Document:

Exhibit 10.01

    
      

    

    

      
        	 	
                U.S.
                  Department of Justice

              
	 
	
                United
                  States Attorney

              
	
                Southern
                  District of New York

              
	 
	 
	 	 
	 	 
	 	
                The
                  Silvio J.
                  Mollo
                  Building

              
	 	
                One
                  Saint Andrew's Plaza

              
	 	
                New
                  York. New York 10007

              
	 	 
	 	
                March
                  26, 2007

              

      

       

    

    Aaron
      S.
      Dyer, Esq. 

    Pillsbury
      Winthrop Shaw Pittman 

    725
      South
      Figueroa Street, Suite 2800 

    Los
      Angeles, California 900
      17
      

    

    
      	 	
              Re:

            	
              ECHO,
                Inc -Non-Prosecution
                Agreement

            

    

    

    Dear
      Mr.
      Dyer: 

    

    On
      the
      understandings specified below, the Office of the United States Attorney for
      the
      Southern District of New York (the “Office”)
      will not
      criminally prosecute Electronic Clearing House, Inc., and its subsidiaries
      (collectively, “ECHO”) for any crimes (except for criminal tax violations, as to
      which this Office cannot and does not make any agreement) related to its
      transfer of money through its electronic payment services, including the
      automated clearinghouse (“ACH”) system and related collection activities, on
      behalf of, or for the benefit of, any company providing payment services to
      any
      internet gambling operation servicing customers within the United States during
      the period January 2001, through and including the date of the signing of this
      Agreement. This conduct is described more fully in the Statement of Facts,
      which
      is attached hereto as Exhibit A, and incorporated by reference herein. This
      Agreement is entered into by ECHO pursuant to authority conveyed by resolution
      of the Executive Board of ECHO. A copy of the resolution is attached hereto
      as
      Exhibit B.
      

    

    Moreover,
      if ECHO fully complies with the understandings specified in this Agreement,
      no
      information given at the request of this Office by or on behalf of ECHO or
      any
      then- current employee (or any other information directly or indirectly derived
      there from) will be used against ECHO in any criminal tax prosecution. This
      Agreement does not provide any protection against prosecution for any crimes
      except as set forth above, and applies only to ECHO and not to any other
      entities or any individuals except as set forth herein. ECHO expressly
      understands that the protections provided to ECHO by this Agreement shall not
      apply to any successor entities, whether the successor’s interest
      arises
      through a merger or plan of reorganization, unless and until such successor
      formally adopts and executes this Agreement. The protections arising from this
      Agreement will not apply to any purchasers of all or substantially all of the
      assets of ECHO, unless such purchaser enters into a written agreement, on terms
      acceptable to this Office, agreeing in substance to undertake all obligations
      set forth in the Continuing Obligation to Cooperate paragraph. 

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    Aaron
      S.
      Dyer, Esq. 

    March
      26,
      2007 

    Page
      2

    

    Continuing
      Obligation To Cooperate 

    

    ECHO
      acknowledges and understands that the cooperation it has provided to date in
      connection with a criminal investigation by the Office, and its pledge of
      continuing cooperation, are important and material factors underlying the
      Office’s
      decision to enter into this Agreement, and, therefore, ECHO agrees to cooperate
      fully and actively with the Office, the Federal Bureau of Investigation (the
      “FBI”), and with any other agency of the government designated by the Office
      (“Designated Agencies”) regarding any matter relating to the Office's
      investigation about which ECHO has knowledge or information. 

    

    In
      this
      regard, it is understood that, in connection with any matter relating to
      ECHO’s
      operations, finances, and corporate governance between 2001 and the date of
      the
      signing of this Agreement, ECHO: (a) shall truthfully and completely disclose
      all information with respect to the activities of ECHO, its officers and
      employees, and others concerning all such matters about which this Office
      inquires, which information can be
      used
      for
      any purpose, except as limited by the second paragraph of this Agreement; (b)
      shall cooperate fully with this Office, the FBI, and any other law enforcement
      agency designated by this Office; (c) shall, at the Office’s request,
      use its
      best efforts to assist this Office in any prosecution or investigation arising
      out of the operation and/or financing of any internet gambling site conducting
      business with customers in the United States, by providing logistical and
      technical support for any meeting, interview, grand jury proceeding, or any
      trial or other court proceeding; (d) shall at the Office's request, use its
      best
      efforts to promptly secure the attendance and truthful statements or testimony
      of any officer, agent, employee, or former employee at any meeting or interview
      or before the grand jury or at any trial or other court proceeding; (e) shall
      use its best efforts to promptly provide to this Office, upon request, any
      document, record, or other tangible evidence relating to matters concerning
      any
      automated clearinghouse services about which this Office or any designated
      law
      enforcement agency inquires, including assembling and organizing all documents,
      records, information, and other evidence in ECHO’s possession,
      custody, or control as may be requested by the Office or the FBI; and (f) shall
      bring to this Office's attention all criminal conduct by, or criminal
      investigations of, ECHO or its employees that comes to the attention of ECHO's
      board of directors or senior management, as well as any administrative
      proceeding or civil action brought by any governmental authority related to
      the
      operation of ECHO’s business.
      It is
      further understood that ECHO shall commit no crimes whatsoever. Moreover, any
      assistance that ECHO may provide to federal criminal investigators shall be
      pursuant to the specific instructions and control of this Office and designated
      investigators. ECHO'S obligations under this paragraph shall continue until
      the
      later of (1)
      a
      period
      of one
      year
      from
      the date of the signing of this Agreement or (2) the date upon which all
      prosecutions arising out of the conduct described in the opening paragraph
      of
      this Agreement are final. 

    

    
      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

    

     

    Aaron
      S.
      Dyer, Esq. 

    March
      26,
      2007 

    Page
      3
      

     

    Disgorgement
      Obligations 

     

    In
      order
      to eliminate any benefit that ECHO received that may have related to the online
      gaming business, ECHO agrees that it will pay a total of $2,300,000 (the
“Property”) to the United States as part of this Agreement. ECHO agrees to pay
      this money to the United States at the time of the execution of this Agreement.
      Such payment shall be made by a certified check payable to the United States
      Marshals Service or wire transfer to an account designated by the United States
      Marshal for the Southern District of New York. ECHO agrees that it will not
      file
      a claim with the Court or otherwise contest any civil forfeiture action and
      will
      not assist a third party in asserting any claim against the Property, except
      as
      required by lawful process. It is further understood that ECHO will not file
      or
      assist anyone in filing a petition for remission or mitigation with the
      Department of Justice concerning the Property. 

    

    Additional
      Obligations 

    

    It
      is
      understood that, should ECHO commit any crimes subsequent to the date of the
      signing of this Agreement, or should it be determined that ECHO or any of its
      representatives have given false, incomplete, or misleading testimony or
      information, or has otherwise violated any provision of this Agreement, (a)
      ECHO
      shall thereafter be subject to prosecution for any federal violation of which
      this Office has knowledge, including perjury and obstruction of justice; (b)
      all
      statements made by ECHO'S representatives to this Office, the FBI, or other
      designated law enforcement agents, including but not limited to the Statement
      of
      Facts, and any testimony given by ECHO'S representatives before a grand jury
      subsequent to the signing of this Agreement, and any leads from such statements
      or testimony shall be admissible in evidence in any criminal proceeding brought
      against ECHO and relied upon as evidence to support any civil penalty imposed
      on
      ECHO; and (c) ECHO shall assert no claim under the United States Constitution,
      any statute, Rule 410
      of
      the
      Federal Rules of Evidence, or any other federal rule that such statements or
      any
      leads therefrom should be suppressed. In addition, any such prosecution that
      is
      not
      time-barred by the applicable statute of limitations on the date of the
      execution of this Agreement may be commenced against ECHO, notwithstanding
      the
      expiration of the statute of limitations between the signing of this Agreement
      and the commencement of such prosecution or the imposition of such civil
      penalties. It is the intent of this Agreement to waive all defenses based on
      the
      statute of limitations with respect to any prosecution that is not time-barred
      on the date that this Agreement is signed. 

    

    It
      is
      understood that ECHO accepts and acknowledges as true the facts as set forth
      in
      the Statement of Facts attached as Exhibit A, which is incorporated by reference
      herein. Pursuant to this Agreement, ECHO agrees to maintain, with respect to
      its
      operations, a permanent restriction upon illegally providing automated
      clearinghouse services of any kind to any business entity providing internet
      gambling services to customers in the United States in violation of the law
      in
      the United States. 

    

    It
      is
      understood that this Agreement does not bind any federal, state, or local
      agencies, any licensing authorities, or any regulatory authorities. This Office
      will, however, bring the cooperation Aaron S. Dyer, Esq. March 26,2007
Page
      4
      and
      remedial actions of ECHO to the attention of other prosecuting and other
      investigative offices, if requested by ECHO. 

    

    
      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

    

    

    Aaron
      S.
      Dyer, Esq. 

    March
      26,2007 

    Page
      4
      

    

    With
      respect to this matter, this Agreement supersedes all prior understandings,
      promises and/or conditions between this Office and ECHO. No additional promises,
      agreements, and conditions have been entered into other than those set forth
      in
      this letter and none will be entered into unless in
      writing
      and signed by all parties.

    

    
      	 	 	 	
              Very
                truly yours, 

            
	 	 	 	 
	 	 	 	
              MICHAEL
                J.
                GARCIA
                

            
	 	 	 	
              United
                States Attorney 

            
	 	 	 	
              Southern
                District of New York 

            
	 	 	 	 
	 	 	
              By:

            	
              /s/
                Timothy Treanor

            
	 	 	 	
              Timothy
                J. Treanor/Christopher P. Conniff 

            
	 	 	 	
              Assistant
                United States Attorneys 

            
	 	 	 	 
	 	 	 	
              /s/
                Lev Dassin

            
	 	 	 	
              Lev
                L. Dassin 

            
	 	 	 	
              Chief,
                Criminal Division 

            
	 	 	 	 
	
              AGREED
                AND CONSENTED TO: 

            	 	 	 
	 	 	 	 
	/s/
              Joel M. Barry, CEO	 	 	 
	
              Pursuant
                to Authority Conveyed By Date Resolution of the Executive Board of
                ECHO
                

            	 	 	
              Date

            
	 	 	 	 
	 	 	 	 
	
              APPROVED:

            	 	 	 
	 	 	 	 
	
              /s/
                Aaron S. Dyer

            	 	 	
              3/26/07

            
	
              Aaron
                S. Dyer, Esq.

            	 	 	
              Date

            
	
              Pillsbury
                Winthrop Shaw Pittman for ECHO

            	 	 	 

    

    

    
      
        
          
          

        

        
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    STATEMENT
      OF FACTS

    

    Electronic
      Clearing House, Inc. (“ECHO”) is an electronic payment processor that provides
      for the payment processing needs of merchants, banks, technology partners and
      collection agencies. ECHO derives the majority of its revenue from two main
      business segments: I) bankcard and transaction processing services (“bankcard
      services”), whereby it provides solutions to merchants, banks and technology
      partners to allow them to accept credit and debit card payments from consumers;
      and 2) check-related products (“check services”), whereby it provides various
      services to merchants, banks, technology partners, and collection agencies
      to
      allow them to accept and process check payments from consumers. 

    

    The
      principal services offered within these two segments include, with respect
      to
      its bankcard services, debit and credit card processing, and with respect to
      its
      check services, check guarantee, check verification, electronic check
      conversion, check re-presentment, and check collection. ECHO operates under
      the
      following brands: 

    

    s
      MerchantAmerica, which
      is the retail provider of all credit card, debit card and check payment
      processing services to both the merchant and bank markets;

    

    s
      National Check Network
      (“NCN”),
      which is ECHO's proprietary database of negative and positive check writer
      accounts, for check verification and check conversion capture services;

    

    sXPRESSCHEX,
      Inc. for check collection services; and 

    

    sECHO,
      for
      wholesale credit card and check processing services. 

    

    ECHO
      was
      incorporated in Nevada in December 1981. Its executive offices are located
      at
      730 Paseo Camarillo, Camarillo, California 930 10.ECHO's common stock is traded
      on the NASDAQ Capital Market under the ticker symbol “ECHO.” 

    

    From
      2001
      until the beginning of 2007, ECHO provided payment processing and collection
      services to several “internet wallet” or “e-wallet” companies. Those companies,
      as ECHO has previously disclosed in its securities filings, authenticated
      customers and acted as the online wallets for online merchants, including gaming
      websites, and provided e-wallet and payment processing for those online
      merchants. ECHO processed the transfer of finds between the consumer and such
      e-wallets. After the individuals transferred money into their online wallets,
      they could then use those funds to make online purchases, including placing
      bets
      on gaming websites. 

    

    In
      late
      2001, ECHO began processing payments for Optimal Payments, the parent of
      e-wallet Firepay. Over the next five years, it began providing processing
      services to several other e-wallets, including Citadel, Mediapay and Neteller.
      Additionally, ECHO provided to some of these e-wallets collection services
      with
      respect to delinquent accounts. ECHO knew that these e-wallets were providing
      such services to these gaming websites. Each of these e-wallets almost
      exclusively handled illegal transactions with online gaming websites.

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    Beginning
      in October 2006, ECHO initiated a progressive wind-down plan for all e-wallet
      companies and began shutting down processing and collection services for
      e-wallets. In
      addition,
      ECHO is cooperating with the Department of Justice’s ongoing
      investigation relating to e-wallets. To that end, ECHO has frozen funds
      belonging to the e-wallet companies totaling approximately $21
      million. 

    

    In
      order
      to eliminate any benefit that ECHO received that may have related to online
      gaming, ECHO has agreed that it will disgorge any profits it earned from
      processing transactions or providing collection services to e-wallets. While
      some of the e-wallets acted as online wallets for non-gaming merchants, ECHO
      has
      calculated its earnings by including all revenues from services provided to
      e-wallets, rather than just those e-wallet revenues specifically attributable
      to
      gaming. ECHO'S gross revenues from providing processing and collection services
      to e-wallets totaled approximately $17.7 million over five years. In determining
      its profits from the e-wallet revenues, ECHO allocated its expenses based on
      (I)
      the proportion of revenues attributable to the e-wallets and (2)
      the
      higher margin on most e-wallet transactions. As a result, ECHO estimates that
      $2.3million
      (total e-wallet revenue less expenses allocated to e-wallet business) reasonably
      represents its profits from its business with the e-wallets. 

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    MINUTES
      OF THE MEETING OF 

    THE
      BOARD OF DIRECTORS

     

    OF

     

    ELECTRONIC
      CLEARING HOUSE, INC. 

    a
      Nevada
Corporation
      

    

    A
      duly
      noticed meeting of the Board of Directors (the
“Board”)
      of Electronic
      Clearing House, Inc., a Nevada corporation (the
“Corporation”), was held on March 21, 2007, at
3:00
      p.m.
      (local time), at the Corporation’s offices
      at
730
      Paseo
      Camarillo, Camarillo, California. 

    

    The
      following persons, constituting a majority of the directors of the Corporation,
      were present: Charles Harris, a director and the President and Chief Operating
      Officer of the Corporation, Aristides W. Georgantas, Carl R.
      Terzian,
      Herbert L. Lucas, H. Eugene Lockhart and Richard D. Field. Also present for
      portions of the meeting were Alice Cheung, Chief Financial Officer of the
      Corporation, and Mark Salter, and Jonathan Howe, of New Century Capital
      Partners, LLC and
      WedBush Morgan Securities, Inc., respectively. V. Joseph Stubbs, Scott Galer
      and
      Gregory Akselrud of Stubbs Alderton &
      Markiles,
      LLP, outside counsel to the Corporation, were also present during the meeting.
      Aaron Dyer, of Pillsbury Winthrop, white collar criminal counsel to the Company,
      was also present. Joel M.
      Barry,
      the Chairman and Chief Executive Officer of the Corporation, was
      not
      present. 

    

    Mr.
      Harris
      acted as
      Chairman
      of
      the
      meeting and Mr. Akselrud acted as secretary of the meeting and kept these
      minutes. 

    

    The
      Chairman announced that a quorum was present and that the meeting, having been
      duly convened, was ready to proceed with its business. 

    

    1.    
Intuit
      Transaction and Summary of Grand Juw Subpoena Matter 

    

    The
      first
      item of business was [DISCUSSION REDACTED]. Upon motion duly made and seconded,
      the following recitals and resolutions were approved by the Board: 

    

    WHEREAS,
      it has
      been proposed that the Corporation enter into a Non- Prosecution Agreement
      substantially in the form attached hereto as
      Exhibit
      A (“Non-Prosecution Agreement”); and 

    

    WHEREAS,
      the
      Board has determined that it is advisable and in the best interests of the
      Corporation and its shareholders for the Corporation to enter into the
      Non-Prosecution Agreement. 

    

    NOW,
      THEREFORE,
      BE IT RESOLVED,
      that
      the Corporation's entry into the Non-Prosecution Agreement is hereby adopted,
      approved and ratified; 

    

    RESOLVED
      FURTHER,
      that
      the form, terms and provisions of the Non- Prosecution Agreement, are hereby
      adopted, approved and ratified; 

    

    RESOLVED
      FURTHER,
      that
      the officers of the Corporation, and each of them, are hereby authorized and
      directed to execute the Non-Prosecution Agreement
      and to cause the Corporation to perform its obligations under the Non-
      Prosecution Agreement and to consummate the actions contemplated thereby;

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

     

     

    RESOLVED
      FURTHER, that
      the
      officers of the Corporation, and each of them, are hereby authorized, for and
      on
      behalf of the Corporation, to modify, amend or revise the form, terms and
      provisions of the Non-Prosecution Agreement, to execute, deliver and/or file
      any
      and all documents, certificates, instruments, agreements and notices, and to
      perform or cause to be performed any and all acts as may, in their judgment,
      be
      necessary or desirable to accomplish the purposes of the foregoing resolutions
      and the actions contemplated thereby and the Non-Prosecution Agreement therein
      approved, the making of any such
      modification, amendment or revision,
      the taking of any such actions and/or the execution, delivery or filing of
      any
      such documents or instruments shall be conclusive evidence that the individual
      making such modification, amendment or revision, taking such action and/or
      executing, delivering or filing such document or instrument has deemed the
      same
      to be necessary or advisable; and 

    

    FINALLY
      RESOLVED, that the actions of the officers and other agents of the
      Corporation, and each of them,
      previously
      taken in
      connection
      with
      the
      negotiation and/or the preparation of the forms, terms and provisions of the
      Non- Prosecution Agreement are hereby ratified, approved and adopted.

     

    [REMAINDER
      OF
      MINUTES
      REDACTED]

     

    [Signature
      Page Follows]
      

    

    
      
        
          
          

        

        
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    There
      being no further business to
      come
      before the meeting, upon motion duly
      made,
      seconded
      and unanimously
      approved,
      the meeting was. 

    
      	 	 
	 	 
	 	
              /s/
                Gregory Akselrud

            
	 	
              Gregory
                Akselrud

            
	 	
              Secretary
                of the Meeting

            
	 	 
	 	 
	 	 
	 	 
	
              Attest:

            	 
	 	 
	
              /s/
                Charles Harris

            	 
	
              Charles
                Harris

            	 
	
              Director

            	 

    

     

     

    3Unassociated Document

    
      	
              No.:
                

            	 
	
               

              Name: 

            	 
	
               

              Number
                of Units Subscribed for:

            	 

    

     

    

    

    

    

    

    

    

    FUSION
      TELECOMMUNICATIONS INTERNATIONAL, INC.

    SUBSCRIPTION
      AND RIGHTS AGREEMENT

    

    

    

    

    

    

    December
      20, 2006

    

    

    

    

     

    
      
         

      

      
         

        
          

        

      

      
         

        
        

      

    

    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.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    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.

    
      
         

      

      
        ii

        
          

        

      

      
         

      

    

    

    

    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.

    

    

    

    
      
         

      

      
        iii

        
          

        

      

      
         

        
          

        

      

    

    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 or A-2 Cumulative Convertible
      Preferred Stock (“Convertible
      Preferred Stock”)
      and
      accompanying Warrants to purchase shares of the Company’s common stock, par
      value $.01 per share1 
      50%
      of the number of shares of Common Stock into which Holder's Preferred Stock
      is
      convertible.
      (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 days2 ,
      (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”).
      The
      Offering Period has been extended to January 15, 2007.

     

    __________________________

    
      1
        50% of
        the number of shares of Common Stock into which Holder's Preferred Stock
        is
        convertible.
2 The
      Company initially extended the Offering Period to December 15, 2006 in order
      to
      close on the Minimum Offering. On December 14, 2006, the Company entered into
      subscription agreements with 27 individual investors for an offering of $3.875
      million in consideration for 3,875 shares of Series A-1 Cumulative Convertible
      Preferred Stock, (the “Series A-1 Preferred Stock”). In addition, the Company
      issued warrants to purchase 1,160,204 shares of common stock exercisable at
      $1.67 per share.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    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 York10036

            
	
              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: Matt
      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.

     

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    

    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.

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    

    

    (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.

    
      
         

      

      
        4

        
          

        

      

      
         

      

    

    

    

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

    

    (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.

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    

    (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 therefor, 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.

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    

    

    (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.

    

    (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.

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    

    

    (22) The
      undersigned understands that the Company intends to use the net proceeds from
      the Offering for, among other things, sales and marketing, capital expenditures,
      and other corporate and working capital 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).

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    

     

    (4) The
      Company has reserved sufficient conversion shares and warrant shares for
      conversion of the Preferred Stock and exercise of the Warrants,
      respectively.

    

    (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;

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    

    

    (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;

    

    (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

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    

    

    (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.
      

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    

    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: Matt
      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.

    
      
         

      

      
        12

        
          

        

      

      
         

        
          

        

      

    

    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:

            	 

    

    

    
      
         

      

      
        13

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, the undersigned has executed this Subscription and Rights
      Agreement on this  
      day of
      ________, 200_.

    

    PURCHASER:

    

    

    

    
      	
               

            	 	
               

            
	
              (Signature
                of Purchaser) 

            	 	
              (Name
                Typed or Printed)

            
	 	 	 
	
               

            	 	 
	
              (Signature
                of Co-Purchaser) 

            	 	
              (Name
                Typed or Printed)

            

    

    

    

    ACCEPTED
      as of the  
      day of
      _________, 200_

    

    

    FUSION
      TELECOMMUNICATIONS INTERNATIONAL, INC.

    

    

    By:
      _________________________________

     Matt
      D.
      Rosen, President and CEO

    

    
      	
              REGISTERED
                REPRESENTATIVE:

            	 	
              BRANCH
                OFFICE MANAGER:

            
	
              (Sign
                and Print Name)

            	 	
              (Sign
                and Print Name)

            
	 	 	 
	 	 	 
	 	 	 
	
               

            	 	
               

            

    

    

    

    

    

    

    

    

    

    

    

    

    

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    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
  ,
      200_,
      on behalf of the Company.

    

    
      	 	
              FUSION
                TELECOMMUNICATIONS INTERNATIONAL, INC.

            
	 	 	 
	 	 	 
	 	 	 
	 	
              By:

            	
               

            
	 	 	
              Matt
                D. Rosen, President and CEO

            

    

    

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    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
      ___________ ,
      200_,
      on behalf of the Company.

    

    
      	 	
              FUSION
                TELECOMMUNICATIONS INTERNATIONAL, INC.

            
	 	 	 
	 	 	 
	 	 	 
	 	
              By:

            	 

	 	 	
              Matt
                D. Rosen, President and CEO

            

    

     

    

    
      
         

      

      
        16

        
          

        

      

      
         

        
          

        

      

    

    Appendix
      A

    Risk
      Factors

    

    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 may impose limits on its financial and
      operating flexibility. 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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