing underwriter, and using best efforts to obtain as high a valuation of
the Company as possible.

(3)
(i) All fees, costs and expenses of and incidental to the registration of
Registrable Securities, shall be borne by the Company; provided, however, that
Participating Holders shall bear their pro rata share of the underwriting
discount, if any, and commissions and transfer taxes, and any professional fees
or costs of accounting, financial or legal advisors to any of the Participating
Holders.

(ii) The fees, costs and expense of registration to be borne by the Company as
provided in Section D(3)(i) above shall include, without limitation, all
registration, filing fees, exchange or market listing fees, printing expenses,
fees and disbursements of counsel and accountants for the Company, and all legal
fees and disbursements and other expenses of complying with state securities or
blue sky laws of any jurisdictions in which the securities to be offered are to
be registered and qualified.

(4) Upon the proper and lawful transfer of any of the Securities by any holder
thereof prior to such time as the Securities have been resold pursuant to a
registration statement contemplated by this Section D, the registration rights
attendant to such Securities shall be transferable hereunder if:

(i) such Participating Holder gives prior written notice to the Company;

(ii) such transferee agrees to execute a counterpart to this Subscription
Agreement agreeing to comply with the terms and provisions of this Subscription
Agreement, whereupon such transferee shall have the benefits of, and shall be
subject to the restrictions contained in, this Subscription Agreement as if such
transferee had originally been a party hereto;

(iii) such transfer is otherwise in compliance with this Subscription Agreement;
and

(iv) such transfer is otherwise effected in accordance with applicable
securities laws.

 
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E.    Notice Provisions

Any and all notices, demands or requests required or permitted to be given under
this Subscription Agreement shall be given in writing and sent, by registered or
certified U.S. mail, return receipt requested, by hand, or by overnight courier,
addressed to the parties hereto at their addresses set forth above or such other
addresses as they may from time-to-time designate by written notice, given in
accordance with the terms of this Section E, together with copies thereof as
follows:

In the case of the Company to:

Fusion Telecommunications International, Inc.
420 Lexington Avenue, Suite 1718
New York, NY 10170
Attn: Matthew D. Rosen, President and CEO
Fax: (212) 972-7884

with a copy to:

Gersten Savage LLP
600 Lexington Avenue, 9th Floor
New York, New York 10022-6018
Attention: Jay Kaplowitz, Esq.
Fax: (212) 980-5192

In the case of any owner of equity securities of the Company, to:

The address of such equity owner on the books and records of the Company.
 
Notice given as provided in this Section shall be deemed effective: (i) on the
business day hand delivered (or, if it is not a business day, then the next
succeeding business day thereafter), (ii) on the first business day following
the sending thereof by overnight courier, and (iii) on the seventh calendar day
(or, if it is not a business day, then the next succeeding business day
thereafter) after the depositing thereof into the exclusive custody of the U.S.
Postal Service. As used herein, the term business day (other than Saturday or
Sunday) shall mean any day when commercial banks are open in the State of New
York to accept deposits.

 
 
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ALL SUBSCRIBERS MUST COMPLETE THIS PAGE.

_________________________________
Exact Name in Which Title is to be Held

Amount Subscribed for: $__________

Units Subscribed for: ______________

Type of Ownership (Check One):

                     Individual
                     Joint tenants with rights of survivorship
                     Tenants in common
                     Tenants by the entirety
                     Corporation
                     Limited Liability Company
                     Partnership
                     Limited Liability Partnership
                     Limited Partnership
                     Trust
                     Other (specify)

 

        Residence Address   City, State and Zip Code                   Mailing
Address (if not residence)   City, State and Zip Code  

 
Social Security or Federal Tax Identification Number of Purchaser:
 

 

 
 
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IN WITNESS WHEREOF, the undersigned has executed this Subscription and Rights
Agreement on this        day of ________, 2006.

PURCHASER:

         (Signature of Purchaser)    (Name Typed or Printed)                  
 (Signature of Co-Purchaser)    (Name Typed or Printed)  

 
ACCEPTED as of the        day of _________, 2006
 
FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.

By: _________________________________
       Matthew D. Rosen, President and CEO
 

 REGISTERED REPRESENTATIVE:    BRANCH OFFICE MANAGER:  (Sign and Print Name)  
 (Sign and Print Name)            

 
 
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EXECUTION BY SUBSCRIBER WHO IS A NATURAL PERSON

                                                                                      
Exact Name in Which Title is to be Held

 

       (Signature)    (Signature)

(If Joint Tenant or Tenants in Common, both persons must sign and this page must
contain all information for both persons.)
 

      Name (Please Print)   Name (Please Print)             Residence Address  
Residence Address             Telephone Number   Telephone Number            
Social Security Number
 
Social Security Number

 
ACCEPTED this         day   , 2006, on behalf of the Company.

FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.

By: _________________________________
Matthew D. Rosen, President and CEO

 
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EXECUTION BY SUBSCRIBER WHICH IS AN ENTITY

(Corporation, Partnership, Trust, Etc.)

                                                                                                       
Name of Entity (Please Print)

                                                                                                                                   
 
Address of Principal Office of Entity

BY: ___________________________
NAME:
TITLE:

(seal)

Attest:     
          (If Entity is a Corporation)

 
                                                            
Address
 
 
                                                            
Telephone Number
 
 
                                                            
Taxpayer Identification Number

ACCEPTED this          day of   , 2006, on behalf of the Company.

FUSION TELECOMMUNICATIONS INTERNATIONAL, INC.

By:        
Matthew D. Rosen, President and CEO
 

 
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Appendix A
Risk Factors

If the Company does not sell at least 30 Units with gross proceeds of
$3,000,000, then it may have to modify its business plan and/or seek to raise
additional capital from equity or debt sources, which may impose limits on its
financial and operating flexibility. The Company cannot assure prospective
investors that any financing arrangements will be available or, if available,
that it will be on acceptable terms.

Even if the Company sells the Maximum and the entire Over Allotment, the
Company’s ability to meet its projected growth plans may require additional cash
resources from equity or debt sources, which also may impose limits on its
financial and operating flexibility. Again, the Company cannot assure you that
any financing arrangements will be available or, if available, that it will be
on acceptable terms.
 
See also the Risk Factors set forth in the Company’s Quarterly Report on Form
10-Q for the quarterly period ended September 30, 2006 and the Risk Factors set
forth the Company’s Annual Report on Form 10-K for the fiscal year ended
December 31, 2005.
 
 
 
 

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