Exhibit 10.42


 


EXECUTION COPY


 


VISTULA COMMUNICATIONS SERVICES, INC.


 


SUBSCRIPTION AGREEMENT


 


As of March 30, 2006


 


Vistula Communications Services Inc.

405 Park Avenue

Suite 801

New York, NY 10022


Attention: Rupert Galliers-Pratt


 


Investors:


 


1.                                       Subscription.
The undersigned subscriber (the “Subscriber”) hereby irrevocably
subscribes for and agrees to purchase a
Note in the principal amount of up to five million United States dollars ($5,000,000) from Vistula Communications Services, Inc., a Delaware corporation
(the “Company”; and such note the “Note”) and a five (5) year
warrant for the purchase of up to 500,000 shares of the Company’s common stock
at an exercise price of $1.50 per share (the “Warrant”; together with
the Note, the “Securities”) in connection with a credit facility
provided by Subscriber to the Company pursuant to the terms of a Revolving
Credit Agreement dated as of March 30, 2006 by and between Subscriber and
the Company (the “Revolving Credit Agreement”) attached to this
Subscription Agreement (the “Subscription Agreement”) as Exhibit A.
This subscription is based upon the information provided below and upon the
Subscriber’s own investigation as to the merits and risks of this investment. The
Subscriber shall deliver herewith:


 


(i)                                     Two
(2) duly executed copies of the Signature Page to this Subscription
Agreement; and


 


(ii)                                  An
initial advance of up to $1,300,000 per the terms of the Revolving Credit
Agreement (the “Initial Advance”).


 


The closing of the
purchase of the Securities shall occur on or before March 30, 2006 (the “Closing”),
unless otherwise extended by the Company. This offering is not conditioned on
any minimum number of Securities being sold.


 


As soon as
possible after the Closing, the Company will deliver instruments representing
the Subscriber’s Securities to the Subscriber.


 


2.                                       Subscriber
Representations, Warranties and Agreements. The Subscriber hereby
acknowledges, represents and warrants as follows (with the understanding that
the Company will rely on such representations and warranties in determining,
among other matters, 


 

















 


the suitability of this
investment for the Subscriber in order to comply with federal and state
securities laws):


 


a.                                       In
connection with this subscription, the Subscriber has read this Subscription Agreement.
The Subscriber acknowledges that this Subscription Agreement is not intended to
set forth all of the information which might be deemed pertinent by an investor
who is considering an investment in the Securities. It being the responsibility
of Subscriber (i) to determine what additional information he desires to
obtain in evaluating this investment and (ii) to obtain such information
from the Company.


 


b.                                      This
offering is limited to persons who are “accredited investors,” as that term is
defined in Regulation D under the Securities Act of 1933, as amended (the “Act”),
and who have the financial means and the business, financial and investment
experience and acumen to conduct an investigation as to, and to evaluate, the
merits and risks of this investment. The Subscriber hereby represents that he
has read, is familiar with and understands Rule 501 of Regulation D under
the Act. The Subscriber is an “accredited investor” as defined in Rule 501(a) of
Regulation D.


 


c.                                       The
Subscriber has had full access to all the information which the Subscriber (or
the Subscriber’s advisor) considers necessary or appropriate to make an
informed decision with respect to the Subscriber’s investment in the Securities.
The Subscriber acknowledges that the Company has made available to the
Subscriber and the Subscriber’s advisors the opportunity to examine and copy
any contract, matter or information which the Subscriber considers relevant or
appropriate in connection with this investment and to ask questions and receive
answers relating to any such matters including, without limitation, the
financial condition, management, employees, business, obligation, corporate
books and records, budgets, business plans of and other matters relevant to the
Company. To the extent the Subscriber has not sought information regarding any
particular matter, the Subscriber represents that he or she had and has no
interest in doing so and that such matters are not material to the Subscriber
in connection with this investment. The Subscriber has accepted the
responsibility for conducting the Subscriber’s own investigation and obtaining
for itself such information as to the foregoing and all other subjects as the
Subscriber deems relevant or appropriate in connection with this investment. The
Subscriber is not relying on any representation other than that contained
herein. Other than as set forth in the Company’s filings with the Securities
and Exchange Commission (“SEC”), no financial information is currently
available and no such financial information has been provided to the Subscriber
in connection with the investment made hereunder. The Subscriber acknowledges
that no representation regarding projected revenues or a projected rate of
return has been made to it by any party.


 


d.                                      The
Subscriber understands that the offering of the Securities has not been
registered under the Act, in reliance on an exemption for private offerings
provided pursuant to Section 4(2) of the Act and that, as a result,
the Securities will be “restricted securities” as that term is defined in Rule 144
under the Act and, accordingly, under Rule 144 as currently in effect,
that the Securities must be held for at least one year after the investment has
been made (or indefinitely if the Subscriber is deemed an “affiliate” within
the meaning of such 


 


2

















 


rule) unless the Securities
are subsequently registered under the Act and qualified under any other
applicable securities law or exemptions from such registration and qualification
are available. The Subscriber understands that the Company is under no
obligation to register the Securities under the Act or to register or qualify
the Securities under any other applicable securities law, or to comply with any
other exemption under the Act or any other securities law, and that the
Subscriber has no right to require such registration. The Subscriber further
understands that the offering of the Securities has not been qualified or
registered under any foreign or state securities laws in reliance upon the
representations made and information furnished by the Subscriber herein and any
other documents delivered by the Subscriber in connection with this
subscription; that the offering has not been reviewed by the SEC or by any
foreign or state securities authorities; that the Subscriber’s rights to
transfer the Securities will be restricted, which includes restrictions against
transfers unless the transfer is not in violation of the Act and applicable
state securities laws (including investor suitability standards); and that the
Company may in its sole discretion require the Subscriber to provide at
Subscriber’s own expense an opinion of its counsel to the effect that any
proposed transfer is not in violation of the Act or any state securities laws.


 


e.                                       The
Subscriber is empowered and duly authorized to enter into this Subscription
Agreement which constitutes a valid and binding agreement of the Subscriber
enforceable against the Subscriber in accordance with its terms; and the person
signing this Subscription Agreement on behalf of the Subscriber is empowered
and duly authorized to do so.


 


f.                                         The
Subscriber acknowledges that there will be no market for the Securities and
that the Subscriber may not be able to sell or dispose of them; the
Subscriber has liquid assets sufficient to assure that the purchase price of
the Securities will cause no undue financial difficulties and that, after
purchasing the Securities the Subscriber will be able to provide for any
foreseeable current needs and possible personal contingencies; the Subscriber
is able to bear the risk of illiquidity and the risk of a complete loss of this
investment.


 


g.                                      The
information in any documents delivered by the Subscriber in connection with
this subscription is true, correct and complete in all respects as of the date
hereof. The Subscriber agrees promptly to notify the Company in writing of any
change in such information after the date hereof.


 


h.                                      The
offering and sale of the Securities to the Subscriber were not made through any
advertisement in printed media of general and regular paid circulation, radio
or television or any other form of advertisement, or as part of a
general solicitation.


 


i.                                          The
Subscriber recognizes that an investment in the Securities involves significant
risks, which risks could give rise to the loss of the Subscriber’s entire
investment in such securities.


 


j.                                          The
Subscriber is acquiring the Securities, as principal, for the Subscriber’s own
account for investment purposes only, and not with a present intention toward
or for the resale, distribution or fractionalization thereof, and with the
exception of Subscriber’s 


 


3

















 


members, no other person
has a beneficial interest in the Securities. The Subscriber has no present
intention of selling or otherwise distributing or disposing of the Securities,
and understands that an investment in the Securities must be considered a
long-term illiquid investment.


 


3.                                       Representations
and Warrants of the Company. As a material inducement of the Subscribers to
enter into this Subscription Agreement and subscribe for the Securities, the
Company represents and warrants to the Subscriber, as of the date hereof, as
follows:


 


a.                                       Organization
and Standing. The Company is a duly organized corporation, validly existing
and in good standing under the laws of the State of Delaware, has full power to
carry on its respective business as and where such business is now being
conducted and to own, lease and operate the properties and assets now owned or
operated by it and is duly qualified to do business and is in good standing in
each jurisdiction where the conduct of its business or the ownership of its
properties requires such qualification except
where the failure to be so qualified would not have a Material Adverse Effect
on the Company. “Material Adverse Effect” means any circumstance, change
in, or effect on the Company that, individually or in the aggregate with any
other similar circumstances, changes in, or effects on, the Company taken as a
whole: (a) is, or is reasonably expected to be, materially adverse to the
business, operations, assets, liabilities, employee relationships, customer or
supplier relationships, prospects, results of operations or the condition
(financial or otherwise) of the Company taken as a whole or (b) is
reasonably expected to adversely affect the ability of the Company to operate
or conduct the Company’s business in the manner in which it is currently
operated or conducted or proposed to be operated or conducted by the Company.


 


b.                                      Authority.
The execution, delivery and performance of this Subscription Agreement by the
Company and the consummation of the transactions contemplated hereby have been
duly authorized by the Board of Directors of the Company.


 


c.                                       No
Conflict. The execution, delivery and performance of this Subscription
Agreement and the consummation of the transactions contemplated hereby do not (i) violate
or conflict with the Company’s Certificate of Incorporation, By-laws or other
organizational documents, (ii) conflict with or result (with the lapse of
time or giving of notice or both) in a material breach or default under any
material agreement or instrument to which the Company is a party or by which
the Company is otherwise bound, (iii) violate any order, judgment, law,
statute, rule or regulation applicable to the Company, except where such
violation, conflict or breach would not have a material adverse effect on the
Company. This Subscription Agreement when executed by the Company will be a
legal, valid and binding obligation of the Company enforceable in accordance
with its terms (except as may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws and equitable principles relating
to or limiting creditors’ rights generally).


 


d.                                      Authorization.
Issuance of the Securities to Subscriber has been duly authorized by all
appropriate corporate actions of the Company.


 


4

















 


e.                                       Litigation
and Other Proceedings. There are no actions, suits, proceedings or
investigations pending or, to the knowledge of the Company, threatened against
the Company at law or in equity before or by any court or Federal, state,
municipal or their governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign which could materially adversely affect
the Company. The Company is not subject to any continuing order, writ,
injunction or decree of any court or agency against it which would have a
material adverse effect on the Company.


 


f.                                         Use
of Proceeds. The proceeds of this offering and sale of the Securities, net
of payment of placement expenses, will be used by the Company for working
capital and other general corporate purposes pursuant to the restrictions set
forth in the Revolving Credit Facility.


 


g.                                      Consents/Approvals.
No consents, filings (other than Federal and state securities filings relating
to the issuance of the Securities pursuant to applicable exemptions from
registration, which the Company hereby undertakes to make in a timely fashion),
authorizations or other actions of any governmental authority are required to
be obtained or made by the Company for the Company’s execution, delivery and
performance of this Subscription Agreement which have not already been obtained
or made or will be made in a timely manner following the Closing.


 


h.                                      No
Commissions. The Company has not incurred any obligation for any finder’s,
broker’s or agent’s fees or commissions in connection with the transaction
contemplated hereby.


 


4.                                       Legends.
The Subscriber understands and agrees that the Company will cause any necessary
legends to be placed upon any instruments(s) evidencing ownership of the Securities,
together with any other legend that may be required by federal or state
securities laws or deemed necessary or desirable by the Company.


 


5.                                       General
Provisions.


 


a.                                       Confidentiality.
The Subscriber covenants and agrees that it will keep confidential and will not
disclose or divulge any confidential or proprietary information that such
Subscriber may obtain from the Company pursuant to financial statements,
reports, and other materials submitted by the Company to such Subscriber in
connection with this offering or as a result of discussions with or inquiry
made to the Company, unless such information is known, or until such
information becomes known, to the public through no action by the Subscriber; provided,
however, that a Subscriber may disclose such information to its
attorneys, accountants, consultants, and other professionals to the extent
necessary in connection with his or her investment in the Company so long as
any such professional to whom such information is disclosed is made aware of
the Subscriber’s obligations hereunder and such professional agrees to be
likewise bound as though such professional were a party hereto.


 


5

















 


b.                                      Successors.
The covenants, representations and warranties contained in this Subscription
Agreement shall be binding on the Subscriber’s and the Company’s heirs and legal
representatives and shall inure to the benefit of the respective successors and
assigns of the Company. The rights and obligations of this Subscription
Agreement may not be assigned by any party without the prior written
consent of the other party.


 


c.                                       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.


 


d.                                      Execution
by Facsimile. 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.


 


e.                                       Governing
Law and Jurisdiction. This Subscription Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts to be wholly performed within such state and without regard to
conflicts of laws provisions. Any legal action or proceeding arising out of or
relating to this Subscription Agreement may be instituted in the courts of
the State of New York sitting in New York County or in the United States of
America for the Southern District of New York, and the parties hereto
irrevocably submit to the jurisdiction of each such court in any action or
proceeding. Subscriber hereby irrevocably waives and agrees not to assert, by
way of motion, as a defense, or otherwise, in every suit, action or other
proceeding arising out of or based on this Subscription Agreement and brought
in any such court, any claim that Subscriber is not subject personally to the
jurisdiction of the above named courts, that Subscriber’s property is exempt or
immune from attachment or execution, that the suit, action or proceeding is
brought in an inconvenient forum or that the venue of the suit, action or
proceeding is improper.


 


f.                                         (i)                                     Indemnification
Generally. The Company, on the one hand, and the Subscriber, on the other
hand (each an “Indemnifying Party”), shall indemnify the other from and
against any and all losses, damages, liabilities, claims, charges, actions,
proceedings, demands, judgments, settlement costs and expenses of any nature
whatsoever (including, without limitation, reasonable attorneys’ fees and
expenses) resulting from any breach of a representation and warranty, covenant
or agreement by the Indemnifying Party and all claims, charges, actions or
proceedings incident to or arising out of the foregoing.


 


(ii)                                  Indemnification
Procedures. Each person entitled to indemnification under this Section 5
(an “Indemnified Party”) shall give notice as promptly as reasonably
practicable to each party required to provide indemnification under this Section 5
of any action commenced against or by it in respect of which indemnity may be
sought hereunder, but failure to so notify an Indemnifying Party shall not
release such Indemnifying Party from any liability that it may have,
otherwise than on account of this indemnity agreement so long as such failure
shall not have materially prejudiced the position of the Indemnifying Party. Upon
such notification, the Indemnifying Party shall assume the defense of such
action if it is a claim 


 


6

















 


brought by a third party,
and, if and after such assumption, the Indemnifying Party shall not be entitled
to reimbursement of any expenses incurred by it in connection with such action
except as described below. In any such action, any Indemnified Party shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (i) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to the
contrary or (ii) the named parties in any such action (including any
impleaded parties) include both the Indemnifying Party and the Indemnified
Party and representation of both parties by the same counsel would be
inappropriate due to actual or potential differing or conflicting interests
between them. The Indemnifying Party shall not be liable for any settlement of
any proceeding effected without its written consent (which shall not be
unreasonably withheld or delayed by such Indemnifying Party), but if settled
with such consent or if there be final judgment for the plaintiff, the
Indemnifying Party shall indemnify the Indemnified Party from and against any
loss, damage or liability by reason of such settlement or judgment.


 


g.                                      Notices.
All notices, requests, demands, claims and other communications hereunder shall
be in writing and shall be delivered by certified or registered mail (first class postage
pre-paid), guaranteed overnight delivery, or facsimile transmission if such
transmission is confirmed by delivery by certified or registered mail (first class postage
pre-paid) or guaranteed overnight delivery, to the following addresses and
facsimile numbers (or to such other addresses or facsimile numbers which such
party shall subsequently designate in writing to the other party):


 


(i)                                     if
to the Issuer:


 


Vistula Communications Services
Inc.

405 Park Avenue

Suite 801

New York, NY 10022


Attention:
Rupert Galliers-Pratt


 


(ii)                                  if
to the Subscriber to the address set forth next to its name on the signature page hereto.


 


h.                                      Entire
Agreement. This Subscription Agreement (including the Exhibit attached
hereto) and other documents delivered at the Closing pursuant hereto, contain
the entire understanding of the parties in respect of its subject matter and
supersedes all prior agreements and understandings between or among the parties
with respect to such subject matter. The Exhibit constitutes a part hereof
as though set forth in full above.


 


i.                                          Amendment;
Waiver. This Subscription Agreement may not be modified, amended,
supplemented, canceled or discharged, except by written instrument executed by
both parties. No failure to exercise, and no delay in exercising, any right,
power or privilege under this Subscription Agreement shall operate as a waiver,
nor shall any single or partial exercise of any right, power or privilege
hereunder preclude the exercise of any other 


 


7

















 


right, power or privilege.
No waiver of any breach of any provision shall be deemed to be a waiver of any
proceeding or succeeding breach of the same or any other provision, nor shall
any waiver be implied from any course of dealing between the parties. No
extension of time for performance of any obligations or other acts hereunder or
under any other agreement shall be deemed to be an extension of the time for
performance of any other obligations or any other acts. The rights and remedies
of the parties under this Subscription Agreement are in addition to all other
rights and remedies, at law or equity, that they may have against each
other.


 


8

















 


[Signature
Page to Subscription Agreement]


 


PRINCIPAL AMOUNT OF NOTE:
Up to $5,000,000.


 


Total $ Amount of Initial
Advance to be provided by Subscriber at Closing: up to $1,300,000.00


 


The Initial Advance may be
delivered to the Company in several wires which may come directly from
Subscriber or Subscribers individual members. The Initial Advance shall be
noted on Schedule A to the Revolving Loan Note.


 


Executed March 30,
2006


 


	
  SUBSCRIBER:

  
	
   

  
	
  INDIGO
  INVESTMENTS I LLC

  
	
   

  
	
  By:

  	
  Indigo Ventures, LLC,
  its Managing Member

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Eric Brachfeld

  	
   

  
	
  Name:

  	
  Eric Brachfeld

  	
   

  
	
  Title:

  	
  Managing Member

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ACCEPTED:

  	
   

  
	
   

  	
   

  	
   

  
	
  VISTULA COMMUNICATIONS SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Rupert Galliers-Pratt

  	
   

  
	
  Name:

  	
  Rupert
  Galliers-Pratt

  	
   

  
	
  Title:

  	
  President and
  CEO

  	
   

  



 


9

















 


EXECUTION COPY


 


EXHIBIT A


 


Revolving
Credit Facility