Document:

Exhibit 10.1

 

NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS
EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR
THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN
AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE
SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR
REASONABLY ACCEPTABLE TO THE COMPANY TO SUCH EFFECT, THE SUBSTANCE OF WHICH
SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. 
THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS SECURITY
MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN
SECURED BY SUCH SECURITIES.

 

COMMON STOCK PURCHASE WARRANT

 

To Purchase              Shares
of Common Stock of

 

VISTULA COMMUNICATIONS SERVICES, INC.

 

THIS COMMON STOCK
PURCHASE WARRANT (the “Warrant”) certifies that, for value received,                       (the
“Holder”), is entitled, upon the terms and subject to the limitations on
exercise and the conditions hereinafter set forth, at any time on or after the
date hereof (the “Initial Exercise Date”) and on or prior to the close
of business on the fifth anniversary of the Initial Exercise Date (the “Termination
Date”) but not thereafter, to subscribe for and purchase from Vistula
Communications Services, Inc., a Delaware corporation (the “Company”),
up to           shares (the “Warrant
Shares”) of Common Stock, par value $0.001 per share, of the Company (the “Common
Stock”).  The purchase price of one
share of Common Stock under this Warrant shall be equal to the Exercise Price,
as defined in Section 2(b).

 

Section 1.               Issuance of Warrant.  This
Warrant has been issued pursuant to that certain Warrant Exercise Agreement by
and between the Company and the Holder dated as of October      ,
2005 (the “Warrant Exercise Agreement”).

 

Section 2.               Exercise.

 

a)             Exercise
of Warrant.  Exercise of the purchase
rights represented by this Warrant may be made at any time or times on or after
the Initial Exercise Date and on or before the Termination Date by delivery to
the Company of a duly executed facsimile copy of the Notice of Exercise annexed
hereto (or such other office or agency of the Company as it may designate by
notice in writing to the registered Holder at the address of such Holder
appearing on the books of the Company); provided, however, within
5 Trading Days (defined below) of the date said Notice of Exercise is delivered
to the

 

 

Company, the Holder shall
have surrendered this Warrant to the Company and the Company shall have
received payment of the aggregate Exercise Price of the shares thereby
purchased by wire transfer or cashier’s check drawn on a United States bank.

 

b)            Exercise Price.  The exercise price of the Common Stock under
this Warrant shall be $1.50, subject to adjustment hereunder (the “Exercise
Price”).

 

c)             Cashless
Exercise.  If at any time after one
year from the date of issuance of this Warrant there is no effective
registration statement registering, or no current prospectus available for, the
resale of the Warrant Shares by the Holder, then this Warrant may also be
exercised at such time by means of a “cashless exercise” in which the Holder
shall be entitled to receive a certificate for the number of Warrant Shares
equal to the quotient obtained by dividing [(A-B) (X)] by (A), where:

 

(A) =  the Volume Weighted Average Price (“VWAP”)
on the Trading Day (defined below) immediately preceding the date of such
election;

 

(B) =  the Exercise Price of this Warrant, as
adjusted; and

 

(X) =  the number of Warrant Shares issuable upon
exercise of this Warrant in accordance with the terms of this Warrant by means
of a cash exercise rather than a cashless exercise.

 

As used herein, “Trading
Day” means a day on which the Common Stock is traded or quoted on the market or
exchange on which the Common Stock is then listed or quoted for trading.

 

Notwithstanding anything
herein to the contrary, except in the event this Warrant is earlier terminated
pursuant to Section 2(d), on the Termination Date, this Warrant shall be
automatically exercised via cashless exercise pursuant to this Section 2(c).

 

d)            Acceleration
of Termination.  Notwithstanding anything to the contrary provided
herein, in the event the Company provides written notice (an “Accelerated
Termination Notice”) to the Holder that (i) the closing bid price per
share of Common Stock on the market or exchange on which the Common Stock is
then listed or quoted for trading has exceeded $4.50 or higher for 20 consecutive
Trading Days and, (ii) the average daily trading volume of the Common
Stock on such market or exchange during such period was at least 100,000
shares, then this Warrant shall terminate and no longer be exercisable with
respect to any Warrant Shares at the close of business on the later of (x) the
20th Trading Day following the delivery of the Accelerated
Termination Notice and (y) the 10th Trading Day occurring after the
delivery of the Accelerated Termination Notice on which there shall have been
an effective registration statement registering, and a current prospectus
available for, the resale of the Warrant Shares by the Holder.

 

e)             Exercise
Limitations; Holder’s Restrictions. 
The Holder shall not have the right to exercise any portion of this
Warrant, pursuant to Section 2(c) or otherwise, to the extent that
after giving effect to such issuance after exercise, the Holder (together with

 

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the Holder’s affiliates),
as set forth on the applicable Notice of Exercise, would beneficially own in
excess of 4.99% of the number of shares of the Common Stock outstanding
immediately after giving effect to such issuance.  For purposes of the
foregoing sentence, the number of shares of Common Stock beneficially owned by
the Holder and its affiliates shall include the number of shares of Common
Stock issuable upon exercise of this Warrant with respect to which the
determination of such sentence is being made, but shall exclude the number of
shares of Common Stock which would be issuable upon (A) exercise of the
remaining, nonexercised portion of this Warrant beneficially owned by the
Holder or any of its affiliates and (B) exercise or conversion of the
unexercised or nonconverted portion of any other securities of the Company
subject to a limitation on conversion or exercise analogous to the limitation
contained herein beneficially owned by the Holder or any of its
affiliates.  Except as set forth in the preceding sentence, for purposes
of this Section 2(d), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act, it being
acknowledged by Holder that the Company is not representing to Holder that such
calculation is in compliance with Section 13(d) of the Exchange Act
and Holder is solely responsible for any schedules required to be filed in
accordance therewith.   To the extent
that the limitation contained in this Section 2(d) applies, the
determination of whether this Warrant is exercisable (in relation to other
securities owned by the Holder) and of which a portion of this Warrant is
exercisable shall be in the sole discretion of such Holder, and the submission
of a Notice of Exercise shall be deemed to be such Holder’s determination of
whether this Warrant is exercisable (in relation to other securities owned by
such Holder) and of which portion of this Warrant is exercisable, in each case
subject to such aggregate percentage limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination.  For purposes of this Section 2(d), in
determining the number of outstanding shares of Common Stock, the Holder may
rely on the number of outstanding shares of Common Stock as reflected in (x)
the Company’s most recent Form 10-QSB or Form 10-KSB, as the case may
be, (y) a more recent public announcement by the Company or (z) any other
notice by the Company or the Company’s transfer agent setting forth the number
of shares of Common Stock outstanding.  Upon the written or oral request
of the Holder, the Company shall within two Trading Days confirm orally and in
writing to the Holder the number of shares of Common Stock then
outstanding.  In any case, the number of outstanding shares of Common
Stock shall be determined after giving effect to the conversion or exercise of
securities of the Company, including this Warrant, by the Holder or its
affiliates since the date as of which such number of outstanding shares of
Common Stock was reported.  The
provisions of this Section 2(d) may be waived by the Holder upon, at
the election of the Holder, not less than 61 days’ prior notice to the Company,
and the provisions of this Section 2(d) shall continue to apply until
such 61st day (or such later date, as determined by the Holder, as
may be specified in such notice of waiver).

 

f)             Mechanics
of Exercise.

 

i.              Authorization
of Warrant Shares.  The Company
covenants that all Warrant Shares which may be issued upon the exercise of the
purchase rights represented by this Warrant will, upon exercise of the purchase
rights represented by this Warrant, be duly authorized, validly

 

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issued, fully paid and
nonassessable and free from all taxes, liens and charges in respect of the
issue thereof (other than taxes in respect of any transfer occurring
contemporaneously with such issue).

 

ii.             Delivery
of Certificates Upon Exercise. 
Certificates for shares purchased hereunder shall be transmitted by the
transfer agent of the Company to the Holder by crediting the account of the
Holder’s prime broker with the Depository Trust Company through its
Deposit/Withdrawal at Custodian (“DWAC”) system if the Company is a
participant in such system, and otherwise by physical delivery to the address
specified by the Holder in the Notice of Exercise within 3 Trading Days from
the delivery to the Company of the executed Notice of Exercise, surrender of
this Warrant and payment of the aggregate Exercise Price as set forth above (“Warrant
Share Delivery Date”).  This Warrant
shall be deemed to have been exercised on the date the Exercise Price is
received by the Company.  The Warrant
Shares shall be deemed to have been issued, and Holder or any other person so
designated to be named therein shall be deemed to have become a holder of
record of such shares for all purposes, as of the date the Warrant has been
exercised by payment to the Company of the Exercise Price and all taxes
required to be paid by the Holder, if any, pursuant to Section 2(e)(vii) prior
to the issuance of such shares, have been paid.

 

iii.            Delivery
of New Warrants Upon Exercise.  If
this Warrant shall have been exercised in part, the Company shall, at the time
of delivery of the certificate or certificates representing Warrant Shares,
deliver to Holder a new Warrant evidencing the rights of Holder to purchase the
unpurchased Warrant Shares called for by this Warrant, which new Warrant shall
in all other respects be identical with this Warrant.

 

iv.            Rescission
Rights.  If the Company fails to
cause its transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Shares pursuant to this Section 2(e)(iv) by
the Warrant Share Delivery Date, then the Holder will have the right to rescind
such exercise.

 

v.             Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon Exercise.  In addition to any other rights available to
the Holder, if the Company fails to cause its transfer agent to transmit to the
Holder a certificate or certificates representing the Warrant Shares pursuant
to an exercise on or before the Warrant Share Delivery Date, and if after such
date the Holder is required by its broker to purchase (in an open market
transaction or otherwise) shares of Common Stock to deliver in satisfaction of
a sale by the Holder of the Warrant Shares which the Holder anticipated
receiving upon such exercise (a “Buy-In”), then the Company shall (1) pay
in cash to the Holder the amount by which (x) the Holder’s total purchase price
(including brokerage commissions, if any)

 

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for the shares of Common
Stock so purchased exceeds (y) the amount obtained by multiplying (A) the
number of Warrant Shares that the Company was required to deliver to the Holder
in connection with the exercise at issue times (B) the price at which the
sell order giving rise to such purchase obligation was executed, and (2) at
the option of the Holder, either reinstate the portion of the Warrant and
equivalent number of Warrant Shares for which such exercise was not honored or
deliver to the Holder the number of shares of Common Stock that would have been
issued had the Company timely complied with its exercise and delivery
obligations hereunder.  For example, if
the Holder purchases Common Stock having a total purchase price of $11,000 to
cover a Buy-In with respect to an attempted exercise of shares of Common Stock
with an aggregate sale price giving rise to such purchase obligation of
$10,000, under clause (1) of the immediately preceding sentence the
Company shall be required to pay the Holder $1,000. The Holder shall provide
the Company written notice indicating the amounts payable to the Holder in
respect of the Buy-In, together with applicable confirmations and other
evidence reasonably requested by the Company. 
Nothing herein shall limit a Holder’s right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation, a
decree of specific performance and/or injunctive relief with respect to the
Company’s failure to timely deliver certificates representing shares of Common
Stock upon exercise of the Warrant as required pursuant to the terms hereof.

 

vi.            No
Fractional Shares or Scrip.  No
fractional shares or scrip representing fractional shares shall be issued upon
the exercise of this Warrant.  As to any
fraction of a share which Holder would otherwise be entitled to purchase upon
such exercise, the Company shall pay a cash adjustment in respect of such final
fraction in an amount equal to such fraction multiplied by the Exercise Price.

 

vii.           Charges,
Taxes and Expenses.  Issuance of
certificates for Warrant Shares shall be made without charge to the Holder for
any issue or transfer tax or other incidental expense in respect of the
issuance of such certificate, all of which taxes and expenses shall be paid by
the Company, and such certificates shall be issued in the name of the Holder or
in such name or names as may be directed by the Holder; provided, however,
that in the event certificates for Warrant Shares are to be issued in a name
other than the name of the Holder, this Warrant when surrendered for exercise
shall be accompanied by the Assignment Form attached hereto duly executed
by the Holder; and the Company may require, as a condition thereto, the payment
of a sum sufficient to reimburse it for any transfer tax incidental thereto.

 

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viii.          Closing
of Books.  The Company will not close
its stockholder books or records in any manner which prevents the timely
exercise of this Warrant, pursuant to the terms hereof.

 

Section 3.               Certain Adjustments.

 

a)             Stock
Dividends and Splits. If the Company, at any time while this Warrant is
outstanding: (A) pays a stock dividend or otherwise make a distribution or
distributions on shares of its Common Stock or any other equity or equity
equivalent securities payable in shares of Common Stock (which, for avoidance
of doubt, shall not include any shares of Common Stock issued by the Company
pursuant to this Warrant), (B) subdivides outstanding shares of Common
Stock into a larger number of shares, (C) combines (including by way of
reverse stock split) outstanding shares of Common Stock into a smaller number
of shares, or (D) issues by reclassification of shares of the Common Stock
any shares of capital stock of the Company, then in each case the Exercise
Price shall be multiplied by a fraction of which the numerator shall be the
number of shares of Common Stock (excluding treasury shares, if any)
outstanding before such event and of which the denominator shall be the number
of shares of Common Stock outstanding after such event and the number of shares
issuable upon exercise of this Warrant shall be proportionately adjusted.  Any adjustment made pursuant to this Section 3(a) shall
become effective immediately after the record date for the determination of
stockholders entitled to receive such dividend or distribution and shall become
effective immediately after the effective date in the case of a subdivision,
combination or re-classification.

 

b)            Fundamental
Transaction. If, at any time while this Warrant is outstanding, (A) the
Company effects any merger or consolidation of the Company with or into another
Person, (B) the Company effects any sale of all or substantially all of
its assets in one or a series of related transactions, (C) any tender
offer or exchange offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to tender or exchange
their shares for other securities, cash or property, or (D) the Company
effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or
exchanged for other securities, cash or property (in any such case, a “Fundamental
Transaction”), then, upon any
subsequent exercise of this Warrant, the Holder
shall have the right to receive, for each Warrant Share that would have
been issuable upon such exercise absent such Fundamental Transaction, at the option of the Holder, (a) upon exercise of
this Warrant, the number of shares of Common Stock of the successor or
acquiring corporation or of the Company, if it is the surviving corporation,
and Alternate Consideration receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of
assets by a Holder of the number of shares of Common Stock for which this
Warrant is exercisable immediately prior to such event or (b) upon
exercise of this Warrant, if the Company is acquired in an all cash
transaction, cash equal to the the cash amount issuable in respect to one share
of Common Stock in such Fundamental Transaction (the “Alternate
Consideration”).  For purposes of any
such exercise, the determination of the Exercise Price shall be appropriately
adjusted to apply to such Alternate Consideration based on the amount of

 

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Alternate Consideration
issuable in respect of one share of Common Stock in such Fundamental
Transaction, and the Company shall apportion the Exercise Price among the
Alternate Consideration in a reasonable manner reflecting the relative value of
any different components of the Alternate Consideration.  If holders of Common Stock are given any
choice as to the securities, cash or property to be received in a Fundamental
Transaction, then the Holder shall be given the same choice as to the Alternate
Consideration it receives upon any exercise of this Warrant following such
Fundamental Transaction.  To the extent
necessary to effectuate the foregoing provisions, any successor to the Company
or surviving entity in such Fundamental Transaction shall issue to the Holder a
new warrant consistent with the foregoing provisions and evidencing the Holder’s
right to exercise such warrant into Alternate Consideration. The terms of any
agreement pursuant to which a Fundamental Transaction is effected shall include
terms requiring any such successor or surviving entity to comply with the
provisions of this Section 3(b) and insuring that this Warrant (or
any such replacement security) will be similarly adjusted upon any subsequent
transaction analogous to a Fundamental Transaction.

 

c)             Calculations.
All calculations under this Section 3 shall be made to the nearest cent or
the nearest 1/100th of a share, as the case may be. The number of shares of
Common Stock outstanding at any given time shall not include shares of Common
Stock owned or held by or for the account of the Company, and the description
of any such shares of Common Stock shall be considered on issue or sale of
Common Stock.  For purposes of this Section 3,
the number of shares of Common Stock deemed to be issued and outstanding as of
a given date shall be the sum of the number of shares of Common Stock
(excluding treasury shares, if any) issued and outstanding.

 

d)            Voluntary
Adjustment By Company. The Company may at any time during the term of this
Warrant reduce the then current Exercise Price to any amount and for any period
of time deemed appropriate by the Board of Directors of the Company.

 

e)             Notice
to Holders.

 

i.              Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to this
Section 3, the Company shall promptly mail to each Holder a notice setting
forth the Exercise Price after such adjustment and setting forth a brief
statement of the facts requiring such adjustment.

 

ii.             Notice
to Allow Exercise by Holder. If (A) the Company shall declare a
dividend (or any other distribution) on the Common Stock; (B) the Company
shall declare a special nonrecurring cash dividend on or a redemption of the
Common Stock; (C) the Company shall authorize the granting to all holders
of the Common Stock rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights; (D) the approval of any
stockholders of the Company shall be required in connection with any
reclassification of the Common Stock, any consolidation or merger to which the
Company is a party, any sale or transfer of all or substantially all of the
assets of the Company, of any

 

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compulsory share exchange
whereby the Common Stock is converted into other securities, cash or property; (E) the
Company shall authorize the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Company; then, in each case, the Company
shall cause to be mailed to the Holder at its last addresses as it shall appear
upon the Warrant Register of the Company, at least 20 calendar days prior to
the applicable record or effective date hereinafter specified, a notice stating
(x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be
taken, the date as of which the holders of the Common Stock of record to be
entitled to such dividend, distributions, redemption, rights or warrants are to
be determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock
of record shall be entitled to exchange their shares of the Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer or share exchange; provided, that
the failure to mail such notice or any defect therein or in the mailing thereof
shall not affect the validity of the corporate action required to be specified
in such notice.  The Holder is entitled
to exercise this Warrant during the 20-day period commencing on the date of
such notice to the effective date of the event triggering such notice.

 

Section 4.               Transfer of Warrant.

 

a)             Transferability.  Subject to compliance with any applicable
securities laws and the conditions set forth in Sections 5(a) and 4(d),
this Warrant and all rights hereunder are transferable, in whole or in part,
upon surrender of this Warrant at the principal office of the Company, together
with a written assignment of this Warrant substantially in the form attached
hereto duly executed by the Holder or its agent or attorney and funds
sufficient to pay any transfer taxes payable upon the making of such
transfer.  Upon such surrender and, if
required, such payment, the Company shall execute and deliver a new Warrant or
Warrants in the name of the assignee or assignees and in the denomination or
denominations specified in such instrument of assignment, and shall issue to
the assignor a new Warrant evidencing the portion of this Warrant not so
assigned, and this Warrant shall promptly be cancelled.  A Warrant, if properly assigned, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.  The minimum number
of Warrant Shares subject to this Section 4(a) shall be 10,000 per
transfer.

 

b)            New
Warrants. This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney.  Subject to compliance with Section 4(a),
as to any transfer which may be involved in such division or combination, the

 

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Company shall execute and
deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be
divided or combined in accordance with such notice.

 

c)             Warrant
Register. The Company shall register this Warrant, upon records to be
maintained by the Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time.  The Company may deem and treat the registered
Holder of this Warrant as the absolute owner hereof for the purpose of any
exercise hereof or any distribution to the Holder, and for all other purposes,
absent actual notice to the contrary.

 

d)            Transfer
Restrictions. If, at the time of the surrender of this Warrant in
connection with any transfer of this Warrant, the transfer of this Warrant
shall not be registered pursuant to an effective registration statement under
the Securities Act and under applicable state securities or blue sky laws, the
Company may require, as a condition of allowing such transfer (i) that the
Holder or transferee of this Warrant, as the case may be, furnish to the
Company a written opinion of counsel reasonably acceptable to the Company
(which opinion shall be in form, substance and scope customary for opinions of
counsel in comparable transactions) to the effect that such transfer may be made
without registration under the Securities Act and under applicable state
securities or blue sky laws, (ii) that the holder or transferee execute
and deliver to the Company an investment letter in form and substance
acceptable to the Company and (iii) that the transferee be an “accredited
investor” as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7), or (a)(8) promulgated
under the Securities Act or a qualified institutional buyer as defined in Rule 144A(a) under
the Securities Act.

 

Section 5.               Miscellaneous.

 

a)             Title
to Warrant.  Prior to the Termination
Date and subject to compliance with applicable laws and Section 4 of this
Warrant, this Warrant and all rights hereunder are transferable, in whole or in
part, at the office or agency of the Company by the Holder in person or by duly
authorized attorney, upon surrender of this Warrant together with the
Assignment Form annexed hereto properly endorsed.  The transferee shall sign an investment
letter in form and substance reasonably satisfactory to the Company.

 

b)            No
Rights as Shareholder Until Exercise. 
This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company prior to the exercise hereof.  Upon the surrender of this Warrant and the
payment of the aggregate Exercise Price (or by means of a cashless exercise),
the Warrant Shares so purchased shall be and be deemed to be issued to such
Holder as the record owner of such shares as of the close of business on the
later of the date of such surrender or payment.

 

c)             Loss,
Theft, Destruction or Mutilation of Warrant. The Company covenants that
upon receipt by the Company of evidence reasonably satisfactory to it of the
loss, theft, destruction or mutilation of this Warrant or any stock certificate
relating to the Warrant Shares, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock

 

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certificate, if
mutilated, the Company will make and deliver a new Warrant or stock certificate
of like tenor and dated as of such cancellation, in lieu of such Warrant or
stock certificate.

 

d)            Saturdays,
Sundays, Holidays, etc.  If the last
or appointed day for the taking of any action or the expiration of any right
required or granted herein shall be a Saturday, Sunday or a legal holiday, then
such action may be taken or such right may be exercised on the next succeeding
day not a Saturday, Sunday or legal holiday.

 

e)             Authorized
Shares.

 

The Company covenants
that during the period the Warrant is outstanding, it will reserve from its
authorized and unissued Common Stock a sufficient number of shares to provide
for the issuance of the Warrant Shares upon the exercise of any purchase rights
under this Warrant.  The Company further
covenants that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the Warrant Shares upon the
exercise of the purchase rights under this Warrant.  The Company will take all such reasonable
action as may be necessary to assure that such Warrant Shares may be issued as
provided herein without violation of any applicable law or regulation, or of
any requirements of the Trading Market upon which the Common Stock may be
listed.

 

Except and to the extent
as waived or consented to by the Holder, the Company shall not by any action,
including, without limitation, amending its certificate of incorporation or
through any reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary action, avoid
or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant
against impairment.  Without limiting the
generality of the foregoing, the Company will (a) not increase the par
value of any Warrant Shares above the amount payable therefor upon such
exercise immediately prior to such increase in par value, (b) take all
such action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable Warrant Shares upon the
exercise of this Warrant, and (c) use commercially reasonable efforts to
obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be necessary to enable the
Company to perform its obligations under this Warrant.

 

Before taking any action
which would result in an adjustment in the number of Warrant Shares for which
this Warrant is exercisable or in the Exercise Price, the Company shall obtain
all such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction
thereof.

 

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f)             Jurisdiction.
All questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by and construed and enforced
in accordance with the internal laws of the State of Delaware, without regard
to the principles of conflicts of law thereof.

 

g)            Restrictions.  The Holder acknowledges that the Warrant
Shares acquired upon the exercise of this Warrant, if not registered, will have
restrictions upon resale imposed by state and federal securities laws.

 

h)            Nonwaiver
and Expenses.  No course of dealing
or any delay or failure to exercise any right hereunder on the part of Holder
shall operate as a waiver of such right or otherwise prejudice Holder’s rights,
powers or remedies, notwithstanding the fact that all rights hereunder
terminate on the Termination Date.  If
the Company willfully and knowingly fails to comply with any provision of this
Warrant, which results in any material damages to the Holder, the Company shall
pay to Holder such amounts as shall be sufficient to cover any costs and
expenses including, but not limited to, reasonable attorneys’ fees, including
those of appellate proceedings, incurred by Holder in collecting any amounts
due pursuant hereto or in otherwise enforcing any of its rights, powers or
remedies hereunder.

 

i)              Notices.  Any notice, request or other document
required or permitted to be given or delivered to the Holder by the Company shall
be delivered in accordance with the notice provisions of the Warrant Exercise
Agreement.

 

j)              Limitation
of Liability.  No provision hereof,
in the absence of any affirmative action by Holder to exercise this Warrant or
purchase Warrant Shares, and no enumeration herein of the rights or privileges
of Holder, shall give rise to any liability of Holder for the purchase price of
any Common Stock or as a stockholder of the Company, whether such liability is
asserted by the Company or by creditors of the Company.

 

k)             Remedies.  Holder, in addition to being entitled to
exercise all rights granted by law, including recovery of damages, will be
entitled to specific performance of its rights under this Warrant.  The Company agrees that monetary damages
would not be adequate compensation for any loss incurred by reason of a breach
by it of the provisions of this Warrant and hereby agrees to waive the defense
in any action for specific performance that a remedy at law would be adequate.

 

l)              Successors
and Assigns.  Subject to applicable
securities laws, this Warrant and the rights and obligations evidenced hereby
shall inure to the benefit of and be binding upon the successors of the Company
and the successors and permitted assigns of Holder.  The provisions of this Warrant are intended
to be for the benefit of all Holders from time to time of this Warrant and
shall be enforceable by any such Holder or holder of Warrant Shares.

 

m)            Amendment.  This Warrant may be modified or amended or
the provisions hereof waived with the written consent of the Company and the
Holder.

 

11

 

n)            Severability.  Wherever possible, each provision of this
Warrant shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant shall be prohibited by or
invalid under applicable law, such provision shall be ineffective to the extent
of such prohibition or invalidity, without invalidating the remainder of such
provisions or the remaining provisions of this Warrant.

 

o)            Headings.  The headings used in this Warrant are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.

 

********************

 

12

 

IN WITNESS
WHEREOF, the Company has caused this Warrant to be executed by its officer
thereunto duly authorized.

 

 

Dated:  October    ,
2005

 

 

	
   

  	
  VISTULA COMMUNICATIONS SERVICES, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

13

 

NOTICE OF EXERCISE

 

TO:         VISTULA COMMUNICATIONS SERVICES, INC.

 

(1)           The
undersigned hereby elects to purchase              
Warrant Shares of the Company pursuant to the terms of the attached Warrant
(only if exercised in full), and tenders herewith payment of the exercise price
in full, together with all applicable transfer taxes, if any.

 

(2)           Payment
shall take the form of (check applicable box):

 

o
in lawful money of the United States; or

 

o
the cancellation of such number of Warrant Shares as is necessary, in
accordance with the formula set forth in subsection 2(c), to exercise this
Warrant with respect to the maximum number of Warrant Shares purchasable
pursuant to the cashless exercise procedure set forth in subsection 2(c).

 

(3)           Please
issue a certificate or certificates representing said Warrant Shares in the
name of the undersigned or in such other name as is specified below:

 

 

 

The Warrant Shares shall be delivered to the following:

 

 

 

 

(4)           Accredited
Investor.  The undersigned is an “accredited
investor” as defined in Regulation D promulgated under the Securities Act of
1933, as amended.

 

[SIGNATURE OF HOLDER]

 

Name of Investing Entity: 

Signature of Authorized Signatory of Investing
Entity: 

Name of Authorized Signatory: 

Title of Authorized Signatory: 

Date: 

 

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

this form and supply required information. 

Do not use this form to exercise the warrant.)

 

FOR VALUE
RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby
assigned to

 

	
   

  	
  whose address is

  
	
   

  	
   

  
	
   

  	
  .

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
			

 

	
   

  	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Holder’s Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Holder’s Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Signature Guaranteed:

  	
   

  	
   

  
												

 

 

NOTE:  The signature to this
Assignment Form must correspond with the name as it appears on the face of
the Warrant, without alteration or enlargement or any change whatsoever, and
must be guaranteed by a bank or trust company. 
Officers of corporations and those acting in a fiduciary or other representative
capacity should file proper evidence of authority to assign the foregoing
Warrant.Exhibit 10.2

 

REGISTRATION
RIGHTS AGREEMENT

 

This Registration Rights Agreement (this “Agreement”)
is made and entered into as of October 3, 2005, among Vistula
Communications Services, Inc., a Delaware corporation (the “Company”),
and the purchasers signatory hereto (each such purchaser is a “Purchaser”
and collectively, the “Purchasers”).

 

WHEREAS, the Company, the Purchasers and
certain other parties entered into a Securities Purchase Agreement dated as of February 18,
2005 (the “Purchase Agreement”) pursuant to which the Purchasers
purchased certain warrants the (“Initial Warrants”) to purchase shares
of Common Stock, par value $0.001 per share, of the Company (the “Common
Stock”);

 

WHEREAS, the Company has entered into with
each of the Purchasers a Warrant Exercise Agreement (the “Warrant Exercise
Agreement”) dated as of the date hereof pursuant to which the Purchasers
may exercise the Initial Warrants with respect to all shares of Common Stock
purchasable thereunder and, in consideration therefor, receive new warrants
(the “Replacement Warrants”) as set forth in the several Warrant
Exercise Agreements; and

 

WHEREAS, the Company has agreed to grant
certain registration rights with respect to the shares of Common Stock issuable
from time to time upon exercise of the Replacement Warrants;

 

NOW, THEREFORE, in consideration of the
mutual premises and covenants contained herein, the parties hereto agree as
follows:

 

1. Definitions

 

Capitalized
terms used and not otherwise defined herein that are defined in the Purchase
Agreement shall have the meanings given such terms in the Purchase Agreement.
As used in this Agreement, the following terms shall have the following
meanings:

 

“Advice”
shall have the meaning set forth in Section 6(d).

 

“Commission”
means the United States Securities and Exchange Commission.

 

“Effectiveness
Date” means the 120th calendar day following the date hereof; provided,
however, that in the event the Company is notified by the Commission
that the Registration Statement will not be reviewed or is no longer subject to
further review and comments, the Effectiveness Date of the Registration
Statement shall be the fifth Trading Day following the date on which the
Company is so notified if such date precedes the dates required above.

 

“Effectiveness
Period” shall have the meaning set forth in Section 2(a).

 

“Filing
Date” means the later of the (i) 90th calendar day
following the date hereof and (ii) the 5th business day
following the first date on which the Company is permitted to

 

 

file new registration statements without an
opinion of counsel in accordance under Section 4.14 of the Purchase
Agreement.

 

“Holder”
or “Holders” means the holder or holders, as the case may be, from time
to time of Registrable Securities.

 

“Indemnified
Party” shall have the meaning set forth in Section 5(c).

 

“Indemnifying
Party” shall have the meaning set forth in Section 5(c).

 

“Losses”
shall have the meaning set forth in Section 5(a).

 

“Placement
Agent” shall mean Indigo Securities, LLC.

 

“Plan of
Distribution” shall have the meaning set forth in Section 2(a).

 

“Proceeding”
means an action, claim, suit, investigation or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.

 

“Prospectus”
means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of the Registrable Securities covered by the Registration Statement,
and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference or deemed
to be incorporated by reference in the Prospectus.

 

“Registrable
Securities” means (i) all of the shares of Common Stock issuable upon
exercise in full of the Replacement Warrants, and (ii) any securities
issued or issuable upon any stock split, dividend or other distribution,
recapitalization or similar event with respect to the foregoing.

 

“Registration
Statement” means the registration statement required to be filed hereunder
including the Prospectus, amendments and supplements to such registration
statement or Prospectus, including pre-effective and post-effective amendments,
all exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.

 

“Rule 415”
means Rule 415 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.

 

2

 

“Rule 424”
means Rule 424 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
purpose and effect as such Rule.

 

“Selling
Shareholder Questionnaire” shall have the meaning set forth in Section 3(a).

 

2.             Shelf
Registration.

 

(a)           On
or prior to the Filing Date, the Company shall prepare and file with the
Commission a “Shelf” Registration Statement covering the resale of the
Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415.  The
Registration Statement shall be on Form S-3 (except if the Company is not
then eligible to register for resale the Registrable Securities on Form S-3,
in which case such registration shall be on another appropriate form in
accordance herewith) and shall contain (unless otherwise directed by the
Holders) substantially the “Plan of Distribution” attached hereto as Annex
A.  Subject to the terms of this
Agreement, the Company shall use its best efforts to cause the Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event prior to the applicable
Effectiveness Date, and shall use its best efforts to keep the Registration
Statement continuously effective under the Securities Act until the Registrable
Securities have been sold or may be sold without volume restrictions pursuant
to Rule 144(k) as determined by the counsel to the Company pursuant to a
written opinion letter to such effect, addressed and acceptable to the Company’s
transfer agent and the affected Holders (the “Effectiveness Period”).  The Company shall immediately notify the
Holders via facsimile of the effectiveness of the Registration Statement on the
same day that the Company receives notification of the effectiveness from the Commission.

 

(b)           If: (i) the
Company fails to file with the Commission a request for acceleration in
accordance with Rule 461 promulgated under the Securities Act within five (5) Trading
Days of the date that the Company is notified (orally or in writing, whichever
is earlier) by the Commission that a Registration Statement will not be “reviewed,”
or will not be subject to further review, (ii) a Registration Statement
filed or required to be filed hereunder is not declared effective by the
Commission by its Effectiveness Date, or (iii) after the Effectiveness
Date but prior to the first anniversary of the date of issuance of the
Replacement Warrants (the “Warrant Anniversary Date”), a Registration
Statement ceases for any reason to remain continuously effective as to all
Registrable Securities for which it is required to be effective or the Holders
are not permitted to utilize the Prospectus therein to resell such Registrable
Securities for 15 consecutive Trading Days or more than an aggregate of 25
Trading Days during any 12-month period (which need not be consecutive Trading
Days) (any such failure or breach being referred to as an “Event”, and
for purposes of clause (i) the date on which such five Trading Day period
is exceeded, or for purposes of clause (ii) the date on which such Event
occurs, or for purposes of clause (iii) the date on which such 15 or 25
Trading Day period, as applicable, is exceeded being referred to as “Event
Date”), then in addition to any other rights the Holders may have hereunder
or under applicable law, on each monthly anniversary of each such Event Date
(if the applicable Event shall not have been cured by such date) until (i) the
date on which the applicable Event is

 

3

 

cured or (ii) the
Warrant Anniversary Date, whichever comes first, the Company shall pay to each
Holder an amount in cash, as liquidated damages and not as a penalty, equal to
0.5% per month of the aggregate exercise price applicable under the terms of
the Replacement Warrants to the Registrable Securities then held by such
Holder.  If the Company fails to pay any
liquidated damages pursuant to this Section in full within seven days
after the date payable, the Company will pay interest thereon at a rate of 18%
per annum (or such lesser maximum amount that is permitted to be paid by
applicable law) to the Holder, accruing daily from the date such liquidated
damages are due until such amounts, plus all such interest thereon, are paid in
full. The liquidated damages pursuant to the terms hereof shall apply on a
daily pro-rata basis for any portion of a month prior to the date on which an
Event is cured or the Warrant Anniversary Date, as applicable.

 

3. Registration Procedures

 

In connection with the Company’s registration
obligations hereunder, the Company shall:

 

(a)           Not
less than five Trading Days prior to the filing of the Registration Statement,
related Prospectus, the Company shall, (i) furnish to each Holder copies
of such documents, which documents will be subject to the review of such
Holders, and (ii) cause its officers and directors, counsel and
independent certified public accountants to respond to such inquiries as shall
be necessary, in the reasonable opinion of respective counsel to conduct a
reasonable investigation within the meaning of the Securities Act. The Company
shall not file the Registration Statement or Prospectus to which the Holders of
a majority of the Registrable Securities shall reasonably object in good faith,
provided that, the Company is notified of such objection in writing no later
than 5 Trading Days after the Holders have been so furnished copies of such
documents. Each Holder agrees to furnish to the Company a completed
Questionnaire in the form attached to this Agreement as Annex B (a “Selling
Shareholder Questionnaire”) not less than two Trading Days prior to the
Filing Date or by the end of the fourth Trading Day following the date on which
such Holder receives draft materials in accordance with this Section.

 

(b)           (i) Prepare
and file with the Commission such amendments, including post-effective
amendments, to the Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep the Registration Statement continuously
effective for the Effectiveness Period; (ii) cause the related Prospectus
to be amended or supplemented by any required Prospectus supplement (subject to
the terms of this Agreement), and as so supplemented or amended to be filed
pursuant to Rule 424; (iii) respond as promptly as reasonably possible
to any comments received from the Commission with respect to the Registration
Statement or any amendment thereto; and (iv) comply in all material
respects with the provisions of the Securities Act and the Exchange Act with
respect to the disposition of all Registrable Securities covered by the
Registration Statement during the applicable period in accordance (subject to
the terms of this Agreement) with the intended methods of disposition by the
Holders thereof set forth in the Registration Statement as so amended or in the
Prospectus as so supplemented.

 

(c)           Notify
the Holders of Registrable Securities to be sold (which notice shall, pursuant
to clauses (ii) through (vi) hereof, be accompanied by an instruction
to suspend the use of the Prospectus until the requisite changes have been
made) as promptly as reasonably possible

 

4

 

(and, in the case of (i)(A) below,
not less than five Trading Days prior to such filing) and (if requested by any
such Person) confirm such notice in writing no later than one Trading Day
following the day (i)(A) when the Prospectus or post-effective amendment
to the Registration Statement is proposed to be filed; (B) when the
Commission notifies the Company whether there will be a “review” of the
Registration Statement; and (C) with respect to the Registration Statement
or any post-effective amendment thereof, when the same has become effective; (ii) of
any request by the Commission or any other Federal or state governmental authority
for amendments or supplements to the Registration Statement or Prospectus or
for additional information; (iii) of the issuance by the Commission or any
other federal or state governmental authority of any stop order suspending the
effectiveness of the Registration Statement or the initiation of any
Proceedings for that purpose; (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or exemption
from qualification of any of the Registrable Securities for sale in any
jurisdiction, or the initiation or threatening of any Proceeding for such
purpose; (v) of the occurrence of any event or passage of time that makes
the financial statements included in the Registration Statement ineligible for
inclusion therein or any statement made in the Registration Statement or
Prospectus or any document incorporated or deemed to be incorporated therein by
reference untrue in any material respect or that requires any revisions to the
Registration Statement, Prospectus or other documents so that, in the case of
the Registration Statement or the Prospectus, as the case may be, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not misleading; and (vi) the
occurrence or existence of any pending corporate development with respect to
the Company that the Company believes may be material and that, in the determination
of the Company, makes it not in the best interest of the Company to allow
continued availability of the Registration Statement or Prospectus; provided
that any and all of such information shall remain confidential to each Holder
until such information otherwise becomes public, unless disclosure by a Holder
is required by law; provided, further, notwithstanding each
Holder’s agreement to keep such information confidential, the Holders make no
acknowledgement that any such information is material, non-public information.

 

(d)           Use
its best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
of (i) any order suspending the effectiveness of the Registration
Statement, or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, at the earliest practicable moment.

 

(e)           Furnish
to each Holder, without charge, at least one conformed copy of the Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference to the extent requested by such Person, and all exhibits to the
extent requested by such Person (including those previously furnished or incorporated
by reference) promptly after the filing of such documents with the Commission.

 

(f)            Promptly
deliver to each Holder, without charge, as many copies of the Prospectus
(including each form of prospectus) and each amendment or supplement thereto as
such Holder may reasonably request in connection with resales by the Holder of
Registrable Securities.  Subject to the
terms of this Agreement, the Company hereby consents to the use of

 

5

 

the Prospectus and each
amendment or supplement thereto by each of the selling Holders in connection
with the offering and sale of the Registrable Securities, except after the
giving on any notice pursuant to Section 3(d).

 

(g)           If
NASDR Rule 2710 requires any broker-dealer to make a filing prior to
executing a sale by a Holder, make an Issuer Filing with the NASDR, Inc.
Corporate Financing Department pursuant to NASDR Rule 2710(b)(10)(A)(i) and
respond within five Trading Days to any comments received from NASDR in
connection therewith, and pay the filing fee required in connection therewith.

 

(h)           Prior
to any resale of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the selling Holders
in connection with the registration or qualification (or exemption from the
Registration or qualification) of such Registrable Securities for the resale by
the Holder under the securities or Blue Sky laws of such jurisdictions within
the United States as any Holder reasonably requests in writing, to keep each
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things reasonably
necessary to enable the disposition in such jurisdictions of the Registrable
Securities; provided, that the Company shall not be required to qualify
generally to do business in any jurisdiction where it is not then so qualified,
subject the Company to any material tax in any such jurisdiction where it is
not then so subject or file a general consent to service of process in any such
jurisdiction.

 

(i)            If
requested by the Holders, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be delivered to a transferee pursuant to the Registration Statement, which
certificates shall be free of all restrictive legends, and to enable the
Registrable Securities to be in such denominations and registered in such names
as any such Holders may request.

 

(j)            Upon
the occurrence of any event contemplated by this Section 3, as promptly as
reasonably possible under the circumstances taking into account the Company’s
good faith assessment of any adverse consequences to the Company and its
stockholders of the premature disclosure of such event, prepare a supplement or
amendment, including a post-effective amendment, to the Registration Statement
or a supplement to the related Prospectus or any document incorporated or
deemed to be incorporated therein by reference, and file any other required
document so that, as thereafter delivered, neither the Registration Statement
nor the Prospectus will contain an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading.  If the Company notifies
the Holders in accordance with clauses (ii) through (vi) of Section 3(d) above
to suspend the use of the Prospectus until the requisite changes to the
Prospectus have been made, then the Holders shall suspend use of the
Prospectus.  The Company will use its
best efforts to ensure that the use of the Prospectus may be resumed as
promptly as is practicable.  The Company
shall be entitled to exercise its right under this Section 3(j) to suspend
the availability of the Registration Statement and Prospectus for a period not
to exceed 60 days (which need not be consecutive days) in any 12-month period.

 

6

 

(k)           Comply
with all applicable rules and regulations of the Commission.

 

(l)            The
Company may require each selling Holder to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially owned by such
Holder and, if required by the Commission, the person thereof that has voting
and dispositive control over the Shares.

 

4. Registration Expenses.  All fees and expenses incident to the
performance of or compliance with this Agreement by the Company shall be borne
by the Company whether or not any Registrable Securities are sold pursuant to
the Registration Statement. The fees and expenses referred to in the foregoing
sentence shall include, without limitation, (i) all registration and
filing fees (including, without limitation, fees and expenses (A) with
respect to filings required to be made with the Trading Market on which the
Common Stock is then listed for trading, (B) in compliance with applicable
state securities or Blue Sky laws reasonably agreed to by the Company in
writing (including, without limitation, fees and disbursements of counsel for
the Company in connection with Blue Sky qualifications or exemptions of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment if required under the laws of such jurisdictions and
requested by the Holders) and (C) if not previously paid by the Company in
connection with an Issuer Filing, with respect to any filing that may be
required to be made by any broker through which a Holder intends to make sales
of Registrable Securities with NASD Regulation, Inc. pursuant to the NASD Rule 2710,
so long as the broker is receiving no more than a customary brokerage
commission in connection with such sale, (ii) printing expenses (including,
without limitation, expenses of printing certificates for Registrable
Securities and of printing prospectuses if the printing of prospectuses is
reasonably requested by the holders of a majority of the Registrable
Securities), (iii) messenger, telephone and delivery expenses, (iv) fees
and disbursements of counsel for the Company, (v) Securities Act liability
insurance, if the Company so desires such insurance, and (vi) fees and
expenses of all other Persons retained by the Company in connection with the
consummation of the transactions contemplated by this Agreement.  In addition, the Company shall be responsible
for all of its internal expenses incurred in connection with the consummation
of the transactions contemplated by this Agreement (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), the expense of any annual audit and the fees and
expenses incurred in connection with the listing of the Registrable Securities
on any securities exchange as required hereunder.  In no event shall the Company be responsible
for any broker or similar commissions or, except to the extent provided for
herein or in the Replacement Warrants, any legal fees or other costs of the
Holders.

 

5. Indemnification

 

(a) Indemnification by the Company. The Company shall,
notwithstanding any termination of this Agreement, indemnify and hold harmless
each Holder, the officers, directors, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment
advisors and employees of each of them, each Person who controls any such
Holder (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) and the officers, directors, agents and employees of each
such controlling Person, to the fullest extent permitted

 

7

 

by applicable law, from and
against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorneys’ fees) and expenses (collectively, “Losses”),
as incurred, arising out of or relating to any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, the
Prospectus or form of prospectus or in any amendment or supplement thereto or
in any preliminary prospectus, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of the Prospectus or form of
prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading, except to the extent, but only to the extent,
that (i) such untrue statements or omissions are based upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information relates to
such Holder or such Holder’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in the Registration Statement, the Prospectus or the form of
Prospectus or in any amendment or supplement thereto (it being understood that
the Holder has approved Annex A hereto for this purpose) or (ii) in the
case of an occurrence of an event of the type specified in Section 3(d)(ii)-(vi),
the use by such Holder of an outdated or defective Prospectus after the Company
has notified such Holder in writing that the Prospectus is outdated or
defective and prior to the receipt by such Holder of the Advice contemplated in
Section 6(d).  The Company shall
notify the Holders promptly of the institution, threat or assertion of any
Proceeding arising from or in connection with the transactions contemplated by
this Agreement of which the Company is aware.

 

(b) Indemnification by Holders. Each Holder shall, severally and
not jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents or employees of such controlling
Persons, to the fullest extent permitted by applicable law, from and against
all Losses, as incurred, to the extent arising out of or based solely upon: (x)
such Holder’s failure to comply with the prospectus delivery requirements of
the Securities Act provided that the Company has complied with its requirements
under Section 3(g) to furnish current prospectuses to the Holder or
(y) any untrue or alleged untrue statement of a material fact contained in the
Registration Statement, the Prospectus, or form of prospectus, or in any
amendment or supplement thereto or in any preliminary prospectus, or arising
out of or relating to any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading (i) to the extent, but only to the extent, that such untrue
statement or omission is contained in any information so furnished in writing
by such Holder to the Company specifically for inclusion in the Registration
Statement or the Prospectus or (ii) to the extent that (1) such
untrue statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder or such
Holder’s proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement (it being understood that the Holder has approved
Annex A hereto for this purpose), the Prospectus or the form of Prospectus or
in any amendment or supplement thereto or (2) in the case of an occurrence
of an event of the type specified in Section 3(d)(ii)-(vi), the use by
such Holder of an outdated or defective Prospectus after the Company has
notified such Holder in writing that the Prospectus is outdated or defective
and

 

8

 

prior to the receipt by such
Holder of the Advice contemplated in Section 6(d). In no event shall the
liability of any selling Holder hereunder be greater in amount than the dollar
amount of the net proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.

 

(c) Conduct of Indemnification Proceedings. If any Proceeding
shall be brought or asserted against any Person entitled to indemnity hereunder
(an “Indemnified Party”), such Indemnified Party shall promptly notify
the Person from whom indemnity is sought (the “Indemnifying Party”) in
writing, and the Indemnifying Party shall have the right to assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to the
extent that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have prejudiced the Indemnifying Party.

 

An Indemnified Party shall have the right to
employ separate counsel in any such Proceeding and to participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Indemnified Party or Parties unless:  (1) the Indemnifying Party has agreed in
writing to pay such fees and expenses; (2) the Indemnifying Party shall
have failed promptly to assume the defense of such Proceeding and to employ
counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (3) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that a
material conflict of interest is likely to exist if the same counsel were to
represent such Indemnified Party and the Indemnifying Party (in which case, if
such Indemnified Party notifies the Indemnifying Party in writing that it
elects to employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
the reasonable fees and expenses of one separate counsel shall be at the
expense of the Indemnifying Party).  The
Indemnifying Party shall not be liable for any settlement of any such
Proceeding effected without its written consent, which consent shall not be
unreasonably withheld.  No Indemnifying
Party shall, without the prior written consent of the Indemnified Party, effect
any settlement of any pending Proceeding in respect of which any Indemnified
Party is a party, unless such settlement includes an unconditional release of
such Indemnified Party from all liability on claims that are the subject matter
of such Proceeding.

 

Subject to the terms of this Agreement, all
reasonable fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this
Section) which are required to be paid by the Indemnifying Party pursuant to
this Agreement shall be paid to the Indemnified Party, as incurred, within ten
Trading Days of written notice thereof to the Indemnifying Party; provided,
that the Indemnified Party shall promptly reimburse the Indemnifying Party for
that portion of such fees and expenses applicable to such actions for which
such Indemnified Party is not entitled to indemnification hereunder, determined
based upon the relative faults of the parties determined in accordance with Section 5(d).

 

9

 

(d) Contribution. If the indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party, then each Indemnifying Party
shall in lieu of indemnifying such Indemnified party, contribute to the amount
paid or payable by such Indemnified Party, in such proportion as is appropriate
to reflect the relative fault of the Indemnifying Party and Indemnified Party
in connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The relative
fault of such Indemnifying Party and Indemnified Party shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission.  The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in this Agreement, any reasonable attorneys’ or other reasonable fees or
expenses incurred by such party in connection with any Proceeding to the extent
such party would have been indemnified for such fees or expenses if the
indemnification provided for in this Section was available to such party
in accordance with its terms.

 

The parties hereto agree that it would not be
just and equitable if contribution pursuant to this Section 5(d) were
determined by pro rata allocation or by any other method of allocation that
does not take into account the equitable considerations referred to in the
immediately preceding paragraph. 
Notwithstanding the provisions of this Section 5(d), no Holder
shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the proceeds actually received by such Holder from the sale of
the Registrable Securities subject to the Proceeding exceeds the amount of any
damages that such Holder has otherwise been required to pay by reason of such
untrue or alleged untrue statement or omission or alleged omission, except in
the case of fraud by such Holder.

 

The indemnity and contribution agreements
contained in this Section are in addition to any liability that the
Indemnifying Parties may have to the Indemnified Parties.

 

6. Miscellaneous

 

(a)           Remedies.  In the event of a breach by the Company or by
a Holder, of any of their obligations under this Agreement, each Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of its rights under this Agreement.  Each of the Company and each Holder agrees
that monetary damages would not provide adequate compensation for any losses
incurred by reason of a breach by it of any of the provisions of this Agreement
and hereby further agrees that, in the event of any action for specific performance
in respect of such breach, it shall waive the defense that a remedy at law
would be adequate.

 

(b)           No Piggyback on Registrations.
Except as set forth on Schedule 6(b) attached hereto, neither
the Company nor any of its security holders (other than the Holders in such
capacity pursuant hereto) may include securities of the Company in the
Registration Statement

 

10

 

other than the Registrable
Securities.  The Company shall not file
any other registration statements until the Registration Statement required
hereunder is declared effective by the Commission, provided that this Section 6(b) shall
not prohibit the Company from filing amendments to registration statements
already filed.

 

(c)           Compliance. Each Holder covenants
and agrees that it will comply with the prospectus delivery requirements of the
Securities Act as applicable to it in connection with sales of Registrable
Securities pursuant to the Registration Statement.

 

(d)           Discontinued Disposition. Each Holder
agrees by its acquisition of such Registrable Securities that, upon receipt of
a notice from the Company of the occurrence of any event of the kind described
in Section 3(d), such Holder will forthwith discontinue disposition of
such Registrable Securities under the Registration Statement until such Holder’s
receipt of the copies of the supplemented Prospectus and/or amended
Registration Statement, or until it is advised in writing (the “Advice”)
by the Company that the use of the Prospectus may be resumed, and, in either
case, has received copies of any additional or supplemental filings that are
incorporated or deemed to be incorporated by reference in the Prospectus or
Registration Statement.  The Company will
use its best efforts to ensure that the use of the Prospectus may be resumed as
promptly as it practicable.

 

(e)           Piggy-Back Registrations. If at
any time during the Effectiveness Period there is not an effective Registration
Statement covering all of the Registrable Securities and the Company shall
determine to prepare and file with the Commission a registration statement
relating to an offering for its own account or the account of others under the
Securities Act of any of its equity securities, other than on Form S-4 or Form S-8
(each as promulgated under the Securities Act) or their then equivalents
relating to equity securities to be issued solely in connection with any
acquisition of any entity or business or equity securities issuable in
connection with the stock option or other employee benefit plans, then the
Company shall send to each Holder a written notice of such determination and,
if within fifteen days after the date of such notice, any such Holder shall so
request in writing, the Company shall include in such registration statement all
or any part of such Registrable Securities such holder requests to be
registered; provided, that, the Company shall not be required to register any
Registrable Securities pursuant to this Section 6(e) that are
eligible for resale pursuant to Rule 144(k) promulgated under the
Securities Act.

 

(f)            Amendments and Waivers. The
provisions of this Agreement, including the provisions of this sentence, may
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, unless the same shall be in
writing and signed by the Company and each Holder.

 

(g)           Notices. Any and all notices or
other communications or deliveries required or permitted to be provided
hereunder shall be delivered as set forth in the Warrant Exercise Agreement.

 

(h)           Successors and Assigns. This
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of each of the parties and shall inure to the

 

11

 

benefit of each Holder. The
Company may not assign its rights or obligations hereunder without the prior
written consent of all of the Holders of the then-outstanding Registrable
Securities. Each Holder may assign their respective rights hereunder in the
manner and to the Persons as permitted under the Purchase Agreement.

 

(i)            No Inconsistent Agreements. Other
than that certain Registration Rights Agreement between the Company, the
Purchasers and the other parties thereto dated as of February 18, 2005, neither
the Company nor any of its subsidiaries has entered, as of the date hereof, nor
shall the Company or any of its subsidiaries, on or after the date of this
Agreement, enter into any agreement with respect to its securities, that would
have the effect of impairing the rights granted to the Holders in this
Agreement or otherwise conflicts with the provisions hereof.  Except as set forth on Schedule 6(i),
neither the Company nor any of its subsidiaries has previously entered into any
agreement granting any registration rights with respect to any of its
securities to any Person that have not been satisfied in full.

 

(j)            Execution and Counterparts. This
Agreement may be executed in any number of counterparts, each of which when so
executed shall be deemed to be an original and, all of which taken together
shall constitute one and the same Agreement. In the event that any signature is
delivered by facsimile transmission (including, without limitation, an executed
..PDF version of this Agreement), such signature shall create a valid binding
obligation of the party executing (or on whose behalf such signature is
executed) the same with the same force and effect as if such facsimile
signature were the original thereof.

 

(k)           Governing Law.  All
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by and construed and enforced in accordance
with the internal laws of the State of New York, without regard to principles
of conflicts of laws thereof.

 

(l)            Cumulative Remedies. The remedies
provided herein are cumulative and not exclusive of any remedies provided by
law.

 

(m)          Severability. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.

 

(n)           Headings. The headings in this
Agreement are for convenience of reference only and shall not limit or
otherwise affect the meaning hereof.

 

(o)           Independent Nature of Holders’ Obligations
and Rights. The obligations of each Holder hereunder are several and
not joint with the obligations of any other Holder hereunder,

 

12

 

and no Holder shall be
responsible in any way for the performance of the obligations of any other
Holder hereunder. Nothing contained herein or in any other agreement or
document delivered at any closing, and no action taken by any Holder pursuant
hereto or thereto, shall be deemed to constitute the Holders as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Holders are in any way acting in concert with respect to
such obligations or the transactions contemplated by this Agreement. Each
Holder shall be entitled to protect and enforce its rights, including without
limitation the rights arising out of this Agreement, and it shall not be necessary
for any other Holder to be joined as an additional party in any proceeding for
such purpose.

 

********************

 

13

 

IN WITNESS WHEREOF, the parties have executed
this Registration Rights Agreement as of the date first written above.

 

 

	
   

  	
  VISTULA COMMUNICATIONS
  SERVICES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ George R. Vaughn

  
	
   

  	
   

  	
  Name:  George R. Vaughn

  
	
   

  	
   

  	
  Title:   Chief Financial Officer

  

 

 

[SIGNATURE PAGE OF HOLDERS
FOLLOWS]

 

14

 

[SIGNATURE PAGE OF PURCHASER]

 

 

	
  Name of Purchaser:

  	
  GSSF Master Fund LP

  
	
   

  	
   

  
	
  Signature of Authorized Signatory of Purchaser:

  	
  /s/ E.B. Lyon IV

  	
   

  
	
   

  	
   

  	
   

  
	
  Name of Authorized Signatory:

  	
   

  	
  E.B. Lyon IV

  
	
   

  	
   

  	
   

  
	
  Title of Authorized Signatory:

  	
   

  	
  Authorized Agent

  
						

 

 

[SIGNATURE PAGES CONTINUE]

 

 

15

 

[SIGNATURE PAGE OF PURCHASER]

 

 

	
  Name of Purchaser:

  	
  Gryphon Master Fund, L.P.

  
	
   

  	
   

  
	
  Signature of Authorized Signatory of Purchaser:

  	
  /s/ E.B. Lyon IV

  	
   

  
	
   

  	
   

  	
   

  
	
  Name of Authorized Signatory:

  	
   

  	
  E.B. Lyon IV

  
	
   

  	
   

  	
   

  
	
  Title of Authorized Signatory:

  	
   

  	
  Authorized Agent

  
						

 

 

[SIGNATURE PAGES CONTINUE]

 

 

16

 

[SIGNATURE PAGE OF PURCHASER]

 

 

	
  Name of Purchaser:

  	
  Murray Chernick      .

  
	
   

  	
   

  
	
  Signature of Authorized Signatory of Purchaser:

  	
  /s/ Murray Chernick

  	
   

  
	
   

  	
   

  	
   

  
	
  Name of Authorized Signatory:

  	
   

  	
  Murray Chernick

  
	
   

  	
   

  	
   

  
	
  Title of Authorized Signatory:

  	
   

  	
  Individual

  
						

 

 

[SIGNATURE PAGES CONTINUE]

 

 

17

 

ANNEX A

 

Plan of Distribution

 

Each Selling Stockholder (the “Selling Stockholders”)
of the common stock (“Common Stock”) of Vistula Communications Services, Inc.,
a Delaware corporation (the “Company”) and any of their pledgees,
assignees and successors-in-interest may, from time to time, sell any or all of
their shares of Common Stock on the Trading Market or any other stock exchange,
market or trading facility on which the shares are traded or in private
transactions.  These sales may be at
fixed or negotiated prices.  A Selling
Stockholder may use any one or more of the following methods when selling
shares:

 

•                  ordinary brokerage transactions and
transactions in which the broker-dealer solicits purchasers;

 

•                  block trades in which the broker-dealer
will attempt to sell the shares as agent but may position and resell a portion
of the block as principal to facilitate the transaction;

 

•                  purchases by a broker-dealer as
principal and resale by the broker-dealer for its account;

 

•                  an exchange distribution in
accordance with the rules of the applicable exchange;

 

•                  privately negotiated transactions;

 

•                  settlement of short sales entered
into after the date of this prospectus;

 

•                  broker-dealers may agree with the
Selling Stockholders to sell a specified number of such shares at a stipulated
price per share;

 

•                  a combination of any such methods of
sale;

 

•                  through the writing or settlement of
options or other hedging transactions, whether through an options exchange or
otherwise; or

 

•                  any other method permitted pursuant
to applicable law.

 

The Selling Stockholders may also sell shares under Rule 144
under the Securities Act of 1933, as amended (the “Securities Act”), if
available, rather than under this prospectus.

 

Broker-dealers engaged by the Selling Stockholders may
arrange for other brokers-dealers to participate in sales.  Broker-dealers may receive commissions or
discounts from the Selling Stockholders (or, if any broker-dealer acts as agent
for the purchaser of shares, from the purchaser) in amounts to be negotiated,
but, except as set forth in a supplement to this Prospectus, in the case of an
agency transaction not in excess of a customary brokerage

 

18

 

commission in compliance
with NADSR Rule 2440; and in the case of a principal transaction a markup
or markdown in compliance with NASDR IM-2440.

 

In connection with the sale of the Common Stock or
interests therein, the Selling Stockholders may enter into hedging transactions
with broker-dealers or other financial institutions, which may in turn engage
in short sales of the Common Stock in the course of hedging the positions they
assume.  The Selling Stockholders may
also sell shares of the Common Stock short and deliver these securities to
close out their short positions, or loan or pledge the Common Stock to
broker-dealers that in turn may sell these securities.  The Selling Stockholders may also enter into
option or other transactions with broker-dealers or other financial
institutions or the creation of one or more derivative securities which require
the delivery to such broker-dealer or other financial institution of shares
offered by this prospectus, which shares such broker-dealer or other financial
institution may resell pursuant to this prospectus (as supplemented or amended
to reflect such transaction).

 

The Selling Stockholders and any broker-dealers or
agents that are involved in selling the shares may be deemed to be “underwriters”
within the meaning of the Securities Act in connection with such sales.  In such event, any commissions received by
such broker-dealers or agents and any profit on the resale of the shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.  Each Selling Stockholder
has informed the Company that it does not have any written or oral agreement or
understanding, directly or indirectly, with any person to distribute the Common
Stock. In no event shall any broker-dealer receive fees, commissions and
markups which, in the aggregate, would exceed eight percent (8%).

 

The Company is required to pay certain fees and
expenses incurred by the Company incident to the registration of the
shares.  The Company has agreed to
indemnify the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.

 

Because Selling Stockholders may be deemed to be “underwriters”
within the meaning of the Securities Act, they will be subject to the
prospectus delivery requirements of the Securities Act.  In addition, any securities covered by this
prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than under this
prospectus.  Each Selling Stockholder has
advised us that they have not entered into any written or oral agreements,
understandings or arrangements with any underwriter or broker-dealer regarding
the sale of the resale shares.  There is
no underwriter or coordinating broker acting in connection with the proposed
sale of the resale shares by the Selling Stockholders.

 

We agreed to keep this prospectus effective until the
earlier of (i) the date on which the shares may be resold by the Selling
Stockholders without registration and without regard to any volume limitations
by reason of Rule 144(e) under the Securities Act or any other rule of
similar effect or (ii) all of the shares have been sold pursuant to the
prospectus or Rule 144 under the Securities Act or any other rule of
similar effect.  The resale shares will
be sold only through registered or licensed brokers or dealers if required
under applicable state securities laws. In addition, in certain states, the
resale shares may not be sold unless they have been registered or

 

19

 

qualified for sale in the applicable state or an exemption from the
registration or qualification requirement is available and is complied with.

 

Under applicable rules and regulations under the
Exchange Act, any person engaged in the distribution of the resale shares may
not simultaneously engage in market making activities with respect to the
Common Stock for a period of two business days prior to the commencement of the
distribution.  In addition, the Selling
Stockholders will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including Regulation M, which may
limit the timing of purchases and sales of shares of the Common Stock by the
Selling Stockholders or any other person. 
We will make copies of this prospectus available to the Selling
Stockholders and have informed them of the need to deliver a copy of this
prospectus to each purchaser at or prior to the time of the sale.

 

20

 

Annex B

 

VISTULA COMMUNICATIONS SERVICES, INC.

 

Selling Securityholder Notice and Questionnaire

 

The
undersigned beneficial owner of common stock, par value $0.001 per share (the “Common
Stock”), of Vistula Communications Services, Inc., a Delaware
corporation (the “Company”), (the “Registrable Securities”)
understands that the Company has filed or intends to file with the Securities
and Exchange Commission (the “Commission”) a registration statement on Form SB-2
(the “Registration Statement”) for the registration and resale under Rule 415
of the Securities Act of 1933, as amended (the “Securities Act”), of the
Registrable Securities, in accordance with the terms of the Registration Rights
Agreement, dated as of September        ,
2005 (the “Registration Rights Agreement”), among the Company and the
Purchasers named therein.  A copy of the
Registration Rights Agreement is available from the Company upon request at the
address set forth below.  All capitalized
terms not otherwise defined herein shall have the meanings ascribed thereto in
the Registration Rights Agreement.

 

Certain
legal consequences arise from being named as a selling securityholder in the
Registration Statement and the related prospectus.  Accordingly, holders and beneficial owners of
Registrable Securities are advised to consult their own securities law counsel
regarding the consequences of being named or not being named as a selling
securityholder in the Registration Statement and the related prospectus.

 

NOTICE

 

The
undersigned beneficial owner (the “Selling Securityholder”) of
Registrable Securities hereby elects to include the Registrable Securities
owned by it and listed below in Item 3 (unless otherwise specified under such
Item 3) in the Registration Statement.

 

21

 

The undersigned hereby provides
the following information to the Company and represents and warrants that such
information is accurate:

 

QUESTIONNAIRE

 

1.                                      Name.

 

(a)                                  Full Legal Name
of Selling Securityholder

 

 

(b)                                 Full Legal Name
of Registered Holder (if not the same as (a) above) through which
Registrable Securities Listed in Item 3 below are held:

 

 

(c)                                  Full Legal Name
of Natural Control Person (which means a natural person who directly you
indirectly alone or with others has power to vote or dispose of the securities
covered by the questionnaire):

 

 

2.  Address for Notices to Selling
Securityholder:

 

	
   

  
	
   

  
	
   

  
	
  Telephone:

  
	
  Fax:

  
	
  Contact Person:

  

 

3.  Beneficial Ownership of Registrable
Securities:

 

(a)                                  Type and
Principal Amount of Registrable Securities beneficially owned:

 

 

22

 

4.  Broker-Dealer Status:

 

(a)                                  Are you a
broker-dealer?

 

Yes  o           No  o

 

Note:                   If yes, the Commission’s
staff has indicated that you should be identified as an underwriter in the
Registration Statement.

 

(b)                                 Are you an
affiliate of a broker-dealer?

 

Yes  o   No  o

 

(c)                                  If you are an
affiliate of a broker-dealer, do you certify that you bought the Registrable
Securities in the ordinary course of business, and at the time of the purchase
of the Registrable Securities to be resold, you had no agreements or
understandings, directly or indirectly, with any person to distribute the
Registrable Securities?

 

Yes  o   No  o

 

Note:                   If no, the Commission’s
staff has indicated that you should be identified as an underwriter in the Registration
Statement.

 

5.  Beneficial Ownership of Other Securities of
the Company Owned by the Selling Securityholder.

 

Except as set forth below in this
Item 5, the undersigned is not the beneficial or registered owner of any
securities of the Company other than the Registrable Securities listed above in
Item 3.

 

(a)                                  Type and Amount
of Other Securities beneficially owned by the Selling Securityholder:

 

 

 

23

 

6.  Relationships with the Company:

 

Except as set forth below, neither
the undersigned nor any of its affiliates, officers, directors or principal
equity holders (owners of 5% of more of the equity securities of the
undersigned) has held any position or office or has had any other material
relationship with the Company (or its predecessors or affiliates) during the
past three years.

 

State
any exceptions here:

 

 

The
undersigned agrees to promptly notify the Company of any inaccuracies or
changes in the information provided herein that may occur subsequent to the
date hereof at any time while the Registration Statement remains effective.

 

By
signing below, the undersigned consents to the disclosure of the information
contained herein in its answers to Items 1 through 6 and the inclusion of such
information in the Registration Statement and the related prospectus and any
amendments or supplements thereto.  The
undersigned understands that such information will be relied upon by the
Company in connection with the preparation or amendment of the Registration Statement
and the related prospectus.

 

IN
WITNESS WHEREOF the undersigned, by authority duly given, has caused this
Notice and Questionnaire to be executed and delivered either in person or by
its duly authorized agent.

 

	
  Dated:

  	
   

  	
   

  	
  Beneficial Owner:

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
						

 

PLEASE FAX A COPY OF THE COMPLETED AND
EXECUTED NOTICE AND QUESTIONNAIRE, AND RETURN THE ORIGINAL BY OVERNIGHT MAIL,
TO:

 

24

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