Exhibit 10.1


 


FINANCIAL
ADVISORY AGREEMENT


 


This Financial Advisory Agreement (the “Agreement”)
is made as of January 27, 2006 (the “Effective Date”) by and
between Vistula Communications Services, Inc. (the “Company”) and
Indigo Ventures LLC (“Indigo” or the “Advisor”).


 


1. Engagement of Advisor.  The Company hereby engages the Advisor on a
non-exclusive basis for the term of this Agreement, and the Advisor hereby
agrees, to advise, consult with, and assist the Company in various matters
which may include, without limitation (i) a review of the Company’s
business, operations and financial condition, including advising on
capitalization structures; (ii) advice relating to general capital raising
matters; (iii) recommendations relating to specific business operations,
transactions and joint ventures;  (iv) advice
regarding future financings involving debt or equity securities of the Company
or any affiliate; and (v) assistance in connection with the due diligence
review of any significant acquisition transactions proposed by the Company
during the term of this Agreement.   In
the event that Company engages Advisor in connection with any future offering
of the Company’s securities, the Company and the Advisor shall execute a
mutually satisfactory Placement Agent Agreement which shall set forth, among
other things, the Advisor’s compensation for rendering placement agent services
in connection with such offering and the material terms of such offering.  The Advisor agrees to prepare and deliver to
the Company (i) an oral update outlining the services provided by the
Advisor to the Company hereunder in each month during the term of this
Agreement no later than five (5) business days following the end of such
month and (ii) a written report outlining the services provided by the
Advisor to the Company hereunder in each quarter during the term of this
Agreement no later than five (5) business days following the end of such
quarter and to provide to the Company such information as reasonably requested
by the Company in connection with the performance of services by the Advisor
under this Agreement.


 


2. Compensation; Stock Grant; Expenses.  (a) As compensation for services
rendered to the Company under this Agreement, the Company shall pay to the
Advisor a cash fee of $20,000 per month in arrears (“Consulting Fee”)
for Consulting Services, increasing to $30,000 per month beginning in the first
month following the consummation by the Company of a significant debt or equity
financing from which the Company obtains gross proceeds of at least $5
million.  The Advisor Equity shall be
subject to the following restrictions: (i) such equity shall be
non-transferable by Advisor (other than affiliate transfers) prior to the first
anniversary of the date of issuance of such equity and (ii) such equity
shall not be entitled to any registration rights benefiting other Company
common stock.  The Company and Advisor
shall agree on the value of the Advisor Equity for tax reporting purposes at
the time such equity is issued; provided, however, that if the parties are
unable to agree upon such valuation or if the Company’s independent auditor
concludes that the actual value of the Advisor Shares is greater than the
agreed valuation, the parties shall obtain an appraisal of the Advisor Equity by
an independent appraiser acceptable to both parties, at the sole cost of the
Advisor, and the appraisal of the Advisor Shares by such independent appraiser
shall be the agreed value of the Advisor Equity for the purposes of this
Agreement.


 


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(b)           The
Company hereby grants the Advisor 1,500,000 restricted shares of the Company’s
common stock as additional compensation for services rendered hereunder (“Advisor
Shares”).  The Advisor Shares shall
vest upon the earlier of: (i) the closing of a significant acquisition as
may be described in a written notice delivered by the Company to the Advisor on
or after the date hereof, (ii) subject to the approval of the compensation
committee of the Company, the closing of another major acquisition or financing
transaction on which the Advisor provides advice, (iii) a Change of
Control (as defined below) in the Company, or (iv) the one year
anniversary of the Effective Date. 
Except as expressly provided herein, the Advisor Shares may not be sold,
assigned or transferred by the Advisor for a one (1) year period beginning
on the Effective Date and ending on the one (1) year anniversary of such
Effective Date.  If the Advisor Shares
are not covered by an effective registration statement on the first anniversary
of the Effective Date, the Advisor may request that the Company use
commercially reasonable efforts to cause such Advisor Shares to be registered
under the Securities Act of 1933, as amended, by July 1, 2007.  For the purposes of this Section 2(b), a
“Change of Control” shall mean (i) any consolidation or merger of the
Company in which stockholders of the Company immediately prior to such
consolidation or merger do not beneficially own (as such term is used in Rule 13d-3
under the Securities Exchange Act of 1934, as amended) at least a majority of
the outstanding equity of the resulting or surviving entity following such
consolidation or merger, (ii) any sale of all or substantially all of the
assets of the Company or (iii) a transaction or series of related
transactions as a result of which any person or related group of persons (other
than the Company or a person that directly or indirectly controls, is
controlled by, or is under common control with the Company) shall become the
beneficial owner (within the meaning of such Rule) of a majority of the Company’s
outstanding equity, but not including the public offering of equity securities
by the Company registered under the Securities Act of 1933 or any other sale of
shares of stock or convertible securities by the Company in exchange for cash
in a financing transaction.


 


(c)           In
the event that this Agreement is terminated by the Company in accordance with Section 6
hereof as a result of a material breach of this Agreement by the Advisor, the
Company shall have the right and option to repurchase fifty percent (50%) of
all unvested Advisor Shares at a purchase price of $0.001 per share, which
right and option shall be exercised by the Company by delivery of written
notice (the “Repurchase Notice”) to the Advisor.  Such Repurchase Notice shall set forth a time
and place of the closing of such purchase no later than 30 days after the date
of such Repurchase Notice.  At such
closing, the Advisor shall deliver the stock certificate or certificates
representing such Advisor Shares, together with a stock power with respect to
such Advisor Shares duly executed in blank; and upon such delivery the Company
shall pay the aggregate purchase price for such shares to the Advisor in cash
or by check.


 


(d)           (i) the
Advisor Shares shall not be entitled to receive dividends or distributions from
the Company while the Advisor Shares are held by the Advisor or any of its
affiliates; provided, however, that if notwithstanding the foregoing the
Company is required by applicable law to distribute such dividends or
distributions to the Advisor (or any of its affiliates) with respect to the
Advisor Shares, the Advisor or such affiliate shall promptly forfeit and waive
such dividend or distribution and promptly return such dividend or distribution
to the Company and (ii) the Advisor hereby irrevocably appoints the board
of directors of the Company, or any of them acting singly, proxies and
attorneys-in-fact, with full power of substitution, to vote all of


 


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such Advisor Shares on any matter put to the vote of the stockholders
of the Company in the same proportions as the other outstanding shares of the
Company are voted for and against any such matter while such shares are held by
the Advisor or any of its affiliates.


 


(e)           The
Company will pay or reimburse the Advisor for all necessary and reasonable
out-of-pocket costs and expenses directly incurred by the Advisor in performing
its obligations under this Agreement, which costs and expenses shall include,
but not be limited to, travel expenses incurred in performing its duties
hereunder, including due diligence, in connection with this Agreement and any
transactions on which the Advisor provides advice or assistance hereunder;
provided that no single item of expense in excess of $500.00 shall be paid or
reimbursed by the Company unless such expense is incurred with the prior
written approval of the Company.  In
seeking reimbursement for expenses, the Advisor shall provide to the Company a
written statement or statements detailing expenses for which reimbursement is
sought together with copies of invoices and other documentation supporting such
expenses.  Reimbursable expenses shall be
payable by the Company within 30 days of receipt by the Company.


 


3. Business Practice.  The Company recognizes that the Advisor is in
the business of advising and consulting with other businesses, some of which
businesses may be in competition with the Company.  The Company acknowledges and agrees that the
Advisor may advise and consult with other businesses, including those which may
be in competition with the Company in the course of advising and consulting
with such other businesses provided however that that the Advisor shall not
disclose or use any confidential information of the Company or its affiliates,
and shall not be required to devote its full time and resources to performing
services on behalf of the Company under this Agreement.  The Advisor shall only be required to expend
such time and resources as are reasonably appropriate to advise and assist the
Company as provided for herein.


 


4. Indemnification.  The Company agrees to indemnify and hold
harmless the Advisor and its directors, officers, employees, agents and controlling
persons (each such person is hereinafter referred to as an “Indemnified Party”),
from and against any and all losses, claims, damages, liabilities and expenses
whatsoever, joint or several, to which any such Indemnified Party may become
subject under any applicable federal or state law of the United States of
America or otherwise, caused by, relating to or arising out of the engagement
evidenced hereby. The Company will reimburse any Indemnified Party for any
reasonable out-of-pocket expenses (including fees and expenses of counsel
reasonably acceptable to the Company) as they are incurred by an Indemnified
Party in connection with the defense of any pending or threatened claim or any
action or proceeding arising therefrom, whether or not resulting in liability;
provided, however, that at the time of such reimbursement the Indemnified Party
shall have entered into an agreement with the Company whereby the Indemnified
Party agrees to repay all such reimbursed amounts if it is determined in a
final judgment by a court of competent jurisdiction that the Indemnified Party
is not entitled to indemnity from the Company. Notwithstanding the foregoing,
the Company shall not be liable to any Indemnified Party under the foregoing
indemnification provisions for any settlement made without the Company’s prior
written consent, which shall not be unreasonably withheld, or to the extent
that any loss, claim, damage, liability or expense results directly from any
such Indemnified Party’s willful misconduct or gross negligence.


 


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If for any reason (other than a final
non-appealable judgment finding any Indemnified Party liable for losses,
claims, damages, liabilities or expenses for its gross negligence or willful
misconduct or as a result of a settlement made without the Company’s prior
written consent) the foregoing indemnity is unavailable to an Indemnified Party
or insufficient to hold an Indemnified Party harmless, then the Company shall
contribute to the amount paid or payable by an Indemnified Party as a result of
such loss, claim, damage, liability or expense in such proportion as is
appropriate to reflect not only the relative benefits received by the Company
on the one hand and the Advisor on the other, but also the relative fault by
the Company and the Indemnified Party, as well as any relevant equitable
considerations, subject to the limitation that in no event shall the total
contribution of all Indemnified Parties to all such losses, claims, damages,
liabilities or expenses exceed the amount of fees actually received and
retained by the Advisor hereunder.


 


5. Confidentiality.  All non-public information concerning the
Company and its affiliates which is provided or disclosed to the Advisor in
connection with this engagement shall be used solely in the course of the
performance of the Advisor’s services hereunder.  Except as otherwise required by law or
regulatory authority, the Advisor shall not use or disclose such non-public
information to a third party without the prior consent of the Company.


 


6. Term of Agreement.  This Agreement shall terminate on the first
anniversary of the date hereof, provided that, this Agreement shall
automatically renew for subsequent twelve (12) month periods unless either
party submits a written termination notice to the other party sixty (60) days
prior to the expiration of the applicable term. 
The Company may elect to terminate this Agreement in the event that the
Advisor fails to remedy a material breach by the Advisor of its obligations
hereunder within seven (7) days of written notice from the Company of such
breach or immediately if such breach is incapable of being remedied by the
Advisor.  The Advisor shall be deemed to
have committed a material breach of this Agreement in the event that it is
grossly negligent in the performance of its services hereunder or in the event
that a material conflict of interest arises during the term of this Agreement
with respect to the Advisor and its ability to perform the services contemplated
hereunder in the reasonable determination of the Company.  Upon termination of this Agreement, neither
party shall have any further rights or obligations to the other, except that (i) the
Company shall be obligated to pay any accrued fees referred to in section 2(a) hereof,
(ii) the Company shall be obligated to reimburse expenses under section 2(b) incurred
by the Advisor during the period prior to termination of this Agreement, and (iii) the
Advisor and the Company shall continue to be bound by the provisions of
Sections 4 and 5 hereof.


 


7. Relationship of Parties.  The parties agree that their relationship
under this Agreement is an advisory relationship only, and nothing herein shall
cause the Advisor to be partners, agents or fiduciaries of, or joint venturers
with, the Company or with each other. 
Except as expressly set forth herein, the Advisor is not authorized to
transact business, accept or execute agreements, incur obligations (expressed
or implied), or otherwise act in any manner in the name of, or on the behalf of
the Company or make any promise, warranty or representation with respect to the
Company, the services provided by the Company or any other matter relating to
the Company.


 


8. Notices.  All notices required or permitted herein must
be in writing and shall be deemed to have been duly given the first business
day following the date of service if served


 


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personally, on the first business day following the date of actual
receipt if delivered by telecopier, telex or other similar communication to the
party or parties to whom notice is to be given, or on the third business day
after mailing if mailed to the party or parties to whom notice is to be given
by registered or certified mail, return receipt requested, postage prepaid, to
the Advisor and to the Company at the addresses set forth below, or to such
other addresses as either party hereto may designate to the other by notice
from time to time for this purpose.


 


	
  Advisor:

  	
   

  	
  Indigo Ventures LLC

  
	
   

  	
   

  	
  780 Third Avenue

  
	
   

  	
   

  	
  Suite 2302

  
	
   

  	
   

  	
  New York, NY 10022

  
	
   

  	
   

  	
  Attention: Eric Brachfeld

  
	
   

  	
   

  	
   

  
	
  Company:

  	
   

  	
  Vistula Communications Services, Inc.

  
	
   

  	
   

  	
  Suite 801, 405 Park Avenue

  
	
   

  	
   

  	
  New York, NY 10022

  
	
   

  	
   

  	
  Telecopy No.: (212) 832-7563

  
	
   

  	
   

  	
  Attention: Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Foley Hoag LLP

  
	
   

  	
   

  	
  155 Seaport Boulevard

  
	
   

  	
   

  	
  Boston, MA 02210

  
	
   

  	
   

  	
  Telecopy No.: (617) 832-7000

  
	
   

  	
   

  	
  Attention: Paul Bork, Esq.

  



 


9. Parties.  This Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective successors and
assigns.


 


10. Governing Law.  This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to conflicts of laws.


 


11. Entire Agreement.  This Agreement contains the entire
understanding between the parties hereto with respect to the subject matter
hereof, merges and supersedes all prior discussions and agreements relating
thereto, including without limitation, the provisions of Section 4.A.(iii) of
the existing Placement Agent Agreement between the Company and Indigo
Securities, LLC, and may not be modified or amended except by a writing duly
signed by the party against whom enforcement of the modification or amendment
is sought.


 


12. Assignment.  Neither party shall assign this Agreement, or
any rights under it, without the other party’s prior written consent.  Any attempt to do so is void.  Notwithstanding the foregoing, the Company
may assign this Agreement with written notice to the Advisor in connection with
a merger or the sale of all or substantially all of the Company’s assets or
shares.  This Agreement will be binding
upon the successors and permitted assigns of the respective parties.


 


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13. Severability.  If any provision of this Agreement shall be
held to be invalid or unenforceable, such invalidity or unenforceability shall
not affect any other provision of this Agreement.


 


14. Counterparts.  This Agreement may be executed in
counterparts, each of which shall be deemed an original agreement, but all of
which together shall constitute one and the same instrument.  Execution and delivery of this Agreement by
facsimile transmission (including the delivery of documents in Adobe PDF
format) shall constitute execution and delivery of this Agreement for all
purposes, with the same force and effect as execution and delivery of an
original manually signed copy hereof.


 


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IN WITNESS WHEREOF, the parties have hereto
executed this Agreement as of the 27th day of January, 2006.


 


 


	
   

  	
  INDIGO VENTURES LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Eric Brachfeld

  	
   

  
	
   

  	
  Eric Brachfeld

  
	
   

  	
  Managing Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  VISTULA COMMUNICATIONS SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/
  Rupert Galliers-Pratt

  	
   

  
	
   

  	
  Name: Rupert Galliers-Pratt

  
	
   

  	
  Title: Chairman, President and Chief
  Executive Officer

  



 


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