Document:

Blueprint

 

May 4,
2018

 

 

PRIVATE & CONFIDENTIAL

 

Fusion
Connect, Inc. (f/k/a Fusion Telecommunications International,
Inc.)

420
Lexington Avenue, Suite 1718

New
York, New York 10170

 

Ladies
and Gentlemen:

 

Reference is made
to the Agreement and Plan of Merger, dated as of August 26, 2017
(as it may be amended or modified from time to time in the future,
the “Merger
Agreement”), by and among Fusion Telecommunications
International, Inc., a Delaware corporation (the
“Company”),
Birch Communications Holdings, Inc., a Georgia corporation, and
Fusion BCHI Acquisition LLC, a Delaware limited liability company.
Capitalized terms used but not defined herein have the meaning
given to them in the Merger Agreement. This letter agreement amends
and restates the indemnification letter agreement delivered by BCHI
Holdings, LLC, a Georgia limited liability company
(“Holdings”), to the
Company, dated August 26, 2017, in its entirety.

 

Subject
to the occurrence of the Closing, for a period of eighteen (18)
months following the Closing (the “Indemnity Period”),
Holdings agrees to indemnify and hold harmless the Company for and
against any and all losses in excess of $500,000 that are related
to, or arise from, any of the pending matters listed below that are
incurred during the Indemnity Period; provided, that in no event
will Holdings be responsible for any such losses exceeding
$25,000,000 in the aggregate (the “Cap”). Holdings shall
have the right to assume the defense of these matters and shall
have the right to settle such matters so long as such settlement
does not involve any monetary payment by the Company and/or its
Subsidiaries and does not otherwise have a material adverse effect
on the business of the Company and its Subsidiaries. Amounts owed
by Holdings under this indemnity may be paid in cash or through the
transfer to the Company of a number of shares of Company Common
Stock equal to (rounded up or down to the nearest whole share) (1)
the amount of such obligation divided by (2) the greater of (A)
$2.00, or (B) the weighted average daily closing bid price of the
Company Common Stock, as reported by NASDAQ (or any successor to
such exchange), for five (5) consecutive trading days ending
immediately prior to the third (3rd) Business Day preceding the date of
such transfer. Any cash payment and/or return of shares of Company
Common Stock shall be completed within five (5) Business Days of
the date that the Company’s (or its subsidiary’s)
liability has been determined. During the Indemnity Period,
Holdings shall, at all times, maintain in its name liquid assets
and shares of Company Common Stock with an aggregate value of no
less than the Cap; provided, that for the purposes of determining
the value of shares of Company Common Stock, such shares will not
be deemed to have a value of less than $2.00 per share, regardless
of the then-current market price for such shares.

 

1.

EB-IHD-17-00023706,
Federal Communications Commission Letter of Inquiry to Birch
Communications, Inc. (dated May 2, 2017).

 

2.

California Public
Utilities Commission Data Request No. 1 (dated October 1, 2015),
Data Request No. 2 (dated March 8, 2016), Data Request No. 3 (dated
March 7, 2017); Data Request No. 4 (dated July 27, 2017) to Birch
Telecom of the West, Inc. and Cbeyond Communications,
LLC.

 

3.

Wyoming Universal
Service Fund Audit Notification Letter (dated August 1,
2017).

 

4.

Kansas Corporation
Commission Docket No. 18-BTKT-033-KSF, Audit of Birch Telecom of Kansas, Inc. by the
Kansas Universal Service Fund (KUSF) Administrator Pursuant to
K.S.A. 2016 Supp. 66-2010(b) for KUSF Operating Year 20, Fiscal
Year March 2016-February 2017.

 

5.

Kansas Corporation
Commission Docket No. 18-TEMT-043-KSF, Audit of Tempo Telecom, LLC by the Kansas
Universal Service Fund (KUSF) Administrator Pursuant to K.S.A. 2016
Supp. 66-2010(b) for KUSF Operating Year 20, Fiscal Year March
2016-February 2017.

 

 

-1-

 

 

6.

Kansas Corporation
Commission Docket No. 18-ICIT-041-KSF, Audit of Ionex Communications, Inc. by the
Kansas Universal Service Fund (KUSF) Administrator Pursuant to
K.S.A. 2016 Supp. 66-2010(b) for KUSF Operating Year 20, Fiscal
Year March 2016-February 2017.

 

7.

Richard W. Huskey v. Birch Communications, Inc., Ionex
Communications, Inc., Birch Telecom of Missouri, Inc and certain
named individual defendants (Circuit Court of St. Louis County,
Missouri)

 

8.

Riepen v. Cbeyond, Inc. et al

 

9.

EB-TCD-15-00020193,
Federal Communications Commission Letter of Inquiry to Birch
Communications, Inc. (dated February 23, 2018).

 

10.

CenturyLink Communications, LLC, and Level 3
Communications, LLC, v. Birch Communications, Inc., Formal
Complaint, Proceeding No. 18-73, Bureau ID No. EB-18-MD-002 (filed
with Federal Communications Commission on March 23,
2018).

 

11.
Attorney General of the State of Illinois, People of the State of Illinois v. Birch
Telecom of the Great Lakes, Inc., Subpoena Duces Tecum (ref:
Document #2018005), served via U.S. Mail April 17,
2018.

 

12.
State of Oklahoma Office of Attorney General, Investigation of Birch Telecom of Oklahoma,
LLC, Investigative Demand to Produce Documentary Material or
Physical Evidence and Furnish a Report (issued April 25,
2018).

 

 

This
letter agreement will be governed by, and construed and enforced in
accordance with, the internal Laws of the State of Delaware,
without regard to any applicable conflict of laws principles
(whether of the State of Delaware or any other jurisdiction). This
letter agreement may be executed in two or more counterparts, all
of which will be considered one and the same agreement and will
become effective when counterparts have been signed by each of the
parties hereto and delivered to the other party, it being
understood that each party need not sign the same
counterpart.

 

 

 

-2-

 

 

If you
agree with the foregoing, please sign and return a copy of this
letter agreement, which will constitute our agreement with respect
to the subject matter hereof.

 

 

 

Very
truly yours,

 

BCHI
HOLDINGS, LLC

 

 

 

By: /s/ Holcombe T. Green,
Jr.                   

Name:
Holcombe T. Green, Jr.

Title:
Manager

 

 

AGREED AND ACCEPTED:

 

FUSION
CONNECT, INC.

(f/k/a
Fusion Telecommunications International, Inc.)

 

 

By: /s/ James P. Prenetta,
Jr.                 

Name:
James P. Prenetta, Jr.

Title:
Executive Vice President and

         General
Counsel

 

-3-Blueprint

 

 

May
4, 2018

 

 

PRIVATE & CONFIDENTIAL

 

Fusion Connect, Inc.

420
Lexington Avenue, Suite 1718

New
York, New York 10170

Attention:
General Counsel

 

 

Ladies
and Gentlemen:

 

Reference is made to the Merger Agreement, dated
as of August 25, 2017, as amended (the “Merger
Agreement”),
by and among the Fusion Connect, Inc. (formerly known as Fusion
Telecommunications International, Inc.), a Delaware
corporation (“Fusion”),
Birch Communications Holdings, Inc., a Georgia
corporation, and Fusion BCHI Acquisition LLC, a Delaware limited
liability company (“Fusion
BCHI”). Capitalized terms
used but not defined herein have the meaning given to them in the
Merger Agreement.

 

For a period of twenty four (24) months following
the Closing (the “Indemnity
Period”),
BCHI Holdings, LLC, a Georgia limited liability company
(“Holdings”),
agrees to indemnify and hold
harmless Birch Communications, LLC (“BCLLC'')
and each other subsidiary that remained a subsidiary of BCLLC after
the Closing (BCLLC and each such other subsidiary of BCLLC
hereinafter collectively referred to as a “Covered
Subsidiary”)
from and against any and all asserted and/or actual liabilities for
unpaid state income or
franchise taxes, late fees and
penalties and interest owed for 2017 and prior years and paid by
BCLLC after the Closing.
Notwithstanding the foregoing, Fusion
BCHI agrees that Fusion BCHI shall cover the initial
$1,000,000 of any actual tax liabilities (but not any
late fees, penalties and interest associated therewith). Holdings
shall have the right to assume the defense of these matters and
shall have the right to settle such matters so long as such
settlement does not involve any monetary payment by the Company
and/or its Subsidiaries and does not otherwise have
a material adverse effect on the business of the
Company and its Subsidiaries with respect to any state
taxes.

 

 

 

 

Amounts owed by Holdings under the foregoing
indemnity may be paid in cash or through the transfer to Fusion of
a number of shares of Fusion common stock equal to (rounded up or
down to the nearest whole share) (1) the amount of such obligation
divided by (2) the greater of (A) $3.00, or (B) the weighted
average daily closing bid price of the Fusion common
stock, as reported by NASDAQ (or any successor to such exchange),
for five (5) consecutive trading days ending immediately prior to
the third (3rd) business day preceding the date of such transfer.
Any cash payment and/or return of shares of Fusion common stock
shall be completed within five (5) business days of the date that
the Covered Subsidiary's liability has been
determined. During the Indemnity Period, Holdings
shall, at all times, maintain in its name liquid assets
and shares of Fusion common stock with an aggregate value of no
less than $5.0 million; provided, that for the purposes of
determining the value of shares of Fusion common stock, such shares
will not be deemed to have a value of less than $3.00 per share,
regardless of the then-current market price for such shares.
Amounts owed by Holdings under this indemnity shall be settled
within ten (10) days of the liability being
incurred.

 

 

This
letter agreement shall be governed by, and construed and enforced
in accordance with, the internal Laws of the State of Delaware,
without regard to any applicable conflict of laws principles
(whether of the State of Delaware or any other jurisdiction). This
letter agreement may be executed in two or more counterparts, each
of which will be considered one and the same agreement and will
become effective when counterparts have been signed by each of the
parties and delivered to the other party, it being understood that
each party need not sign the same counterpart.

 

 

[Signatures
are on the following page]

 

 

 

 

If you
agree with the foregoing, please sign and return a copy of this
letter agreement, which will constitute our agreement with respect
to the subject matter hereof.

 

Very
truly yours,

 

BCHI
HOLDINGS, LLC

 

 

By: 
/s/ Holcombe T. Green.
Jr. 

Name:
Holcombe T. Green, Jr.

Title:
Manager

 

 

 

 

 

ACKNOWLEDGED AND
AGREED to

as of
this 4th
day of May, 2018:

 

FUSION
CONNECT, INC.

 

 

By: 
/s/ James P. Prenetta,
Jr. 

Name:
James P. Prenetta, Jr.

Title:
Executive Vice President and General Counsel

 

 

 

 

 

[Signature Page to Side Letter]

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