**Exhibit 10.42**

 

**EXECUTION COPY**

 

**VISTULA COMMUNICATIONS SERVICES, INC.**

 

**SUBSCRIPTION AGREEMENT**

 

As of March 30, 2006

 

****Vistula Communications Services Inc.****405 Park AvenueSuite 801New York, NY 10022

Attention: Rupert Galliers-Pratt

 

Investors:

 

1.                                       Subscription.The undersigned subscriber (the “Subscriber”) hereby irrevocablysubscribes for and agrees to purchase aNote 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) yearwarrant for the purchase of up to 500,000 shares of the Company’s common stockat an exercise price of $1.50 per share (the “Warrant”; together withthe Note, the “Securities”) in connection with a credit facilityprovided by Subscriber to the Company pursuant to the terms of a RevolvingCredit Agreement dated as of March 30, 2006 by and between Subscriber andthe Company (the “Revolving Credit Agreement”) attached to thisSubscription Agreement (the “Subscription Agreement”) as Exhibit A.This subscription is based upon the information provided below and upon theSubscriber’s own investigation as to the merits and risks of this investment. TheSubscriber shall deliver herewith:

 

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

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# (ii)                                  Aninitial advance of up to $1,300,000 per the terms of the Revolving CreditAgreement (the “Initial Advance”).

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

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### As soon aspossible after the Closing, the Company will deliver instruments representingthe Subscriber’s Securities to the Subscriber.

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# 2.                                       SubscriberRepresentations, Warranties and Agreements. The Subscriber herebyacknowledges, represents and warrants as follows (with the understanding thatthe Company will rely on such representations and warranties in determining,among other matters, 

 

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the suitability of thisinvestment for the Subscriber in order to comply with federal and statesecurities laws):

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### a.                                       Inconnection with this subscription, the Subscriber has read this Subscription Agreement.The Subscriber acknowledges that this Subscription Agreement is not intended toset forth all of the information which might be deemed pertinent by an investorwho is considering an investment in the Securities. It being the responsibilityof Subscriber (i) to determine what additional information he desires toobtain in evaluating this investment and (ii) to obtain such informationfrom the Company.

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### b.                                      Thisoffering is limited to persons who are “accredited investors,” as that term isdefined in Regulation D under the Securities Act of 1933, as amended (the “Act”),and who have the financial means and the business, financial and investmentexperience and acumen to conduct an investigation as to, and to evaluate, themerits and risks of this investment. The Subscriber hereby represents that hehas read, is familiar with and understands Rule 501 of Regulation D underthe Act. The Subscriber is an “accredited investor” as defined in Rule 501(a) ofRegulation D.

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### c.                                       TheSubscriber has had full access to all the information which the Subscriber (orthe Subscriber’s advisor) considers necessary or appropriate to make aninformed decision with respect to the Subscriber’s investment in the Securities.The Subscriber acknowledges that the Company has made available to theSubscriber and the Subscriber’s advisors the opportunity to examine and copyany contract, matter or information which the Subscriber considers relevant orappropriate in connection with this investment and to ask questions and receiveanswers relating to any such matters including, without limitation, thefinancial condition, management, employees, business, obligation, corporatebooks and records, budgets, business plans of and other matters relevant to theCompany. To the extent the Subscriber has not sought information regarding anyparticular matter, the Subscriber represents that he or she had and has nointerest in doing so and that such matters are not material to the Subscriberin connection with this investment. The Subscriber has accepted theresponsibility for conducting the Subscriber’s own investigation and obtainingfor itself such information as to the foregoing and all other subjects as theSubscriber deems relevant or appropriate in connection with this investment. TheSubscriber is not relying on any representation other than that containedherein. Other than as set forth in the Company’s filings with the Securitiesand Exchange Commission (“SEC”), no financial information is currentlyavailable and no such financial information has been provided to the Subscriberin connection with the investment made hereunder. The Subscriber acknowledgesthat no representation regarding projected revenues or a projected rate ofreturn has been made to it by any party.

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### d.                                      TheSubscriber understands that the offering of the Securities has not beenregistered under the Act, in reliance on an exemption for private offeringsprovided 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 144under 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 hasbeen made (or indefinitely if the Subscriber is deemed an “affiliate” withinthe meaning of such 

 

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rule) unless the Securitiesare subsequently registered under the Act and qualified under any otherapplicable securities law or exemptions from such registration and qualificationare available. The Subscriber understands that the Company is under noobligation to register the Securities under the Act or to register or qualifythe Securities under any other applicable securities law, or to comply with anyother exemption under the Act or any other securities law, and that theSubscriber has no right to require such registration. The Subscriber furtherunderstands that the offering of the Securities has not been qualified orregistered under any foreign or state securities laws in reliance upon therepresentations made and information furnished by the Subscriber herein and anyother documents delivered by the Subscriber in connection with thissubscription; that the offering has not been reviewed by the SEC or by anyforeign or state securities authorities; that the Subscriber’s rights totransfer the Securities will be restricted, which includes restrictions againsttransfers unless the transfer is not in violation of the Act and applicablestate securities laws (including investor suitability standards); and that theCompany may in its sole discretion require the Subscriber to provide atSubscriber’s own expense an opinion of its counsel to the effect that anyproposed transfer is not in violation of the Act or any state securities laws.

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### e.                                       TheSubscriber is empowered and duly authorized to enter into this SubscriptionAgreement which constitutes a valid and binding agreement of the Subscriberenforceable against the Subscriber in accordance with its terms; and the personsigning this Subscription Agreement on behalf of the Subscriber is empoweredand duly authorized to do so.

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### f.                                         TheSubscriber acknowledges that there will be no market for the Securities andthat the Subscriber may not be able to sell or dispose of them; theSubscriber has liquid assets sufficient to assure that the purchase price ofthe Securities will cause no undue financial difficulties and that, afterpurchasing the Securities the Subscriber will be able to provide for anyforeseeable current needs and possible personal contingencies; the Subscriberis able to bear the risk of illiquidity and the risk of a complete loss of thisinvestment.

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

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### h.                                      Theoffering and sale of the Securities to the Subscriber were not made through anyadvertisement in printed media of general and regular paid circulation, radioor television or any other form of advertisement, or as part of ageneral solicitation.

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### i.                                          TheSubscriber recognizes that an investment in the Securities involves significantrisks, which risks could give rise to the loss of the Subscriber’s entireinvestment in such securities.

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### j.                                          TheSubscriber is acquiring the Securities, as principal, for the Subscriber’s ownaccount for investment purposes only, and not with a present intention towardor for the resale, distribution or fractionalization thereof, and with theexception of Subscriber’s 

 

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

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# 3.                                       Representationsand Warrants of the Company. As a material inducement of the Subscribers toenter into this Subscription Agreement and subscribe for the Securities, theCompany represents and warrants to the Subscriber, as of the date hereof, asfollows:

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### a.                                       Organizationand Standing. The Company is a duly organized corporation, validly existingand in good standing under the laws of the State of Delaware, has full power tocarry on its respective business as and where such business is now beingconducted and to own, lease and operate the properties and assets now owned oroperated by it and is duly qualified to do business and is in good standing ineach jurisdiction where the conduct of its business or the ownership of itsproperties requires such qualification exceptwhere the failure to be so qualified would not have a Material Adverse Effecton the Company. “Material Adverse Effect” means any circumstance, changein, or effect on the Company that, individually or in the aggregate with anyother similar circumstances, changes in, or effects on, the Company taken as awhole: (a) is, or is reasonably expected to be, materially adverse to thebusiness, operations, assets, liabilities, employee relationships, customer orsupplier relationships, prospects, results of operations or the condition(financial or otherwise) of the Company taken as a whole or (b) isreasonably expected to adversely affect the ability of the Company to operateor conduct the Company’s business in the manner in which it is currentlyoperated or conducted or proposed to be operated or conducted by the Company.

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

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### c.                                       NoConflict. The execution, delivery and performance of this SubscriptionAgreement and the consummation of the transactions contemplated hereby do not (i) violateor conflict with the Company’s Certificate of Incorporation, By-laws or otherorganizational documents, (ii) conflict with or result (with the lapse oftime or giving of notice or both) in a material breach or default under anymaterial agreement or instrument to which the Company is a party or by whichthe Company is otherwise bound, (iii) violate any order, judgment, law,statute, rule or regulation applicable to the Company, except where suchviolation, conflict or breach would not have a material adverse effect on theCompany. This Subscription Agreement when executed by the Company will be alegal, valid and binding obligation of the Company enforceable in accordancewith its terms (except as may be limited by bankruptcy, insolvency,reorganization, moratorium and similar laws and equitable principles relatingto or limiting creditors’ rights generally).

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

 

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

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### f.                                         Useof Proceeds. The proceeds of this offering and sale of the Securities, netof payment of placement expenses, will be used by the Company for workingcapital and other general corporate purposes pursuant to the restrictions setforth in the Revolving Credit Facility.

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

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### h.                                      NoCommissions. The Company has not incurred any obligation for any finder’s,broker’s or agent’s fees or commissions in connection with the transactioncontemplated hereby.

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

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# 5.                                       GeneralProvisions.

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## a.                                       Confidentiality.The Subscriber covenants and agrees that it will keep confidential and will notdisclose or divulge any confidential or proprietary information that suchSubscriber may obtain from the Company pursuant to financial statements,reports, and other materials submitted by the Company to such Subscriber inconnection with this offering or as a result of discussions with or inquirymade to the Company, unless such information is known, or until suchinformation becomes known, to the public through no action by the Subscriber; provided,however, that a Subscriber may disclose such information to itsattorneys, accountants, consultants, and other professionals to the extentnecessary in connection with his or her investment in the Company so long asany such professional to whom such information is disclosed is made aware ofthe Subscriber’s obligations hereunder and such professional agrees to belikewise bound as though such professional were a party hereto.

 

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## b.                                      Successors.The covenants, representations and warranties contained in this SubscriptionAgreement shall be binding on the Subscriber’s and the Company’s heirs and legalrepresentatives and shall inure to the benefit of the respective successors andassigns of the Company. The rights and obligations of this SubscriptionAgreement may not be assigned by any party without the prior writtenconsent of the other party.

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## c.                                       Counterparts.This Agreement may be executed incounterparts, each of which **shall** be deemed an original**agreement**, but all of which together **shall**constitute **one and the same instrument.**

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d.                                      Executionby Facsimile. Execution and delivery of this Agreement by facsimiletransmission (including the delivery of documents in Adobe PDF format) shallconstitute execution and delivery of this Agreement for all purposes, with thesame force and effect as execution and delivery of an original manually signedcopy hereof.

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## e.                                       GoverningLaw and Jurisdiction. This Subscription Agreement shall be governed by andconstrued in accordance with the laws of the State of New York applicable tocontracts to be wholly performed within such state and without regard toconflicts of laws provisions. Any legal action or proceeding arising out of orrelating to this Subscription Agreement may be instituted in the courts ofthe State of New York sitting in New York County or in the United States ofAmerica for the Southern District of New York, and the parties heretoirrevocably submit to the jurisdiction of each such court in any action orproceeding. Subscriber hereby irrevocably waives and agrees not to assert, byway of motion, as a defense, or otherwise, in every suit, action or otherproceeding arising out of or based on this Subscription Agreement and broughtin any such court, any claim that Subscriber is not subject personally to thejurisdiction of the above named courts, that Subscriber’s property is exempt orimmune from attachment or execution, that the suit, action or proceeding isbrought in an inconvenient forum or that the venue of the suit, action orproceeding is improper.

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

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

 

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brought by a third party,and, if and after such assumption, the Indemnifying Party shall not be entitledto reimbursement of any expenses incurred by it in connection with such actionexcept as described below. In any such action, any Indemnified Party shall havethe right to retain its own counsel, but the fees and expenses of such counselshall be at the expense of such Indemnified Party unless (i) theIndemnifying Party and the Indemnified Party shall have mutually agreed to thecontrary or (ii) the named parties in any such action (including anyimpleaded parties) include both the Indemnifying Party and the IndemnifiedParty and representation of both parties by the same counsel would beinappropriate due to actual or potential differing or conflicting interestsbetween them. The Indemnifying Party shall not be liable for any settlement ofany proceeding effected without its written consent (which shall not beunreasonably withheld or delayed by such Indemnifying Party), but if settledwith such consent or if there be final judgment for the plaintiff, theIndemnifying Party shall indemnify the Indemnified Party from and against anyloss, damage or liability by reason of such settlement or judgment.

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

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## (i)                                     ifto the Issuer:

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****Vistula Communications ServicesInc.********405 Park AvenueSuite 801New York, NY 10022

Attention:Rupert Galliers-Pratt

 

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

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## h.                                      EntireAgreement. This Subscription Agreement (including the Exhibit attachedhereto) and other documents delivered at the Closing pursuant hereto, containthe entire understanding of the parties in respect of its subject matter andsupersedes all prior agreements and understandings between or among the partieswith respect to such subject matter. The Exhibit constitutes a part hereofas though set forth in full above.

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## i.                                          Amendment;Waiver. This Subscription Agreement may not be modified, amended,supplemented, canceled or discharged, except by written instrument executed byboth 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 privilegehereunder preclude the exercise of any other 

 

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

 

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## [SignaturePage to Subscription Agreement]

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

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

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## The Initial Advance may bedelivered to the Company in several wires which may come directly fromSubscriber or Subscribers individual members. The Initial Advance shall benoted on Schedule A to the Revolving Loan Note.

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## Executed March 30,2006

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| 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 |   |

 

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**EXECUTION COPY**

 

## EXHIBIT A

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## RevolvingCredit Facility

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##