FUSION TELECOMMUNICATIONS INTERNATIONAL, INC. SUBSCRIPTION AND RIGHTS AGREEMENT December 20, 2006
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No.:
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Name:
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Number
of Units Subscribed for:
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FUSION
TELECOMMUNICATIONS INTERNATIONAL, INC.
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.
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FOR
RESIDENTS OF FLORIDA
PURSUANT
TO THE LAWS OF THE STATE OF FLORIDA, IF SALES ARE MADE TO FIVE (5) OR MORE
INVESTORS IN FLORIDA, ANY FLORIDA INVESTOR MAY, AT ITS OPTION, WITHDRAW, UPON
WRITTEN (OR TELEGRAPHIC) NOTICE, ANY PURCHASE HEREUNDER WITHIN A PERIOD OF
THREE
(3) DAYS AFTER (A) THE INVESTOR FIRST TENDERS OR PAYS TO THE COMPANY AN AGENT
OF
THE COMPANY OR AN ESCROW AGENT THE CONSIDERATION REQUIRED HEREUNDER, (B) THE
INVESTOR DELIVERS ITS EXECUTED SUBSCRIPTION AGREEMENT, OR (C) THE AVAILABILITY
OF THAT PRIVILEGE IS COMMUNICATED TO SUCH INVESTOR, WHICHEVER OCCURS
LATER.
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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 “▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇ f/b/o Fusion
Telecommunications International, Inc.” or by wire transfer of immediately
available funds to:
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Bank
Name:
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▇▇
▇▇▇▇▇▇ Chase
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Bank
Address:
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1166
Avenue of the Americas - ▇▇▇▇ ▇▇▇▇▇
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▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇
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ABA
Number
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▇▇▇▇▇▇▇▇▇
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Account
Name:
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Fusion
Money Market -
Escrow
Account
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Account
Number:
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777-763281
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(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.
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇
▇.
▇▇▇▇▇, President and CEO
B. Securities
offered will not be registered under the Securities Act of 1933, as
amended
The
undersigned acknowledges that (i) the Securities will not be registered under
the Securities Act of 1933, as amended, and the rules and regulations
promulgated thereunder (the “1933
Act”),
or
the securities laws of any state; (ii) absent an exemption, any transfer of
the
Securities would require registration; (iii) the Securities are being offered
for sale in reliance upon exemptions from registration contained in the 1933
Act
and applicable state laws; and (iv) the Company's reliance upon such exemption
is based in part upon the undersigned's representations, warranties and
agreements contained in this Subscription Agreement and in the Qualified
Purchaser Questionnaire that the undersigned is also delivering to the
Company.
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C. Representations,
Warranties, Acknowledgements and Agreements
In
order
to induce the Company to accept this Subscription Agreement, the undersigned
represents, warrants, acknowledges and covenants to the Company as
follows:
(1) The
undersigned understands that (i) this Subscription Agreement may be accepted
or
rejected in whole or in part by the Company in its sole and absolute discretion,
and (ii) this Subscription Agreement shall survive the undersigned's death,
disability or insolvency, except that the undersigned shall have no obligation
in the event that this Subscription Agreement is rejected by the Company. In
the
event that the Company does not accept the undersigned's subscription, or if
the
Offering is terminated for any reason, the undersigned's subscription payment
(or portion thereof, as the case may be) will be returned to the undersigned
without interest or deduction.
(2) The
undersigned has carefully read this Subscription Agreement (including, without
limitation, the Appendix A entitled “Risk
Factors”),
the
Qualified Purchaser Questionnaire, the Outline of Proposed Terms, the Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2005
(including, without limitation, the risks set forth under the heading
“Risk
Factors”),
and
the Company’s Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 2006, its exhibits attached hereto and thereto, as well as such
other materials as the Company deems necessary to the Offering (collectively,
the “Offering
Materials”).
In
making the decision to invest in the Securities, the undersigned has relied
solely upon the information provided by the Company in the Offering Materials.
To the extent necessary, the undersigned has discussed with his, her or its
counsel the representations, warranties and agreements which the undersigned
makes by signing this Subscription Agreement, the applicable limitations upon
the undersigned's resale of the Securities, and the investment, tax and legal
consequences of this Subscription Agreement. The undersigned disclaims reliance
on any statements made or information provided by any person or entity in the
course of the undersigned’s consideration of an investment in the Securities
other than the Offering Materials.
(3) The
undersigned understands that no federal or state agency has made any finding
or
determination regarding the fairness of the Offering, or any recommendation
or
endorsement of the Offering.
(4) The
undersigned is purchasing the Securities for the undersigned's own account,
with
the intention of holding the Securities for investment purposes, with no present
intention of dividing or allowing others to participate in this investment
or of
reselling or otherwise participating, directly or indirectly, in a distribution
of the Securities; and shall not make any sale, transfer or other disposition
of
the Securities without registration under the 1933 Act and applicable state
securities laws unless an exemption from registration is available under those
laws. The undersigned is not acquiring any portion of the Securities, or any
interest therein, on behalf of another person. No person other than the
undersigned has any direct or indirect beneficial interest in the Securities
subscribed for hereunder by the undersigned. The undersigned, if an entity,
was
not formed for the purpose of purchasing the Securities.
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(5) The
undersigned's overall commitment to investments which are not readily marketable
is not disproportionate to the undersigned's net worth, and the undersigned's
investment in the Securities will not cause such overall commitment to become
excessive.
(6) The
undersigned, if an individual, has adequate means of providing for his or her
current needs and personal and family contingencies and has no need for
liquidity in his or her investment in the Securities.
(7) The
undersigned is an “accredited investor” as that term is defined in Rule 501(a)
under Regulation D promulgated by the Securities and Exchange Commission (the
“SEC”)
under
the 1933 Act. The undersigned is financially able to bear the economic risk
of
this investment, including the ability to afford holding the Securities for
an
indefinite period or to afford a complete loss of this investment.
(8) The
address shown under the undersigned's signature at the end of this Subscription
Agreement is the undersigned's principal residence if he or she is an
individual, or its principal business address if a corporation or other
entity.
(9) The
undersigned, together with any offeree representatives of the undersigned (as
identified in the Qualified Purchaser Questionnaire) has such knowledge and
experience in financial business matters as to be capable of evaluating the
merits and risks of an investment in the Securities. The undersigned
acknowledges that the Offering Materials may not contain all information that
is
necessary to make an investment decision with respect to the Company and the
Securities and that the undersigned must rely on his, her or its own examination
of the Company and the terms and conditions of the Offering prior to making
any
investment decision with respect to the Securities.
(10) The
undersigned has been given the opportunity to ask questions of and receive
answers from the Company and its executive officers concerning the business
and
operations of the Company and the terms, provisions, and conditions of the
Offering and to obtain any such additional information that the undersigned
deems necessary or advisable to verify the accuracy of the information contained
in the Memorandum, or such other information as the undersigned desired in
order
to evaluate an investment in the Company; and the undersigned availed himself,
herself or itself of such opportunity to the extent considered appropriate
in
order to evaluate the merits and risks of the proposed investment.
(11) The
undersigned has made an independent evaluation of the merits of the investment
and acknowledges the high risk nature of the investment including, without
limitation, the Risk Factors set forth in Appendix A.
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(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.
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇
▇.
▇▇▇▇▇, President and CEO
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
with
a
copy to:
▇▇▇▇▇▇▇
Savage LLP
▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇▇
▇▇▇
▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention:
▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
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:
_________________________________
▇▇▇▇
▇.
▇▇▇▇▇, 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:
|
|
|
|
▇▇▇▇
▇. ▇▇▇▇▇, 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:
|
||
|
▇▇▇▇
▇. ▇▇▇▇▇, 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.