Document:

Unassociated Document

    

    

    THE
      SECURITIES REPRESENTED BY THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE
      SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE
      SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT
      BE
      OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED UNLESS (1) THERE IS AN EFFECTIVE
      REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, (2) THE SALE
      IS
      MADE IN ACCORDANCE WITH RULE 144 OR A BONA FIDE PLEDGE OR CUSTODIAL ARRANGEMENT
      WITH RESPECT TO SUCH SECURITIES OR (3) AN OPINION OF COUNSEL REASONABLY
      SATISFACTORY TO THE COMPANY IS DELIVERED STATING THAT SUCH REGISTRATION IS
      NOT
      REQUIRED. 

     

    
 

    
      	Warrant No.
              1	
               Up
                to [_________] shares of
                

              Common
                Stock, subject to
                adjustment

            

    

    
    

    

    Warrant

    

    Fusion
      Telecommunications International, Inc.

    

    Fusion
      Telecommunications International, Inc. (the "Company"
      or the
      "Issuer"),
      a
      Delaware corporation, for value received, hereby certifies that _____, or its
      registered permitted assigns, is the registered holder (the "Holder")
      of
      rights to purchase from the Issuer up to [___________(_____)]1 
      (the
      "Warrant
      Number")
      duly
      authorized, validly issued, fully paid and nonassessable shares of common stock,
      par value $0.01 per share (the "Common
      Stock"),
      of
      the Issuer at a price per share equal to the Warrant Price (as defined herein),
      subject to the terms, conditions and adjustments set forth below in this warrant
      (this "Warrant").

     

     

     

    

      

      
        1
          Insert
          50% of the number of shares of Common Stock into which the Holder's Preferred
          Stock is convertible.

         

        
          
            
            

          

          
            
            

            
              

            

          

          
            
            

          

        

      

    

     

    1.     Warrant. The
      Warrant represented hereby has been issued pursuant to the Subscription and
      Rights Agreement dated December 14, 2006 (the “Subscription
      Agreement”),
      and
      is subject to the terms and conditions thereof. Unless otherwise defined herein,
      capitalized terms used herein shall have the meanings set forth in the
      Subscription Agreement.

     

    1.1
      Warrant
      Number and Price; Warrant Term.

     

    (a)
      Warrant
      Number and Price.
      Subject
      to the provisions of this Warrant:

     

    (i)
      this
      Warrant entitles the Holder to purchase at any time during the Warrant Term
      for
      the Warrant Price up to the Warrant Number of shares of Common Stock, subject
      to
      adjustment as set forth herein;

     

    (ii)
      The
      "Warrant
      Price"
      shall
      be a price per share equal to one dollar and sixty-seven cents
      ($1.67)2 .

     

    (b)
      Warrant
      Term.
      The
      "Warrant
      Term"
      shall
      mean from and after the Closing Date (herein defined) until June 13th,
      20143 .

    

    1.2
      Manner
      of Exercise.
      The
      Warrant may be exercised by the Holder, in whole or in part, from time to time
      during the Warrant Term, by presentation and surrender hereof to the Issuer
      at
      its principal office with of a notice in substantially the form attached to
      this
      Warrant as Exhibit
      1
      duly
      executed by such Holder (a "Warrant
      Notice")
      and
      accompanied by payment of the Warrant Price for the number of shares of Common
      Stock specified in such form. Any such exercise shall be irrevocable. As soon
      as
      practicable after each such exercise of this Warrant, but not later than five
      (5) Business Days from the receipt the Warrant Notice, the Issuer shall issue
      and deliver to the Holder a certificate or certificates for the shares of Common
      Stock issuable upon such exercise, registered in the name of the Holder or
      its
      designee.

    

      

    

    
      
        
          2
            120% of
            price of Issuer’s Common Stock determined at the initial closing under the
            Subscription Agreement (the “Closing
            Date”),
            as
            adjusted pursuant to this Warrant.

           

        

        
          3
            Date is
            90th
            monthly
            anniversary of Closing Date.

           

        

      

    

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

       

    

    2.     Reservation
      of Shares. For
      so
      long as this Warrant has not been exercised in full, the Issuer shall, at all
      times prior to the end of the Warrant Term, reserve and keep available free
      from
      any pre-emptive rights that would reduce the number of shares issuable to the
      Holder under this Warrant, out of its authorized but unissued capital stock,
      the
      number of shares of Common Stock available for exercise hereunder. In the event
      the number of Common Shares plus all other shares of Common Stock outstanding
      and otherwise reserved for issuance exceeds the total authorized number of
      shares of Common Stock, the Issuer shall promptly take all actions necessary
      to
      increase the authorized number of shares of Common Stock, including causing
      its
      board of directors to call a special meeting of stockholders and recommend
      such
      increase.

     

    3.     Transfer
      and Assignment. By
      accepting delivery of this Warrant, the Holder covenants and agrees with the
      Issuer not to exercise the Warrant or transfer the Warrant or the Common Shares
      represented hereby except in compliance with the terms of this Warrant. By
      accepting delivery of this Warrant, the Holder further covenants and agrees
      with
      the Issuer that the Warrant may not be sold or assigned, in whole or in part,
      unless such sale or assignment complies with applicable federal and state
      securities laws and the terms of this Warrant. As condition precedent to any
      transfer, the Holder shall provide the Issuer with an opinion of counsel in
      such
      form as the Issuer may reasonably require. If a portion of the Warrant evidenced
      hereby is transferred in compliance with the terms of this Warrant, all rights
      of the Holder hereunder may be exercised by the transferee provided
      that any
      Holder of the Warrant may deliver a Warrant Notice only with respect to such
      Holder's portion of the Warrant.

     

    4.    Taxes. The
      Issuer will pay all documentary stamp taxes (if any) attributable to the
      issuance of Common Stock upon the exercise of the Warrant by the Holder;
provided,
      however,
      that
      the Issuer shall not be required to pay any tax or taxes which may be payable
      in
      respect of any transfer involved in the registration of the Warrant or any
      certificates for Common Shares in a name other than that of the Holder of the
      Warrant surrendered upon the exercise of the Warrant, and the Issuer shall
      not
      be required to issue or deliver a Warrant evidencing rights thereunder or
      certificates for Common Shares unless or until the person or persons requesting
      the issuance thereof shall have paid to the Issuer the amount of such tax or
      shall have established to the reasonable satisfaction of the Issuer that such
      tax has been paid.

     

    5.     Adjustments.
      The
      number of share of Common Stock issuable upon exercise of the Warrant is subject
      to adjustment for stock splits, recombinations, stock dividends and the
      like.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

       

    

    6.     Business
      Combinations.
      In case
      the Issuer on or after the date hereof is party to any (a) acquisition of the
      Issuer by means of merger or other form of corporate reorganization in which
      outstanding shares of the Issuer are exchanged for securities or other
      consideration issued, or caused to be issued, by the Acquiring Person, herein
      defined, or its Parent, herein defined, Subsidiary, herein defined, or
      affiliate, (b) a sale of all or substantially all of the assets of the Issuer
      (on a consolidated basis) in a single transaction or series of related
      transactions, (c) any other transaction or series of related transactions by
      the
      Issuer or relating to the Common Stock (including without limitation, any stock
      purchase or tender or exchange offer) in which the power to cast the majority
      of
      the eligible votes at a meeting of the Issuer's stockholders at which directors
      are elected is transferred to a single entity or group acting in concert, or
      (d)
      a capital reorganization or reclassification of the Common Stock or other
      securities (other than a reorganization or reclassification in which the Common
      Stock or other securities are not converted into or exchanged for cash or other
      property, and, immediately after consummation of such transaction, the
      stockholders of the Issuer immediately prior to such transaction own the Common
      Stock, other securities or other voting stock of the Issuer in substantially
      the
      same proportions relative to each other as such stockholders owned immediately
      prior to such transaction), then, and in the case of each such transaction
      (each
      of which is referred to herein as "Change
      in Control"),
      proper provision shall be made so that, at the option of the Acquiring Person
      and upon fifteen days’ notice to the Issuer and the Holder prior to the
      consummation of the Change of Control, either (i) the Acquiring Person expressly
      agrees to assume all of the Issuer’s obligations under the Warrant or (ii) the
      Holder has fifteen (15) days in which to exercise its rights under the Warrant.
      If Holder does not exercise its rights during such fifteen (15) day period,
      all
      rights under the Warrant shall terminate and the Warrant shall be of no further
      force and effect. The Issuer, to the extent feasible, shall provide the Holder
      with thirty (30) days’ notice of the consummation of any Change of Control.
      Subject to the foregoing, on or before the closing date under the agreement
      entered into with an Acquiring Person resulting in a Change in Control, the
      Issuer, if applicable, shall deliver to the Holder written notice that the
      Acquiring Person has assumed such obligations. "Acquiring
      Person"
      means,
      in connection with any Change in Control, (i) the continuing or surviving
      corporation of a consolidation or merger with the Issuer (if other than the
      Issuer), (ii) the transferee of all or substantially all of the properties
      or
      assets of the Issuer, (iii) the corporation consolidating with or merging into
      the Issuer in a consolidation or merger in connection with which the Common
      Stock is changed into or exchanged for stock or other securities of any other
      Person or cash or any other property, (iv) the entity or group (other than
      Holder or any of its affiliates) acting in concert acquiring or possessing
      the
      power to cast the majority of the eligible votes at a meeting of the Issuer
      's
      stockholders at which directors are elected, or, (v) in the case of a capital
      reorganization or reclassification, the Issuer, or (vi) at the Holder's
      election, any Person that (A) controls the Acquiring Person directly or
      indirectly through one or more intermediaries, (B) is required to include the
      Acquiring Person in the consolidated financial statements contained in such
      Parent's Annual Report on Form 10-K (if such Person is required to file such a
      report) or would be required to so include the Acquiring Person in such Person's
      consolidated financial statements if they were prepared in accordance with
      U.S.
      GAAP and (C) is not itself included in the consolidated financial statements
      of
      any other Person (other than its consolidated subsidiaries). "Parent"
      shall
      mean any corporation (other than the Acquiring Person) in an unbroken chain
      of
      corporations ending with the Acquiring Person, provided each corporation in
      the
      unbroken chain (other than the Acquiring Person) owns, at the time of the
      determination, stock possessing fifty percent (50%) or more of the total
      combined voting power of all classes of stock in one of the other corporations
      in such chain. "Subsidiary"
      shall
      mean any corporation at least 50% of whose outstanding voting stock shall at
      the
      time be owned directly or indirectly by the Acquiring Person or by one or more
      Subsidiaries.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

       

    

    7.     Lost
      or Stolen Warrant. In
      case
      this Warrant shall be mutilated, lost, stolen or destroyed, the Issuer may
      in
      its discretion issue in exchange and substitution for and upon cancellation
      of
      the mutilated Warrant, or in lieu of and substitution for the Warrant lost,
      stolen or destroyed, a new Warrant of like tenor, but only upon receipt of
      evidence reasonably satisfactory to the Issuer of such loss, theft or
      destruction of such Warrant. Applicants for a substitute Warrant shall also
      comply with such other reasonable regulations and pay such other reasonable
      charges as the Issuer may prescribe.

     

    8.     Agent. The
      Issuer (and any successor) shall at all times maintain a register of the holders
      of the Warrant.

     

    9.     Notice. All
      notices and other communications from the Issuer to the Holder, or vice versa,
      shall be deemed delivered and effective when given personally or mailed by
      first-class registered or certified mail, postage prepaid, or overnight courier,
      at such address as may have been furnished to the Issuer or the Holder, as
      the
      case may be, in writing by the Issuer or such Holder from time to
      time.

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

       

    

    10.   Miscellaneous.

     

    10.1
      This
      Warrant shall be governed by, and construed in accordance with, the internal
      laws of the State of New York (including Sections 5-1401 and 5-1402 of the
      New
      York General Obligation Law), and the Issuer hereby submits to the non-exclusive
      jurisdiction of any state or federal court in the Southern District of New
      York
      and any court hearing any appeal therefrom, over any suit, action or proceeding
      against it arising out of or based upon this Warrant (a "Related
      Proceeding").
      The
      Issuer hereby waives any objection to any Related Proceeding in such courts
      whether on the grounds of venue, residence or domicile or on the ground that
      the
      Related Proceeding has been brought in an inconvenient forum.

     

    10.2
      Any
      and all remedies set forth in this Warrant: (i) shall be in addition to any
      and
      all other remedies the Holder or the Issuer may have at law or in equity, (ii)
      shall be cumulative, and (iii) may be pursued successively or concurrently
      as
      each of Holder and the Issuer may elect. The exercise of any remedy by the
      Holder or the Issuer shall not be deemed an election of remedies or preclude
      the
      Holder or the Issuer, respectively, from exercising any other remedies in the
      future.

     

    10.3
      For
      purposes of this Warrant, except as otherwise expressly provided or unless
      the
      context otherwise requires: (i) the terms defined in this Warrant have the
      meanings assigned to them in this Warrant and include the plural as well as
      the
      singular, and the use of any gender herein shall be deemed to include the other
      gender and neuter gender of such term; (ii) accounting terms not otherwise
      defined herein have the meanings assigned to them in accordance with U.S. GAAP;
      (iii) references herein to "Articles", "Sections", "Subsections",
      "Paragraphs" and other subdivisions without reference to a document are to
      designated Articles, Sections, Subsections, Paragraphs and other subdivisions
      of
      this Warrant, unless the context shall otherwise require; (iv) a reference
      to a Subsection without further reference to a Section is a reference to such
      Subsection as contained in the same Section in which the reference appears,
      and
      this rule shall also apply to Paragraphs and other subdivisions; (v) the
      words "herein", "hereof", "hereunder" and other words of similar import refer
      to
      this Agreement as a whole and not to any particular provision; (vi) the
      term "include" or "including" shall mean without limitation; (vii) any
      agreement, instrument or statute defined or referred to herein means such
      agreement, instrument or statute as from time to time amended, modified or
      supplemented, including (in the case of agreements or instruments) by waiver
      or
      consent and (in the case of statutes) by succession of comparable successor
      statues and references to all attachments thereto and instruments incorporated
      therein; and (viii) references to a Person are also to its permitted
      successors and assigns and, in the case of an individual, to his or her heirs
      and estate, as applicable.

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

       

    

    10.4
      If
      any term or other provision of this Warrant is invalid, illegal or incapable
      of
      being enforced by any rule of law or public policy all other conditions and
      provisions of this Warrant shall nevertheless remain in full force and effect.
      If the final judgment of a court of competent jurisdiction or other authority
      declares that any term or provision hereof is invalid, void or unenforceable,
      the undersigned agrees that the court making such determination shall have
      the
      power to reduce the scope, duration, area or applicability of the term or
      provision, to delete specific words or phrases, or to replace any invalid,
      void
      or unenforceable term or provision with a term or provision that is valid and
      enforceable and that comes closest to expressing the intention of the invalid
      or
      unenforceable term or provision. Upon such determination that any term or other
      provision is invalid, illegal or incapable of being enforced, the Issuer shall
      negotiate in good faith to modify this Warrant so as to effect the original
      intent of the parties as closely as possible in a mutually acceptable manner
      in
      order that the transactions contemplated hereby be consummated as originally
      contemplated to the fullest extent possible.

     

    10.5
      All
      dollar ($) amounts set forth herein refer to United States dollars. All payments
      hereunder and thereunder will be made in lawful currency of the United States
      of
      America.

     

    10.6
      The
      Issuer may not assign its obligations under this Warrant other than by operation
      of law or in connection with a merger or sale of all or substantially all of
      the
      Issuer's assets or stock or a Change in Control of the Issuer. Subject to the
      terms hereof, Holder may assign, pledge, hypothecate or transfer any of the
      rights and associated obligations contemplated by this Warrant, in whole or
      in
      part, at its sole discretion (including, but not limited to, assignments,
      pledges, hypothecations and transfers in connection with hedging transactions
      with respect to this Warrant).

     

    10.7
      Under the Subscription Agreement, the Issuer is only required to use its best
      efforts to cause a registration statement covering the issuance of the
      Registrable Securities to be declared effective, and once effective, only to
      use
      its best efforts to maintain the effectiveness of the registration statement.
      The Issuer will not be obligated to deliver any Registrable Securities, and
      there are no contractual penalties for failure to deliver any such securities,
      if a registration statement is not effective at the time of exercise. The
      failure or inability of the Issuer to maintain the effectiveness of such
      registration statement shall not in any way prevent the expiration of this
      Warrant at the end of the Warrant Term.

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

       

    

    Notwithstanding
      anything herein to the contrary, if a Holder upon any Warrant exercise does
      not
      consent to accept unregistered Common Stock in lieu of Registered Common Stock
      (as defined in the Issuer’s Certificate of Rights and Preferences of Series A-1
      Cumulative Convertible Preferred Stock, as amended), then such Holder’s Warrant
      Notice shall be deemed, without any further action, to have been withdrawn.
      Moreover, in no event is the Issuer obligated to settle any Warrant exercise,
      in
      whole or in part, for cash.

    

     

    This
      Warrant shall not be valid unless signed by the Issuer.

     

    [Remainder
      of Page Left Blank Intentionally]

    

     

     

     

     

     

    

 

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

       

    

    IN
      WITNESS WHEREOF, the Issuer has caused this Warrant to be signed by its duly
      authorized officer.

    

    

    Dated:
      ________, 2006

    

    

                FUSION
      TELECOMMUNICATIONS INTERNATIONAL, INC.

    

    

    

                By:
      ______________________

                Name:

                Title:

     

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Exhibit
      1

    

    [FORM
      OF
      WARRANT NOTICE]

    

    

    (To
      Be
      Executed Upon Exercise Of Warrant)

    

    

                  [DATE]

    

    Fusion
      Telecommunications International, Inc.

    420
      Lexington Avenue, Suite 1718

    New
      York,
      New York 10170

    Attention:          
       [____________]

    

    
      	
            	Re:	
              Exercise
                of Warrant

            

    

    

    Ladies
      and Gentlemen:

    

    The
      undersigned is the registered holder of a warrant (the "Warrant")
      evidencing certain rights to purchase shares of Fusion Telecommunications
      International, Inc. (the "Issuer")
      and
      hereby elects to exercise the Warrant to purchase ______ shares of Common Stock
      (as defined in the Warrant) and hereby delivers via wire transfer of immediately
      available United States funds $____________ in exchange for such shares of
      Common Stock, all in accordance with the terms of such Warrant.

    

    In
      accordance with the terms of the attached Warrant, the undersigned requests
      that
      certificates for such shares be registered in the name of and delivered to
      the
      undersigned at the following address:

    

    [TO
      BE
      ADDED]

    

    [If
      the number of shares of Common Stock specified above is less than the total
      number of shares of Common Stock remaining under the Warrant, insert the
      following
      -- The
      undersigned requests that a new Warrant substantially identical to the attached
      Warrant be issued to the undersigned evidencing rights to exercise additional
      Warrants equal to the number of shares of Common Stock called for on the face
      of
      the current Warrant, as adjusted, minus
      the
      gross number of shares of Common Stock delivered to the undersigned in
      accordance with this Notice.]

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

                    HOLDER

    

    

                    By:____________________________________     

                      Name:

                      Title:

    

    

    

                    By:____________________________________     

                      Name:

                      Title:

    

    

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    Table
      of Contents

    
      	 	 	
               Page

            
	
              1.

            	
              Warrant

            	
               2

            
	 	 	 
	
              2.

            	
              Reservation
                of Shares

            	
               3

            
	 	 	 
	
              3.

            	
              Transfer
                and Assignment

            	
               3

            
	 	 	 
	
              4.

            	
              Taxes

            	
               3

            
	 	 	 
	
              5.

            	
              Adjustments

            	
               3

            
	 	 	 
	
              6.

            	
              Business
                Combinations

            	
               4

            
	 	 	 
	
              7.

            	
              Lost
                or Stolen Warrant

            	
               5

            
	 	 	 
	
              8.

            	
              Agent

            	
               5

            
	 	 	 
	
              9.

            	
              Notice

            	
               5

            
	 	 	 
	
              10.

            	
              Miscellaneous

            	
               5CERTIFICATE
      OF RIGHTS AND PREFERENCES

    OF

    SERIES
      A-1 CUMULATIVE CONVERTIBLE PREFERRED STOCK

    OF

    FUSION
      TELECOMMUNICATIONS INTERNATIONAL, INC.

     

    DECEMBER
      14, 2006

     

    Pursuant
      to Section 151 of the Delaware General Corporation Law and Article Fourth,
      Section 2 of the Certificate of Incorporation (as amended, the "Certificate
      of Incorporation"),
      of
      Fusion Telecommunications International, Inc. (the "Company"),
      a
      corporation organized and existing under the laws of the State of Delaware,
      hereby certifies that the following resolution was duly adopted by the board
      of
      directors of the Company (the "Board")
      effective as of December 14, 2006 pursuant to authority conferred upon the
      Board
      by the Certificate of Incorporation, which authorizes the issuance of up to
      ten
      million (10,000,000) shares of preferred stock, par value $0.01 per
      share.

     

    RESOLVED,
      that pursuant to authority expressly granted to and vested in the Board and
      pursuant to the provisions of the Certificate of Incorporation, the Board hereby
      creates a series of preferred stock, herein designated and authorized as the
      Series A-1 Cumulative Convertible Preferred Stock, par value $0.01 per share,
      which shall consist of ten thousand (10,000) of the ten million (10,000,000)
      shares of preferred stock (the "Series
      A-1 Preferred Stock")
      which
      the Company now has authority to issue, and the Board of Directors hereby fixes
      the powers, designations and preferences and the relative, participating,
      optional and other special rights of the shares of such series, and the
      qualifications, limitations and restrictions thereof as follows:

     

    1.     Number.
      The
      number of shares constituting the Series A-1 Cumulative Convertible Preferred
      Stock shall be ten thousand (10,000).

     

    2.     Definitions.
      Unless
      the context otherwise requires, when used herein the following terms shall
      have
      the meaning indicated.

     

    "Acquiring
      Person"
      is
      defined in Section 6(G).

     

    "AMEX"
      means
      the American Stock Exchange, provided,
      however,
      that if
      the American Stock Exchange is not then the principal U.S. trading market for
      the Common Stock, then "AMEX"
      shall
      be deemed to mean the principal U.S. national securities exchange (as defined
      in
      the Securities Exchange Act of 1934, as amended (the "Exchange
      Act")
      on
      which the Common Stock is then traded, or if such Common Stock is not then
      listed or admitted to trading on any national securities exchange but is
      designated as a Nasdaq Capital Market Security by the National Association
      of
      Securities Dealers, Inc. ("NASD"),
      then
      such market system, or if such Common Stock is not listed or quoted on any
      of
      the foregoing, then the OTC Bulletin Board.

     

    "Board"
      means
      the Board of Directors of the Company.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

       

    

    "Business
      Day"
      means
      any day on which the Common Stock may be traded on the AMEX, or, if not admitted
      for trading on the AMEX, any day other than a Saturday, Sunday or holiday on
      which banks in New York City are required or permitted to be
      closed.

     

    “Call
      Notice”
is
      defined in Section
      6(C).

     

    "Capital
      Stock"
      means
      (i) with respect to any Person that is a corporation, any and all shares,
      interests, participations or other equivalents (however designated) of capital
      or capital stock of such Person and (ii) with respect to any Person that is
      not
      a corporation, any and all partnership, limited partnership, limited liability
      company or other equity interests of such Person.

     

    "Certificate"
      means
      this Certificate of Rights and Preferences of the Series A-1 Cumulative
      Convertible Preferred Stock.

     

    "Certificate
      of Incorporation"
      means
      the Certificate of Incorporation of the Company, as amended.

     

    "Change
      of Control"
      is
      defined in Section
      6G.

     

    "Common
      Stock"
      means
      the Company's common stock, par value $0.01 per share, and any Capital Stock
      for
      or into which such Common Stock hereafter is exchanged, converted, reclassified
      or recapitalized by the Company or pursuant to a Change of Control to which
      the
      Company is a party (or, at the election of the Acquiring Person, the capital
      stock of any Acquiring Person from and after the consummation of a Change of
      Control).

     

    "Common
      Stock Equivalents"
      means
      (without duplication with any other Common Stock or common stock, as the case
      may be, or Common Stock Equivalents) rights, warrants, options, convertible
      securities or exchangeable securities, exercisable for or convertible or
      exchangeable into, directly or indirectly, Common Stock, or common stock, as
      the
      case may be, whether at the time of issuance or upon the passage of time or
      the
      occurrence of some future event.

     

    "Company"
      means
      Fusion Telecommunications International, Inc., a Delaware corporation (or,
      if,
      as, and when applicable, any Acquiring Person from and after the consummation
      of
      a Change of Control).

     

    "Company
      Conversion"
      is
      defined in Section
      6(B)(i).

     

    "Company
      Conversion Notice"
      is
      defined in Section
      6(B)(i).

     

    "Conversion
      Notice"
      is
      defined in Section
      6(A)(i).

     

    "Conversion
      Price"
      means
      $1.67, subject to adjustment for stock splits, recombinations, stock dividends
      and the like as provided herein.

     

    "Conversion
      Stock Amount"
      is
      defined in Section
      6(A)(ii).

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

       

    

    "Daily
      Market Price"
      means,
      on any date, the amount per share of the Common Stock equal to (i) the daily
      volume-weighted average price on the AMEX or, if no sale takes place on such
      date, the closing bid prices on the AMEX thereof on such date, in each case
      as
      reported by Bloomberg, L.P. (or by such other Person as the Company may select),
      or (ii) if such Common Stock is not then listed or admitted to trading on the
      AMEX, the higher of (x) the book value per share thereof as determined by any
      firm of independent public accountants of recognized standing selected by the
      Board as of the last calendar day of the most recent month ending before the
      date as of which the determination is to be made or (y) the fair value per
      share
      thereof determined in good faith by an independent, nationally recognized
      appraisal firm selected by the Board, subject to adjustment for stock splits,
      recombinations, stock dividends and the like.

     

    "Dividend
      Payment Date"
      is
      defined in Section
      3(A).

     

    "Dividend
      Period"
      is
      defined in Section
      3(A).

     

    "Dividend
      Rate"
      means a
      rate equal to the Stated Value multiplied by eight percent (8%) per
      annum.

     

    "Exchange
      Act"
      means
      the Securities Exchange Act of 1934, as amended. 

     

    "Holder"
      shall
      mean a holder of the Series A-1 Preferred Stock.

     

    "Issue
      Date"
      means
      with respect to shares of the Series A-1 Preferred Stock the initial date of
      issuance of any of such shares of the Series A-1 Preferred Stock.

     

    “Issue
      Date Price”
means
      the price of Issuer’s Common Stock determined on the date of the initial
      issuance of the shares of the Series A-1 Preferred Stock.

     

    "Junior
      Securities"
      means
      Capital Stock that, with respect to dividends and distributions upon
      Liquidation, ranks junior to the Series A Preferred Shares, including but not
      limited to Common Stock and any other class or series of Capital Stock issued
      by
      the Company or any Subsidiary of the Company on or after the Issue Date, but
      excluding any Parity Securities and Senior Securities issued (i) to Holders
      of
      the Series A-1 Preferred Stock, (ii) with the approval of the Holders of a
      Majority of the Series A-1 Preferred Stock or (iii) upon the conversion,
      redemption or exercise of securities described in clause (i) or (ii) in
      accordance with the terms thereof.

     

    "Liquidation"
      means
      the voluntary or involuntary liquidation, dissolution or winding up of the
      Company; provided,
      however,
      that a
      consolidation, merger or share exchange shall not be deemed a Liquidation,
      nor
      shall a sale, assignment, conveyance, transfer, lease or other disposition
      by
      the Company of all or substantially all of its assets, which does not involve
      a
      substantial distribution by the Company of cash or other property to the holders
      of Common Stock, be deemed to be a Liquidation.

     

    "Liquidation
      Preference"
      is
      defined in Section
      4.

     

    "Majority
      of the Series A-1 Preferred Stock"
      means
      more than fifty percent (50%) of the then outstanding shares of the Series
      A-1
      Preferred Stock.

     

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

       

    

    "Other
      Securities"
      means
      any stock (other than Common Stock) and other securities of the Company or
      any
      other Person which the Holders of the Series A-1 Preferred Stock at any time
      shall be entitled to receive, or shall have received, upon conversion or
      redemption of the Series A-1 Preferred Stock in lieu of or in addition to Common
      Stock, or which at any time shall be issuable or shall have been issued in
      exchange for or in replacement of Common Stock or Other Securities.

     

    "Parity
      Securities"
      means
      any class or series of Capital Stock that, with respect to dividends or
      distributions upon Liquidation, is pari passu
      with all
      Series A-1 Preferred Shares. For the avoidance of doubt, each series of Series
      A
      Preferred Shares is a Parity Security with respect to each other series of
      Series A Preferred Shares.

     

    "Person"
      means
      an individual, corporation, partnership, limited liability company, joint
      venture, association, trust, unincorporated organization or other
      entity.

     

    "Prevailing
      Price"
      means,
      with respect to any reference date, the average of the Daily Market Prices
      of
      the Common Stock for the thirty (30) Business Days ending on and including
      the
      third (3rd)
      Business Day before such reference date.

     

    "Qualified
      Public Company"
      means a
      corporation meeting all of the following criteria: (i) the common stock of
      the
      corporation is registered under Section 12 of the Securities Exchange Act of
      1934, as amended, (ii) the Prevailing Price shall be an amount greater than
      one
      dollar ($1) per share of Common Stock, and (iii) the average daily reported
      volume of trading in such common stock on all national securities exchanges,
      markets, services, and/or reported through the AMEX as reported by Bloomberg
      L.P. (or by such other Person as the Company may select) during the ninety
      (90)
      calendar days preceding the reference date exceeds twenty thousand (20,000)
      shares of Common Stock.

     

    "Registered
      Common Stock"
      means
      Common Stock the resale of which has been registered under the Securities Act
      and is freely tradable upon delivery.

     

    "Securities
      Act"
      means
      the Securities Act of 1933, as amended, or any successor statute, and the rules
      and regulations promulgated thereunder.

     

    "Senior
      Securities"
      means
      any class or series of Capital Stock that, with respect to dividends or
      distributions upon Liquidation, ranks senior to the Series A-1 Preferred
      Stock.

     

    "Series
      A-1 Preferred Stock"
      means
      the Series A-1 Cumulative Convertible Preferred Stock of the Company or any
      successor.

     

    "Stated
      Value"
      is an
      amount equal to one thousand dollars ($1,000) per share of the Series A-1
      Preferred Stock plus any accrued and unpaid dividends, whether or not declared
      and whether or not earnings are available in respect of such dividends. In
      the
      event the Company shall declare a distribution on the Common Stock payable
      in
      securities or property other than cash, the value of such securities or property
      will be the fair market value. Any securities shall be valued as follows: (i)
      if
      traded on a national securities exchange or through a Nasdaq market, the value
      shall be deemed to be the average of the closing prices of the securities on
      such exchange or system over the thirty (30) Business Day period ending three
      (3) calendar days prior to such declaration; (ii) if actively traded
      over-the-counter, the value shall be deemed to be the average of the closing
      bid
      or sale prices (whichever is applicable) over the thirty (30) Business Day
      period ending three (3) calendar days prior to such declaration; and (iii)
      if
      there is no active public market, the value shall be the fair market value
      thereof, as determined in good faith by the Board.

     

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

       

    

    "Subsidiary"
      of a
      Person means (i) a corporation, a majority of whose stock with voting power,
      under ordinary circumstances, to elect directors is at the time of
      determination, directly or indirectly, owned by such Person or by one or more
      Subsidiaries of such Person, or (ii) any other entity (other than a corporation)
      in which such Person or one or more Subsidiaries of such Person, directly or
      indirectly, at the date of determination thereof has a least a majority
      ownership interest.

     

    The
      foregoing definitions will be equally applicable to both the singular and plural
      forms of the defined terms.

     

    3.     Dividends
      and Distributions.

     

    (A) Holders
      shall be entitled to receive out of the assets of the Company legally available
      for that purpose, dividends at the Dividend Rate to be paid in accordance with
      the terms of this Section
      3.
      Such
      dividends shall be fully cumulative from the Issue Date, shall accumulate
      regardless of whether the Company earns a profit and shall be payable in
      arrears, when and as declared by the Board (or a duly appointed committee of
      directors), on January 1 of
      each
      year,
      (each
      such date being herein referred to as a "Dividend
      Payment Date"),
      commencing on January 1, 2008. The period from the Issue Date to January 1,
      2008, and each annual period between consecutive Dividend Payment Dates shall
      hereinafter be referred to as a "Dividend
      Period."
      The
      dividend for any Dividend Period for any share of Series A-1 Preferred Stock
      that is not outstanding on every calendar day of the Dividend Period shall
      be
      prorated based on the number of calendar days such share was outstanding during
      the period. Each such dividend shall be paid to the Holders of record of the
      Series A-1 Preferred Stock as their names appear on the share register of the
      Company on the Dividend Payment Date. Dividends on account of arrears for any
      past Dividend Periods may be declared and paid at any time, without reference
      to
      any Dividend Payment Date (including, without limitation, for purposes of
      computing the Stated Value of any shares of Series A-1 Preferred Stock in
      connection with the conversion or redemption thereof or any Liquidation of
      the
      Company), to Holders of record on a date designated by the Board, not exceeding
      thirty (30) calendar days preceding the payment date thereof, as may be fixed
      by
      the Board. For purposes of determining the amount of dividends accrued as of
      the
      first Dividend Payment Date and as of any date that is not a Dividend Payment
      Date, such amount shall be calculated on the basis of the Dividend Rate for
      the
      actual number of calendar days elapsed from and excluding the Issue Date (in
      case of the first Dividend Payment Date and any date prior to the first Dividend
      Payment Date) or the last preceding Dividend Payment Date (in case of any other
      date) to the date as of which such determination is to be made, based on a
      three
      hundred sixty-five (365) day year.

     

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

       

    

    (B) Subject
      to the following proviso, dividends payable on the Series A-1 Preferred Stock
      shall be paid, at the option of the Holder, in cash or by the issuance of Common
      Stock provided,
      however,
      that
      the Company may elect to make any payment of dividends by the issuance of
      Registered Common Stock on any Dividend Payment Date with 10 days’ prior written
      notice to the Holder, if the Company is a Qualified Public Company on the
      Dividend Payment Date. The number of shares of Registered Common Stock to be
      issued shall be determined by dividing the cash amount of the dividend otherwise
      payable by the Prevailing Price calculated as of such Dividend Payment Date,
      provided,
      however,
      except
      at the Company’s option, in no event shall such price be less than the price set
      on the Issue Date; provided,
      further,
      if the
      Company shall combine, subdivide or reclassify its Common Stock, or shall
      declare any dividend payable in shares of its Common Stock, or shall take any
      other action of a similar nature affecting such shares, the number of shares
      of
      Registered Common Stock to be issued shall be adjusted to the extent appropriate
      to reflect such event, including appropriate adjustments to account for any
      such
      event that occurs during the period used for calculating such Prevailing Price.
      The number of shares of Registered Common Stock to be issued as a dividend
      shall
      be rounded to the nearest whole share after aggregating all shares of Series
      A-1
      Preferred Stock owned by a Holder.

     

    (C) If,
      on
      any Dividend Payment Date, the Company fails to pay dividends, then until the
      dividends that were scheduled to be paid on such date are paid, such dividends
      shall cumulate, but shall not accrue additional dividends. Unpaid dividends
      for
      any period less than a full Dividend Period shall cumulate on a day to day
      basis
      and shall be computed on the basis of a three hundred sixty-five (365) day
      year.

     

    (D) So
      long
      as any shares of Series A-1 Preferred Stock shall be outstanding, (i) the
      Company, except for the payment of dividends or other cash distributions under
      a
      joint venture agreement or other strategic alliance with respect to which the
      Company and/or a Subsidiary is a party, shall not and shall not allow its
      Subsidiaries to declare or pay any dividend whatsoever, whether in cash,
      property or otherwise, set aside any cash or property for the payment of
      dividends, or make any other distribution on any Parity Securities, except
      for
      dividends paid to the Company or any of its wholly-owned Subsidiaries and
      dividends paid on the Series A Preferred Shares or (ii) the Company shall not
      and shall not allow its Subsidiaries to repurchase, redeem or otherwise acquire
      for value or set aside any cash or property for the repurchase or redemption
      of
      any Junior Securities or Parity Securities, unless in each such case all
      dividends to which the Holders of the Series A-1 Preferred Stock shall have
      been
      entitled to receive for all previous Dividend Periods shall have been
      paid.

     

    (E) Subject
      to the immediately following sentence, the Company shall be entitled to deduct
      and withhold from any dividend on the Series A-1 Preferred Stock such amounts
      as
      the Company is required to deduct and withhold with respect to such dividend
      under the Internal Revenue Code of 1986, as amended, or any other provision
      of
      state, local or foreign tax law. In the event the Company or the Holder elects,
      pursuant to Section 3(B), to pay or be paid, as the case may be, a dividend
      on
      the Series A-1 Preferred Stock by issuing Registered Common Stock or Common
      Stock, as the case may be, to a Holder, (i) the Company shall deliver the number
      of shares of Registered Common Stock or Common Stock, as the case may be, that
      would be delivered to a Holder pursuant to Section 3(B) in the absence of any
      requirement under applicable law to deduct and withhold any amount with respect
      to such dividend and (ii) on the Business Day following the Dividend Payment
      Date, Holder shall transfer to the Company by wire transfer of immediately
      available funds an amount equal to what the Company is required under applicable
      law to deduct and withhold with respect to such dividend. For purposes of
      determining the withholding amount, the dividend value shall be determined
      under
      Section 3(B) hereof.

     

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

       

    

    4.     Liquidation
      Preference.
      In the
      event of any Liquidation, after payment or provision for payment by the Company
      of the debts and other liabilities of the Company and the liquidation preference
      of any Senior Securities that rank senior to the Series A-1 Preferred Stock
      with
      respect to distributions upon Liquidation, each Holder shall be entitled to
      receive an amount in cash for each share of the then outstanding Series A-1
      Preferred Stock held by such Holder equal to the greater of (a) the Stated
      Value
      per share to and including the date full payment is tendered to the Holders
      with
      respect to such Liquidation, and (b) the amount the Holders would have received
      if the Holders had converted all outstanding shares of Series A-1 Preferred
      Stock into Common Stock in accordance with the provisions of Section
      6(A)
      hereof,
      in each case as of the Business Day immediately preceding the date of such
      Liquidation (the "Liquidation
      Preference"),
      before any distribution shall be made to the holders of any Junior Securities
      (and any Senior Securities or Parity Securities that, with respect to
      distributions upon Liquidation, rank junior to the Series A-1 Preferred Stock)
      upon the Liquidation of the Company. In case the assets of the Company available
      for payment to the Holders are insufficient to pay the full Liquidation
      Preference on all outstanding shares of the Series A-1 Preferred Stock and
      all
      outstanding shares of Parity Securities and Senior Securities that, with respect
      to distributions upon Liquidation, are pari passu
      with the
      Series A-1 Preferred Stock in the amounts to which the holders of such shares
      are entitled, then the entire assets of the Company available for payment to
      the
      Holders and to the holders of such Parity Securities and Senior Securities
      shall
      be distributed ratably among the Holders of the Series A-1 Preferred Stock
      and
      the holders of such Parity Securities and Senior Securities, based upon the
      aggregate amount due on such shares upon Liquidation. Written notice of any
      Liquidation of the Company, stating a payment date and the place where the
      distributable amounts shall be payable, shall be given by facsimile and
      overnight delivery not less than ten (10) calendar days prior to the payment
      date stated therein, to the Holders of record of the Series A-1 Preferred Stock,
      if any, at their respective addresses as the same shall appear on the books
      of
      the Company.

     

    5.     Voting
      Rights.
      The
      Holders shall have the following voting rights with respect to the Series A-1
      Preferred Stock:

     

    (A) Each
      share of Series A-1 Preferred Stock shall entitle the holder thereof to the
      voting rights specified in Section
      5(B)
      and no
      other voting rights except as required by law.

     

    (B) The
      consent of the Holders of at least a Majority of the Series A-1 Preferred Stock,
      voting separately as a single class with one vote per share, in person or by
      proxy, either in writing without a meeting or at an annual or a special meeting
      of such Holders called for the purpose, shall be necessary to:

     

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

       

    

    (i) amend,
      alter or repeal, by way of merger or otherwise, any of the provisions of the
      Certificate of Incorporation, including this Certificate, or Bylaws of the
      Company so as to:

     

    A. change
      any of the rights, preferences or privileges of Holders. Without limiting the
      generality of the preceding sentence, such change includes any action that
      would:

     

    1. reduce
      the Dividend Rate on the Series A-1 Preferred Stock, or make such dividends
      non-cumulative, or defer the date from which dividends will accrue, or cancel
      accrued and unpaid dividends, or change the relative seniority rights of the
      holders of Series A-1 Preferred Stock as to the payment of dividends in relation
      to the holders of any other capital stock of the Company;

     

    2. reduce
      the amount payable to the holders of the Series A-1 Preferred Stock upon the
      voluntary or involuntary liquidation, dissolution, or winding up of the Company,
      or change the relative seniority of the liquidation preferences of the holders
      of the Series A-1 Preferred Stock to the rights upon liquidation of the holders
      of any other capital stock of the Company; 

     

    3. make
      the
      Series A-1 Preferred Stock redeemable at the option of the Company other than
      in
      accordance with the terms of this Certificate.

     

    B. authorize,
      create or issue any shares of Parity Securities or Senior Securities (or amend
      the provisions of any existing class of Capital Stock to make such class of
      Capital Stock a class of Parity Securities or Senior Securities).

     

    (ii) permit
      any Subsidiary of the Company to issue or sell, or obligate itself to issue
      or
      sell, except to the Company or any wholly owned Subsidiary, any security of
      such
      Subsidiaries or all or substantially all of the assets of any Subsidiary other
      than sales of assets on an arm's-length, fair market value basis;
      or

     

    (iii) increase
      or decrease (other than by redemption or conversion) the total number of
      authorized shares of Series A-1 Preferred Stock or amend any provisions of
      any
      Capital Stock so as to make such Capital Stock redeemable by the
      Company.

     

    6.     Conversion
      and Call Rights.

     

    (A) Procedure
      for Conversion.

     

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

       

    

    (i) General.
      Shares
      of Series A-1 Preferred Stock are convertible at the option of the Holder
      thereof at any time, from time to time, in whole or in part, as
      follows:

     

    A. The
      conversion of shares of Series A-1 Preferred Stock may be effected by delivering
      a duly executed written Series A-1 Preferred Stock Conversion Notice, in form
      and substance as provided by the Company (the "Conversion
      Notice"),
      to
      the Company, at its principal office specifying the number of shares of Series
      A-1 Preferred Stock to be converted and surrendering the certificate
      representing the shares of Series A-1 Preferred Stock to be
      converted.

     

    B. As
      soon
      as practicable after each such conversion of Series A-1 Preferred Stock, but
      not
      later than five (5) Business Days from the receipt of the Conversion Notice,
      the
      Company shall deliver to such Holder at the address specified in the Conversion
      Notice the Conversion Stock Amount of duly authorized, validly issued, fully
      paid and nonassessable shares of Registered Common Stock (or Other Securities
      or, with such Holder's express written consent, unregistered Common
      Stock).

     

    C. Notwithstanding
      anything in the Certificate to the contrary, if such Holder does not consent
      to
      accept unregistered Common Stock, then such Holder’s Notice of Conversion shall
      be deemed, without any further action, to have been withdrawn. Moreover, in
      no
      event, shall any conversion under the Certificate be settled in
      cash.

     

    (ii) Conversion
      for stock.
      Subject
      to the previous sub-paragraph, such shares of stock shall be converted into
      that
      number of shares of Registered Common Stock (or at the sole election of the
      Holder, unregistered Common Stock) equal to (A) the aggregate Stated Value
      of
      such shares divided by (B) the Conversion Price (the
      "Conversion
      Stock Amount").
      It
      shall be a condition of either the Company or the converting Holder's obligation
      to close the conversion of the Series A-1 Preferred Stock that such conversion
      be in accordance with applicable federal and state securities laws and any
      applicable waiting period (and any extension thereof) under the
      Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, shall have
      expired or been terminated without litigation having been commenced that is
      continuing, or threat of litigation having been made that remains unresolved,
      by
      the United States Department of Justice or the United States Federal Trade
      Commission.

     

    (iii) Holder
      of record.
      Each
      conversion of Series A-1 Preferred Stock shall be deemed to have been effected
      immediately before the close of business on the Business Day on which the
      Conversion Notice is delivered, and at such time the Person or Persons in whose
      name or names any certificate or certificates for shares of Common Stock (or
      Other Securities) shall be issuable upon such conversion as provided herein
      shall be deemed to have become the holder or holders of record
      thereof.

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

       

    

    (iv) Partial
      conversion.
      If any
      conversion is for only part of the shares represented by the certificate
      surrendered, the Company shall send a new Series A-1 Preferred Stock certificate
      of like tenor via certified or registered mail RRR or reputable overnight
      courier to such address specified by the Holder, calling in the aggregate on
      the
      face or faces thereof for the number of shares of Series A-1 Preferred Stock
      which have not been converted.

     

    (B) Procedure
      for Conversion by the Company.

     

    (i) Conversion
      by the Company.
      Shares
      of Series A-1 Preferred Stock may be converted by the Company (a "Company
      Conversion")
      in
      whole or in part for Common Stock as follows

     

    A. From
      and
      after the first anniversary of the Closing Date, the Company may require the
      Holders to convert, on a pro rata
      basis as
      among the holders of Series A-1 Preferred Shares, shares of Series A-1 Preferred
      Shares held by such holders on any of March 31, June 30,
      September 30 and December 31 of each year by delivering a conversion
      notice to the Holders, at least ten (10) days prior to such conversion and
      substantially in the form as provided by the Company (a "Company
      Conversion Notice"),
      provided
      that (x)
      the average of the Daily Market Prices of the Common Stock for the ninety (90)
      calendar days ended immediately prior to such Conversion Notice is an amount
      greater than two hundred twenty percent (220%) of the Conversion Price or (y)
      after the fifth anniversary of the Closing Date, the Prevailing Price shall
      be
      an amount greater than the Issue Date Price. The number of Series A Preferred
      Shares so converted under clause (x) may not exceed the number that would be
      converted for a quantity of shares of Common Stock greater than eight (8) times
      the average daily reported volume of trading in the Common Stock on all national
      securities exchanges, Nasdaq market, service, and/or reported through the AMEX
      as reported by Bloomberg L.P. (or by such other Person as the Company may
      select) during the ninety (90) calendar days ending one day prior to the
      Conversion Notice Date concerning a conversion under clause (x). The Conversion
      Price and the Conversion Stock Amount under clause (x) shall be determined
      in
      accordance with Section
      6(A)(ii).
      The
      conversion price under clause (y) shall be the Prevailing Price, if the
      Prevailing Price is greater than the Conversion Price and shall be the
      Conversion Price if the Conversion Price is greater than the Prevailing Price.
      The Conversion Stock Amount under clause (y) shall be determined in accordance
      with Section
      6(A)(ii),
      using
      the conversion price as determined in accordance with the immediately preceding
      sentence.

     

    (C) Five
      Year Call Right.
      From
      and after the fifth anniversary of the date on which the Registration
      Requirement has been satisfied, the Company may from time-to-time issue a call
      notice to the holders of the Series A-1 Preferred Shares (the “Call
      Notice”).
      Such
      Call Notice, at the Company’s discretion, may be for all or a portion of the
      Series A-1 Preferred Shares. On or before the tenth (10th) Business Day
      following the date of the Call Notice, the holders of the Series A-1 Preferred
      Shares shall deliver to the Company, all, or, in the case of a Call Notice
      concerning a portion of the Series A-1 Preferred Shares, on a pro rata
      basis as
      provided in the Call Notice, based on the number of shares of Series A-1
      Preferred Shares held by each holder, Series A-1 Preferred Shares with an
      aggregate Stated Value equal to the amount designated in the Call Notice. The
      Company shall promptly thereafter pay, by wire transfer of immediately available
      funds, an amount to each such holder equal to the aggregate Stated Value of
      all
      such Series A-1 Preferred Shares delivered by such holder.

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

       

    

    (D) The
      Company shall at all times reserve for issuance such number of its shares of
      Common Stock as shall be required hereunder.

     

    (E) The
      Company will use its best efforts to procure, at its sole expense, the listing
      of the Common Stock issuable upon conversion or redemption of the Series A-1
      Preferred Stock and shares issuable as dividends hereunder, subject to issuance
      or notice of issuance, on all stock exchanges, markets, and quotation service
      on
      which the Common Stock is then listed or quoted, no later than the date on
      which
      such Series A-1 Preferred Stock is issued to the Holder and thereafter shall
      use
      its best efforts to prevent delisting or removal from quotation of such shares.
      The Company will pay any and all documentary stamp or similar issue or transfer
      taxes that may be payable in respect of the issuance or delivery of shares
      of
      Common Stock on conversion or redemption of shares of the Series A-1 Preferred
      Stock. The Company shall not, however, be required to pay any tax which may
      be
      payable in respect of any transfer involving the issue and delivery of shares
      of
      Common Stock in a name other than that in which the shares of Series A-1
      Preferred Stock so converted or redeemed were registered, and no such issue
      and
      delivery shall be made unless and until the person requesting such issue has
      paid to the Company the amount of any such tax, or has established, to the
      reasonable satisfaction of the Company, that such tax has been
      paid.

     

    (F) No
      fractional shares or scrip representing fractional shares shall be issued upon
      the conversion or redemption of the Series A-1 Preferred Stock. If any such
      conversion or redemption would otherwise require the issuance of a fractional
      share of Common Stock, an amount equal to such fraction multiplied by the
      current Daily Market Price per share of Common Stock on the date of conversion
      or redemption shall be paid to the Holder in cash by the Company. If more than
      one share of Series A-1 Preferred Stock shall be surrendered for conversion
      or
      redemption at one time by or for the same Holder, the number of full shares
      of
      Common Stock issuable upon conversion or redemption thereof shall be computed
      on
      the basis of the aggregate number of shares of Series A-1 Preferred Stock so
      surrendered.

     

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

       

    

    (G) Change
      of Control.
      In case
      the Company on or after the Issue Date is party to any (a) acquisition of the
      Company by means of merger or other form of corporate reorganization in which
      outstanding shares of the Company are exchanged for securities or other
      consideration issued, or caused to be issued, by the Acquiring Person, herein
      defined, or its Parent, herein defined, Subsidiary, herein defined, or
      affiliate, (b) a sale of all or substantially all of the assets of the Company
      (on a consolidated basis) in a single transaction or series of related
      transactions, (c) any other transaction or series of related transactions by
      the
      Company or relating to the Common Stock (including without limitation, any
      stock
      purchase or tender or exchange offer) in which the power to cast the majority
      of
      the eligible votes at a meeting of the Company's stockholders at which directors
      are elected is transferred to a single entity or group acting in concert, or
      (d)
      a capital reorganization or reclassification of the Common Stock or other
      securities (other than a reorganization or reclassification in which the Common
      Stock or other securities are not converted into or exchanged for cash or other
      property, and, immediately after consummation of such transaction, the
      stockholders of the Company immediately prior to such transaction own the Common
      Stock, other securities or other voting stock of the Company in substantially
      the same proportions relative to each other as such stockholders owned
      immediately prior to such transaction), then, and in the case of each such
      transaction (each of which is referred to herein as "Change
      in Control"),
      proper provision shall be made so that, at the option of the Acquiring Person
      and upon fifteen days’ notice to the Company and the Holder prior to the
      consummation of the Change of Control, either (i) the Acquiring Person expressly
      agrees to assume all of the Company’s obligations under the Series A-1 Preferred
      Stock or (ii) the Holder has fifteen (15) days in which to exercise its
      conversion rights under the Series A-1 Preferred Stock. If Holder does not
      exercise its rights during such fifteen (15) day period, all rights under the
      Series A-1 Preferred Stock shall terminate and the Series A-1 Preferred Stock
      shall be deemed cancelled. The Company, to the extent feasible, shall provide
      the Holder with thirty (30) days’ notice of the consummation of any Change of
      Control. Subject to the foregoing, on or before the closing date under the
      agreement entered into with an Acquiring Person resulting in a Change in
      Control, the Company, if applicable, shall deliver to the Holder written notice
      that the Acquiring Person has assumed such obligations. "Acquiring
      Person"
      means,
      in connection with any Change in Control, (i) the continuing or surviving
      corporation of a consolidation or merger with the Company (if other than the
      Company), (ii) the transferee of all or substantially all of the properties
      or
      assets of the Company, (iii) the corporation consolidating with or merging
      into
      the Company in a consolidation or merger in connection with which the Common
      Stock is changed into or exchanged for stock or other securities of any other
      Person or cash or any other property, (iv) the entity or group (other than
      Holder or any of its affiliates) acting in concert acquiring or possessing
      the
      power to cast the majority of the eligible votes at a meeting of the Company
      's
      stockholders at which directors are elected, or, (v) in the case of a capital
      reorganization or reclassification, the Company, or (vi) at the Holder's
      election, any Person that (A) controls the Acquiring Person directly or
      indirectly through one or more intermediaries, (B) is required to include the
      Acquiring Person in the consolidated financial statements contained in such
      Parent's Annual Report on Form 10-K (if such Person is required to file such
      a
      report) or would be required to so include the Acquiring Person in such Person's
      consolidated financial statements if they were prepared in accordance with
      U.S.
      GAAP and (C) is not itself included in the consolidated financial statements
      of
      any other Person (other than its consolidated subsidiaries). "Parent"
      shall
      mean any corporation (other than the Acquiring Person) in an unbroken chain
      of
      corporations ending with the Acquiring Person, provided each corporation in
      the
      unbroken chain (other than the Acquiring Person) owns, at the time of the
      determination, stock possessing fifty percent (50%) or more of the total
      combined voting power of all classes of stock in one of the other corporations
      in such chain. "Subsidiary"
      shall
      mean any corporation at least 50% of whose outstanding voting stock shall at
      the
      time be owned directly or indirectly by the Acquiring Person or by one or more
      Subsidiaries.

     

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

       

    

    7.     Status
      of Converted and Redeemed Shares; Limitations on Series A-1 Preferred
      Stock.
      The
      Company shall return to the status of unauthorized and undesignated shares
      of
      Series A-1 Preferred Stock each share of Series A-1 Preferred Stock which shall
      be converted, redeemed or for any other reason acquired by the Company, and
      such
      shares thereafter may have such characteristics and designations as the Board
      may determine. Without the consent of Majority of the Series A-1 Preferred
      Stock, the Company will not issue any further shares of Series A-1 Preferred
      Stock.

     

    

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      rest
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        -13-

        
          

        

      

      
         

      

       

    

    IN
      WITNESS WHEREOF, this Certificate of Rights and Preferences has been signed
      on
      behalf of the Company by the undersigned, all as of the date first set forth
      above.

     

    

            FUSION
      TELECOMMUNICATIONS INTERNATIONAL, INC.

    

    

            ___________________________________

            Name: _____________________________

            Title: _____________________________

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